双日（2768） – Internet Disclosure of Matters for the Notice of the 19th Ordinary General Shareholders’ Meeting

Internet Disclosure of Matters for the Notice of the 19th Ordinary General Shareholders’ Meeting ■ Basic Concept and Status of Implementation and Operation of Internal Control System ꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏ 1 ■ Accounting Auditor ꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏ 8 ■ Consolidated Statement of Changes in Equity ꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏ 10 ■ Notes to the Consolidated Financial Statements ꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏ 14 ■ (Reference) Consolidated Statement of Profit or Loss and Other Comprehensive Income ꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏꞏ 38 ■ Non-consolidated Statement of Changes in Net Assets ꞏꞏꞏꞏꞏꞏꞏ 39 ■ Notes to the Non-consolidated Financial Statements ꞏꞏꞏꞏꞏꞏꞏꞏꞏ 41 In accordance with laws and regulations and Article 14 of the Articles of Incorporation, this information is posted on Sojitz’s website at: (https://www.sojitz.com/en/ir/stkholder/general/) The following is an English translation of the Internet Disclosure of Matters for the Notice of the 19th Ordinary General Shareholders’ Meeting of Sojitz Corporation (“Sojitz”) to be held on June 17, 2022. Sojitz provides this translation for your reference and convenience only. In the case of any discrepancy between the translation and the Japanese original, the latter shall prevail. Sojitz hereby disclaims all representations and warranties with respect to this translation, whether express or implied, including, but not limited to, any representations and warranties with respect to accuracy, reliability or completeness of this translation. Under no circumstances shall Sojitz be liable for any damages of any kind of nature, including, but not limited to, direct, indirect, special, punitive, consequential or incidental damages arising from or in connection with this translation. Also, this document was created for the purpose of providing information to our shareholders that will help them make informed decisions. It was not created to solicit investors to buy or sell Sojitz’s shares. The final decision and responsibility for investments rests solely with the reader of this document. Basic Concept and Status of Implementation and Operation of Internal Control System 1. Basic Concept Sojitz has been working on implementing and maintaining our internal control systems on a Group-wide basis. The “Basic policy regarding the establishment of systems for ensuring appropriate execution of Sojitz Group business operations” was resolved by the Board of Directors on April 24, 2015, based on the Companies Act and Ordinance for the Enforcement of the Companies Act of Japan. i) Retention and management of information relating to the execution of the Company Directors’ duties With respect to important documents relating to the execution of duties by Directors of the Company, such as the minutes of Board of Directors meetings and approval documents, a retention period that is equal to the period required by the relevant law or regulation shall be prescribed in accordance with the Board of Directors rules and the internal rules for document retention and information management. The department in charge of such retention shall also be designated, and documents shall be made available for view as necessary. ii) System to ensure compliance by Company Directors and employees with laws and regulations and the Articles of Incorporation in execution of duties The Sojitz Group Compliance Code of Conduct and Ethics and the manual for its implementation shall be established, as well as the Sojitz Group Compliance Program to ensure that Directors and employees comply with laws and regulations, the Articles of Incorporation, and internal rules. In order to fully achieve understanding of and compliance with amendments of laws and regulations relating to the Group’s operations, the reinforcement and improvement of the legal compliance system centering on the Compliance Committee shall be promoted. Also, the separation of duties by departments and the supervisors in charge of Group companies shall be clarified. Sojitz shall ensure that the Group does not enter into any business or other relationship with anti-social forces, and shall resolutely reject any improper request, taking legal measures if necessary. iii) Rules and other systems regarding management of loss risks of the Company and its subsidiaries In order to prevent, or when impossible to prevent, to minimize economic losses of the Group, various potential risks for economic losses both inside and outside the Company including credit risks, business investment risks, market risks and disaster risks shall be analyzed and categorized. The Company shall establish internal rules or manuals, and assign a department for managing the risks in each category. The effectiveness of internal rules and handling procedures shall be periodically reviewed and improved. Furthermore, in the event that a new type of risk emerges in the Group due to changes in the business environment, a person and/or department to be responsible shall be promptly appointed, and appropriate internal rules with regard to the new risk shall be prescribed. iv) System to ensure efficiency in execution of duties by Directors of the Company and its subsidiaries The responsible fields or departments of each Director and Executive Officer of the Company and the responsibility of each of its departments shall be made clear, as well as chains of command, scopes of authority and decision-making rules. In the Board of Directors rules, important matters requiring resolutions of the Board of Directors shall be clearly prescribed and the Management Committee and other committees to deliberate and 1 decide other important matters shall be convened. Also, matters to be reported to the Board of Directors shall be set forth in the Board of Directors rules. A department to oversee the management structure of the Group and ensure the sound management of Group companies shall be established. Top management policy of the Group shall be promptly announced to all Directors and employees of the Group companies through the Management Committee, Corporate Planning Department or the supervisor in charge, and through other oral and written methods. Group management shall be promoted by preparing a management plan on a consolidated basis and by sharing management objectives and management indices within the Group. v) System for reporting the execution of duties by Directors of subsidiaries to the Company and other systems for proper business operations in the Company and its Subsidiaries The supervisors in charge who manage the Group companies as prescribed in the Basic Code of Group Management shall be designated. The supervisors in charge must request prior consultation with the Group companies regarding important matters, and must report to the Company regularly on the business report, operating activity reports, and other reports. The Company shall review and develop the business processes of each Group company in light of internal controls relating to consolidated financial reporting. The Audit Department of the Company shall conduct internal audits on the Group companies, and ensure the proper conduct of their business operations. vi) Employees assisting Audit & Supervisory Board Members of the Company and their independence from Directors, and the system to ensure efficiency of instructions to these employees from the Audit & Supervisory Board Members of the Company The Audit & Supervisory Board Members Office shall be established to assist Audit & Supervisory Board Members and assign the necessary employees. These employees shall work under the direction of the Audit & Supervisory Board Members of the Company, and their performance evaluations and personnel changes shall require the consent of the Audit & Supervisory Board Members of the Company. vii) Reports to Audit & Supervisory Board Members The Board of Directors rules shall include a rule that requires any Director of the Company to immediately report to Audit & Supervisory Board Members of the Company when he/she learns of a fact that may cause significant damage to the Company. The department in charge of the internal reporting system of the Group shall report regularly to Audit & Supervisory Board Members of the Company on the status of the internal report from Directors and employees of the Group through the Compliance Committee or other body. The Audit Department of the Company shall provide Audit & Supervisory Board Members of the Company with a copy of the internal audit report upon completion of each internal audit. The Audit & Supervisory Board of the Company shall be entitled to request a report from the Accounting Auditor, a Director or other relevant person, as it deems necessary. viii) System for ensuring that a person who reports to Audit & Supervisory Board Members of the Company will not receive disadvantageous treatment as a result 2 A Director or employee of the Group shall not be treated disadvantageously because he/she makes a report through the internal reporting system or other methods (including reports to Audit & Supervisory Board Members of the Company and others). ix) Other arrangements to ensure efficient auditing by the Audit & Supervisory Board Members of the Company Expenses deemed necessary shall be paid by the Company, keeping in mind the efficiency and appropriateness of audits by Audit & Supervisory Board Members. One or more of the Audit & Supervisory Board Members of the Company shall attend every meeting of the Board of Directors of the Company and express opinions as necessary. They may also attend the Management Committee and other important meetings of the Company, directly observing the discussions and reporting on important matters. Representative Directors shall regularly meet with Audit & Supervisory Board Members and exchange opinions on key issues, as well as on the conditions of and important issues relating to audits by Audit & Supervisory Board Members. 2. Status of Implementation and Operation Overall internal control system The Internal Control Committee, which is an executing body under the management of the President, consolidates and monitors the status of implementation and operation of the Internal Control System, and leads maintenance and improvement of our internal control systems. (Overview of operational status) The Internal Control Committee oversees the implementation and enforcement of the overall internal control system, as well as conducts periodic monitoring. The Committee also identifies issues and considers countermeasures related to the internal systems and frameworks, points out these issues to the relevant departments, and makes improvements. In addition, the Committee monitors progress on assessments of internal controls with regards to financial reporting, based on the Financial Instruments and Exchange Act, thereby working to ensure the reliability of financial reporting. Each committee (Compliance Committee, Sustainability Committee, etc.), subcommittee (Information Security Subcommittee, which was reorganized into a committee in April 2022) and working group (the Disclosure Working Group, the Business Continuity Management Working Group) discuss specific initiatives for their area of expertise. The Internal Control Committee met six times during the fiscal year ended March 31, 2022, and reported the details of these meetings to the Board of Directors. With a view to further disseminating and sharing important information including those concerning the establishment and revision of rules and guidelines of the Sojitz Group and precautions, Sojitz continued its regular distribution of the “Internal Control Bulletin,” a summary of key information, to all Group companies in Japan and overseas. Compliance Sojitz has established a “Sojitz Group Compliance Program,” which sets out procedures for achieving thorough compliance, and have also formulated a “Sojitz Group Code of Conduct and Ethics,” which 3 provides common criteria for conduct that applies to Group officers and employees globally. The Compliance Committee, chaired by the Chief Compliance Officer (CCO), leads the establishment of systems for promoting compliance with laws and regulations and corporate ethics at Group companies and overseas bases, such as appointing compliance supervisors and forming compliance committees. To help prevent or quickly detect compliance violations, Sojitz has a hotline (internal reporting system) that provides access to the CCO and outside legal counsel; a consultation desk where the Compliance Committee Secretariat members can be contacted; and the multi-lingual Sojitz Ethics Hotline, which is available 24 hours a day, 365 days a year. These systems are made known to all Sojitz Group officers and employees. In addition, a point of contact for external parties concerning the compliance of Sojitz has been established on the website of Sojitz, to collect any reports from outside of the Company. To prevent corruption, Sojitz has also established the “Sojitz Group Anti-Corruption Policy” and the “Guidelines for Sojitz Group Anti-Corruption Policy,” and has introduced corresponding rules at overseas local subsidiaries as well as Group companies in Japan and overseas. In addition, Sojitz became the first Japanese company to acquire the ISO 37001 certification, an international standard for anti-bribery management systems. Furthermore, Sojitz formulated the Sojitz Group Basic Policy on Sanctions and Export Controls, in an effort to develop a safeguard structure against the risks associated with the violations of sanctions and export controls in Japan and overseas. With regard to paid leave and medical checkup for employees, Sojitz has encouraged them to actively take paid leave and receive checkup, by improving work efficiency and fostering such workplace culture. Sojitz strived to thoroughly monitor the progress in order to ensure the fulfillment of legal obligations. In addition, in expanding the business around the world, the Group has established the “Sojitz Group Tax Policy” regarding observance of tax compliance, optimization of tax costs, and relationships with tax authorities, and strived to fulfill its tax obligations in a timely and appropriate manner. Sojitz has continued educational activities useful for business practice to ensure legal compliance and maintain a good working environment free of any kind of harassment, such as providing educational opportunities including e-learning. (Overview of operational status) Based on the action plan formulated by the Compliance Committee, Sojitz continues to provide counsel on how to prevent compliance issues from reoccurring, as well as providing assistance and guidance to Group companies on how to practice said Code of Conduct. Specific activities related to compliance in the fiscal year ended March 31, 2022 included the following: Meetings of the CCO with Chief Operation Officers of business divisions and presidents of Group companies corruption Regular liaison meetings among the compliance staff of Group companies Regular liaison meetings with the compliance staff of overseas operating sites Trainings, seminars and briefings on important issues concerning the prevention of harassment and Various training programs for newly hired employees, employees hired as mid-career professionals, employees on overseas assignments, and others Alert letters for eradication of harassment and scandals caused by consumption of alcohol 4 Individual support for Sojitz’s domestic operating companies through a risk-based approach to enhance the compliance system (cooperation in investigations, tailored trainings, etc.) Revision of the “Sojitz Group Code of Conduct and Ethics” (revised on April 1, 2022, and to be continuously revised by the Group companies). The Compliance Committee met a total of four times, once in each quarter, during the fiscal year ended March 31, 2022. With regard to security trade control, based on the action plans formulated by the Security Trade Control Committee, the committee secretariat is engaged in activities for preventing violations of sanctions and export controls while providing support and guidance to the Group companies. Specific activities carried out in the fiscal year ended March 31, 2022, included the following: Various training programs for newly hired employees, employees hired as mid-career professionals, employees on overseas assignments, and others Support for the revision and formulation of local security trade control-related regulations at overseas operating sites Held two meetings of the Security Trade Control Committee Support for responding to measures in concert with strengthened sanctions and others, due to changes in the security situation (including deterioration of U.S.-China relations, military coup d’état in Myanmar, and Russia’s invasion of Ukraine, etc.) Risk management Sojitz has designated categories of business activity risk based on the “Basic rules of corporate risk management,” has assigned officers responsible for each kind of risk, and has formulated the “Risk Management Policy and Plan” in order to deal with the various risks facing general trading companies today. By implementing a PDCA cycle with regards to formulating, executing, monitoring and summarizing the Risk Management Policy and Plan, Sojitz strives to secure its sustainability and further improve the risk management system. (Overview of operational status) Sojitz identifies risks in the entire Company and conducts periodic review on major risks through evaluations of the degree of materiality. The Group has currently identified twelve major risks and, in line with characteristics of those risks, has established the “Risk Management Policy and Plan.” The “Risk Management Policy and Plan” is resolved by the Board of Directors, and the Internal Control Committee deliberates whether it is operating properly, issuing a report to the Board of Directors quarterly. Additionally, in the event that it becomes necessary to make everyone at Sojitz aware of measures to counter changes in the business environment, or if new risks require new responses, such situations are dealt with upon making the necessary reports to the management on the issues and the status of responses. Among the twelve risk categories, for quantifiable risks such as market risk, credit risk, business investment risk and country risk, risk assets are measured on a quarterly basis. As for the risks that are difficult to quantify such as funding risk, environmental and social (human rights) risk, compliance risk, legal risk, system and information security risk, disaster risk, risks concerning the delivery of corporate information via websites and SNS, and quality-related risk, Sojitz continuously monitors them in a PDCA cycle. 5 Given the expansion and diversification of our business fields, in the year ended March 31, 2022, Sojitz has set up the Quality Management Committee and formulated the Sojitz Group Quality Management Policy as a basic policy for the Group’s quality management, in an effort to strengthen its response to quality-related risks. Sojitz continues to conduct ongoing education programs through a variety of risk management training, in order to firmly establish a risk management mindset among Sojitz Group officers and employees. Management of Group companies Each Group company has a management system based on the management system for Group companies’ business operations defined in the “Basic Rules of Group Management” and the “Group Management Administration Regulations.” The status of each system is monitored on a periodic basis. In addition, Directors monitor business management of Group companies through the business division or corporate department staff who supervise these companies, or else the Directors, Audit & Supervisory Board Members, and others dispatched to Sojitz Group companies. (Overview of operational status) Through the Directors and the Audit & Supervisory Board Members dispatched to each Group company, Sojitz manages and supervises Group companies, ensuring that they have established an appropriate management foundation and corporate governance and that these are working correctly. Sojitz also receives regular reports, including annual business reports and monthly operating activity reports. As for the most important matters at Group companies, execution of the most important business requires advance consultation with Sojitz to ensure appropriate management. Additionally, in order to promote Group management, Sojitz has the business division or corporate department staff supervising Sojitz Group company explain Sojitz Group’s management philosophy, as well as make efforts to publicize our management philosophy and policies during training sessions for Group companies’ officers and employees. Based on an audit plan adopted by the Board of Directors and under the supervision of the Internal Audit Committee, the Internal Audit Department of the Company conducts audits to investigate whether organizational governance, risk management, and internal controls are functioning appropriately in the Group companies. The Internal Audit Department also makes proposals for effective improvements to prevent losses and solve issues. As part of the Group’s efforts to further enhance the corporate governance of Group companies, in order to improve the effectiveness of the Board of Directors at each Group company, the “Guidance for management of the Board of Directors” has been formulated, and the operating status of the Board of Directors at each company has been monitored and reported regularly to the Management Committee and the Board of Directors at Sojitz. In addition, trainings for Directors of Group companies are provided on a yearly basis and additional trainings are separately provided for newly appointed Directors and Audit & Supervisory Board Members. Management and storage of information With respect to handling of important documents related to execution of duties such as the minutes of Board of Directors meetings, the responsible department shall appropriately manage such documents according to the retention period required by law based on guidelines including the internal rules for 6 document retention, and shall make such documents available for viewing as necessary. As for the information related to business execution, a system is in place to monitor the status of operation by establishing rules that define the classification and confidentiality of the information. In addition, Sojitz has created the position of the Chief Information Security Officer (CISO) in the year ended March 31, 2022, for further strengthening information security system. (Overview of operational status) With respect to information related to business execution, Sojitz regularly reviews the classification, management methods, and retention period of information as stipulated in the internal regulations, and makes efforts to ensure proper management. In addition, the Group has formulated guidelines on specific methods for the management and operation of information that requires particularly strict control, which is defined as “information requiring specific management,” and has investigated the status of holding such information and provided instructions for improvement as necessary. Furthermore, the Group has continuously endeavored to bolster security measures, such as countermeasures against cyberattacks that are becoming increasingly advanced and sophisticated. Especially for the fiscal year ended March 31, 2022, which saw a certain establishment of remote work as a working style, the Group focused on security measures, such as introducing software to minimize the impacts of cyberattacks by detecting them at an early stage, and expanding provision of trainings to handle suspicious e-mails to domestic and overseas subsidiaries. Arrangements to ensure effective auditing by the Audit & Supervisory Board Members In terms of reporting to Audit & Supervisory Board Members, Sojitz has adopted a system which, in addition to the reports by the Directors, reports matters required for auditing in a timely manner, such as reporting on Group-wide matters by various committees, including the Internal Control Committee and the Compliance Committee, as well as the Internal Audit Department, and business reports from the consolidated subsidiaries. Additionally, relevant regulations provide that persons who report to the Audit & Supervisory Board Members will not receive disadvantageous treatment on account of having made the report. For accounting audits, Audit & Supervisory Board Members receive explanations on the audit plan and regular reports on the audit status from the Accounting Auditor, share information with each other, and establish a system enabling efficient audits. Additionally, Audit & Supervisory Board Members monitor and verify whether the Accounting Auditor maintains its independence and constantly evaluate the status of quality management of audits. (Overview of operational status) Audit & Supervisory Board Members receive reports in a timely fashion and set interviews regularly in addition to exchange of opinions conducted between the Audit & Supervisory Board Members and Directors as well as the Audit & Supervisory Board Members and the Accounting Auditor. Furthermore, for the fiscal year ended March 31, 2022, Sojitz conducted audits through remote auditing by utilizing a web conferencing system and communicating sufficiently with domestic and overseas consolidated subsidiaries even amid the continuing COVID-19 pandemic. 7 Accounting Auditor (1) Name of Accounting Auditor KPMG AZSA LLC (2) Amount of remuneration, etc. for Accounting Auditor in FY2021 Remuneration, etc. payable by Sojitz in FY2021 Remuneration, etc. for services stipulated in Article 2, Paragraph 1 of the Certified Public Accountants Act Remuneration, etc. for services other than those stipulated in Article 2, Paragraph 1 of the Certified Public Accountants Act Total Total amount of money and other financial benefits payable by Sojitz and its subsidiaries to the Accounting Auditor (Millions of yen) Amount paid 410 24 434 764 (Notes) 1. The Audit & Supervisory Board conducted necessary verification on whether the contents of the audit plan, the status of execution of accounting audit duties and the basis for calculating the estimated amount of remunerations, etc. of the Accounting Auditor are appropriate. As a result, the Audit & Supervisory Board has given the consent with regard to remuneration, etc. for the Accounting Auditor in accordance with Article 399, Paragraph 1 of the Companies Act. 2. The audit agreement between Sojitz and the Accounting Auditor does not and cannot practically distinguish between remunerations for audits in accordance with the Companies Act and those in accordance with the Financial Instruments and Exchange Act. For this reason, the above figures include the remuneration for audits under the Financial Instruments and Exchange Act. 3. Of major subsidiaries of Sojitz, Sojitz Corporation of America, Sojitz Europe plc, and Sojitz Asia Pte. Ltd. are audited (limited to audits stipulated in the Companies Act or the Financial Instruments and Exchange Act (including equivalent laws and regulations of the relevant overseas country)) by CPAs or audit firms (including those who hold equivalent qualifications of the relevant overseas country) other than KPMG AZSA LLC. 4. Figures are rounded down to the nearest million yen. (3) Non-audit services Sojitz entrusts our Accounting Auditor to provide advisory services pertaining to IFRS that are services other than those stipulated in Article 2, Paragraph 1 of the Certified Public Accountants Act (non-audit services). (4) Policy and reason for selection of Accounting Auditor Sojitz selects its Accounting Auditor under comprehensive consideration of quality control, independence, auditing execution systems, estimated amounts of remuneration and other considerations according to the evaluation standards for Accounting Auditor set out by the Audit & Supervisory Board. 8 (5) Policy for determining dismissal or non-reappointment of Accounting Auditor In the event that the Audit & Supervisory Board deems that any Accounting Auditor falls under any of the Items of Article 340, Paragraph 1 of the Companies Act, the Audit & Supervisory Board shall dismiss the Accounting Auditor based on the consent of all the Audit & Supervisory Board members. In addition, the Audit & Supervisory Board shall make comprehensive judgments on the Accounting Auditors’ execution of their duties, etc., and in case the Accounting Auditor is deemed incapable of executing proper audits, the Audit & Supervisory Board shall decide on the contents of proposal on dismissal or non-reappointment of the Accounting Auditor, to be submitted to the General Shareholders’ Meeting, by the resolution of the Audit & Supervisory Board. (6) Evaluation of Accounting Auditor by the Audit & Supervisory Board and its Members The Audit & Supervisory Board and its Members evaluate the Accounting Auditor according to the evaluation standards for Accounting Auditor set out by the Audit & Supervisory Board, by having interviews, etc., with the Accounting Auditor, and from such perspectives as quality control, results of examination by external institutions, the auditing team’s independence, expertise and member configuration, auditing fees, effectiveness and efficiency of audit, communication with the Audit & Supervisory Board Members and group auditing. 9 Consolidated Statement of Changes in Equity Attributable to owners of the Company Other components of equity (Millions of yen) Share capital Capital surplus Treasury stock Foreign currency translation differences for foreign operations (16,018) 48,046 48,046 (712) (15,854) ― (15,173) 12 146,814 ― (9) (12) 235 Financial assets measured at fair value through other comprehensive income 97,920 7,364 7,364 Cash flow hedges (4,129) 4,829 4,829 (552) ― 699 Balance as of April 1, 2021 Profit for the year Other comprehensive income Total comprehensive income for the year Purchase of treasury stock Disposal of treasury stock Dividends Change in ownership interests in subsidiaries without loss/acquisition of control Put options granted to non-controlling interests Reclassification from other components of equity to retained earnings Share remuneration transaction Other changes Total contributions by and distributions to owners of the Company 160,339 ― Balance as of March 31, 2022 160,339 147,027 (31,015) 31,314 104,732 ― 212 (15,160) (712) (552) 10 Attributable to owners of the Company Other components of equity Remeasurements of defined benefit pension plans Total other components of equity ― (143) (143) 77,772 60,096 60,096 Balance as of April 1, 2021 Profit for the year Other comprehensive income Total comprehensive income for the year Purchase of treasury stock Disposal of treasury stock Dividends Change in ownership interests in subsidiaries without loss/acquisition of control Put options granted to non-controlling interests Reclassification from other components of equity to retained earnings Share remuneration transaction Other changes Total contributions by and distributions to owners of the Company 143 ― 143 (409) Retained earnings 250,039 82,332 82,332 (16,408) Total equity attributable to owners of the Company 619,111 82,332 60,096 142,429 (15,183) ― (16,408) (3,571) (3,571) 409 133 ― 235 133 Non-controlling interests Total equity 35,527 3,138 3,021 6,159 (4,577) 1,225 654,639 85,471 63,117 148,588 (15,183) ― (20,986) (3,571) ― 235 1,358 (712) 1,979 1,266 (2,468) (1,201) Balance as of March 31, 2022 136,747 314,913 728,012 35,866 763,878 (1,121) (17,458) (33,528) (5,820) (39,349) 11 (Reference) Attributable to owners of the Company (Millions of yen) Share capital Capital surplus Treasury stock Other components of equity Foreign currency translation differences for foreign operations (29,975) 13,800 13,800 Financial assets measured at fair value through other comprehensive income 86,513 15,081 15,081 Cash flow hedges (6,760) 2,630 2,630 156 534 (0) (4,208) 146,756 ― (1) (47) 108 (10,901) ― (5,000) 47 Balance as of April 1, 2020 Profit for the year Other comprehensive income Total comprehensive income for the year Purchase of treasury stock Disposal of treasury stock Dividends Change in ownership interests in subsidiaries without loss/acquisition of control Reclassification from other components of equity to retained earnings Share remuneration transaction Other changes Total contributions by and distributions to owners of the Company 160,339 ― Balance as of March 31, 2021 160,339 146,814 (15,854) (16,018) ― 58 (4,953) 156 (3,674) 97,920 (0) (4,129) 12 Attributable to owners of the Company Other components of equity Remeasurements of defined benefit pension plans Total other components of equity Retained earnings 233,151 27,001 27,001 (16,381) Total equity attributable to owners of the Company 579,123 27,001 32,109 59,111 (5,002) ― (16,381) Non-controlling interests Total equity 42,774 2,416 1,439 3,856 (3,249) (2,170) 621,898 29,417 33,549 62,967 (5,002) ― (19,630) ― 108 (2,165) 690 1,457 2,147 (5,684) (3,536) (597) (4,805) 4,805 ― 108 4 4 Balance as of April 1, 2020 Profit for the year Other comprehensive income Total comprehensive income for the year Purchase of treasury stock Disposal of treasury stock Dividends Change in ownership interests in subsidiaries without loss/acquisition of control Reclassification from other components of equity to retained earnings Share remuneration transaction Other changes Total contributions by and distributions to owners of the Company 49,777 32,109 32,109 ― 597 597 Balance as of March 31, 2021 ― 77,772 250,039 619,111 35,527 654,639 (597) (4,115) (10,113) (19,123) (11,103) (30,227) 13 Notes to the Consolidated Financial Statements Significant Basis of Presenting Consolidated Financial Statements 1. Basis for Presenting Consolidated Financial Statements Sojitz prepares its consolidated financial statements based on the International Financial Reporting Standards (hereinafter referred to as “IFRS“), in accordance with Article 120, Paragraph 1 of the Rules of Corporate Accounting. In accordance with the second sentence of Article 120, Paragraph 1 of the Rules of Corporate Accounting, certain disclosures and notes as required by the IFRS are omitted. 2. Scope of Consolidation Number of consolidated subsidiaries: 294 The major consolidated subsidiaries of Sojitz Group are as follows: Sojitz Aerospace Corporation, Nissho Electronics Corporation, Sojitz Ject Corporation, Sojitz Pla-Net Corporation, Pla Matels Corporation, Sojitz Building Materials Corporation, Sojitz Foods Corporation, Sojitz Fashion Co., Ltd., Sojitz New Urban Development Corporation, Sojitz Machinery Corporation, Sojitz Kyushu Corporation, Sojitz Corporation of America, Sojitz Europe plc, and Sojitz Asia Pte. Ltd. 3. Application of Equity Method Number of entities subject to equity method: 136 The major entities subject to equity method are as follows: Metal One Corporation, LNG Japan Corporation, and JALUX, Inc. 4. Accounting Policies 1) Financial assets (1) Basis and methods of valuation of significant assets Sojitz Group has applied the IFRS 9 Financial Instruments (2014 version). At initial recognition, financial assets are classified as financial assets measured at amortized costs, debt financial assets measured at fair value through other comprehensive income, equity financial assets measured at fair value through other comprehensive income, and financial assets measured at fair value through profit or loss. Sojitz Group initially recognizes financial assets measured at amortized costs and debt financial assets measured at fair value through other comprehensive income on the date of occurrence. Sojitz Group initially recognizes other financial assets on the transaction date. In cases in which the contractual right with respect to the cash flow from a financial asset is extinguished, or the contractual right to receive cash flow from a financial asset has been transferred, and substantially all of the risks and rewards associated with the ownership of such asset are removed, Sojitz Group derecognizes such financial asset. (a) Financial assets measured at amortized costs A financial asset that meets the following conditions is classified as financial asset measured at amortized costs. 14 When the financial asset is held for a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets When the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding At initial recognition, financial assets measured at amortized costs are measured at fair value plus transaction costs directly attributable to acquisition of such assets. After initial recognition, the carrying amount of such financial assets measured at amortized cost is calculated using the effective interest method. (b) Debt financial assets measured at fair value through other comprehensive income A financial asset that meets the following conditions is classified as a debt financial asset measured through other comprehensive income. The asset is held in a business model for which the objective is to collect cash flow under a contract and to sell the financial asset; and, Based on the contractual terms with respect to the financial asset, the cash flow, which is intended only for payment of principal and interests on the outstanding principal balance, arises on a specified date. At initial recognition, debt financial assets measured at fair value through other comprehensive income are measured at fair value plus transaction costs directly attributable to the acquisition of such assets. After initial recognition, they are measured at fair value, and subsequent changes in the fair value are recognized as other comprehensive income. Of the subsequent changes in fair value, however, financial revenue based on the effective interest method, foreign exchange translation differences and impairment losses are recognized as profit or loss. The accumulated amount of other comprehensive income is reclassified as profit or loss when derecognized. (c) Equity financial assets measured at fair value through other comprehensive income Regarding equity financial assets invested in for purposes other than that of purchase and sale, an irrevocable election may be made at initial recognition to present subsequent changes to the fair value of such instruments as other comprehensive income. Sojitz Group makes such election per each such financial instrument. At initial recognition, equity financial assets invested in for purposes other than that of purchase and sale for which an irrevocable election was made to present subsequent changes to the fair value as other comprehensive income are measured at fair value plus transaction costs directly attributable to the acquisition of such assets. After initial recognition, they are measured at fair value, and subsequent changes in the fair value are recognized as other comprehensive income. When the equity investment is derecognized, or the decrease in fair value is substantial, the accumulated amount of other comprehensive income is reclassified as retained earnings and not as profit or loss. Dividends are recognized as profit or loss. (d) Financial assets measured at fair value through profit or loss Financial assets other than the above are classified as financial assets measured at fair value through profit or loss. At initial recognition, such assets are measured at fair value, and transaction costs directly attributable to the acquisition of such assets are recognized as profit or loss at the time they are incurred. After initial recognition, they are measured at fair value and the subsequent changes in fair value are recognized as profit or loss. Trade receivables without significant financing components are measured at transaction prices 15 at initial recognition. 2) Inventories Inventories are measured at the lower of a historical cost basis and net realizable value. The costs of inventories include purchasing costs, processing costs and all other costs incurred in the process of bringing such inventories to the present location and condition, and is mainly determined based on the average method. Non-fungible inventories are calculated based on the specific identification method. Inventories that have been acquired for trading purposes are measured at fair value less costs to sell, and changes in the fair values of such inventories are recognized as profit or loss. 3) Property, plant and equipment After initial recognition, Sojitz Group applies the cost model, under which property, plant and equipment are measured at cost less any accumulated depreciations and accumulated impairment losses. The costs of property, plant and equipment include costs directly attributable to the acquisition of such assets. If a material component of property, plant and equipment is consumed differently, then such component is accounted for as a separate item of property, plant and equipment. 4) Right-of-use assets Please refer to “4. Accounting Policies (8) Leases.” 5) Goodwill and intangible assets (a) Goodwill Goodwill is measured at cost less any accumulated impairment losses. (b) Intangible assets After initial recognition, Sojitz Group applies the cost model and intangible assets are measured at cost less any accumulated depreciations and accumulated impairment losses. At initial recognition, intangible assets acquired individually are measured at cost. The costs of intangible assets acquired from business combinations are measured at fair value at the date of acquisition. With respect to internally-generated intangible assets that do not meet the criteria for asset recognition, expenditures related thereto are accounted for as expenses at the time they are incurred. With respect to internally-generated intangible assets that meet the criteria for asset recognition, the total of expenditures related thereto that were incurred from the date such criteria was first met is treated as cost. 6) Investment property An investment property is a property held either to earn rental income or for capital appreciation or for both. An investment property does not include a property held for sale in the ordinary course of business or property used for the production or supply of goods or service or for other administrative purposes. After initial recognition, Sojitz Group applies the cost model and investment property is measured at cost less any accumulated depreciations and accumulated impairment losses. 16 (2) Depreciation method for significant depreciable assets 1) Property, plant and equipment Depreciation of property, plant and equipment is mainly computed under the straight-line method based on the estimated useful life of each component thereof. 2) Right-of-use assets 3) Intangible assets Please refer to “4. Accounting Policies (8) Leases.” Intangible assets, of which their useful lives may be determined (excluding mining rights), are depreciated under the straight-line method for the period of such estimated use. With respect to mining rights, they are depreciated using the production output method based on estimated mine reserves. Intangible assets for which their useful lives may not be determined are not depreciated. 4) Investment property Depreciation of an investment property is mainly computed under the straight-line method based on the applicable estimated useful life. (3) Accounting standards for significant provisions A provision is recognized only when Sojitz Group has a currently existing obligation (legal or presumptive) as a result of a past event, there is a probability that an outflow of resources with economic benefits will be required to settle such obligation and a reliable estimate can be made regarding the amount of such obligation. In the case where there is significance in the effect of the time value of money, provision is posted for the amount from which the current discount rate before tax after reflecting the risks specific to the relevant liabilities have been deducted. (4) Revenue recognition standards The Company has adopted an approach of recognizing the amount of profit to which the Company is expected to be entitled due to the transfer of goods or services to customers based on the following five-step model. Step 1. Identify the contract(s) with a customer Step 2. Identify the performance obligations in the contract Step 3. Determine the transaction price Step 4. Allocate the transaction price to the performance obligations in the contract Step 5. Recognize revenue when (or as) the entity satisfies a performance obligation Sojitz Group identifies each good or service in the contract with a customer and identifies a performance obligation for each as a unit of transaction. Because, in ordinary business transactions, Sojitz Group might act as a broker or an agent, we determine whether we are a principal or an agent in identifying a performance obligation. It is judged as principal if the nature of our promise is a performance obligation for us ourselves to provide a specified good or service, while it is judged as agent if the nature of our promise is a performance obligation to arrange so that such good or service is provided by another party. The principal versus agent determination is 17 made comprehensively by considering the following factors. – – – The Group assumes lead responsibility for performing the promise of providing a specified good or service. Before the specified good or service is transferred to the customer, or after the control is transferred to the customer, the Group holds an inventory risk. The Group has discretion with regard to determining the price of the specified good or service. For a transaction in which the Group is judged as principal, we recognize revenue at the total amount of consideration in which the right is expected to be acquired in exchange for providing the specified good or service, when or as a performance obligation is satisfied. Meanwhile, for a transaction in which the Group is judged as agent, revenue is recognized at a total amount of the remuneration or commission in which the right is expected to be acquired in exchange for arranging that the specified good or service is provided by another party or the net amount of the consideration. The Group recognizes revenue at the amount of consideration in which the right is expected to be acquired in exchange for a transfer of goods or services to a customer, exclusive of consumption tax, value-added tax or other taxes that are collected on behalf of tax authorities. If variable components are included in the consideration in the contract with a customer, the variable consideration amount estimated in the transaction price is included to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur when uncertainties relating to the variable consideration are later eliminated. Regarding the transaction prices, the amount of revenue that includes variable consideration, etc., carries no significance. In the case that, at the commencement of the contract, the period between the timing of transfer to the customer of the good or service promised by the Group and the timing of payment for said good or service is expected to be not more than one year, the Group does not make any adjustments on the effects of significant financial components regarding the amount of the promised consideration. The timing of recognizing revenue for major transactions by the Group is as follows. 1) Revenue concerning the sale of goods Revenue concerning the sale of goods includes revenue regarding the sale of products mainly through the wholesale, retail, manufacturing and/or processing thereof, and the sale of real estate. The Group judges that a customer acquires control over the goods and the Group’s performance obligations are satisfied at the time of delivery or receiving inspections or when contractual terms of delivery are satisfied. Therefore, revenue is recognized at such timing. The consideration relating to the sale of goods does not include significant financial components because they are received primarily within one year from the satisfaction of performance obligations. 2) Revenue concerning the sale of services and others Revenue concerning the sale of services and others includes revenue arising from the provision of services, such as system-related services, quality inspection of automobile parts and building management. If revenue falls under any of the following, the Group judges that control over the service is transferred for a certain period and therefore the Group’s performance obligations are satisfied for that certain period. Accordingly, the revenue is recognized according to the progress of performance obligations being satisfied. The degree of progress is measured in consideration of the nature of the goods or services transferred to the customer. 18 – A customer receives and consumes the benefits provided from the Group’s performance of obligations at the same time as the Group’s performance of obligations. The Group’s performance of obligations creates or enhances the value of an asset (e.g., work in progress), and a customer acquires control as said asset is created or its value is enhanced. The Group’s performance of obligations does not create an asset that can be used for other purposes, and the Group has the enforceable right to receive payment for the obligations that have been completed to date. In the case that the aforementioned conditions are not met, the Group recognizes revenue when it acquires the right to receive consideration from a customer due to such reasons as completion of the provision of services because we judge that the Group’s performance obligations are satisfied at such time. The consideration relating to the sale of services and others does not include significant financial components because they are received primarily within one year from the satisfaction of performance obligations. (5) Retirement benefits liabilities Defined benefit plans refer to retirement benefits plans other than a defined contribution plan. Defined benefits obligations are calculated separately for each plan by estimating the future amount of benefits that employees will have earned in return for their services provided in the current and prior periods and discounting such amount in order to determine the present value. The fair value of any plan assets is deducted from the present value of the defined benefits obligations. The discount rates are principally equivalent to the market yields of AA credit-rated corporate bonds at the fiscal year end that have maturity terms that are approximately the same as those of Sojitz Group’s obligations and use the same currencies as those used for future benefits payments. Past service costs are immediately recognized as profit or loss. Sojitz Group immediately recognizes all of the net amount of remeasured defined benefits obligations (assets) arising from the defined benefit plans as other comprehensive income and promptly reclassifies them as retained earnings. – – (6) Foreign currency translation 1) Foreign currency transactions Foreign currency transactions are translated to the respective functional currencies of each company at exchange rates on the dates of such transactions. Monetary items in foreign currency on the reporting date are retranslated to the functional currency at the exchange rate on such date. Foreign exchange translation differences on monetary items are recognized as profit or loss in the period incurred. Non-monetary items that are measured based on historical cost of the foreign currency are translated using the exchange rate on the date of the transaction. Non-monetary items in foreign currency that are measured at fair value of such foreign currency are retranslated to the functional currency at the exchange rate as of the calculation date of fair values thereof. With 19 respect to the foreign exchange translation differences of non-monetary items, if gains or losses on non-monetary items are recognized as other comprehensive income, the exchanged portion of such gains or losses will be recognized as other comprehensive income. On the other hand, if gains or losses on non-monetary items are recognized as profit or loss, the exchanged portions of such gains or losses will be recognized as profit or loss. 2) Foreign operations The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising from acquisitions thereof, are translated into presentation currency using the exchange rate on the reporting date. In addition, the income and expenses of foreign operations are translated into presentation currency using the average exchange rate for the year excluding cases in which exchange rates are fluctuating significantly. Foreign exchange translation differences are recognized as other comprehensive income. If Sojitz Group’s foreign operation is disposed of, the cumulative amount of the foreign exchange translation differences related to such foreign operation are reclassified to profit or loss at the time of such disposal. Based on the application of the exemption clauses under IFRS 1 First Time Adoption of International Financial Reporting Standards, Sojitz Group reclassified the cumulative translation differences as of the Transition Date to retained earnings. (7) Derivatives and hedge accounting In order to hedge the foreign currency risk, interest rate fluctuation risk and commodity price fluctuation risk, Sojitz Group conducts derivative transactions, such as forward exchange transactions, interest rate swap transactions and commodity futures and forward transactions. Derivatives are initially recognized at fair value. After initial recognition, derivatives are measured at fair value and subsequent changes in the fair value thereof are accounted for as follows: 1) Fair value hedges 2) Cash flow hedges The changes in fair value of a derivative used as a hedging instrument are recognized as profit or loss. The carrying amount of hedged items is measured at fair value and the gains or losses on such hedged items arising from changes in the fair values attributable to the hedged risks are recognized as profit or loss. Of the changes in fair value of a derivative used as a hedging instrument, portions determined to be effective are recognized as other comprehensive income, and the cumulative amount is included in other components of equity. The amount accumulated in other components of equity is reclassified to profit or loss in the same period that the hedged transaction affects profit or loss; provided, however, that if hedging of a scheduled transaction subsequently results in the recognition of a non-financial asset or liability, the amount accumulated in other components of equity is directly included in the initial carrying amount of such non-financial asset or liability. Portions determined to be not effective are immediately recognized as profit or loss. When the hedge no longer meets the criteria for hedge accounting, the hedge instrument expires or is sold, terminated or exercised or designation of the hedge is revoked, hedge accounting is discontinued prospectively. If the scheduled transaction is no longer expected to occur, the 20 amount accumulated in other components of equity is immediately reclassified to profit or loss. 3) Hedge of a net investment Of the changes in fair value of derivatives and other hedge instruments, such as loans payable, under the same accounting applied to a cash flow hedge, portions determined to be effective are recognized as other comprehensive income and the cumulative amount is included in other components of equity. The effective portions recognized as other comprehensive income are reclassified from other components of equity to profit or loss at the time of disposition of a foreign operation. 4) Derivatives not designated as hedging instrument The changes in the fair value of such derivatives are recognized as profit or loss. (8) Leases The Group determines, at the commencement of an agreement, whether such agreement constitutes or includes a lease. An agreement is deemed to constitute or include a lease, if such agreement involves transfer of the right to control the use of a specified asset for a specific period in return for consideration. 1) Leases as lessee In regard to leases as the lessee, the Company recognizes right-of-use assets and lease liabilities on the commencement day of the lease period. Lease liabilities are recognized by first measuring the total outstanding amount of the lease at discounted present value using the calculated interest rate for the lease. After recognition, the book value of the lease liabilities is adjusted to reflect interest associated with the lease and lease payments made. If the calculated interest rate for the lease cannot be easily determined, the Group’s incremental borrowing rate is used as a substitute, which the Group normally uses for the purpose of discount rate. In measuring lease liabilities, the Group has opted for a method whereby lease components and associated non-lease components are not separated, and recognized as a single lease component. Right-of-use assets are first recognized by measuring the acquisition cost by adjusting the initially measured value for the initial direct costs. After recognition, the value is measured by deducting accumulated depreciation and accumulated impairment losses. Depreciation of right-of-use assets is performed using the straight-line method over the shorter of the lease period and the usable life of the lease assets. The lease period is determined as a period including the non-cancellable period of the lease, the period covered under the lease extension option likely to be executed with reasonable certainty, and the period covered under the lease termination option unlikely to be executed with reasonable certainty. Lease payments for short-term leases and small-sum asset leases are recognized as expenses using the straight-line method over the lease period. 2) Leases as lessor The Group classifies a lease, as of the date of its agreement, as either finance lease or operating lease. A lease involving transfer of nearly all of the risks and economic value associated with the ownership of the underlying asset is classified as a finance lease, whereas a lease not involving transfer of nearly all of the risks and economic value associated with the ownership of the underlying asset is classified as an operating lease. 21 If the Group is acting as an intermediate lessor, the sublease is classified based on the right-of-use asset arising from the head lease, rather than the underlying asset. If the head lease is a short-term lease, its sublease is classified as an operating lease. (a) Finance leases At the lease commencement date, recognition of the assets held based on a finance lease is terminated, whereupon lease liability is recognized as a receivable at an amount equal to the net unrecovered investment in the lease. Subsequent to such initial recognition, recovery of receivables from the lessee is recognized as the lease payment is received, and financial revenue is recognized over the lease period so that the profit ratio against the net unrecovered in the lease over a period of time is constant. (b) Operating leases The underlying assets subject to operating leases are continuously recognized in the consolidated statement of financial position. Lease payments under operating leases are recognized as revenue either by using the straight-line method or another regular basis. In addition, the underlying assets subject to operating leases are subjected to depreciation and amortization by using the method consistent with that applicable to other similar assets held by the Group. Initial direct costs associated with acquiring the operating lease agreement are added to the book value of the underlying assets subject to the operating lease, and recognized as expenses over the lease period on the same basis as applicable to the lease revenue. 5. Accounting Estimates Impairment of non-financial assets (1) Amounts recorded in the consolidated financial statements for the current fiscal year Property, plant and equipment Right-of-use assets Goodwill Intangible assets Investments accounted for using the equity method (Millions of yen) 201,516 69,661 82,522 85,031 490,320 (2) Information relating to significant accounting estimates on identified items At each fiscal year end, the Group determines whether there is any indication of an impairment loss with respect to the Group’s non-financial assets, and, if so, the Group estimates the recoverable amount of such assets. Goodwill and intangible assets with indefinite useful lives, of which their useful lives cannot be determined, are tested for impairment annually and whenever there is an indication that there may be an impairment with respect thereof. If the carrying amount of an individual asset or a cash-generating unit exceeds the recoverable amount, such carrying amount is reduced to equal the recoverable amount and an impairment loss is recognized. Recoverable amount is either the fair value or the value in use (whichever is the higher value) after deducting disposal costs from individual assets or cash-generating units. Fair value is calculated using reasonable estimated prices, obtainable through orderly transactions between market participants. Value in use is calculated by discounting estimated future cash flow using a pre-tax discount rate that reflects the current market value in relation to the inherent risks of cash-generating units or individual assets, and the time value of mo