ＥＮＥＯＳホールディングス（5020） – Disclosure through the Internet Relating to the Convocation Notice of the 12th Ordinary General Meeting of Shareholders

THE FOLLOWING IS AN ENGLISH TRANSLATION PREPARED FOR THE CONVENIENCE OF THE SHAREHOLDERS AND INVESTORS. THE OFFICIAL TEXT IN JAPANESE OF THE DISCLOSURE THROUGH THE INTERNET RELATING TO THE CONVOCATION NOTICE OF THE ORDINARY GENERAL MEETING OF SHAREHOLDERS HAS BEEN PREPARED IN ACCORDANCE WITH STATUTORY PROVISIONS. SHOULD THERE BE ANY INCONSISTENCY BETWEEN THE TRANSLATION AND THE OFFICIAL TEXT IN TERMS OF THE CONTENTS OF THE NOTICE, THE OFFICIAL TEXT SHALL PREVAIL. THE COMPANY ACCEPTS NO LIABILITY FOR ANY MISUNDERSTANDING CAUSED BY THE TRANSLATION FOR ANY REASON WHATSOEVER. June 6, 2022 Dear Our Shareholders, Disclosure through the Internet Relating to the Convocation Notice of the 12th Ordinary General Meeting of Shareholders The 12th Fiscal Term (from April 1, 2021 to March 31, 2022) Business Report 1. Matters Concerning Present Condition of the Corporate Group 2. Matters Concerning the Financial Auditor 3. System to Ensure Proper Operations and the Operating Effectiveness of Such System Consolidated Financial Statements Consolidated Statements of Changes in Equity Notes to Consolidated Financial Statements Non-consolidated Financial Statements Non-consolidated Statements of Changes in Net Assets Notes to Non-consolidated Financial Statements ENEOS Holdings, Inc. 2 3 4 12 13 38 39 The contents above are provided to our shareholders by posting on our website (https://www.hd.eneos.co.jp/ir/stock/meeting/) pursuant to the provisions of laws and regulations, and Article 15 of the Articles of Incorporation of the Company. 1 1. Matters Concerning Present Condition of the Corporate Group Major Business Activities (as of March 31, 2022) Business Segment Details of Major Business Activities Details of Principal Operating Companies Energy Business ENEOS Corporation Oil and Natural Gas E&P Business JX Nippon Oil & Gas Exploration Corporation Metals Business JX Nippon Mining & Metals Corporation ・Manufacturing and marketing petroleum products (e.g. gasoline, kerosene, and lubricants.) ・Manufacturing and sales of petrochemical products and high-performance materials ・Supply of electricity, gas and hydrogen ・Development and operation of renewable energy power source ・Exploring, developing, and producing oil and natural gas ・Exploring and developing non-ferrous metal resources (e.g. copper and gold) ・Smelting, refining and marketing non-ferrous metal products (e.g. copper, gold, silver, and rare metals) ・Manufacturing and marketing electro-deposited copper foils and treated rolled copper foils ・Manufacturing and marketing thin-film materials (e.g. sputtering targets, surface treatment agents and compound semiconductor materials) ・Manufacturing and marketing precision rolled products and precision-fabricated products ・Recycling of non-ferrous metal materials and treatment of industrial waste ・Manufacturing, processing, and marketing titanium metals ・Civil engineering work, including roadwork and pavement construction ・Construction work 2 Other Business 2. Matters Concerning the Financial Auditor (1) Name Ernst & Young ShinNihon LLC (2) Amount of the Remunerations (for the fiscal year 2021) (i) Amount of the Remuneration as the Financial Auditor of the Company (ii) Total amount of monies and other property benefits to be paid by the Company and its subsidiaries (Millions of yen)1631,199(Notes) 1. The Audit and Supervisory Committee received reports from the financial auditor and the related sections in the Company about how the remuneration estimates in the audit plan drafted by the financial auditor were calculated, including the audit items, audit time, and deployment plans; and considered the performance of past fiscal years, the level of remuneration in other companies, and other factors. As a result, the Audit and Supervisory Committee came to determine that the amount of remuneration of the financial auditor was appropriate, and consented to it based on Articles 399.1 and 399.3 of the Japanese Companies Act. 2. The amount set forth in (i) above includes the amount of audit remuneration for the audit based on the Japanese Financial Instruments and Exchange Act because the amount of audit remuneration for the audit based on the Japanese Companies Act and the amount of audit remuneration for the audit based on the Japanese Financial Instruments and Exchange Act are not distinguished in the audit agreement between the Company and the financial auditor, and are not practically distinguishable. 3. The Company has paid the financial auditor fees for the preparation of comfort letters for issuance of bonds, which is non-audit service (service other than services set forth in Article 2, Paragraph 1 of the Japanese Certified Public Accountants Act). (3) Policies on Determining Dismissal or Refusal of Reappointment of the Financial Auditor a. b. If the Audit and Supervisory Committee deems that a financial auditor falls under any of the categories set forth in items of Article 340.1 of the Japanese Companies Act, and if it determines it necessary to immediately dismiss the financial auditor without obtaining a resolution of a general meeting of shareholders, the financial auditor shall be dismissed by the consent of all Audit and Supervisory Committee Members. If the Audit and Supervisory Committee deems that a financial auditor falls under any of the following items, and if it determines that it is necessary to dismiss or refuse to reappoint the financial auditor, it shall decide the details of the proposal to be submitted to a general meeting of shareholders regarding the dismissal or non-reappointment of the financial auditor. (i) the financial auditor falls under any of the categories set forth in items of Article 340.1 of the Japanese Companies Act; (ii) the financial auditor is subject to an administrative punishment for a breach of laws and regulations, or is subject to a punishment pursuant to the rules established by The Japanese Institute of Certified Public Accountants; or (iii) the Audit and Supervisory Committee determines it reasonable to make the accounting audit proper and efficient. 3 System Operations 3. System to Ensure Proper Operations and the Operating Effectiveness of Such (1) The Contents of the Resolution on Development of System to Ensure the Properness of The contents of the resolution on the Company’s development of the system (the internal control system) set forth in Article 399-13.1.1 (b) and (c) of the Japanese Companies Act are as follows: Under the “ENEOS Group Philosophy” and the “ENEOS Group Code of Conduct,” with recognition of the importance of ESG (Environment, Social and Governance) management, the Company shall develop, based on the following basic policies, a system aimed at ensuring the properness of operations (the internal control system), and operate the system. In operating the internal control system, the Company shall make efforts to continuously improve the system, and regularly monitor the operational status at the Executive Council’s meeting, so that the internal control system will be implemented across the entire ENEOS Group, and done so effectively. 1. System to Ensure That the Execution of Duties by Directors and Employees Complies with Laws and Regulations, and the Articles of Incorporation (1) The Company shall comply with laws and regulations, its articles of incorporation, and its rules, etc., in its entire operational spectrum by developing and enforcing rules aimed at fully ensuring compliance, so that the Company may carry out its corporate activities fairly and improve society’s trust in the ENEOS Group, whether in or outside of Japan. (2) The Company shall develop and operate organizational systems, such as committees, aimed at fully ensuring compliance, as well as regularly conduct inspection activities regarding the ENEOS Group’s status of compliance, and shall take appropriate measures that correspond to the inspection results. (3) The Company shall pursue early detection and early correction of the breaching of laws and regulations, as well as develop and operate a whistleblowing system that cooperates with attorneys-at-law in order to appropriately protect the whistleblower complaining of a breach of laws and regulations. Also, the Company shall develop and operate systems required to ensure that any person who reports any incident to the Company by using a whistleblowing system, or by any other appropriate method, is not treated unfavorably on the grounds of making such a report (including by expressly prohibiting such treatment in the relevant rules, among others). (4) In order to achieve appropriate operation of the Board of Directors’ meetings, the Company shall establish “Rules for the Board of Directors.” Based on these rules, it shall hold Board of Directors’ meetings once every month in principle, and decide on the execution of important business activities after thorough deliberations, as well as receive reports from directors in an appropriate manner on the status of execution of their duties. (5) By having outside directors attend the Board of Directors’ meetings and participate in deliberations thereof, the Company shall aim to ensure objectivity and further improve the adequacy of decisions on the execution of business activities. (6) The Company shall establish the Internal Audit Department, which will be in charge of internal auditing and which will implement audits independently from other divisions. 4 (7) The Company shall develop and operate an internal control system aimed at ensuring trust in its financial reporting, as well as evaluate the effectiveness of the reporting every year, and make any necessary corrections. (8) To prevent a relationship between the Company and anti-social forces, the Company shall set the basic policy for the entire ENEOS Group, and each company under the ENEOS Group shall develop and enforce the rules, etc., that correspond to each of their actual business activities, and fully ensure that the rules, etc., are complied with. 2. System for the Storage and Management of Information Related to the Execution of Duties by Directors and Employees (1) The execution of duties by directors and employees shall in principle be conducted in writing, and the rules, etc., on document preparation, management, or the like, shall be established and enforced. (2) The Company shall properly prepare minutes of the Board of Directors’ meetings based on laws and regulations, and shall develop and enforce rules, etc. on the preparation, approval process, storage, or the like, of approval documents for each management position. (3) The Company shall develop and enforce rules, etc., aimed at preventing wrongful use, disclosure, and divulgence of company information, and at appropriately handling confidential information and personal information, as well as to protect its IT system from outside threats. In addition, the Company shall, by providing opportunities such as internal training, ensure that employees fully comply with the rules, etc. (4) Based on the Japanese Companies Act, the Japanese Financial Instruments and Exchange Act and the Timely Disclosure Rules of the stock exchange, the Company shall appropriately prepare business reports, financial statements and annual securities reports, and shall disclose the company information appropriately and in a timely manner. 3. Rules and Other Systems for the Management of Risk of Loss (1) In submitting an important matter, such as regarding a substantial amount of investment, to the Board of Directors’ meeting or the Executive Council’s meeting, policies on treatment of risks pertaining to the matter shall be defined after sorting out the anticipated risk. In addition, the Company shall, as necessary, appoint outside legal, accounting, tax and other advisors, and seek their opinions. (2) The Company shall appropriately identify and analyze various risks that may affect the ENEOS Group’s business activities, such as radical changes in the economy and financial conditions; drastic fluctuation in crude oil, copper metal, or other resource prices, or in currency exchange rates; the occurrence of a large earthquake; and climate change, etc., and shall develop and enforce the risk management systems and rules, etc., aimed at dealing with these risks. (3) The Company shall promote internal control systems in order to manage the risks for the achievement of organizational goals in each department and shall develop and operate necessary systems and rules in order to achieve this. (4) The Company shall achieve safety, preserve the environment and maintain health, and shall carry out the measures for respecting human rights and for human resource development, and shall develop and operate necessary systems and rules for these purposes. (5) To prepare for an event where a crisis or emergency significantly affects the ENEOS Group’s management, the Company shall appropriately transmit and manage information regarding the crisis or the emergency, and shall develop and enforce systems and rules, etc., aimed at preventing the occurrence and expansion of damage. 5 4. System to Ensure Efficient Execution of Duties by Directors and Employees (1) The Company shall set forth, in its rules on organization and authority, the organizational structure, management positions and business activity allocations in the Company, as well as matters for approval and the approval authority that correspond to each skill and management position, and have the duties executed in an efficient manner. (2) In order to improve the effectiveness of business execution, the Board of Directors shall delegate a part of its important decision-making on business execution to the President, and shall focus on the deliberations and determinations of the basic policies on management and basic policies for the development of internal control systems, as well as on the oversight of the execution of duties by directors and executive officers. (3) The matters to be resolved by the Board of Directors shall in principle be approved by the President in advance. In addition, on the granting of the President’s approval, the Executive Council shall be established as a body that discusses the President’s approval of the matter, and appropriate and efficient decision-making shall be conducted after the management of the Company have conducted examination and deliberation. (4) As well as formulating a long-term business plan for ENEOS Group, the Company shall develop a management plan for the next three (3) years in the Medium-Term Management Plan. The Company also develops and operates management control systems such as the budget system and the objectives management system. (5) The Company shall establish and operate an optimal IT system from the perspective of proper information management, standardization and optimization of business and strengthening of the internal control system. 5. System to Ensure Appropriate Business Operations within the Corporate Group (1) Regarding the “ENEOS Group Philosophy” and the “ENEOS Group Code of Conduct,” the Company shall define them as the philosophies and standards of conduct common to each company under the ENEOS Group, and shall aim to disseminate them among and have them fully understood by each company. (2) Under the supervision of the Board of Directors to the entire ENEOS Group, in order to establish the energy business centered operational structure of the group, the management of the Company and ENEOS shall concurrently hold the management posts and shall integrally operate the two companies’ Executive Council and the management divisions. Under the Company’s policies on management, JX Nippon Oil & Gas Exploration and JX Nippon Mining & Metals shall create, according to their business characteristics, highly self-directed, flexible and independent business operation systems. (3) The Company shall set forth, in its “Rules for the Board of Directors” and the rules on organization and authority, the matters to be resolved at, approved by, or reported to the Company’s Board of Directors’ meetings and the Executive Council’s meetings from among the matters regarding execution of the business activities of the group companies, and shall enforce those rules in an appropriate manner. (4) The Company shall set forth, in its rules, etc., the basic matters regarding the operation of the ENEOS Group, such as the mission, purposes, basic role, structure of authority for decision-making in the Company and ENEOS Group companies, as well as develop and enforce the rules, etc., that should be applied to the entire ENEOS Group, and shall aim to have each company under the group share and comply with the rules, etc. 6 (5) Regarding the systems related to internal control systems of the ENEOS Group (including systems related to compliance and systems related to internal controls through IT), the Company shall develop and operate them as systems that include the group companies, considering the business characteristics of the group companies. (6) The Company shall appropriately develop and operate a compliance system, risk management system, system to execute business efficiently, and other internal control systems of the ENEOS Group by monitoring the development and operation of the internal control system at the Executive Council’s meeting. 6. System to Ensure Effective Auditing by the Audit and Supervisory Committee (1) The Company shall respect the audit standards and the audit plans set forth by the Audit and Supervisory Committee, and shall cooperate in the smooth performance of audits and the development of conditions for an audit. (2) The Company shall take the measures necessary so that the Audit and Supervisory Committee members are able to attend important meetings, such as the Executive Council’s meetings, and understand the process of making important decisions and the status of execution of business activities. In addition, the Company shall develop and operate systems for the Company and the group companies to appropriately report on the matters which the Audit and Supervisory Committee members request. (3) The Company shall develop and operate systems for the Audit and Supervisory Committee to receive reports on any fact that may be identified concerning the Company or the group companies, such as material breaches of laws and regulations or the articles of incorporation, fraudulent acts, or facts that could cause considerable damage to the Company, immediately when such a fact is identified. In addition, the Company shall develop and operate systems for the auditor of the group companies to report on the matters, such as audit results, which the Audit and Supervisory Committee members request. (4) The Company shall develop and operate systems required to ensure that any person who reports any incident to the Company by reporting to the Audit and Supervisory Committee is not treated unfavorably on the grounds of making such a report (including by expressly prohibiting such treatment in the relevant rules, among others). (5) The Representative Director and other management shall hold meetings with the Audit and Supervisory Committee members regularly, and exchange opinions on matters such as the ENEOS Group’s management issues. (6) The Internal Audit Department, which is in charge of internal audits, shall make efforts to maintain close cooperation with the Audit and Supervisory Committee, such as exchanging views about audit plans and audit results. (7) The Company shall establish the Office of Audit and Supervisory Committee as an organization independent from the business execution sections, and the employees appointed exclusively to the office shall assist in the Audit and Supervisory Committee’s duties. Treatment of personnel, such as evaluation and transfer of such employees, shall be determined after prior discussions with the full-time Audit and Supervisory Committee members, in order to ensure the effectiveness of instructions that the Audit and Supervisory Committee gives to such employees. (8) The Company shall, upon an Audit and Supervisory Committee member’s request, appropriately bear any expenses or debt associated with the execution of duties of the Audit and Supervisory Committee member pursuant to Article 399-2, paragraph 4 of the Japanese Companies Act. 7 (2) The Overview of the Operating Effectiveness of the System to Ensure Proper Operations The following is an overview of the operating effectiveness of the internal control system of the Company. The Company monitored the operating effectiveness of the internal control system of the ENEOS Group in the Executive Council, and reported the results to the Board of Directors held on April 19, 2022. 1. System to Ensure That the Execution of Duties by Directors and Employees Complies with Laws and Regulations, and the Articles of Incorporation (1) The Company has conducted a self-check of the internal control and associated compliance status check based on the “ENEOS Group Compliance Activity Basic Policies” which defines compliance activities that should be carried out by ENEOS Group companies. The situation and the result of those activities have been monitored by the ENEOS Group Internal Control Compliance Committee. In this fiscal year, the Company worked to continue autonomous internal control and compliance activities even during the COVID-19 pandemic by taking measures such as reinforcement of the checking system to prevent recurrence of defects. (2) Based on “the ENEOS Group Internal Reporting System Basic Policies,” the Company has developed and operated a whistleblowing system in cooperation with attorneys-at-law. The Company has developed and operated systems prohibiting unfavorable treatment, explicitly providing in the Policies, for example, that no whistleblower may be treated unfavorably on the grounds of making a whistleblower report. (3) Based on the “Rules for the Board of Directors,” the Company held Board of Directors’ meetings 14 times this fiscal year with the attendance of the outside directors, thereby deciding on the execution of important business activities and receiving reports on the status of the execution of directors’ duties. Effectiveness of discussions in the Board of Directors’ meetings has been improved by enhancing the deliberation of basic management policies and monitoring of operating companies. (4) The Internal Audit Department formulates an audit plan and sequentially conducts audits based on the plan. It also conducts internal audit based on specific topics, as required in accordance with the instructions of management. In this fiscal year, an audit work support system has been newly introduced to conduct audits more efficiently using information technologies. (5) The Company conducts assessments of effectiveness concerning internal control over financial reporting pursuant to the Japanese Financial Instruments and Exchange Act. (6) Based on the “ENEOS Group Basic Regulations on Anti-Social Forces,” the Company investigates its business partners and takes contractual and other necessary measures to prevent a relationship between the Company and anti-social forces. 2. System for the Storage and Management of Information Related to the Execution of Duties by Directors and Employees (1) The Company executes the duties in principle in writing based on “Rules for Handling Documents,” which sets out how documents are to be prepared and managed. In this fiscal year, in order to achieve both the further speeding up of business execution and the ensuring of internal control for document management, the Company has introduced a new electronic approval system (digital workflow). (2) The Company prepares minutes of the Board of Directors’ meetings based on laws and regulations, and prepares documents for approval by each managerial position based on the “Rules for Handling Documents,” and appropriately stores and manages them. 8 (3) Based on rules such as the “ENEOS Group Basic Rules for Information Security” and “Regulation for Protection of Personal Information,” the Company appropriately manages the company information including confidential information and personal information. (4) Based on the related laws and regulations and the stock exchanges’ Timely Disclosure Rules, the Company appropriately prepares such documents as its business reports, financial statements, the securities report, and discloses them. 3. Rules and Other Systems for the Management of Risk of Loss (1) In submitting important matters to the Board of Directors’ meeting, the Company seeks opinions from outside advisors as necessary, identifies the anticipated risks pertaining to the matter, and defines the policy on how such risks are to be treated. (2) The Company develops and operates systems to handle each type of risk by responding appropriately to risks related to group management based on the “Risk Management Policy on ENEOS Group Management,” as well as by establishing and following rules concerning the derivative transactions, setting forth a business continuity plan in the event of a major earthquake, analyzing the effect of climate change on business and implementing measures therefor, and taking other measures. (3) The Company has developed the “Basic Policy on Internal Control System of the ENEOS Group” to set forth fundamental matters concerning the ENEOS Group internal control system, and each department promotes internal control pursuant to the provisions of such policy in order to mitigate the risks that hinder the organization from achieving its objectives. (4) The Company defined “2040 ENEOS Environmental Vision” and “2030 Long-Term Environmental Target” to aim for carbon neutrality by 2040, and is working towards establishment of a low-carbon, recycling-oriented society. The Company has also systematically provided training programs to make Group’s employees fully aware of respect for human rights as well as taking measures for preventing occupational accidents and improving the health of the Group’s employees. In addition, the Company has provided various educational training to improve the skills of every single employee. (5) The Company has established the “ENEOS Group Crisis and Emergency Response Regulations” to prepare for an event where a crisis or emergency such as a disaster or accident affects the Company and the ENEOS Group’s management, and conducts training assuming that such crisis or emergency will occur, and verifies the results of the training. In this fiscal year, the Company continued to make every effort to prevent infections of Group employees and ensure its business continuity in principal operating companies under the supervision of the task force to respond to COVID-19. 4. System to Ensure Efficient Execution of Duties by Directors and Employees (1) The Company has established the “ENEOS Holdings Organization Rules” and “ENEOS Holdings Authority Rules.” Duties are executed as defined in these regulations. (2) In order to strengthen the management and monitoring functions and to improve the agility of the execution of business activities, the Board of Directors delegates a part of the decision-making on execution of important business activities to the President, and conducts an operation wherein the Board of Directors can focus on deliberating and deciding on basic management policies, such as the corporate governance of the ENEOS Group and Medium-Term Management Plan. 9 (3) The matters to be resolved by the Board of Directors are in principle approved by the President. In addition, to receive the President’s approval, Executive Council meetings are held as a body to discuss matters for the President’s approval. (4) The Company formulates a Medium-Term Management Plan over three years in addition to the long-term vision of the ENEOS Group. The annual budgets and numerical targets of each Group company are set based on the Medium-Term Management Plan, and progress status is checked in the Executive Council’s meetings and Board of Directors’ meetings. (5) In this fiscal year, from the perspective of establishing an optimal IT system, the Company started operation of a new ERP system and endeavored to make the system work stably for the purpose of proper information management, standardization and optimization of business and strengthening of the internal control system. 5. System to Ensure Appropriate Business Operations within the Corporate Group (1) To permeate and strictly apply “ENEOS Group Philosophy” and “ENEOS Group Code of Conduct,” the Company continually holds internal seminars for each company in the ENEOS Group in addition to issuing the Integrated Report, etc. (2) The management of the Company concurrently serves as the management of ENEOS Corporation, and Executive Councils and the administrative departments of the both companies are efficiently managed as a single entity. Meanwhile, highly autonomous, flexible, and independent business execution systems are implemented in JX Nippon Oil & Gas Exploration Corporation and JX Nippon Mining & Metals Corporation. Furthermore, it is ensured that the Company’s Board of Directors is able to monitor ENEOS Corporation, JX Nippon Oil & Gas Exploration Corporation, and JX Nippon Mining & Metals Corporation appropriately through detailed business execution status reports. (3) In addition to the “Rules on the Operation of ENEOS Group,” the Company has established rules, to be applied to each company in the ENEOS Group, and has each company comply. (4) The Company has established the “Basic Policy on Internal Control System of the ENEOS Group” as the policy for the entire ENEOS Group, and is promoting internal control in each company in the Group. (5) The Company conducts surveys on the development and operation of the internal control system of the ENEOS Group every year, reports the results at the Executive Council’s meetings, and makes improvements as necessary. 6. System to Ensure Effective Auditing by the Audit and Supervisory Committee (1) The Company respects the audit standards and the audit plans set forth by the Audit and Supervisory Committee, and cooperates in the development of conditions for an audit. (2) The Company shall take the measures necessary so that the Audit and Supervisory Committee Members are able to attend important meetings, such as the Executive Council’s meetings, and understand the process of making important decisions and the status of execution of business activities. The Company has also established the system to report required matters, periodically and as required, to the Audit and Supervisory Committee, such as the operation status of the whistleblowing system and status of incidents, accidents, and lawsuits, including those related to Group companies. (3) The Company develops an environment in which the Audit and Supervisory Committee can appropriately gather information related to the Company’s management, by way of exchanges of opinions with the Representative Director and other management members, report on the audit plan and on how audits are being executed by the internal audit division and other ways. 10 (4) The Company has established the Office of Audit and Supervisory Committee, in which employees appointed exclusively to assist in the Audit and Supervisory Committee’s duties engage in their tasks under the direction of the Audit and Supervisory Committee Members. The treatment of personnel, such as the evaluation and transfer of such employees, is determined based on prior discussions with the full-time Audit and Supervisory Committee Members. (5) The Company, upon an Audit and Supervisory Committee Member’s request, bears any expenses or debt associated with the execution of the duties of the Audit and Supervisory Committee Members. End ～～～～～～～～～～～～～～～～～～～～～～～～～～～～～～～～～～～～～～～～～～～～～ (Note) The figures stated in this business report have been obtained by rounding off the fractions less than the unit indicated for each, and the ratios have been obtained by rounding off the fractions less than the digit indicated for each. However, the number of shares has been obtained by omitting the fractions less than the unit indicated for each, and the ratios regarding shares have been obtained by omitting the fractions less than the digit indicated for each. 11 |Consolidated Statements of Changes in Equity (from April 1, 2021 to March 31, 2022)| Balance as of April 1, 2021 100,000 1,066,459 (Millions of yen) Common stock Capital surplus Retained earnings Treasury stock 1,042,416 537,117 537,117 (70,733) 8,933 (61,800) 1,517,733 (8,793) – (50) 286 236 (8,557) Profit for the year Other comprehensive income Total comprehensive income for the year Purchase of treasury stock Disposal of treasury stock Cash dividends Share-based payment transactions Equity transactions with non-controlling interests, etc. Transfer from other components of equity to retained earnings Transfer from other components of equity to non-financial assets, etc. Changes due to business combination Other Total transactions with owners Balance as of March 31, 2022 – – 100,000 – (285) 443 (13,228) (4,296) (17,366) 1,049,093 – 7,058 7,058 Other components of equity Changes in fair value of cash flow hedges Exchange differences on translation of foreign operations Remeasurement (losses) gains on defined benefit plans Changes in fair value of financial assets measured at fair value through other comprehensive income (loss) Total equity attributable to owners of the parent Total Non-controlling interests Total equity Balance as of April 1, 2021 93,184 (6,851) 38,693 125,026 2,325,108 427,460 2,752,568 537,117 85,231 85,231 85,231 622,348 41,935 13,444 55,379 579,052 98,675 677,727 – – – – – – (70,733) (21,671) (92,404) (50) 1 443 – – (4,296) (50) 1 443 – 37,971 1,809 37,971 (2,487) 3,400 (1,875) (7,058) 3,400 (8,933) (9,828) (122,752) (132,580) (2,196) (2,196) (2,196) (4,914) (7,110) 47,951 47,951 (12,935) (12,935) 43,157 43,157 Profit for the year Other comprehensive income (loss) Total comprehensive income (loss) for the year Purchase of treasury stock Disposal of treasury stock Cash dividends Share-based payment transactions Equity transactions with non-controlling interests, etc. Transfer from other components of equity to retained earnings Transfer from other components of equity to non-financial assets, etc. Changes due to business combination Other 12 Total transactions with owners 1,525 (2,196) – (7,058) (7,729) (86,659) (109,557) (196,216) Balance as of March 31, 2022 142,660 (21,982) 81,850 – 202,528 2,860,797 373,282 3,234,079 Consolidated Financial Statements Notes to Consolidated Financial Statements (from April 1, 2021 to March 31, 2022) 1. Notes to Important Matters Fundamental for Preparation of Consolidated Financial Statements (1) Standards for Preparation of Consolidated Financial Statements The consolidated financial statements of the Company have been prepared in conformity with the International Financial Reporting Standards (“IFRS”) pursuant to the provisions of Article 120.1 of Rules of Corporate Accounting. Some of the items in the consolidated financial statements required to be disclosed by IFRS have been omitted in accordance with the provisions of the second sentence of Article 120.1 of Rules of Corporate Accounting. (2) Matters relating to the Scope of Consolidation and Application of Equity Method The Company has 594 subsidiaries and 170 subsidiaries and affiliates accounted for using the equity-method (affiliated companies, jointly controlled businesses and jointly controlled companies). Major subsidiaries ENEOS Corporation, JX Nippon Oil & Gas Exploration Corporation, JX Nippon Mining & Metals Corporation, Toho Titanium Co., Ltd. and NIPPO CORPORATION Major subsidiaries and affiliates accounted for using the equity-method Osaka International Refining Co., Ltd., Abu Dhabi Oil Co., Ltd., United Petroleum Development Co., Ltd., LS-Nikko Copper Inc. and Minera Los Pelambres (3) Matters relating to Accounting Policies (i) Valuation standards and valuation method for assets A. Valuation standards and valuation method for financial assets Financial assets measured at amortized cost Financial assets are categorized as financial assets measured at amortized cost if both of the following conditions are satisfied. ・ Financial assets are held based on the business model whose purpose is to hold assets to recover contractual cash flows. ・ A cash flow that only concerns the payment of the principal and interest accrued on the balance of the principal is accrued based on the contractual terms of the financial assets. Subsequent to the initial recognition, the financial assets are measured at amortized cost using the effective interest method and undergo impairment loss evaluation. 13 Financial assets measured at fair value through other comprehensive income Financial assets other than those measured at amortized cost are measured at fair value. Of such financial assets, each of the equity instruments other than those held for trading purposes is evaluated whether to be designated as a financial asset measured at fair value through other comprehensive income upon the initial recognition. The financial assets designated as financial assets measured at fair value through other comprehensive income are measured at fair value subsequent to the initial recognition and all subsequent changes in such financial assets are recognized in other comprehensive income. The amount recognized in other comprehensive income may not be subsequently transferred to net profit or loss, but may be transferred within equity. If any relevant financial asset is derecognized or its fair value has significantly declined, the amount recognized in other comprehensive income is transferred to retained earnings. Dividends from such financial assets are recognized in net profit or loss. Financial assets measured at fair value through net profit or loss Of financial assets other than the financial assets measured at amortized cost, those that are not designated as financial assets measured at fair value through other comprehensive income are categorized as financial assets measured at fair value through net profit or loss. Subsequent to the initial recognition, all subsequent increases and decreases in such financial assets are recognized in net profit or loss. B. Valuation standards and valuation method for inventories The acquisition cost of inventories includes purchase costs, process costs and all other costs incurred up to the current place and condition. Inventories are recorded at the lower of the acquisition cost and net realizable value. Net realizable value is the expected sales price in the ordinary course of business less estimated cost and estimated selling expenses required to complete. The acquisition cost is calculated mainly using the gross average method. C. Valuation standards, valuation method and depreciation method for property, plant and equipment For the measurement after recognition of property, plant and equipment, the cost model is adopted. The measurement value is indicated in the amount of acquisition cost less accumulated depreciation and accumulated impairment loss. Depreciation of tangible fixed assets other than land is primarily calculated based on the straight-line method over the estimated useful life of each component of property, plant and equipment, with respect to the amortizable value after deducting the residual value from the acquisition cost. 14 Estimated useful lives of major tangible fixed assets are as follows. Buildings, structures and oil tanks 2 years to 50 years 2 years to 20 years Machinery and vehicles Expenditure recognized as assets in the exploration, evaluation and development of oil and natural gas is depreciated using the units-of-production method after production begins. D. Valuation standards and valuation method for intangible assets and goodwill For the measurement after recognition of intangible assets, the cost model is adopted, and the measurement value is indicated in the amount of the acquisition cost less accumulated amortization and accumulated impairment loss. In addition, goodwill is indicated in the amount of the acquisition cost less the accumulated impairment loss. Intangible assets are amortized principally using the straight-line method over the estimated useful lives of the acquisition cost less residual value. Estimated useful lives of major intangible assets are as follows. Software Customer-related assets Contract-related assets 5 years 10 years to 25 years 12 years to 20 years E. Valuation standards and valuation method for the right-of-use assets Lease liabilities and right-of-use assets are recognized for leases except for short-term leases and leases of low-value assets. Lease liabilities are initially recognized at the present value of the lease payments outstanding as of the commencement date of the lease by discounting them at the interest rate implicit in the lease. However, if the interest rate implicit in the lease is not practicably readily determinable at the time of recognition, the ENEOS Group uses its own incremental borrowing rates. Right-of-use assets are recognized in the amount calculated by adjusting the measured amount of lease liabilities with initial direct costs, advance lease payments, etc. and adding any estimated costs incurred to fulfill restoration arising from the lease contract, and are depreciated systematically over the lease term. In addition, right-of-use assets are included in “property, plant, and equipment” in the consolidated statements of financial position. Lease payments are allocated to finance costs and the repayment portion of the outstanding lease liabilities in a way that the constant rate of interest is applied to the outstanding lease liability. Finance costs are presented separately from depreciation associated with the right-of-use assets in the consolidated statements of profit or loss. The Company determines if a contract is a lease, or if a contract includes a lease, based on the substance of the contract, including those legally not in the form of leasing. 15 Lease payments for short-term leases with a lease term of 12 months or less and leases of low-value assets are recognized as expenses on a straight-line basis over the lease term unless another systematic basis is more representative of the pattern of the lessee’s benefit. F. Impairment of non-financial assets The ENEOS Group assesses the impairment indicators for each asset for each reporting period, and estimates the recoverable amount of the asset if there are indications of impairment. If the recoverable value cannot be estimated for individual assets, the recoverable value is estimated for each cash generating unit to which the asset belongs. If the carrying amount of the asset or cash generating unit exceeds the recoverable amount, the impairment loss is recognized for the asset and the value is written down to the recoverable amount. With respect to goodwill, an impairment test is carried out every year or whenever there is an indication of impairment. Impairment losses on goodwill are recognized in net profit or loss and are not reversed. Assets other than goodwill are examined as to whether there is an indication of possible reduction or extinction of impairment losses recognized in the past reporting periods. If such indication exists, the recoverable amount of the asset or cash-generating unit is estimated, and if the recoverable amount exceeds the carrying amount of the asset or cash-generating unit, the impairment loss is reversed up to the amount not exceeding the carrying amount after deducting the necessary depreciation or amortization expenses from the carrying amount where impairment loss is not recognized. (ii) Recording standards for provisions Provisions are recognized where the Company has a current legal or constructive obligation as a result of a past event and it is highly likely that an outflow of resources with economic benefits will be required to settle the obligation and where the amount of such obligation can be reliably estimated. Provisions are measured in present value by applying to expenditures expected to be required for settlement of the obligation, the pre-tax discount rate that reflects the current market valuation of the time value of money and the risks specific to the obligation. Increase in provision over time is recognized as interest expense. (iii) Other important matters for preparation of the consolidated financial statements Business combinations and goodwill The Company applies the acquisition method to account for business combinations. Identifiable assets acquired, liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values as of the acquisition date. Acquisition-related costs are recognized as expenses as incurred. For each transaction, the Company determines whether to measure the non-controlling interest at fair value or at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets. 16 Goodwill is measured as the excess when the aggregate of the consideration transferred for the business combination, the amount of any non-controlling interest in the acquiree and the fair value of any equity interest in the acquiree previously held by the acquirer exceeds the net amount of identifiable assets and liabilities at the acquisition date. When the aggregate amount falls below the net amount of identifiable assets and liabilities due to a bargain purchase, the difference is directly recognized as net profit or loss in the consolidated statements of profit or loss. Goodwill is tested for impairment annually and whenever there is an indication of impairment. Goodwill is presented at acquisition cost less accumulated impairment losses. Any impairment losses on goodwill are recognized as net profit or loss in the consolidated statements of profit or loss and are not reversed. Goodwill relating to affiliated companies and jointly controlled companies included in the carrying amount of the investments accounted for using equity method is not tested for impairment separately. The Company assesses whether there is any objective evidence that an investment in an affiliated company or jointly controlled company is impaired. If any objective evidence of impairment exists, the Company performs an impairment test by comparing the recoverable amount (the higher of value in use and the fair value less costs of disposal, or FVLCD) of the investment to its carrying amount. Any impairment losses recognized in prior periods are reversed to the extent that the recoverable amount of the investment subsequently increases only when there has been a change in the estimates used for determining the recoverable amount of the investment, since the last impairment losses were recorded. For the purpose of impairment testing, goodwill is allocated to each of the cash-generating units, or CGUs, or groups of CGUs expected to benefit from synergies of the business combination. Foreign currency translation The Company’s consolidated financial statements are indicated in Japanese yen, the functional currency of the Company. Transactions denominated in foreign currencies are translated into functional currencies of each group company at the exchange rate at the transaction date. Monetary assets and liabilities denominated in foreign currency at the end of the fiscal year are re-translated to functional currency at the exchange rate at the end of the fiscal year, and non-monetary assets and liabilities denominated in foreign currency that are measured at fair value are translated into functional currency at the exchange rate at the date of calculation of the fair value. Foreign currency translation differences arising therefrom are in principle recognized in net profit or loss. Non-monetary assets and liabilities denominated in foreign currency that are measured at acquisition cost are translated at the exchange rate of the transaction date. Assets and liabilities of foreign operations are translated into Japanese yen using exchange rates at the end of the fiscal year, and income and expenses are translated into Japanese yen using the average exchange rate in the reporting period unless there have been significant fluctuations in the exchange rate during the reporting period. Differences arising from foreign currency translation are recognized in other comprehensive income. 17 Retirement benefits Recognition of income The ENEOS Group adopts a defined benefit plan and a defined contribution plan. The liability recognized in the consolidated statements of financial position in connection with the defined benefit plan is the present value of the defined benefit obligation as of the end of the reporting period minus the fair value of the plan assets. Defined benefit plan obligations are calculated annually by independent pension actuaries. The discount rate is calculated based on the market yield of high quality corporate bonds as of the end of the fiscal year corresponding to the discount period by setting a discount period based on the period up to the anticipated future payment date for each fiscal year. Retirement benefit expenses that constitute service cost and net interest on the net amount of defined benefit obligation (asset) are recognized in net profit or loss. The re-measurement, including the differences between estimates and actual results as well as the actuarial differences arising from changes in actuarial assumptions, is recognized as other comprehensive income in the period in which it occurred. Although such re-measurement amount may not be transferred to net profit or loss, since it is permitted to transfer within equity, it is immediately transferred from other components of equity to retained earnings. Prior service cost is recognized in net profit or loss. Retirement benefit expenses pertaining to defined contribution plans are recognized as expenses during the period when employees provided services, and unpaid contributions are recognized as obligations. The ENEOS Group recognizes income by applying the following five steps, excluding interest and dividend income or the like under IFRS 9 “Financial Instruments.” Step 1: Step 2: Step 3: Step 4: Step 5: Identify the contract with customers Identify the performance obligations in the contract Calculate the transaction value Allocate the transaction value to performance obligation in the contract Recognize the income when the performance obligation has been satisfied (or as it becomes satisfied) The ENEOS Group sells petroleum products, petrochemical products, crude oil, natural gas, material ore such as copper concentrates, non-ferrous metal products such as electrolytic copper, electronic materials products, and the like. In the sales of such products, the legal rights of ownership, possessory rights, risks accompanying the ownership of products and the economic value transfer to the customer generally at the time when the control over the product transfers to the customer, i.e. when the product is delivered to the customer, and the rights to receive consideration for the product from the customer are obtained. Thus, income is recognized at that point. Income is recognized based on the transaction value in accordance with the contract with the customer, and is shown in net amount after subtracting the value-added tax (VAT), returned products, rebates and discounts. Taxes that are imposed at the time of sales and considered to be collected as a substitute, such as VAT or gas oil delivery tax, are included in the net amount, and not included in the revenue. On the other hand, taxes that are 18 imposed before the sales, such as gasoline tax, are included in the revenue. Regarding transactions in which the consideration can fluctuate, the income therefrom is recognized within the scope wherein no significant reverse will occur in the future by using the single amount which is the most likely amount within the range of possible consideration amounts. Application of the consolidated tax payment system The consolidated tax payment system is applied. 2. Notes to Significant Accounting Estimates The Company’s consolidated financial statements include management’s estimates. Although these estimates are based on the best estimates by management in light of historical experience and various factors, etc. deemed to be reasonable at the end of the reporting period, actual results may differ from those estimates. In addition, at the end of the reporting period, the Company recognized that the impact of the COVID-19 and global affairs related to Ukraine was a highly uncertain factor to be taken into account in estimation. The impact of COVID-19 continues to affect the economy, business activities, and social life in a wide range of areas, and the impact on demand and prices for various products in the various businesses in which the ENEOS Group operates differs greatly from one business or product to the next. Therefore, we have made reasonable estimates for each business and product on the assumption that the impact of the COVID-19 will continue to a certain extent in the future, based on past sales results and other circumstances. The international situation surrounding Ukraine has affected commodity prices, especially those of crude oil, natural gas, and copper, which are important to the ENEOS Group. We have made our best estimates based on the assumption that the impact on commodity prices will be short term, and that in the medium to long term, the impact of the situation will disappear and prices will settle down at a certain level. If the future outlook for the above impacts changes, we may revise our estimates at that time. Major estimates that may have significant impact on the Company’s consolidated financial statements are as follows. (1) Impairment of non-financial assets The ENEOS Group tests property, plant and equipment, goodwill, and intangible assets for impairment in accordance with “1. (3) Matters relating to Accounting Policies” in Notes to Consolidated Financial Statements. In the calculation of recoverable amount in impairment test, estimated future cash flows, discount rate, etc. are determined. In the calculation in each impairment test, estimated future cash flows are determined by management’s best estimates and judgments based on a business plan approved by management. However, because estimated future cash flows are subject to effects of changes in uncertain factors such as sales volume, commodity price and foreign exchange rates included in the estimated future cash flows, consolidated financial statements could be affected significantly if these estimates and recoverable amount need to be reviewed. 19 Accordingly, of other expenses, the amount recorded as impairment loss in this fiscal year was 47,030 million yen. In addition, the amount recorded as property, plant and equipment, goodwill, and intangible assets at the end of this fiscal year was 4,313,223 million yen. The amount recorded in this fiscal year includes an impairment loss of 27,640 million yen for the entire book value of the refinery facilities, including buildings, structures, and oil tanks, as of the end of this fiscal year, as ENEOS Corporation, a subsidiary in the Energy segment, decided at its Board of Directors meeting in January 2022 to stop refining, manufacturing, and distribution functions at its Wakayama Refinery by October 2023, and the stand-alone use value of the refinery facilities is expected to become negative. In November 2021, JX Nippon Oil & Gas Exploration Corporation (“JX”), a subsidiary in the Oil and Natural Gas Exploration & Production segment, signed an agreement with NEO Energy Upstream UK Limited for the sale of 100% share of JX Nippon Exploration and Production (E&P) (U.K.) Limited (“JXNEPUK”), a subsidiary wholly owned by JX, and as a result, the assets and liabilities of JXNEPUK were classified as held-for-sale disposal group and the deferred tax assets of the company were reduced to the amount expected to be recoverable upon the sale. Although JXNEPUK’s net assets increased by 10,780 million yen from the time of this classification, mainly due to the recognition of profit after tax, said disposal group was remeasured at fair value less costs to sell and the same amount (10,780 million yen) was recorded as an impairment loss at the end of the third quarter of this fiscal year. The sale was completed in March 2022. (2) Estimates of oil, natural gas and ore reserves Depreciation of assets related to oil, natural gas and metallic resources is calculated at a ratio of output during the reporting period to total of proved reserves and probable reserves by production unit using the units-of-production method. Estimates of these reserves include many uncertain assumptions such as quality, commodity price and foreign exchange rates, production cost, and future capital expenditure. These assumptions are determined based on management’s best estimates and judgments. The estimates of reserves are related to part of 344,292 million yen of exploration and development investment account and 253,707 million yen of property, plant and equipment and intangible assets recorded by SCM Minera Lumina Copper Chile, which operates the Caserones Copper Mine, in Metals segment, among property, plant and equipment recorded at the end of this fiscal year. In addition, these estimates also affect impairment test in “(1) Impairment of non-financial assets.” Because assumptions used to estimate reserves are subject to effects of future changes in uncertain economic conditions, consolidated financial statements could be affected significantly if these estimates need to be reviewed. (3) Income tax expense The ENEOS Group is affected by income taxes in multiple tax jurisdictions, and significant judgments are required to determine the estimated amount of income taxes around the world. 20 In this fiscal year, the amount recorded as income tax expense was 192,737 million yen. Depending on transactions and calculation method, the final tax amount often includes uncertainty. Liabilities are recognized for any possible problem in tax examination based on estimation of whether additional tax collection is required. If the final tax amount related to such problems differs from the initially recognized amount, consolidated financial statements could be affected significantly. Moreover, the amount of deferred tax assets is calculated to the extent that it is probable that taxable profits will be available against which deductible temporary difference, unused tax credit carryforward and the loss carryforward can be utilized. The timing when taxable profits arise in the future and the amount of such profits are estimated based on the business plan approved by management including assumptions of sales volume, commodity price and foreign exchange rates. Accordingly, the amount recorded as deferred tax assets at the end of this fiscal year was 39,175 million yen. The timing when taxable profits arise in the future and the amount of such profits are subject to effects of future changes in uncertain economic conditions. Therefore, if the timing when taxable profits actually arise and the amount differ from the estimates, the amount of available deferred tax assets also changes accordingly, and consequently, consolidated financial statements could be affected significantly. (4) Evaluation of inventories Inventories are recorded at the lower of the acquisition cost and net realizable value. If the net realizable value falls below the acquisition cost at the end of the reporting period, inventories are measured at the net realizable value and a difference from the acquisition cost (write-down) is recorded in cost of sales. Accordingly, the amount recorded as inventories at the end of this fiscal year was 1,994,830 million yen. If the market environment changes greatly in the future and the net realizable value declines dramatically, a large amount of difference (write-down) may arise in cost of sales, and consolidated financial statements could be affected significantly. (5) Employee benefits The ENEOS Group has retirement benefit plans including a defined benefit plan. The present value of the defined benefit obligation for each of these plans and related service cost, etc. are calculated based on actuarial assumptions. Actuarial assumptions require estimates and judgments on diverse variables such as discount rate. Accordingly, the amount recorded as liabilities for retirement benefits was 220,188 million yen at the end of this fiscal year. Appropriateness of a