Itochu Enex Group
Integrated ReportWe started off in 1961 with only six gas stations.

Over the course of more than half a century, we have worked to contribute toan affluent society and quality of life and bring many smiles, growing with our customers.
Now we are transforming ourselves from a traditional energy trading company~ to an energy trading company ~ supporting the life in local communities.
And we will continue torespond to stakeholders’ expectations, live with local communities,
and contribute in making a sustainable society that brings forth a new era through co-creation.

We strive to pass on very valuable things for people andlocal communities so that future generations may enjoy a more prosperous future.

The Best Partner for Life and Society– with Energy, with the Car, with the Home –Itochu Enex GroupA service station affiliated with Itochu Fuel Corporation was opened.
Minami-morimachi service station, Kita-ku, Osaka

ENEX REPORT 2018 1

This is , ENEX

Itochu Enex Group’s journeyin value creation over half a century

Change revolution
2008~2010

Develop global businesses horizontally andvertically, strengthen core businesses andcreate synergies

Enex Group, which has been developing business mainly in the field of energy beyond the time of more thanhalf a century. We continue to move towards the future as a "The best partner for life and society" listed in our
Corporate philosophy.

Accelerate Change and Growth
2014

2017~2018

Transform the petroleum and gas
business model, Upgrade "Enex DNA"

Reforming the revenue base, Reforming
the organizational base2011~201311.0

2015~2016

Changes in performance and main events

10.4

Prologue to change■ Net profit attributable to Itochu Enex's shareholders (billions of yen)
*Unit performance until FY 1998, and figures for consolidated results since FY1999.
*The figures of this page are based on IFRS(International Financial ReportingStandards) from FY 2013.

Improvement of petroleum product distributionfunctions, transformation into a "company
providing the best mix of energy"

2004~2008

Promotion of organizational structure reform
for the new era

Improvement of profirability,
Sowing seeds for long-term growthstrategy

7.5

7.1

5.5

1961

1970

1980

1990

2000

~

2010

2014

2017

2020

FY

2010~ Era of Oil ,Gas and Power 2018~ Era of Oil ,Gas,Power and Mobility

ENEX EPOC 1961 ~ 2009 Era of Oil and Gas

Company Timeline
Jan. 1961 The Company is founded
May 1965 The Company acquires stock in Oita Kyuseki Hanbai Co., Ltd. (today aconsolidated subsidiary).
Mar. 1970 The Company acquires stock in Unoshima Sansuiso K.K. andadvances into the high-pressure gas business.
Apr. 1971 Capital is increased from ¥600 million to ¥1 billion.
Apr. 1977 To change the par value of its stock, the Company merges with Itochu Fuel
Corporation, headquartered at 2-36 Tsurigane-cho, Higashi-ku, Osaka.
Feb 1978 The Company is listed on the 2nd section of the Osaka Securities
Exchange and the Tokyo Stock Exchange.
Sep. 1979 The Company is promoted to the 1st section of the Osaka Securities
Exchange and the Tokyo Stock Exchange.
Jun. 1983 The Company moves its head office from Osaka to Tokyo.
Mar. 1995 The Company establishes Kyushu Chunen Co., Ltd. (currentconsolidated
subsidiary Enex Petroleum Sales Nishi-Nihon Co., Ltd.).
Feb 1996 Head office moves to 24-12 Meguro 1-chome, Meguro-ku, Tokyo.
Oct 1997 The Company acquires stock in Tokai Corporation, which is in theprocess of being reorganized.
Dec. 1997 The Company acquires stock in Seibu Petroleum Corporation.
Apr. 1998 The Company's CicoMart arm is spun off to form CicoMart Co., Ltd.
Oct. 2000 Tokai Corporation's bankruptcy reorganization proceedings are
declared complete by the overseeing court.

Mar. 2001 The Company takes over gas supply service in Nakatsu City, Oita
Prefecture, with the goal of breaking into the city gas market.
Jul. 2001 The Company changes its name from Itochu Fuel Corporation to
Itochu Enex Co., Ltd. Its 18 consolidated subsidiaries are renamed at
the same time.
Nov. 2001 The Company sells off its stock in CicoMart Co., Ltd.
Apr. 2004 The Company scraps its existing branch-offce system in favor of asystem of organization around business divisions.
May 2005 Takigawa Enex Co., Ltd. (currently Itochu Enex Home-Life Nishi-Nihon
Co., Ltd.) commences operation upon taking over business operations
from Takigawa Industries Co., Ltd.
Sep. 2005 The Company sells off its stock in Tokai Corporation.
Oct. 2005 Kokura Enterprise Energy Co., Ltd. takes over the business of Kokura
Enterprise Co., Ltd. and commences operations.
Oct. 2005 The Itochu Enex Group adopts a single unified logo, the Enex Mark.
Apr. 2007 Ecore Co., Ltd., is founded by the consolidation of Itochu Enex HomeLife Kyushu and Idex Gas K.K. and commences operation
Sep. 2008 Itochu Enex Co., Ltd. acquires Kohnan Corporation's oil sales businessand stock in Kohnan Fleet Corporation, and begins operating theacquired business.
Sep. 2008 Head office is relocated to 4-1 Shibaura 3-chome, Minato-ku, Tokyo.

Oct. 2008 The petroleum product trading business run by Itochu Corporationand the petroleum product logistics business run by Itochu Petroleum
Japan Ltd. are split off and acquired by Itochu Enex Co., Ltd.
Apr. 2009 The Company transfers the LPG lorry wholesales business to JAPANGAS ENERGY CORPORATION.
The Company acquires the shares of JAPAN GAS ENERGYCORPORATION.
Jul. 2010 The Company submitted a notice of commencement of a power
producer and supplier (PPS) businessMay. 2013 The Company and Itochu Corporation jointly invest in a nextgeneration biodiesel production business in the United States.
Dec. 2013 JEN Holdings, Co., Ltd. (currently consolidated subsidiary) acquires
all shares of Tainai Wind Farm Co., Ltd., and further expands its wind
power generation business.
Jan. 2014 The head office is moved to 2-10-1 Toranomon, Minato-ku, Tokyo.
May. 2014 The Company acquires stock in Osaka Car Life Group Co., Ltd.
(today a consolidated subsidiary).

Jan. 2011 The Company celebrates the 50th anniversary of its founding.

Feb. 2015 The company and Oji Green Resources Co., Ltd., a subsidiary of Oji
Holdings Corporation, formed a joint venture for power retailing, OJIITOCHU ENEX POWER RETAILING CO., LTD. (“OJEX”)

Mar. 2011 The Company acquires the shares of JEN Holdings Co., Ltd. tobreak into the electricity and steam supply business for factories.

Mar. 2015 The Company acquires the shares of NISSHO PETROLEUM GASCORPORATION.

Apr. 2011 Kohnan Fleet Co., Ltd. changes its name to Enex Fleet Co., Ltd.

Oct. 2015 The company and ITOCHU INDUSTRIAL GAS CO.,LTD.
established PT.ITC ENEX INDONESIA to tackle the industrial gas
business in INDONESIA.

Oct. 2010 The Company launched an electric power retailing business.

Jan. 2012 The Company takes an equity stake in IP&E Palau Inc. and theRepublic of Palau.
May. 2012 The Company acquires the shares of Tokyo Toshi Service
Company (currently consolidated subsidiary) to break into theheat supply business.

Apr. 2016 Start to electricity Supply Service for Households, “e-koto denki!”

Oct. 2012 JEN Holdings, Co., Ltd (currently consolidated subsidiary) acquires all
shares of CEF Konbumori Wind Farm Co., Ltd., thereby expanding its
wind power generation business.

Oct. 2017 Sendai Power Station Co., Ltd. commences commercial operation of
its thermal power station

Apr. 2013 Power & Utility Division is set up

Apr. 2016 Invests and participates in LP gas sales business in the Philippines
Apr. 2017 Profit attributable to owners of parent surpasses 10 billion yen

Oct. 2017 Establishes ENEARC Co., Ltd.

This is , ENEX

Established advantage through the value-creation way

A Rich Customer Base

Ability to strengthen the customer base
The power of the Itochu Enex Group’s “optimization” that flexibly responds to changes

Optimization for consumer needs

1,800 CSs

2,700 outlets

To increase responsiveness to the changing societal and lifestyleneeds, and offering a wide range of value required by customers.

Service station that our group has nationwide as CS (Carlife Staion)

LP gas outlets that our group has nationwide

Change in business activities as shown by profit composition ratio of
operations(including our brand, “Car Enex Brand CSs” approx. 400)

CSs of convenient CARLIFE STADIUM
Rent-a-Car Service (As of April 1, 2018)

The number of households

Automotive gas stations that supply LP gas to
LP gas vehicles (including buses and taxies)

Strategic approach to the customer base held in
local communities
Before¥9.0 billion

Petroleum 75%
Gas 25%

The Home-Life Division and the Life & Industrial Energy Division wereconsolidated under the “Energy & Logistics Group.” Taking our leadfrom consumers, we will build a consumer-oriented structure, andoffer a variety of energy products and services.

The number of facilities

BeforeFiscal year ended March 2012
Fuel trading company handling petroleum and gas

3,500 facilities

millionhouseholds

Facilities of corporate customers providing energy and materials(Gasoline, Diesel, kerosene, residual oil, LNG, and electric power)

The number of contracts (electric power for households)

The electric power sales volume ranking

8 thContracts for electric power for households

Newcomers ranking in terms of electric power sales volume(FY2017)

20%

Industrial
Energy

Homes

Car
users

Factories,
businesssites

Energy & Logistics Group

Homes

Car
users

Factories,
businesssites

Business optimization
Seeking to make efficient use of managerial resources, we haveestablished and put into operation a supply chain optimized for
demand.
Since 2017, we have promoted efficiency of the sales network
for LP gas.

The market share of AdBlue sales
Our market share in the domestic
AdBlue high-grade urea solution,
breaks down and detoxifies diesel
vehicle exhaust, is top.

Life Energy

25%

Fiscal year ended March 31, 2018
Transitioning to a composite business mix
to handle a broad range of products such as petroleum,gas, electricity and automobiles.

Estabishd ENEARC
In response to changes in demand for LP gas,
we seek efficiency of the local sales network for
LP gas in collaboration with other companies.

Aggressive investment plan tofacilitate the optimization
As the Group medium-term business plan “Moving 2018 Connecting to the future”
has been going well, we also achieved the targets in FY2017. We will continue tomake aggressive investments to strengthen the revenue base.
Group medium-term business plan →p. 14

FY2018Plannedinvestment

Company Information

The market share of asphalt sales¥17.2 billion

Petroleum 44%
Gas 19%
Electricity 26%
Automotive 11%

Home-Life

Data Section

54,000 contracts

Now

Now

Management

Households we supply LP gas and town gas that our group has
nationwide

Domestic market share ofasphalt sales (top class in Japan)

Integrated the business base of petroleum products and LP gas
on April 1, 2018

Segment

1.5

38 stations

Building of an organization that is responsive to changing needs, anddevelopment and utilization of human resources who can generatecreative and flexible thinking.

Strategy

400 CSs

Optimization of organization andhuman resources

Our Vision

The number of LP gas outlets

The number of CSs

This is , ENEX

No.1 Energy Trading Company¥32.2 billion

According to the investment plan in the Group medium-term business plan
“Moving 2018 Connecting to the future.”

as of April 1, 2018

ENEX REPORT 2018 4

ENEX REPORT 2018 5

This is , ENEX

Enex group At a glance

as of March, 201817.2

billions of yen ↓12.7%

32

Commemorative
dividend

4
11.9

13.1
11.0

10.4

Net profit attributable to Itochu Enex's shareholders
7.5

7.1
5.5

(year on year)

billions of yen ↑5.8%
2014/3

2015/3

2016/32017/358.6%

a dividend payout ratio

41.0 %

2018/3

20
16

16

16

20

46.8%
16

45.2%

16

42.7%
35.1%

2008/3

32.4%

30.5%

2009/3

2010/3

2011/3

2012/3

2013/331.7%

2014/3

2015/3

Net interest-bearing debt

116.1billions of yen
Equity-toasset ratio

30.3 %

29.3%

0.26
31.5% 30.3%

29.6%
94.1

97.4

116.1
100.5 108.5

0.25

Net DER

0.18 times

0.17

0.18

16.8

18.3

20.1
Palau (petroleum products) U.S.A. (biodiesel)

2014/3

2015/3

2016/32017/3

2018/3

2014/3

2015/3

2016/32017/3(billions of yen)

Indonesia (Industrial)(billions of yen)

10.0% 9.8%

24.2 billions of yen

34.3
7.8%

9.8 %

Cash flows frominvesting activities

7.5%
5.7%
6.0%
4.7%

4.3%

24.2
17.5

17.8

5.3%

Asphalt terminal-18.5

billions of yen

Asphalt ship

-12.6
-20.4

2015/3

2016/32017/3

2018/3

Power plant site
Terminal tank(year on year)

3.7%

2014/3

Head office, branch office, major Group company

30.3

2014/3

2015/3-16.7

2016/3-14.7

2017/3Company Information

ROE

The Philippines (LP gas)

2018/3

Cash flows from operating activities

5.3 %Network of nationwide

Data Section

ROA

2018/3

Management

0.17
24.8

24.3

2017/3

Segment

33.1%

2016/3

41.0%
34.8%

(yen)

Network of overseas

20.1billions of yen

36.3%

Strategy(billions of yen)

Shareholders' equity

24

22

Our Vision

11.0

40.0 yen

17.2

16.4

(year on year)

40

Annual dividends per share

19.7

This is , ENEX

Profit from operating activities

as of March, 2018

AdBlue supply facility-18.5

Industrial gas terminal

2018/3(billions of yen)

ENEX REPORT 2018 6

ENEX REPORT 2018 7

Our Vision

The value creation pursued by the Itochu Enex Group

Corporate visionThis is ENEX

The fundamental stance, morals, and values that the Itochu Enex Group follows when carrying out business activities are defined
as follows.
These concepts form the basis for business-related decision making, and are the basic policies for the execution of the Group’sbusiness activities and what direction the Group will move in.

Management

Itochu Enex Group’s journeyin value creation over half a century

2

Established advantage through the value-creation way

4

The Itochu Enex Group at a glance

6

The value creation pursued by the Itochu Enex Group

Exclusive discussion between two Outside Directors
Continuously evolving corporate governance aiming
for sustainable growth and improvement in the corporate value

40

Directors, Audit & Supervisory Board Members
and Executive Officers

42

Corporate Governance44

CSR and compliance50

Important challenges of CSR and complianceCorporate philosophy
The Best Partner for Life and Society– with Energy, with the Car, with the Home –For more than half a century, the Itochu Enex Group has delivered energy to customers
across Japan, chiefly in the form of petroleum products and LP gas. Regardless of thechanges to life and society, we continue to deliver the value needed by our customers
as their stalwart partner. Moreover, we will contribute to the realization of a prosperous
society and life, and hope to be a company that regional customers choose. The
Group’s corporate philosophy embodies these ideas.

9

Environmental management

52

The Itochu Enex Group’s value creation process

10

Social contribution activities

54

Message from CEO

12

Protection of human rights

56

20

Consumer issues

56

Labor practices

56

Code of Conduct

Fair business practices

58

Be EthicalStrategy(Reliability and sincerity, creativity and ingenuity, transparency and integrity)

Strategic initiatives aimed at creating value

Data Section

The Energy & Logistics Group:a supportive presence in regional life and industry

22

ENEARC: strengthening customer-centric regional gas sales

23

Deploying proven business models globally

24

Using the wind to drive new growth

Raising productivity, and securing
and developing human resources
26

Launch of “Overseas Training System” to develop
global human resources

27

Message from CFO

28

Segment

62

Consolidated Financial Statements
Consolidated Statement of Financial Position

64

Guiding Precepts (established in 1962)

Consolidated Statement of Comprehensive Income

66

Consolidated Statement of Changes in Equity

68

Consolidated Statement of Cash Flows69

1. Strive to incorporate the principles of reliability and sincerity in your daily duties.
2. Streamline business through creativity and ingenuity, and always keep moving forward.
3. With transparency and integrity as your creed, be cordial and work to improve the wellbeing and prosperity of everyone affiliated with the Company.

Notes to Consolidated Financial Statements

70

INDEPENDENT AUDITOR’S REPORT

125

Declaration of the Group Code of Conduct

Company Information
Stock information

126

Corporate overview

127

The ability to create value
30

Business divisions

Editorial policy
ENEX REPORT 2018 is a comprehensive report covering financial information and nonfinancial information, including CSR activities, prepared based on various guidelines. It is
published with the goal of helping people understand the business activities and strategies
that are implemented in pursuit of the Itochu Enex Group’s sustained growth.

Home-Life Division

32

Life & Industrial Energy Division

34

Power & Utility Division

36

Period covered
April 1, 2017 – March 31, 2018 (Includes some activities that fall outside this period.)

Mobility Life Department

38

Major Group companies

39

Organizations covered
Itochu Enex Co., Ltd. and Itochu Enex Group companies
Publication dateAugust 2018
Please submit comments or feedback to:
Corporate Communications Office, Itochu Enex Co., Ltd.
E-mail: enex_irpr@itcenex.com TEL: +81-3–6327–8003
Note on forward-looking statements
Forward-looking statements made in this report, including outlooks for future Groupbusiness performance, are based on the information available at the time of publication.
Actual results may differ considerably from projections for various reasons, including
fluctuating exchange rates, market trends, and economic conditions.

ENEX REPORT 2018 8

The Company declares that all officers and employees of the Company and its Group
companies (including employees on temporary assignments to and from the Company,
contract-based employees, temporary staff, part-time employees, and casual staff)
will always be conscious of the Code of Conduct’s requirement to “Be Ethical” while
engaging in their day-to-day duties as responsible corporate citizens and members ofsociety. Each individual officer and employee signs and seals a “personal declaration”
as a promise with stakeholders comprising their own guidelines for conduct inperforming their day-to-day duties.

Actionguidelines

Company Information

Business results

Code of
Conduct

The declaration of the Group Code of Conduct in its entirety is on page 50

Field of business
Energy for all applications, whether as a key component of social
infrastructure or as a means of enriching people’s lives
To successfully be “the best partner for life and society,” as outlined in our corporate
philosophy, it will be necessary to further spread the prosperity and convenience thatenergy provides throughout society and people’s lives. The Group wants to not only
provide energy that is a key component of social infrastructure, but also hopes to be asource of spiritual energy for our customers. The Group intends to continue providing avariety of products and services that support the affluence, comfort, and conveniencethat are suitable in this day and age.

Data Section

Promoting ENEX EARLY BIRD working style reforms

60

Environment-related data

Management

25

A decade of financial summary

In 1962, soon after its founding, the Company first established its “guiding precepts”;
the spirit of those precepts is perpetuated in the form of the Group’s Code of Conductannounced in 2001. The Itochu Enex Group of today intends to perform its day-to-day
duties upholding the “Be Ethical” ethos as it contributes to society. To that end, we aim
to act with reliability and sincerity in our dealings with all stakeholders, to generate newvalue by exercising creativity and ingenuity, and to maintain transparency and integrityin our businesses and activities.

Segment

Further growth from developing businesses
in response to regional needs

Promoting an electric power business that contributes
to a low-carbon society

Strategy

Corporate vision

ESG challenges and the Itochu Enex Group

Corporatephilosophy

Our Vision

Our Vision

Management supporting value creation

This is , ENEX

Itochu Enex Group Integrated Report ENEX REPORT 2018 Contents

Field ofbusiness

ENEX REPORT 2018 9

Our Vision

The value creation pursued by the Itochu Enex Group

Input

OutputCorporate Governance

5,613

Products and services(as of March 31, 2018)

Organization
andhuman resources
Strategy

Sales area

Throughout Japan andin four other nations

RatingA+(As of August 28, 2018; Japan Credit Rating Agency, Ltd.)Managementfoundations
More than half a century ofachievements

Intellectual
CapitalMainly power generation
facilities, heat supply
facilities, and industrial gas
production facilities

Technology andknow-howLP gas, city gas,industrial gas, residential
fuel cells, electricity
storage systems, andphotovoltaic power
generation

Petroleum products
and moreBusiness
network

Gasoline, kerosene,diesel, fuel oil, asphalt,
AdBlue, fly ash recycling,slop and recycled oil

Abundant know-how
Power generationand more

A sound financial baseInvigorating local communities
and lifestyles
Sustainable lifestyles that take theenvironment into accountNo. 1 Energy Trading Company

A rich customer baseEnd users living
in regional communities
Distributors rooted
in regional communities

Electricity, steam, andheat supply

Economic Value
Mobility and more
Automobiles andservices related topeople’s lives

Shareholder return
Invigorating industry

NaturalCapitalWind power, hydropower,
photovoltaic power, andbio-resources

Contributing to next-generation
economy and society

Data Section

Financesandcapital Strategy

Management

Production
CapitalLP gas and more

Rich and diverse lifestyles

Segment

Financial
CapitalSocial Value

Employees

StrategySocialCapitalOutcomeOur Vision

Human
CapitalThis is , ENEXThe Itochu Enex Group’s value creation process

Company Information

ENEX REPORT 2018 10

ENEX REPORT 2018 11

Our Vision

The value creation pursued by the Itochu Enex Group

Message from CEO

In fiscal 2017, the Company’s net profit attributable to Itochu Enex’s
shareholders marked a new record for the third consecutive year.
In preparation for the next stage in fiscal 2018, while further strengthening
the foundations of our business we will work steadily to reinforce profitability,
bringing about sustainable growth and improvements in corporate value.

Our Vision

Environmental awarenessFirst, I wish to offer our heartfelt gratitude
for your continued support of the Itochu Enex Group.

This is , ENEX

Taking as our starting point the essential need to supply
humans with energy, by drawing closer to the customer
through the development of a diverse range of services andbusinesses, we aim to become an energy trading company
that supports local communities

An energy industry undergoing drastic transformation,
and a changing competitive environment

Data Section

Number of service stations nationwide (at fiscal year end)
58,285

Management

We cannot survive in our present form
We must change

Segment

companies. It is in this context, and faced with the deregulation ofretail sales of electricity and city gas, that we are working to diversify
our businesses in order to accelerate our transformation into an
integrated energy company. As organizations work to achieve thetargets set by the Paris Accord of cutting 2030 greenhouse gas
emissions by 26% from the 2013 level, we expect the promotion ofenergy-saving measures and the shift towards electronic appliances
in Japan to gather speed, leaving energy industry participants ina fight for survival in which only the fittest and most adaptable willsurvive.

Strategy

The environment in which the Company operates is changing
and becoming more challenging. Due to the rapid shift in Japan
towards lower birth rates and an older population, the country ison the brink of an era of population contraction, and demand forenergy, including petroleum products, is on a downward trend. This
movement has received a further impetus from the rising awarenessof environmental issues that has occurred as a consequence of the
problem of global warming. Environmental awareness is one of the
key concepts of our age, and, together with economic benefits andabundance, drives both society and our daily lives.
The supply side continues to change rapidly in response tothese changes in demand. For example, the number of service
stations nationwide has halved from its 1994 peak of 60,000 toaround 30,000 currently, and this decline seems likely to continue.
The rebuilding of the supply network to deal with this contraction
in demand is under way, resulting in radical changes that touchon the very fundamentals of the industry, such as the closure
or downsizing of refineries, and the consolidation of major oil

60,42153,704

38,77730,747

1989
(FY)

1994

2000

2005

2010

Company Information

47,5842017

Source: “Numbers of gasoline distributors and service stations (registered base)” Ministry of Economy, Trade and Industry, July 19, 2018

ENEX REPORT 2018 12

ENEX REPORT 2018 13

Our Vision

The value creation pursued by the Itochu Enex GroupThe goals and locus of the “Moving” strategy

future growth by amending investment criteria. This was followedin fiscal 2015 and fiscal 2016 by the two-year “Moving 2016
– Sowing seeds for tomorrow” business plan. Based on this,we implemented a tripartite policy of strengthening profitability,
sowing the seeds of a long-term growth strategy, and reinforcing
the organization’s capabilities and core strengths. At the sametime we promoted reform of both the organization and awarenessthrough such initiatives as bolstering the core strengths of individual
businesses, preparing for the liberalization of the electricity market
and establishing overseas businesses. As a result, by the end of
fiscal 2016, the final year of the business plan, the Group’s profit for
the year broke through the ¥10 billion level for the first time.
p. 24

Resolving to “move” to more fertile land on which to build a new home

(FY2014 consolidated business performance plans)

Total trading transactions¥1,600 billion
Profit from operating activities¥13.8 billion

Basic policies

Quantitative targets(1) Increasing earning power(2) Sowing the seeds for long-term
growth(3) Strengthening organizational power
and key strengths

Profit before tax¥13.8 billion(FY2016 consolidated business performance plans)Profit from operating activities¥20 billion
Net profit attributable to Itochu Enex’s
shareholders¥10 billion
ROE
9.0% or above

Net profit attributable to Itochu Enex’s
shareholders¥7.6 billion

Management(1) Transforming business models for oil
and gas(2) Creating new businesses to secure
new revenue sources(3) Achieving further growth in existing
businesses through M&A activities(4) Improving infrastructures andnetworking in the power and utilities
businesses(5) Developing and sowing the seeds ofinternational businesses(6) Strengthening the Enex DNA

Quantitative targets

The first fiscal year of the “Moving 2018 Connecting to the future”
medium-term business plan achieved its targets in accordance withthe basic policies.
First, in regard to “reforming the revenue base,” in order to realize
the optimal composition of assets, we will dispose of unprofitable
operating assets and integrate the operations of subsidiaries thatstraddle different businesses.
In the Home-Life Division, we have reorganized and integrated
with OSAKA GAS CO., LTD. and the LP gas wholesale and retailbusinesses. ENEARC Co., Ltd., a joint-venture company in which
both companies have a 50% stake, was established on October 1,
2017, and integrated the LP gas wholesale and retail businesses
in the Kanto, Chubu and Kansai regions. In addition, shares of thethree sales companies owned by OSAKA GAS subsidiary NISSHOPETROLEUM GAS CORPORATION were transferred to the Group.
This reorganization has resulted in the expansion of the business

Segment

Sowing seeds for tomorrow

Six priority initiatives

Net profit attributable to Itochu Enex’s
shareholders marked a new record for thethird consecutive year

Strategy

Global Businesses

A look back at FY2017

Our Vision

Among these changes in the environment, the Company has
resolved to leave the business of selling oil and gas where it has
resided for so long, reasoning that staying in one place will notguarantee its continued existence, and to “move” in search of amore fertile place to call home. The “Moving” series of medium-termbusiness plans that has been in progress since fiscal 2014 consistsof nothing less than initiatives that cover the whole of management,
businesses, organization and human resources, to which theCompany is committing its full strength with the intention of creatinga corporate group that can survive in this new era.
IIn fiscal 2014, when the “Moving” series started with “Moving
2014,” we reviewed those aspects forming the Company’s base,namely corporate culture, organizational structure and systems,
and we also designed systems aimed at sowing the seeds forfoundation, reinforced cost competitiveness and enabled theprovision of competitive products and services. In the Power & Utility
Division, Tokyo Toshi Service Company (TTS), in partnership withThe Okinawa Electric Power Company, Incorporated, established
The Reliance Energy Okinawa, Incorporated in December 2017with the aim of strengthening TTS’s comprehensive energy services
business. In Okinawa Prefecture, where major urban development
continues, in response to diverse demands for energy we will offer
services that contribute to the efficient use of energy and help
reduce the burden on the environment. Furthermore, in March2018 we took an equity stake in OSAKA GAS, which has extensive
know-how related to the use of city gas, and will use this to realize
and provide new value going forward. In the Life Energy & Logistics
Division, by closing unprofitable Car-Life Station (CS) outlets, selling,
general and administrative expenses fell by 5% year on year, a
reduction of ¥3.7 billion.
As a result, return on equity, which measures the effectivenesswith which the funds entrusted by shareholders to the Company arebeing utilized, reached 9.8% at the end of fiscal 2017.
In relation to “reforming the organizational base,” we haveamended the criteria for investments with the goal of encouraging
a greater awareness of capital cost. We have worked to foster a
corporate culture that continually seeks to balance capital costagainst the profit earned on funds invested. Also, we have resolved
to move the head office in order to improve communications for theGroup as a whole, facilitate the development of new businesses
that straddle existing divisions, and to allow us to leverage nextgeneration digital technology. Until now, each floor was home toa separate business division. Integrating multiple departments
on each floor will facilitate the blending of the know-how and thebusinesses of the respective divisions, with the synergies resulting
from this new layout opening the way to further improvements in
productivity. We have also introduced a casual dress day, and are
striving to encourage freedom of expression and diverse working
styles.

This is , ENEX

Racing ahead of industry changes to reform corporate culture
and organizational structure.

On the other hand, it is a fact that these changes and this rapid
growth have led to imbalances within the Company. Accordingly,
during the “Moving 2018 Connecting to the future” mediumterm business plan that ran in FY2017 and FY 2018, we focusedon normalizing the situation by strengthening the foundations of thebusiness, and making sure of our footing before taking the next step
towards future growth. The issue of “reforming the revenue base”
raised in the basic policies involves optimizing assets and opening
up new customer bases, while “reforming the organizational base”
consists of promoting the nurturing of human resources andworking style reforms, and strengthening Group management. We
have determined that this is a necessary process of creating thefoundations necessary for the long-term growth of the Group.

For more information on ENEARC, please see p. 23

Data Section

Connecting to the future■ Quantitative targets (FY2018 Consolidated basis)
Profit from operating activities¥18.7billion ¥11.3 billion
ROE

Planned investment (2-year total)

9.0% or above ¥56.6 billion
A period used to maintain the direction of the reforms and enhancements
previously targeted, in order to increase the certainty of securing future growth.
Based on the two pillars of reforming the revenue base and the organizationalbase, we will develop our ability to drive forward into the future while maintaining
our ability to generate profits.

ENEX REPORT 2018 14

FY2017 to FY2018

Profit from operating activities (billions of yen)

Profit (billions of yen)

■ Basic policies■・Petroleum, gas and other businesses■・Electric power business■・Automotive businesses (Nissan Osaka)■・Petroleum, gas and other businesses■・Electric power business■・Automotive businesses (Nissan Osaka)“Connecting to future growth” — Reforming the revenue base —Optimizing resources
Accelerating asset
replacement in pursuit ofprofitability and growth

Improving profitability
Improving profit efficiency
based on the ratio of SG&A
expenses to gross trading
profitDeveloping thecustomer base“Connecting people and functions of the Group”— Reforming the organizational base —Reinforcing
organizational strength

Nurturing autonomous
human resources

Reinforcing organizational
Clarifying the mission, andstrength by making provision nurturing autonomousof the group management
personnel
base

13.7
1.8

Deploying the electric
power business across all
divisions and departments,
and driving the future retailoriented expansion of thecustomer base

ENEX EARLY BIRD
Encouraging a working stylethat offers high performancein a short time

19.7
16.4
11.9
2.4

9.9

6.1

9.0

9.0

11.9

9.5

13.1

4.4

3.0

1.4

17.2
6.6
2.5

1.5
8.6

10.6

10.6

4.6
2.1

7.1
5.6
0.2

10.5
5.4

2009/3 2010/3 2011/3 2012/3 2013/3 2014/3 2015/3 2016/3 2017/3 2018/3

Japanese GAAP

10.4

IFRS

4.4

3.9

3.9

5.4

2.4

4.7

5.5
1.8
0.4

7.5

3.4

2.2
0.4

0.7

4.9

11.0
2.2
0.6
8.2

Company Information

Net profit attributable to Itochu
Enex’s shareholders

Business performance trends■ Period

6.3

3.3

2009/3 2010/3 2011/3 2012/3 2013/3 2014/3 2015/3 2016/3 2017/3 2018/3

Japanese GAAPIFRSENEX REPORT 2018 15

Our Vision

The value creation pursued by the Itochu Enex GroupAll eyes on the long-term vision

A time for securing our footing in preparation
for connecting to the future

Segment

Building a pliant andflexible structure

Enhancing the “connecting function” of pipes to further expand the customer base
By using “electricity” to connect the customers at the end of the “pipes” we have already built, and by connecting
the customers of our “electricity” related partners in other industries to our existing core businesses,
we aim to achieve a chain-like expansion of our customer base.

Customers of our partners
in other industries

LP gas/city gas customers

Ability toform connections

LP gasProfitDividend payout ratio¥18.5 billion
10.8 billion
30 %¥18.7 billion
11.3 billion
40 %+0.2 billion
Ability toformconnections+0.5 billion

Electricity+10 %In recognition of strong business performance in fiscal 2017, and as a result of a comprehensive reconsideration of the market environment and theCompany’s own situation, we have revised upward the profit targets.
In addition, having taken into account business performance in the medium- to long-term, as well as capital efficiency, we have revised our profit
distribution policy (the dividend payout ratio).

ENEX REPORT 2018 16

Electricity

Ability toformconnections

Photovoltaic
power
generation
systems

Fuel cells(ENEFARM)

etc...

Company Information

Profit fromoperating activities

Revised targets
Electricity

Data Section

Range of services related topeople’ s daily lives

Upward revision to quantitative targets for the fiscal year ending March 2019
Previously announced targets

Management

This medium-term business plan prioritizes the strengthening of
the foundations of the business, and linking this to the subsequent
growth path. As well as moving forward with the building of astructure that will allow flexible responses to a rapidly changing
operational environment, and promoting business reorganizationand structural reform from a medium- to long-term perspective, wewill put the emphasis on investing in management resources for
future growth and returns to shareholders, grounded in appropriate
financial policies. In addition, to reflect the steady progress made in
implementing the growth strategy, and the resulting strong businessperformance in fiscal 2017, we have updated our quantitative
targets. The forecast for fiscal 2018 profit from operating activities
has been raised to ¥18.7 billion (an increase of ¥0.2 billion versus
the initial forecast), and the outlook for net profit has been raised to¥11.3 billion (an increase of ¥0.5 billion over the initial forecast).

StrategyPlan objectives updated for fiscal 2018

products, in the Car-Life Station (CS) business are provided to theend user, either via the retail outlets of the respective business ordirectly from the Company.
The Company has laid down such invisible “pipes” in the regions,and has taken great care to manage, maintain, improve and expand
them. To express this initiative in terms that may be easier tounderstand, it includes the various measures aimed at optimizing
the logistics function and capturing customers. During the course ofits development, the Company established a solid position as a “fueltrading company” that supplies petroleum products and LP gas,and, having subsequently moved into the electric power business,has further evolved to become an “energy trading company.” Of
course, our entry into the retail electric power business has also
doubtless contributed to the expansion of these “pipes.” By sellingelectric power to existing oil and gas customers, or by creating
alliances with partners that have large numbers of customers in theregions to provide a range of services, the Group aims to continue
its steady growth.

Our Vision

Up to this point, the Group has not interpreted changes in theenvironment as threats, instead developing its businesses with
an awareness that change is a given. For precisely that reason,
the Company perceives the various changes currently attracting
attention as ideal business opportunities that will allow it todemonstrate its strengths.
The single most important reason for this awareness is that
the Company already possesses a robust business foundationthat is resistant to the turmoil caused by changes in the external
environment. This is due only to the networks we have built up withcustomers ever since the time of the Company’s founding. In orderto clearly indicate the importance, significance and functionalityof these networks, the Company refers to them internally using
the term “pipes.” The original meaning of “pipe” is something thatconnects two separate, independent objects and that enables flows
and relationships between them. In the context of the Company’s
actual business, the term “pipe” indicates the channel or route bywhich LP gas, in the Home-Life business, or refined petroleum

This is , ENEX

Aiming for further progress based on the “pipe” business we have built up

CS customers
Vehicleinspection

Examination

RentalvehiclesRefueling

Vehiclesales

etc...

ENEX REPORT 2018 17

Our Vision

The value creation pursued by the Itochu Enex Group

Proposing services from the perspective of the end user to support local community life

Our message to investors

Building a highly effective governancestructure

Corporate Governance“Local production for local consumption” services

p. 40 - p. 44

Services developed in response to the aging of society

ENEX REPORT 2018 18

Next-generation mobility services

Company Information

Promoting stronger corporate
governance in pursuit of further increases
in corporate value
Services related to building livable cities

Data Section

We believe that shareholders and investors are most interested
in enhancements of corporate value clearly grounded in facts.
When I think about the management of this Group, while bearing in
mind the need to steer in the direction of sustainability and growthpotential, I do all that I can to maintain our status as a company
that is recognized by society, that is useful to society and that
can take pride in itself. From that perspective, we will define once
again the environmental, social and corporate governance issuesof material importance on which the Company should act, and, in
responding to these issues, strengthen initiatives aimed at securing
the sustainability and growth potential of the business.
If we widen our vision to the outside world and the entire planet,
we notice that inequalities are widening in a number of areas, as
shown by differences in the living environment, inter-generational
disparities, the gap between rich and poor, and regional inequality.
We live in an era in which private-sector companies are required
to implement initiatives to resolve such social problems, and we
recognize that Itochu Enex, whose corporate philosophy is “thebest partner for life and society,” is one of the companies thatmust shoulder such responsibilities. Moreover, based on ourview that management creates value in partnership with investors
and shareholders, we will strive to further strengthen corporate
governance and to improve the transparency and soundness ofmanagement by means of reinforced monitoring functions involving
Outside Directors and Outside Audit & Supervisory Board Members.
The Company is targeting ROE of 9.0% and a dividend payout
ratio of 40% for fiscal 2018. Going forward, the entire Group will
work to improve management efficiency and raise profitability, inorder to realize sustainable growth and increase corporate value. I
humbly request your continued warm support and encouragement
for the Group going forward.

Management

For the Group, the nurturing of human resources is one of the mostimportant challenges to achieve the future growth strategy. With thebusiness environment changing drastically, each employee must beaware that they must shoulder the burden of upcoming changes,
and take steps to resolve them on their own initiative. It is importantthat those employees who are closest to our customers in thecommunity keep their senses honed, and adopt an attitude of avidly
desiring growth. We are actively working to create such a corporate
culture. One such initiative is the ENEX EARLY BIRD working stylereform. Having reviewed previous working styles, we have achieved
concrete results from moving ahead with initiatives based on thethree pillars of reducing working hours, promoting health andenhancing the quality of work performed.
Moreover, in order to promote the overseas businesses that aredesignated as growth fields, we have begun initiatives in earnest
to nurture global human resources who are capable of carryingout management and administration functions overseas. In fiscal
2018 we introduced a new “Overseas Training System” to develop
human resources by employing them overseas, bringing theminto contact with local culture, enabling them to learn about local
management methods and business customs, and opening the way
to future business opportunities. This system will play an importantdevelopment role in respect to the future of the Company’s overseas
strategy, and going forward we plan for it to be maintained over thelong term.
In addition, given the birth of new businesses that leverage suchtechnologies as the Internet of Things (IoT), artificial intelligence (AI)and big data, we believe it is important to acquire such management
resources from outside the Company in order to strengthen thefoundations of the business speedily. We will invest actively in M&A

forms. Abundance and ecological awareness have both become
an essential part of modern lifestyles. In this mature economy,
consumer interest is shifting from “objects” to “intangible things,”
with people increasingly demanding experience value. The adventof the hyper-aging society is creating increased demand for new
welfare services. The role of electric vehicles (EV) is becoming more
important as energy usage shifts to electricity, and experiments
involving new social infrastructure that combines energy andmobility are taking place as a result of the evolution and wider
utilization of EVs. Things that are necessary for this new era andthings that are accepted by consumers will, without question, catchthe eye of the consumer and cannot fail to attract a high degreeof attention. The Itochu Enex Group must capture and hold thegaze of the consumer, shaping valuable products and services,
one by one, as we move into the future. Beginning with end users’
demands, requests and expectations, we will create and provide
different kinds of value through our business activities in order toplease such end users further. As new end user demands, requests
and expectations are generated, we will respond to these in turnto create new value. By constructing such a value creation cycle,
we will realize the role of the best partner for life and society, as“an energy trading company that supports local communities”
through close relationships with customers and regions.

Segment

Next we will discuss our vision for the Group beyond the fiscal
2019, from a long-term perspective.
Over the past half-century, the Company has transformed itself
from a fuel trading company to an energy trading company that
handles a variety of products. It is now on the verge of casting off
the shell of the energy trading company, and evolving further.
The foundation for this evolution will be, as you might expect, the“pipes” we have spent decades nurturing. We will further strengthen
the customer relationships that traverse these “pipes,” or lay down
new “pipes” to capture new customers. Through such initiatives,
we are creating robust relationships with all kinds of customers, anddeveloping businesses and services to resolve problems in local
communities and local life. As part of this effort, we are promoting
collaboration that transcends divisional frameworks and the fencesthat divide business by product on a regional basis. The goal thatlies at the end of this attempt to overturn the received wisdom of
the organization, which has accumulated over half a century, andto embrace new challenges, is the vision of the Company as “anenergy trading company that supports local communities.”
In order to realize this vision of an energy trading company that
supports local communities, we believe it is becoming increasingly
important to adopt the perspective of the end user. Consumption
is rapidly becoming more diverse and deviating from its previous

Strategy

Creating mechanisms to encourage
autonomous growth

Our Vision

Becoming an energy trading company that supports local communities by providing a
range of services

This is , ENEX

and alliances, an area that is one of the strengths of the Company,
and work to build a business portfolio that takes into accountefficiency, profitability and growth potential within the context of theGroup’s overall growth strategy.

All eyes on the long-term vision

All eyes on the long-term vision

Representative Director

Kenji Okada

ENEX REPORT 2018 19

Our Vision

The value creation pursued by the Itochu Enex Group

ESG statement of the Itochu Enex Group

ESG challenges and the Itochu Enex Group

Social challenges to be solved, and the Itochu Enex Group’s mission and future vision to aim for(Japan’s pledge: A 26%
reduction in greenhouse gas
emissions compared to FY 2013)

Mission and business opportunities of the
Itochu Enex Group
Future retail to boost convenience andPopulation in Japansatisfaction in daily life
Decreased to 95 million
Various services responding to the aging
Sales of petrol and diesel
societyvehicles to be banned in
UK and France
Working environment where people canwork with pride

2040

2030

Coal-fired power stations
to be shut down

(By 2013 in France, 2025 in
the UK, and 2030 in Canada)

2020
5th Strategic Energy Plan** Endorsed by the Cabinet on July 3, 2018
under the Basic Act on Energy Policy.

2011
Guiding principles on
business and human rights

Challenges and change-related risks ofsociety, life and business
Advancement of the aging population anddeclining birth rate
Widening disparity between the rich andthe poor, generations, and regions
Productivity improvement through the use of IT skills
Reforms in ways of working

The environment

Customers

Local communities

Activities to reduce environmental
impacts through businesses
Environment improvement activities in businesses
Environment-themed social contribution activities

Sales of merchandise and services
Provision of information through official website
Safety check operations, customer helpdesk andlocal community events

Social contribution activities
Volunteer activities
Dialogue with local residents living around areas ofbusiness projects

Business partners, suppliers
Provision of information through official website
Integrated Report ENEX REPORT
Corporate Information ENEX OUTLINE
Training for subcontractors

ENEX REPORT 2018 20

Employees
Provision of information through our intranet andin-house booklets
Response to whistleblowing and consulting contact points
Communication through various trainings and seminars
Conducting an attitude survey for employees

Creating diverse values(With society)

Healthy business activities(Governance)

Under the environmental policy, we
will work on continuing environmental
conservation and improvement
activities and contribute to asustainable society with an aim to help
society achieve better coexistencewith the global environment.

We will contribute to developing local
communities through providing stableenergy supplies and creating diverse
values that meet various societal andlifestyle needs.

In accordance with the Code of
Conduct and the Declaration of theGroup Code of Conduct, we willproactively disclose information
keeping in mind strict compliance,emphasis on shareholder returns andmanagement transparency.

•Realizing a low-carbon society•Reducing the environmental impactof our business activities•Striving to conserve energy•Contribution to resource
conservation / recycling-basedsociety•Preserving local environments•Stable energy supplies•Response to promote sustainabilityof life in local communities•Improving corporate governance•Fulfilling CSR and ensuring
compliance•Fair and proactive information
disclosure•Responsible procurement and supply•Upholding industrial safety andhealth•Advancement of value-added
services•Reforms in ways of working
and utilization of diverse humanresources•Social contribution activities in local
communities

Process of selecting important challenges and promoting initiatives
Identifying andunderstanding challenges

The Group identified social challenges from SDGs, internationalguidelines, and FTSE indices.

Basis for selection of important challenges
Standpoint of stakeholders
UN Sustainable Development Goals

Shareholders, investors
General Meeting of Shareholders, and briefing sessions
for announcement of financial results and others
Handling interviews on the Company’s circumstances
Provision of information through official website
Integrated Report ENEX REPORT
Disclosure of materials in English(Response to the aging society)

Prioritizing challenges

Confirming appropriatenessof selected challenges

The Group selected challenges based on their importance to stakeholders andthe Itochu Enex Group, and worked on these challenges in order of priority

The Group integrated the selected challenges into the Group’s
ESG statement and pushed forward with initiatives.

Requirements in international guidelines
Results of objective evaluation by a thirdparty organization, FTSE

Standpoint of
the Itochu Enex Group

Company Information

The Itochu Enex Group’s stakeholders and contacts

Reducing the environmental impact(With the environment)

Data Section“To achieve energy mix target
towards 2030”
Renewable energy 22~24%
Nuclear power 22~20%
Fossil fuels 56% Energy
efficiency (35% reduction in
actual energy efficiency)

EU will gradually ban
palm oil biofuel

The Itochu Enex Group will contributeto achieving SDGs
(UN Sustainable Development Goals).

ESG challenges that the Itochu Enex Group focuses on <three priority areas and initiative themes>

Management

Challenges and change-related risks
concerning energyCountermeasures for climate change
Toward a low-carbon society
removing CO2 emissions
Energy shift to electricity (accelerated
promotion of EVs, decrease indemand for gasoline)
Utilizing next-generation energy
Coexistence of renewable energy and fossil fuels

Paris Accord

2050

Segment

Mission and business opportunities of
the Itochu Enex Group
Stable energy supplies
Strengthening supply capacity of
renewable energy
Procurement and supply of clean
energyEV-support
Commercializing production of bio jet
fuels in 2020

Take on challenges forenergy conversion anddecarbonization, and pursue
every possible option

Setting “reducing the environmental impact,” “creating diverse values” and “healthy business activities” as threeareas to currently focus on, all board members and employees of the Itochu Enex Group will execute their duties
consciously so that we will be an energy company that achieves sustainable growth while generating value.

Strategy

Scenario in the Strategic
Energy Plan 2050

We will continue to contribute to the development of people’s good lives and a sustainable society throughpromotion of businesses that fit with the new times, solution of social challenges and our efforts for corporate social
responsibility.

Our Vision

With stable energy supplies as a core, we will meet needs
low-carbon, economic efficiency and added value,
while contributing to a sustainable, smart-energy society.

Under the corporate philosophy “The best partner for life and society – with Energy, with the Car, with the Home – ,”the Itochu Enex Group has a mission to stably deliver the bounty of energy to everyone, and it seeks to always offer
the value and services that customers truly require.

This is , ENEX

We will address ESG and other various social challenges and further increase the sustainability of business models.

The Itochu Enex Group’s Corporate
philosophy
Code of Conduct: Be Ethical
Declaration of the Group Code of
Conduct
Medium-term business plan
“Moving 2018 – Connecting to the future”

ENEX REPORT 2018 21

Strategy

Strategic initiatives aimed at creating value

Further growth from developing businesses in response to regional needs

ENEARC: strengthening customer-centric regional gas sales
Integration of six companies in the Kanto, Chubu andKansai regions on April 1, 2018
ENEARC owns the shares of six Itochu Enex and OSAKAGAS sales companies in the Kanto, Chubu and Kansai
regions, and is moving forward with the integration of sales
companies by region in order to reinforce the wholesale
and retail operations in these areas.
ENEARC Chubu Co., Ltd.

This is , ENEXThe Energy & Logistics Group: a supportive presence in regional
life and industry

ENEARC Kanto Co., Ltd.

Kanto Area
Our Vision

ENEARC Kansai Co., Ltd.

Chubu Area
Kansai Area
ITOCHU ENEX HOME-LIFE
KANTO CO., LTD.

Itochu Enex Home-Life
Kansai Co., Ltd.

Strategy

Nissho Gas Supply Co., Ltd.
ITOCHU ENEX HOME-LIFE
CHUBU CO., LTD.

Daiya Nensho Co., Ltd.
Osaka Gas LPG Co., Ltd.

Gasoline
City gas

Life services

LP gas

Kerosene

Everything begins
with the customer.
Goal of Energy &Logistics Group’s Business Development
Optimized for Area B

Gas products

Gas products

Oil

Services

Oil

Services

Making ENEARC the most familiar and reliable regional presence
ENEARC will generate synergies by concentrating the management
resources of the sales companies in each area, and raise efficiency byreorganizing businesses, resulting in the provision of more competitiveand higher quality products and life services. In this way, it aims tobecome “the most familiar and reliable regional presence for local
customers,” and to transform itself into a company that is also active inthe housing field.

Reorganization in areas other than Kanto, Chubu and Kansai
Integrating oil and gas operating companies in the Tohoku area
This consumer-oriented approach to unifying the points of contact withoil and gas customers is spreading out to other companies within theGroup. In April 2018, the operations of Itochu Enex Home-Life Tohoku
Co., Ltd., which operates an LP gas sales business in the Tohoku
area, and Tohoku Tanku Shoukai Co., Ltd., which operates an oil sales
business primarily in Aomori Prefecture, were merged. Both companies
are working to provide even more attractive energy products to theirrespective customers, and enhancing their sales competitiveness.

ENEX REPORT 2018 22

Area A consumers

Area B consumers

Effective October 1, 2017, Nissho Petroleum Gas Corporation, a
subsidiary of OSAKA GAS, transferred its entire shareholding in its
subsidiary Nissho Propane Sekiyu Co., Ltd. to the Company, and its
entire shareholdings in Ehime Nissho Propane Co., Ltd. and Kochi
Nissho Propane Corporation to ITOCHU ENEX HOME-LIFE NISHINIHON CO., LTD. Also, in the Hokkaido area, the operations of Itochu
Enex Home-Life Hokkaido Co., Ltd. and Nissho Propane Sekiyu
were integrated, and the reorganization of the business by region isproceeding steadily.

Customer baseafter reorganization

1.08

million households(LP gas/city gas)

1.5

million households

Overview of ENEARC Co., Ltd.
Integration of the wholesale and retail LP gas operations in the Kanto,
Chubu and Kansai areas. The goal is to raise efficiency by sharing
strengths and know-how to generate synergies, concentrating
management resources, and reorganizing businesses.
Head office
Established
CapitalRepresentative
Investment ratio: 2-10-1 Toranomon, Minato-ku, Tokyo: October 1, 2017
: ¥1.04 billion: Masaaki Itoyama, Representative Director,
President and Chief Executive Officer: Osaka Gas 50.0%, Itochu Enex 50.0%

Company Information

Optimized for Area A

Due to stagnant demand, the domestic LP gas industry is struggling with severebusiness conditions, and raising productivity through expanding the businessfoundation and strengthening cost competitiveness has become an urgent issue.
In response to this, on October 1, 2017, the Company and OSAKA GAS CO., LTD.
established a joint-venture company, in which each company took a 50% stake,
named ENEARC Co., Ltd., thus integrating and reinforcing the LP gas wholesale
and retail businesses in the Kanto, Chubu and Kansai regions. Reorganization of thebusiness is also being implemented in other regions. As a result of these actions, theGroup’s LP gas customer base (including city gas) has grown to around 1.5 million
households.
Going forward, we will continue to contribute to society as an LP gas operator thatprovides stable supply, as well as a strong response in times of emergency, by meansof more transparent pricing and an extensive network.

Data Section

Creating a variety of new services matched to the areafrom a resident’s perspective
Going forward, instead of being organized around the products it
handles, the businesses, personnel and organization of the Energy& Logistics Group will be optimized on the basis of geographic area.
These will then provide the energy products and diverse services
that are really required from the perspective of the region and local
residents, aiming to become the company most supported and chosen
by both the region and by customers.

Reorganizing the LP gas sales network in cooperation with OSAKA GASEnergy & Logistics Group
Home-Life Division + Life & Industrial Energy Division

Management

Over more than half a century since it was founded, the Company was organizedaround oil and gas products respectively, and such matters as business initiatives andpersonnel assignments were conducted separately and individually by the oil and gas
operations. However, what the customers are demanding is an environment in which
they can obtain energy more easily, more economically, and in forms that require lesseffort to use, as well as the convenience of being able to choose freely from a varietyof options. Having thought through the issues from a consumer-oriented perspective,
the Company launched the Energy & Logistics Group in April 2018 to unify pointsof contact with customers in oil and gas sales. Under this new group the HomeLife Division, which mostly deals with household customers, and the Life & Industrial
Energy Division, which consists primarily of Car-Life and industrial customers, will
cooperate with each other to promote business, as we unify the points of contact forregional customers.

Segment

Answers to all the customer’s oil and gas service needs, in one place

Building an energy bridge to the future.

The name of the company is derived from “energy” and “arc.” The
name incorporates our wish to be a bridge to a dynamic future, and to
become the most valuable presence in our customer’s lives.

ENEX REPORT 2018 23

Strategy

Strategy

Strategic initiatives aimed at creating value

Strategic initiatives aimed at creating value

Using the wind to drive new growth

Deploying proven business models globally

Promoting an electric power business that contributes toa low-carbon society

Our Vision

Philippines

This is , ENEX

Further growth from developing businesses in response to regional needs

The Republic of Palau

StrategyIndonesia

Using the know-how and business models developed in Japan, and leveraging the overseas network of
the Itochu Group, we are actively developing overseas projects. The Asian market, with its remarkableeconomic growth, is a particular target, and we are actively working to establish businesses while keeping
in mind the characteristics of local demand and geopolitical stability.

PT.ITC ENEX INDONESIA“Making Asia
our backyard”

Creasia Energy Holdings, INC.

LP gas sales business in the Philippines

PT. ITC ENEX INDONESIA was founded as a joint venture between
the Company and ITOCHU INDUSTRIAL GAS CO., LTD., andmanufactures and sells industrial gas primarily to Japanese- affiliatedcompanies that have entered the Indonesian market.

The primary operating entity is Isla Petroleum & Gas Corp. (IP&G),
in which an equity stake has been taken by Creasia Energy
Holdings, INC., a joint venture between the Company and ITOCHU
Corporation, and which is developing an LP gas sales business in
the Philippines.

Overview of the business in fiscal 2017

Overview of the business in fiscal 2017

Outlook going forward

Outlook going forward

From this point on, we will leverage the full advantages of being able to sell all varietiesof industrial gas, extend our share of the growing Indonesian industrial gas market, andseek to improve profitability through alliances with local companies.

By improving operational efficiency through the introduction of a bar code system forcontainer management, offering consulting functions, proposing high value-added
supply equipment, and introducing new gas-driven equipment such as GHP*, whichleads to reductions in energy costs, we seek to entrench our position with customers
and create demand for LP gas.

Palau Project
By acquiring a 25% stake in IP&E Palau, Inc., we have entered thebusiness of petroleum product import and wholesale, as well as
direct sales, in the Pacific region.

ENEX REPORT 2018 24

With the intention of conveying the LP gas business know-how we have developed inJapan to IP&G, the company in which we have taken an equity stake along with our
local partner, we have worked intensively on matching Japanese and Philippines culture,
the industry and the market, and are promoting the sharing of our ideas with local staff.

11,000households

Annual power generated
by Tainai Wind Farm

Hydroelectric power plant begins major program of improvements in
preparation for the next hundred years
In the Myoko mountain range of Niigata Prefecture runs the Yashirogawa river, on which
is located the hydroelectric power facilities owned and operated by the Group’s Joetsu
Energy Service (hydroelectric facilities No.1, No.2 and No.3). This plant began operations
nearly a century ago, in 1927, and has gradually deteriorated over time. Accordingly, a major
program of improvements has been started, and is scheduled to finish in December 2021,
with the aim of raising the efficiency of
Overview of improvement project
the facilities. After operation restarts,
the Feed-in Tariff (FIT) Scheme for
Joetsu City,
Business location
Niigata Prefecture
Renewable Energy will be adopted, andwe will work to strengthen our balanced
Generating capacity
9 MW
internal power portfolio, which includes
Scheduled completion
December 2021
our specialty of renewable energy.
Electric power sales

FIT adopted for entire output¥8.0

billionTotal investment in
improvements over four years

Company Information

By obtaining a sales license for all varieties of industrial gas in November 2017, theconditions for expanding sales improved significantly. The safety and security implied
by Japanese quality (safety and storage management etc.) have been well received byboth Japanese-affiliated companies and local companies, and it has developed into abusiness in which we can be highly confident of ongoing growth.

Sufficient for

Data Section

Sales of industrial gas in Indonesia

The JEN Tainai Wind Farm owned by the Group stretches along the Sea of Japan coastline
of Tainai City in Niigata Prefecture for a total length of 8 km, consisting of 10 wind turbineswith a generating capacity of 2,000 kW each. In this region, strong winds blow from thewest-northwest in the winter, and the average annual wind speed is as high as 6.4 m/s.
In addition, as well as achieving a high degree ofOverview of site
tracking to cope with changes in direction andthe upward-rising winds characteristic of Japan,
Business
Tainai City,
lightning countermeasures of the highest level havelocation
Niigata Prefecture
also been introduced. The wind power generation
Generating
10 turbines of 2,000 kW
facilities have continued to operate safely andcapacity
capacitystably, and produce about 30,000 MWh, roughly
Annualpower
enough to supply electric power to the equivalentAround 30,000 MWh
generatedof around 11,000 households.

Management

IP&E Palau,Inc.

Segment

The Tainai wind power generation plant steadily in its favorable location
overlooking the Sea of Japan

Capturing the rising demand for energy in Asian regions to drive growth*GHP: Gas engine Heat Pump air conditioner system that uses a gas engine to rotate theexternal compressor, and provides heating and cooling through the action of a heatpump.

ENEX REPORT 2018 25

Strategy

Strategic initiatives aimed at creating value

Raising productivity, and securing and developing human resources

Promoting ENEX EARLY BIRD working style reforms

Launch of “Overseas Training System” to develop global human resources
This is , ENEX

Enex café opens

Promoting mobile work

Leaving behind the suit, andfostering a culture that allows
the emergence of more flexible
thinking, as well as improving
communication.

Revitalizing communication by
opening a space for relaxation
within the office.

An initiative* to promote thesharing of office spaces within
the Itochu Group in order toimprove productivity.

Seconded to: South Africa

Seconded to: Philippines

Seconded to: Indonesia

Seconded to: United Kingdom

Our Vision

Introduction of casual dress day

The first cohort of students passing throughthe overseas training system that began in April 2018

Enex nursery

Support for company sports
Certified as one of the“Excellent Enterprise of
Health and Productivity
Management” and signatory
to the Tokyo Work Style
Reform Statement(Certified from 2017 onward)

Certified as a Company
Promoting Sports in Tokyo, andas a sports-supporting company

Seconded to: Singapore

Seconded to: Thailand

Leaving the office at a set
time to perform exercise isencouraged, and expenses
associated with internal
company sports activities are
partially subsidized.

Segment

Supporting both work and childrearing by establishing a daycare
center facility for employees,
facilitating an environment inwhich they can work withoutworrying about their child.

Strategy

10 employees, 8 countries, 2 years
Progress report on working style reforms in FY2017 (compared to FY2016)

80% 5%

Percentage of employees taking paid vacation time

15hours 1hour

60% 4%
Non-smoking ratio

Seconded to: UAE

Seconded to: United States

Seconded to: United States

Seconded to: Indonesia*The “Itochu Group Sharing Office” initiative consists of four companies: Itochu Enex, ITOCHU Corporation, Nippon Access, Inc., and FamilyMart UNY Holdings Co., Ltd.

The goals of ENEX EARLY BIRD working style reforms

Overview of the ENEX EARLY BIRD initiative

Measures implemented(1) Shifting from late-night overtime to morning-based work
(2) Ending meals with customers or colleagues by 10:00 p.m.
(3) Setting a target of taking at least 80% of paid vacation time(4) Setting a target of at least 80% of employees with a BMI of
less than 25(5) Setting a target of at least 80% of employees being
nonsmokers(6) Improving the quality of communication by two levels(7) Improving the quality of meetings by two levels(8) Improving the quality of documents and materials by two levels

ENEX REPORT 2018 26*Itochu Enex and 10 others, including group companies, are scheduled to move into theKasumigaseki Building.

Relocation concept and floor plan
Connecting to the future— Connecting people and functions of the Group for future growth —1. Improvedcommunication 2. Nurturing a sense of unity 3. Working style reforms– Making intentional
connections between people
and organizations –– Sharing the same space together,having the same awareness –– Implementing
ENEX EARLY BIRD –A layout with routes that allow
circuits of the floor, and that
permits the mingling of people
and information

A multipurpose space that allows
people to gather and transcendgroup, floor and position inside oroutside the company

Working floors that help you
become healthy without you
realizing it

A layout that allows internal
cooperation to take place more
widely, more deeply and more
quickly

Integrated reception that conveys
a shared sense of the uniqueaspects of Enex

A space in which to concentrate
and work with high efficiency,
facilitating the generation of newconcepts and values

Shift to digital also to be promoted in new workplace

Internal extensions that use smart phones (transfer from fixedlines), enhancement of online meeting and seminar functions,and strengthening of information security through digitalization of
documents, discontinuing the use of individual cabinets, etc.

Promoting the strengthening of diversity and humanresources

The Group is making efforts to expand overseas, with Asia as theprimary market. From April 2018 onward, we began a system
whereby mainly younger employees, irrespective of their current areaof business, are posted overseas to ITOCHU Corporation groupcompanies or Itochu Enex group companies, to do actual work. As
well as acquiring skills in English and local languages, trainees willseek to understand local business customs and culture, and also
to accumulate business know-how, resulting in the nurturing of
personnel who are able to respond immediately and flexibly to future
developments in the overseas business. In addition, in order to support
the acquisition of English by employees, we have implemented a new
system to subsidize the expense of learning English. We believe thatdeveloping global human resources is one of the key points influencing
the Company’s growth potential going forward.

What is required as the Company works to create innovation going
forward is the richness of the population, consisting of diversity ofviewpoint, sensitivity, intellect,
career, values and dynamism.
To develop, maintain and further
grow this abundance, theGroup is working on initiatives tostrengthen diversity, which will
also help create a healthier andmore sustainable organization andStrengthening initiatives to hire
corporate culture.
and fully utilize women

Nurturing the next generation of business leadersThis management training, which aims to cultivate the knowledge
and skills for a new generation of leaders, is an initiative to develop
personnel who can take a big-picture view of the Group and possess
not only curiosity, wide-ranging knowledge, a spirit that embraces
challenge, and sensitivity to risk but also the overall ability to put
these to good use. Furthermore, we make full use of a graduate
school for working professionals to deepen business management
expertise through such qualifications as Master of Business
Administration or certified public accountant. We support anextensive educational program that allows each individual to engage
with their work in a worthwhile way, and to further their career.

Hiring and full utilization of employees of foreign nationality
At Enex Fleet Co., Ltd., six employees of Philippine nationality havebeen hired and are working in vehicle inspection and maintenance
operations in the Car-Life Station (CS) business, following theTechnical Intern Training Program supported by the Japan
International Training Cooperation Organization (JITCO) as permitted
by the Cabinet Office. ITOCHU INDUSTRIAL GAS CO., LTD. has
also hired three employees of Indonesian nationality as technicalinterns, working on the coating operations within the containerpressure inspection process at the company’s factory. When hiring
foreign employees, we provide detailed support in the form ofJapanese language education and extensive training program.

Company Information

We have implemented fundamental initiatives around the three pillarsof “banning long work hours,” “promoting health,” and “enhancing
the quality of work performed.” We are also working to become aneven better company, a company where employees find their work
rewarding and express pride in their employment in front of theirfamily and society, as well as a company where employees can workwith consideration for others.

As part of one of the basic policies stated in the Group mediumterm business plan, “Connecting people and functions of the Group— Reforming the organizational base,” the head office will be moved
to the Kasumigaseki Building in February 2019.

Nurturing the skills and temperament that enable the creation,
development and expansion of business in overseas markets,

Data Section

Developing and fully utilizing human resources, an important
intangible asset, is the key to the creation of value demanded bycustomers and the market. Through the ENEX EARLY BIRD working
style reforms that the Group has been implementing since November
1, 2016, we seek to draw out the full capabilities of each employee,
and to link this to sustainable medium- to long-term growth.

Moving head office to Kasumigaseki Building for a nextgeneration workplace

Management

Average overtime per month(for those not seconded to other companies/non-executives)

ENEX REPORT 2018 27

Strategy

Strategic initiatives aimed at creating value

Message from CFO

Through efficient financial and capital operations,
we are supporting the sustainable growth of the
Itochu Enex Group.

Investment policy

Fiscal 2017 review

Current ratio
ROE

Ratio of SG&A expenses to gross trading profit
Net DER

118.2%

105.5%

123.1%

Equity-to-asset ratio

123.9%■Home-Life ■Life & Industrial Energy ■Power & Utility ■Mobility Life ■Other
Real cash flows from operating activities

121.6%

83.0%

81.8%

33.1%
29.6%

29.3%

31.5%

10.0%

7.8%

0.25 times

2015/37.5%

0.17 times

2016/30.17 times

2017/3

79.9%

30.3%

9.8%

0.18 times

2018/3We changed the consolidated dividend payout ratio
to 40% or more. We will continue stable dividends.
We have striven for the stable and sustainable return of profits toshareholders, but given that we exceeded plans in the final year of
the medium-term business plan in fiscal 2017 (net profit attributable
to Itochu Enex’s shareholders of ¥10.8 billion) and given the steadyprogress in improving the revenue base, based on an overall
consideration of medium- to long-term results and capital efficiency,
etc., in fiscal 2018 we changed our basic policy relating to profit
distribution from the previous “consolidated dividend payout ratioof 30% or more” to “40% or more.” Going forward, while increasing
profitability, we will work to realize continuous growth and respond to
the expectations of shareholders.

0.7

23.5

25.4

0.6

25.6

11.7
17.3

22.2 12.7

0.2

8.8

1.1

0.6

0.5

4.6
3.4

2.4

3.9

2014/3

4.9

3.2

1.9

7.2

6.6

5.1

2015/3

2016/32017/3

7.2
2018/3*Cash flows from operating activities excluding working capital, etc.

Annual dividends per share and dividend payout ratio
58.6%
¥40
46.8%
35.1%

42.7%
30.5%

¥16

¥16

36.3%

32.4% 31.7%
¥20

¥16

Commemorative¥20
dividend ¥4
¥16

211/3

¥22

¥24

¥32

41.0%

34.8%

¥16

2012/3 2013/3 2014/3 2015/3 2016/3 2017/3 2018/3

Dialogue with shareholders and investors
Financial strategy and capital policy

Changes to the business portfolio

To continuously implement proactive investment in fields that act
as growth drivers, we will work to maintain a highly sound financialbase. In addition to maintaining the same level of net DER of 0.17
times for the past three years, with a current ratio of 121.6% and an
equity-to-asset ratio of 30.3%, the Company has a sufficient base topromote proactive investment. Going forward, we will maintain these
conditions, and support the soundness of the Company.
Furthermore, we have succeeded in maintaining a level below
80% for the ratio of SG&A expenses to gross trading profit, set as a
KPI to secure profits and promote efficient management, continuing
to control our business portfolio, shrink inefficient businesses, andreview inefficient operations through the promotion of work-stylereforms (ENEX EARLY BIRD), as we work to maintain and improvethese levels and boost our profitability and efficiency. This will allow
us to steadily achieve ROE of 9% or more and represent a financialbase and revenue base that can achieve 10% ROE or more.

Assets bybusiness■Home-Life■Life & Industrial Energy■Power & Utility■Mobility Life
■Other

Total

Total

ENEX REPORT 2018 28

Assets bybusiness¥64.3 billion¥192.7 billion¥44.8 billion¥19.2 billion¥321.0 billion■Home-Life■Life & Industrial Energy■Power & Utility■Mobility Life
■OtherTotal¥66.1 billion¥146.4 billion¥80.2 billion¥63.4 billion¥26.5 billion¥382.6 billion

Net profit
attributable to
Itochu Enex’s
shareholders

Net profit
attributable to
Itochu Enex’s
shareholders■Home-Life■Life & Industrial Energy■Power & Utility■Mobility Life
■OtherGoing forward, through continuous dialogue, wewill work to further improve our IR activities.

2018/3¥2.8 billion¥2.3 billion¥2.4 billion¥(0.4) billion¥7.1 billion■Home-Life■Life & Industrial Energy■Power & Utility■Mobility Life
■OtherTotal

The Company’s basic policy for our IR activities is to deepen
shareholders’ and investors’ understanding about the Company andwork to enhance our corporate value through continuous dialogue
with them. Based on this basic policy, in addition to the financial
results presentation meetings held twice annually and attended by
all directors, as well as the interviews with institutional investors andsecurity company analysts, through two-way dialogue at briefings
for individual investors and other initiatives, while deepening theirunderstanding about the Company, we listen earnestly to opinions
about the Company’s management system and business strategy,
etc. and reflect them in management.
Going forward as well, through a sincere approach withshareholders and investors and continuous dialogue, we will work tofurther improve our IR activities.

Financial results presentation meeting

Company Information

2014/3

Data Section

By supporting the soundness of the Company fromthe financial base and boosting profitability, we areworking to increase our corporate value.

Management

2008/3 2009/3 2010/3

45.2%

Segment

5.7%

0.26 times

2014/3

79.8%

0.4

1.8

4.8
Shareholder return policy

80.8%

6.0

Strategy

Fiscal 2017 was the first year of the medium-term business plan
“Moving 2018 Connecting to the future.” The current plan is a twoyear plan, and its basic policy is to promote the reform of the revenue
base and organizational base to connect to future growth.
Looking back at fiscal 2017, we largely exceeded the goals
set forth in the quantitative plan of “a net profit attributable to
Itochu Enex’s shareholders of ¥10.4 billion” with ¥11.0 billion andsucceeded in recording record profit for three straight years. This
result also exceeded our target of ¥10.8 billion in the final year of theplan.
However, profit from operating activities fell below fiscal 2016
results at ¥17.2 billion, but this was mainly due to the promotionof the reform of the revenue base, including the reorganizationand integration of the LP gas business and withdrawing from anddisposing of inefficient locations, with levels still exceeding the
fiscal 2017 plan. Therefore, we believe the first year of the mediumterm business plan got off to a strong start both quantitatively andqualitatively.

Trends in major financial indicators

While placing an emphasis on balancing “offense” and “defense,”
to realize sustainable growth and increased corporate value, wewill continue to prioritize the allocation of management resources
to highly profitable businesses such as the electric power field.
Furthermore, we will reduce the resources allocated to businesses
with low profitability or undue risk, thoroughly implementing so-called“selection and concentration.” As a tool to achieve these goals, we
completed the revision of our investment criteria in the previous fiscal
year, and while being more aware of the balance between risk andreturn, we will work to optimize our assets.

Our Vision

Record profit for three straight years! The firstyear of the medium-term business plan got off to astrong start.

Investment amount and real cash flows
from operating activities* (billions of yen)This is , ENEX

Director and Chief Financial Officer, Atsushi Katsu

Pursue profitability and growth potential and work
to optimize assets.

¥4.0 billion¥5.1 billion¥2.2 billion¥0.2 billion¥(0.5) billion¥11.0 billion

ENEX REPORT 2018 29

Segment

The ability to create value[NEW] FY2017
Profit from operating activities / Net profit attributable to Itochu Enex's shareholders[by Division][by Division as of 2018/4~]

Profit from operating activities

Profit from operating activities

Industrial Energy &Logistics Division

Home-Life Division
Profit from operating activities / Profit

Profit from operating activities / Profit

3.3 billions of yen / 4.0 billions of yen

Home-Life Division
Profit from operating activities / Profit

Profit from operating activities / Profit

3.3 billions of yen / 4.0 billions of yen

2.0 billions of yen / 0.2 billions of yen

Strategy

Net profit
attributable toour shareholders

Our Vision

1.8 billions of yen / 1.3 billions of yen

Mobility Life Department

This is , ENEX

[BEFORE] FY2017
Profit from operating activities / Net profit attributable to Itochu Enex's shareholders

Net profit
attributable toour shareholders

Segment

Life Energy & Logistics Division

Power & Utility Division

8.0 billions of yen / 4.1 billions of yen

4.6 billions of yen / 2.2 billions of yen

Profit from operating activities / Profit

4.6 billions of yen / 2.2 billions of yen

Before Organization (~2018/3)

7.8 billions of yen / 5.1 billions of yen
New Organization (2018/4~)

Power & Utility Division

Power & Utility
GroupPower & Utility Division

Home-Life Division

Energy & Logistics
Group

Industrial Energy & Logistics
DivisionLife Energy & Logistics
DivisionNew

Direct of Executive
Advisory Officer

Life & Industrial Energy
Division

Company Information

Home-Life Division

Energy Innovation &Logistics BusinessGroup

Data Section

Power &
Gas BusinessGroup

Profit from operating activities / Profit

Management

Profit from operating activities / Profit

Profit from operating activities / Profit

Life & Industrial Energy Division

Power & Utility Division

Mobility Life Department

Exept for "Adjustment" stated in the Earnings Reports.

ENEX REPORT 2018 30

ENEX REPORT 2018 31

Segment

The ability to create value

Business divisions

Home-Life Division

Fiscal 2017 review

Chief Operating Officer, Energy & Logistics Group and
Chief Operating Officer, Home-Life Division

Profit from operating activities (billions of yen)

4.0

3.7

3.0

LP gas, city gas sales

1.50 million customers across Japan
Itochu Enex Home-Life Hokkaido Co., Ltd.
Itochu Enex Home-Life Tohoku Co., Ltd.
Itochu Enex Home-Life Nishi-Nihon Co., Ltd.

ENEARC Kanto Co., Ltd.
ENEARC Chubu Co., Ltd.

Strategy

3.3

Net profit attributable to Itochu Enex’s shareholders (billions of yen)

540,000 customers across Japan

Our Vision

Kyosuke Wakamatsu

In October, we established ENEARC Co., Ltd. through a joint
investment with OSAKA GAS CO., LTD. Sales companies in the
Itochu Enex Group and the OSAKA GAS Group were placed under
the umbrella of the newly established company, and the Itochu Enex
Group acquired shares in three Osaka Gas Group sales companies
in Hokkaido and two prefectures in Shikoku. As a result, the numberof customers under direct LP gas supply contracts increased toapproximately 546,000.
Regarding sales of electricity for households, the division promoted
the expansion of the customer base by focusing mainly on sales ofcombined LP gas and electricity supply packages. As a result, as ofMarch 31, 2018, the number of supply contracts increased by around12,000 for a total of approximately 54,000.
In overseas businesses, the sales network and the customer baseare growing strongly in our industrial gas sales business in Indonesia(PT. ITC ENEX INDONESIA) and at our LP gas sales business in thePhilippines (Isla Petroleum & Gas Corporation).

Direct LP gas supply

This is , ENEX

Drove the reorganization of the LP gas industry, overseas
businesses also grew

Through delivering LP gas and various smart-energies,
we propose “comfortable,” “affluent” and “secure” lifestyles.

ENEARC Kansai Co., Ltd.
ECORE Co., Ltd.

2019/3 plan

2018/3 results

2019/3 plan
TopicsThe market environment

The number of customers under direct LP gas supply contracts
following business reorganization with the OSAKA GAS GroupLP Gas sales (Unit: Thousands of tons)

Nationwide

345,000

The Itochu Enex Group

18,65917,333

16,421 16,488 16,405 16,571

15,394 15,504

42,00014,693 14,413

994

686

681

633

619

625

619

601

597

619

2008/3 2009/3 2010/3 2011/3 2012/3 2013/3 2014/3 2015/3 2016/3 2017/3 2018/3

ENEX REPORT 2018 32

Thorough segment management by organizing and increasing the accuracyof the customer database
Implementing effective approaches and promotions for each customer
Preventing customer loss through retention policies utilizing sales of otherproducts such as electricity and kerosene as well as peripheral services andpoints, etc.
Strengthening our base and training human resources through the sales
promotion campaign “Iikyan!”

Identifying growth strategies in peripheral businesses
Industrial gas business growth strategy (cooperating with other companies
and pursuing M&A)
Stabilize earnings in the high pressure gas container pressure testing
business
Pursuing innovation in BtoB peripheral businesses

Overseas businesses
Indonesia (industrial gas sales business): expanding customer base by
diversifying sales schemes
Philippines (LP gas sales business): creating new demand and expanding
business by utilizing Japanese knowhow

Company Information

In the division, the medium-term business plan lists 1) expanding thecustomer base, 2) optimizing assets, and 3) increasing earning power,
and we are working to rebuild the revenue base. We aim to provide
an even greater level of benefits to our customer base, which has
expanded greatly from the second half of fiscal 2017 (see graph to
the right). Furthermore, in this period as well, we are creating a “senseof value” from our products and services through close collaboration
with other divisions and have won a “sense of trust” from increased
brand recognition. We plan to further expand and improve overseas
businesses by combining the knowhow cultivated in Japan with themarket and customer needs of each country, and by promoting andproviding new fields of business.

Rebuilding the LP gas wholesale and retail sales bases
Focusing on “increasing,” “defending,” and “improving” thecustomer base

Customers (Unit: customer)
Around 1.6 times

546,354308,1162013

317,3652014

328,3992015

343,983

2016

Data Section

service

54,000 (up 12,000 year on year)

Fiscal 2018 initiatives

Medium- to long-term ideal profile
Expand our customer base through LP gas +546,000 (up 201,000 year on year)

Promoting set sales of “LP gas + electricity” The number ofcustomers under electricity supply contracts
Management

The domestic LP gas market is welcoming a large period of change,
with a scramble for clients beyond the boundaries of the gas industry
through the full liberalization of retail power and city gas, as well as
the reorganization of oil sales companies, etc. However, turning to theoverseas market, economic growth in Asian countries is leading LP
gas demand to grow year by year, and we expect largely expandedsynergies with our existing businesses going forward. In the HomeLife Division, our business must stay one step ahead of the times, as
we work to understand the needs of the market and customers andpursue the streamlining and increased efficiency of our operations. We
provide added value in our existing strengths and continue to be “Our
Customers’ First Choice” both in Japan and overseas.

Segment

2018/3 results

Home-Life Division overview

2017

Business domains

Energy for home and business use, solutions for richer, more comfortable living

Main products and services

LP gas, home smart energy devices, city gas, electricity, industrial gas, solutions for comfortable living

Main customers

1.50 million households across Japan, corporate users, 2,700 distributors

Forms of business

Retail and wholesale sales

ENEX REPORT 2018 33

Segment

The ability to create value

Business divisions

Life & Industrial Energy Division

Fiscal 2017 review

Chief Operating Officer, Life & Industrial Energy Division

Profit from operating activities (billions of yen)

7.8

Net profit attributable to Itochu Enex’s shareholders (billions of yen)

7.8
5.1

2019/3 plan

2018/3 results

2019/3 plan

The market environment

Group gasoline sales (Unit: thousand KL) Group service stations (Unit: station)
Directly managed CS (internal number) (Unit: station)

3,832

2,174

335

4,079

2,153

322

3,982

2,144

298

4,266

2,157

295

4,317

2,182

307

3,993

2,118

324

3,593

2,039

297

3,722

1,973

264

3,587

3,328

208

1,812

205

■Established a manufacturing and sales company for products
recycled from coal ash“KANOU FA CO., LTD.” Joint investment by three companies:
NICHIYUU CO., LTD. 31%, Kanokosan Co., Ltd. 20%, Itochu Enex
Co., Ltd. 49%.
*1 Car-Life Stations: Car-Life Stations are service stations offering multiple services
provided by the Company.
*2 AdBlue is a high-grade urea solution used in SCR systems, which detoxifies nitrogencompounds (NOx) contained in exhaust gases of diesel vehicles.
*3 GTL is the acronym of Gas to Liquid technology, which is used to convert natural gas togasoline, kerosene, diesel and other fuels. GTL is a method of producing environmentallyfriendly fuel that contains almost no sulfur or metals, etc.
*4 Fly ash business: The fly ash business recovers and processes fly ash (a type of coal ash
discharged from coal-fired thermal power plants). The processed fly ash is then reused
as a roadbed material for asphalt road surfacing and other applications.

Fiscal 2018 initiatives
Affiliated CS chain business (BtoBtoC)

1,888

Searching on Carlife Stadium

Optimizing sites and strengthening the sales network
Diversifying products and services (electricity and automobile-related
business, etc.)
Clarifying the new CS vision (regionally focused one-stop businesses, etc.)

2009/3 2010/3 2011/3 2012/3 2013/3 2014/3 2015/3 2016/3 2017/3 2018/3

Asphalt, marine fuel, industrial energy, and terminal, etc.
business (BtoB)
Promoting the environmental recycling business (fly ash, slop and recycledoil, PCB processing and mediation, etc.))
Appropriate operations and enhanced capabilities of assets including
terminals and ships
Responding to changes in the market from factors including IMO
regulations, etc.

Data Section*New low-carbon regulations for ship fuels (changed from 3.5% to 0.5% sulfuric content forship fuels) from the International Maritime Organization to take effect in 2020.

Itochu Enex Group’s sales of gasoline and number of service stations

1,812 (decrease of 76 stations year on year)■Rebrand from Itsumo Rent-a-Car to Carlife Stadium car rentals
completedManagement

The market environment of the division is characterized by astructural trend of decline in the use of fuel for vehicles at CS (CarLife Stations) and petroleum fuels in industry due to factors such as
the declining birth rate and aging population and the more efficientuse of energy. Like demand for petroleum fuels, the number ofservice stations across Japan has declined by half from the peak toaround 31,000, and the trend of decline is expected to continue. In
addition, further streamlining and consolidation in the petroleum fuelindustry is expected to accelerate due to the reorganization of major
oil companies. That said, we believe the liberalization of electricity andgas and environmental regulations such as IMO* will lead to increased
opportunities for new business development utilizing the businessbase and customer base we have cultivated thus far.

1,888

Segment

2018/3 results[Industrial Energy field]
The asphalt sales business was strong, recording a year-on-yearincrease in sales. In the AdBlue*2 sales business, we are expanding
our sales channels such as exports to Singapore and sales for ships.
In the Industrial Energy sales business, in addition to existingproducts, we are providing new value by proposing new products
starting with sales of GTL*3, a diesel replacement fuel made withnatural gas as the raw material. In the marine fuel sales business, wedeployed our new fuel supply ship at Oita Port in November, giving
the business a nationwide fleet of eight supply ships. Furthermore,
we began operating a lubricant oil supply ship in Seto Inland Sea.
In addition, we also focus on building the environmental andrecycling-related business as a new business base. In the fly ash■Results of structural reforms including withdrawing from
unprofitable CS
Number of affiliated CS

Strategy

5.3

TopicsOur Vision

Toshihisa Fuse

[Life Energy field]
In the CS-related*1 business, we continued to introduce our new
POS system at affiliated CS sites and used a shared loyalty points
system to exchange customers with companies in other sectors.
The number of Car-Life Stations in the Itochu Enex Group as ofMarch 31, 2018 was 1,812, marking a net decrease of 76 stations
from the end of the previous fiscal year due to planned withdrawal of
unprofitable stations.
In the automobile-related business, ENEXAUTO CO., LTD. started
operating the Itsumo Rent-a-Car business under a new brand,
Carlife Stadium car rentals in April. We strive to improve the quality ofvehicles and sales services for customers to expand the functions of
the car rental network, while also working to attract more customers
through web-based promotions and customer transfers from othercompanies.

business*4, which recycles and sells coal ash discharged from the
Itochu Enex Group’s thermal power plants, KANOU FA CO., LTD.
started full-scale operations in November and has been promoting
business expansion. Moreover, the slop and oil recycling business,
which recycles and sells waste oil recovered from ships, is building a
track record and is promoting expansion of the business.

This is , ENEX

Withdrawing from unprofitable CS and promoting new
business

We will help build a better society with diverse forms of energy
and services to benefit local people and industry.

Other overall

Supporting community life and the lifestyle baseThe division is working to expand services rooted in community life
and to develop businesses supporting industry from the base. We
will quickly and appropriately respond to the nature of diversifying
products and services and carefully respond to regional needs.
Furthermore, while flexibly responding to changes in the industry
environment, including the shift to IT, reorganization of major oilcompanies, and IMO regulations, we aim to create a divisional systemthat can evolve without fearing change.

ENEX REPORT 2018 34

Life & Industrial Energy Division overview
Business domains

Contributing to life and energy in communities from petroleum products through the automotive, electric power, andindustrial fields

Main products and services

Gasoline, kerosene, diesel oil, fuel oil, LP gas, electricity, automotive, car rental, living and automotive products andservices, AdBlue, asphalt, marine fuel, import/export of petroleum products, terminal tank rental, recycling of fly ash,recovery and recycling of slop

Main customers

Approx. 1,800 affiliated CS sites, 3,500 corporate business sites, domestic road companies, sea shippers, publicagencies

Forms of business

Retail and wholesale sales

Overseas market

Guam, Palau

Company Information

Sharing customer bases and promoting regional strategies throughorganizational integration
Creating the means of responding to the accelerating shift in society to IT,
and streamlining the overall operational flow

Medium- to long-term ideal profile

ENEX REPORT 2018 35

Segment

The ability to create value

Business divisions

Power & Utility Division

Fiscal 2017 review

Chief Operating Officer, Power & Utility Group and
Chief Operating Officer, Power & Utility Division

Profit from operating activities (billions of yen)

Net profit attributable to Itochu Enex’s shareholders (billions of yen)

6.4
2.8

2.2
2019/3 plan

2018/3 results

2019/3 plan

■Retail power sales
Electricity sales

2,431GWh

66,720Power producers and suppliers total (Unit: thousand MWh)
Liberalization Division share
The Company’s retail power sales (Unit: thousand MWh)

12.6%

Large temperature
difference

Hot
water

Hall

40,232

15,272 14,541 15,353
2.6%

2.8%

2.5%

19,956 19,425 19,106

28,173
7.6%
22,715

2,431

3.6%

3.5%

■Business alliances
Established The Reliance Energy Okinawa, Incorporated as a joint
venture of Tokyo Toshi Service, The Okinawa Electric Power Company
and OSAKA GAS

80

Sales

Electricity sales business: strengthening regional
specialization and sales portfolio improvement
BtoB: Priority acquisition of small-scale customers considering regional
characteristics and industries, etc.
BtoBtoC: Aggressively promoting “collaboration businesses with otherindustries” considering areas and industries, etc.
Additional services: Strengthening the development of an additional service
model compatible with electricity(

Purchasefrom the outside
Other companies,
markets

Enex

Enex’sbalancing
group
OJEX

)

Alliancewitha partner
in a different
industry

Customers

Electric power development

Supply-demand
management

Power generation business
Improving our portfolio of power sources aiming for stable power supply
and reduced environmental impact
Promoting investment in renewable energy power generation facilities
Fusing the Itochu Enex Group’s operational knowhow in various power
plants with financial solutions, we are strengthening our development of
renewable energy power generation

Heat supply business
Through The Reliance Energy Okinawa, we are strengthening ourdevelopment of a comprehensive energy services business in the Okinawa
area
Strengthening initiatives in our comprehensive energy services businesscentered on heat and electricity supply services)

Oji Group
power plants

Heat supply center

Fiscal 2018 initiatives

873

409

Itochu Enex Powerin-house power
generation(

HTHP: Air-source heat pump(heat recovery type)Company Information

Purchase

DBHP: Air-source turbo cooling machine(heat recovery type)

District heat supply business image(Harumi Island district)

4.2%

231

TR: Air-source turbo
cooling machine

2,672GWh (up10% year on year)

Data Section

3

Creating a structure that can respond to more diverse needs,
from power generation to sales

Cold/hotwater tank

5.2%
3.5%

Cold water tank

Hot water tank

Management

2,672

Medium- to long-term ideal profile

ENEX REPORT 2018 36

Cold
water

Topics2008/3 2009/3 2010/3 2011/3 2012/3 2013/3 2014/3 2015/3 2016/3 2017/3 2018/3

The division has conducted business activities aimed at “becoming a
one-of-a-kind presence that provides new services through electric
power and heat” using the strength of our unified system frompower generation through sales. Going forward as well, in the power
generation field, we will pursue the balance of environmental benefits
and economic benefits by strengthening renewable energy businessincorporating financial solutions. Furthermore, in the sales field,
together with our regional business partners with strong customer
bases, we will provide services rooted in the local community suchas new services and integrated energy services combining powerand heat incorporating digital technologies and contribute to local
development.

Large temperature
difference

Office Tower Z

Cold/hotwater tank

The market environment
There is a harsh competitive environment in the electric power retailmarket due to companies from different industries entering the market,
major power companies playing catch up, and continuous changes inthe electric power business system. Meanwhile, as demonstrated by
the entry into force of the Paris Accord and increasing focus on ESG
investment, energy businesses must simultaneously pursue not only
economic benefits but also environmental benefits. Japan’s Strategic
Energy Plan approved by the cabinet stipulates making renewableenergy the main power source by 2030, accounting for 20–24% of
total energy production. Against this backdrop, creating a businessmodel that responds to the dynamically changing market environmentand diversifying needs of members of local communities is growing
even more important.

Office Tower Y

Segment

2018/3 results

Office Tower X

Strategy

4.6*1 Service that owns electric and heat source facilities, etc. and supplies cold and hot
air-conditioning water, hot water for hot-water supply, steam and others on behalf ofcustomers in the use of energy.
*2 GINZA SIX is a multipurpose commercial facility located in Ginza district, Chuo-ku,
Tokyo. Group company Tokyo Toshi Service CO., LTD. provides district heating services
to the facility.

Our Vision

Masahiko Takasaka[Electric power business]
Electricity sales volume and profits in the electricity sales field
increased from the previous fiscal year, led by the Company and OjiItochu Enex power retailing Co., Ltd., reflecting growth in electricity
sales to business users and households and closer cooperation forcapabilities in electricity supply and demand operations, in addition
to the diversification strategy of power source supplies, althoughmargins compressed following the steep rise in wholesale power
market prices due to a harsh winter and other factors. In this field,
ENEX LIFE SERVICE CO., LTD. will lead efforts to form allianceswith companies that have strong customer bases in local areasand companies in other sectors, in order to promote investigationsof new value proposals for households and small companies. We
launched a collaboration business with electricity in partnership with
Bay Communications Inc. and MIYAZAKI CABLE TV NETWORK,
which run cable television businesses.
In the power generation field, total power generation increased fromthe previous fiscal year, due to the start of operations at a new thermal
power plant in October 2017, but profit decreased year on year due
to factors including the nonrecurrence of a gain on sales as a result of
the sale of wind power generation facilities for the purpose of replacing
business assets, which was recognized in the previous year.

[Heat supply business]
Demand for heat varied due to fluctuations in average temperaturesduring the fiscal year, but overall demand for heat increased year
on year due to the impact of GINZA SIX*2, to which supplies started
in April. In addition, we established The Reliance Energy Okinawa,
Incorporated in December 2017 as a joint venture of The Okinawa
Electric Power Company, Incorporated, OSAKA GAS, and Tokyo
Toshi Service CO., LTD., one of our group companies, to provide
heat supply and other ESP business in the Okinawa area.

This is , ENEX

Implemented collaborations with other industries, launched
ESP business*1

We operate electric power-related and heat supply businesses
that deliver energy efficiency, comfort and economic benefits.

Power & Utility Division overview
Business domains

From power generation and demand supply adjustments in pursuit of energy conservation, comfort, and economic
benefits through sale of electricity and district heat supply

Main products and services

Electricity, steam, heat supply, comprehensive energy services

Main customers

Corporations, individuals, power companies, office buildings and business complex

Forms of business

Vertically integrated model based on power generation, demand supply, and sales

ENEX REPORT 2018 37

Segment

The ability to create value

Business divisions

Main Group Companies (as of August 1, 2018)

Mobility Life Department

Home-Life Division■Profit from operating activities (billions of yen)
■Net profit attributable to Itochu Enex’s shareholders (billions of yen)

0.9
2018/3 results 2019/3 plan

ITOCHU ENEX HOME-LIFE HOKKAIDO CO.,LTD.

43.0

100.0

ITOCHU ENEX HOME-LIFE TOHOKU CO.,LTD.

80.0

100.0

ITOCHU ENEX HOME-LIFE NISHI-NIHON CO.,LTD.

450.0

100.0

ECORE CO.,LTD.

480.0

51.0

ITOCHU INDUSTRIAL GAS CO.,LTD.

115.0

100.0

J-Cylinder Service Co.,Ltd.

10.0

100.0

PT. ITC ENEX INDONESIA

676.0

100.0
Strategy

2.0
0.2

50.0

Life & Industrial Energy Division

0.1

Name

2018/3 results 2019/3 plan

Fiscal 2017 review
Nissan Osaka Sales fiscal 2017 results (consolidated)
Total tradingtransactions¥105.3 billion(up ¥4.2 billion year on year)

Profit fromoperatingactivities

New
29,000¥2.1 billion(down ¥0.3 billion year on year) vehicles (up 2,000 vehicles)

Net profit
attributable to
Itochu Enex’s
shareholders(included)

Used
25,000 vehicles¥0.6 billion(down ¥0.1 billion year on year) vehicles (up 1,000 vehicles)

Vehicle unit sales(year on year)

KOKURA ENTERPRISE ENERGY CO.,LTD.

400.0

100.0

ENEX FLEET CO.,LTD.

100.0

100.0

ENEXAUTO CO.,LTD.

100.0

100.0

ENEX PETROLEUM SALES HIGASHI-NIHON CO.,LTD.

57.0

100.0

ENEX PETROLEUM SALES NISHI-NIHON CO.,LTD.

100.0

100.0

KYUSHU ENERGY CO.,LTD.

100.0

75.0

Power & Utility Division
Name

Automobile-based businessSocial and infrastructure-based business

Sharing Nissan Osaka’s customer base and evaluating new automobilerelated businesses (Telematics business, etc.)
Carsharing business evaluation

Environmentally based businessControlling share (%)

ENEX Electric Power Co., Ltd.

100.0

100.0

Tokyo Toshi Service CO.,LTD.

400.0

66.6

ENEX LIFE SERVICE CO., LTD.

100.0

100.0

Oji-Itochu Enex power retailing Co.,Ltd.

100.0

60.0

US biofuel plant begins full-fledged operations
Provided raw materials (waste cooking oil) to Euglena bio jet fueldemonstration plant

Mobility Life Department
Mobility Life Department overview

ENEX REPORT 2018 38

Business domains

Car dealing, next-generation biofuel, and the creation of new services connecting to the environment, society
and lifestyle

Main products and services

Vehicles handled by Nissan Osaka Sales

Joint Participation

Next-generation biodiesel manufacturing business (US)Project

Euglena domestic bio jet fuel demonstration projectName

OSAKA CAR LIFE GROUP CO., LTD.

Paid-in Capital (million yen)

310.0

Company Information

Evaluating new social and infrastructure businesses aimed at the customer
base of Oji-Itochu Enex power retailing Co., Ltd. and ENEX LIFE SERVICE
CO., LTD.
Creating new contents and evaluating businesses that contribute to building
regional infrastructure (Agricultural IoT, HEMS, etc.)

Paid-in Capital (million yen)

Data Section

Fiscal 2018 initiatives

Controlling share (%)

Management

In the car dealer business, unit sales in the third quarter declined
sharply compared to the same period a year earlier due to theimpacts of improper conduct in final inspections for vehicles by Nissan
Motor Co., Ltd., which came to light in September. However, unit
sales in the fourth quarter recovered and exceeded unit sales in thesame period a year earlier due to the introduction of new car models.
Combined with strong sales in the first half of the fiscal year, total unit
sales for the full year exceeded that in the previous year.

Paid-in Capital (million yen)Segment*The above results are for the new business structure in fiscal 2018 (car dealer business and biodiesel production
business in the US).

Our Vision

Masahiko Takasaka

Controlling share (%)

1,040.0

ENEARC Co.,Ltd.

Chief Operating Officer, Power & Utility Group and
Executive Advisory Officer for Mobility Life Department

Paid-in Capital (million yen)This is , ENEX

Name

Guided by the keywords of the quaternary industrial revolution,
the environment, and new technology, we aim to create mobility
and life services for a more prosperous local community base.

Controlling share (%)

52.0

ENEX REPORT 2018 39

Management

Continuously evolving corporate governance aiming forsustainable growth and improvement in the corporate value

Two Outside Directors talked together about the operation of corporate governance of the Itochu Enex Group.

Outside Director /Independent

Ichiro Saeki

Seiichi Shimbo

Having unrestricted discussions based on
proactive information disclosure

Company Information

ENEX REPORT 2018 40

Supporting sound risk taking and connecting the
growth strategy to improvement
in returns to shareholders

Data Section

Improving the quality of cooperation
with executive officers, making use of Mr. Saeki’s
experience in business, legal affairs and education

Management

Shimbo: During my term as Outside Director, which is now
into the fourth year, I think the disclosure of management
information has been improving steadily. In addition to the
explanations we receive at monthly debriefing sessions regarding
items to be discussed at the Management Advisory Conference
and examination agendas for the Board of Directors, since June
2018, we have been provided with a tablet PC, which allows us
to additionally access the intranet and a website exclusive forcompany officers via the internet enabling us easy access to various
information even from our homes.
Saeki: As you said, I believe the information disclosure is at asatisfactory level. Because the Company is a company with Audit &Supervisory Board, the Board of Directors assumes a heavy burden

and the information that officers are required to be familiar withis wide-ranging. Nevertheless, in addition to receiving preliminary
explanations, we also receive a wealth of materials by email andother means. The Company has been proactively promoting onsite inspections by officers. I, together with Mr. Shimbo, inspected
Sendai Power Station last year. This year, we are planning to visit
the heat supply plants of Tokyo Toshi Service and a hydroelectric
power plant held in Niigata Prefecture. After all, opportunities to lookat sites and get employees’ firsthand views are important. There isa big difference between reading information on documents anddirectly hearing opinions, and that is why such inspections are so
important.
Shimbo: From this year, we have started holding informal meetings
with the General Managers of the Corporate Administration
Divisions to hear about problems in the Company. Although wehave just launched this effort, it is definitely something we would like

Shimbo: For the evolution of the Company’s corporate governance,
I am hopeful there will be more women appointed as officers, andI particularly expect the number of female Directors to increase.
Since the energy sector was originally a male-centered society,
the Company has not developed such female talent. However, as
the Company positions environment and life services as important
growth fields, it is essential to incorporate the views, sensibility andvalues of women into management. If no well-qualified person isfound in the Company, the Company also has the option of inviting
someone from outside.
Saeki: I am hopeful that the quality of cooperation with outside
officers will be enhanced further. Although the number of outside
officers has been growing recently, I do not think this trend alone
will improve the management. The number of outside officers is
not the most important thing. What matters is to foster a quality
cooperative relationship where outside officers represent theinterests of shareholders and express their candid opinions on the
management, and executive officers lend their ear to those opinions.
While the economy is becoming uncertain on a global basis, themarket in the Company’s business fields is shrinking with the rapid
aging and very low birthrate in Japan. In order for the Company
to take on challenges for growth in this environment, I will strive toachieve fruitful cooperation with executive officers, making use ofknowledge cultivated in my career as a bank officer, lawyer andfaculty member.
Shimbo: Currently, the Company aggressively implements returns
to shareholders, setting the dividend payout ratio at 40%. However,from now on, we will need to steer the management while balancing
revenue, investments and dividends under a long-term vision. I
expect all employees in the Itochu Enex Group to work on theirtasks as a team while growing as “The best partner for life andsociety” in a sustainable way and increasing the corporate value.

Segment

Outside Director /Independent

Shimbo: As the scope of operations has expanded over the last
five years, management has been steadily steering the Company
forward while carrying out thorough discussions and taking soundrisks.
Saeki: I believe that the intention behind corporate governancereforms, which have attracted attention in recent years, is for eachcompany to strengthen its “earning power” for shareholders. Since
globalization is also intensifying in the energy field, businesses
cannot be operated satisfactorily with only a domestically oriented
mindset. As a consequence of globalism, there is an increasinglevel of business execution that involves risk-taking, and executive
officers are shouldering heavy responsibilities. For that reason, it isimportant that as outside officers, we provide appropriate advice
and recommendations based on knowledge accumulated outside
the Company so that business executors make reasonable andobjective decisions.
Shimbo: In that sense, I think the Governance Committee, which
was set up as an advisory body for the Board of Directors in 2015,
has played prominent roles. One such role is ensuring compliancewith the Corporate Governance Code. The current full compliancewith the code is exactly a result of exhaustive discussions by theGovernance Committee on what is appropriate to the Company
and how it should respond. Other than this effort, the committee
also discussed various challenges and contributed to evolution

Expecting the appointment of female officers
and cooperation with executive officers

StrategyStrengthening the supervisory function andsupporting decision-making for growthof the Company’s corporate governance through reports to anddiscussions with the Board of Directors. To further enhance thisfunction, the operating structure was enhanced in June 2018 byincreasing the number of members to five, of which four members
are independent, outside officers. I believe this will allow the
Company’s use of “outside scrutiny” to become better than ever.
Saeki: That is quite right. As a member of the GovernanceCommittee, I too will properly fulfill my duties.

Our Vision

to continue.
Saeki: Absolutely. I also appreciate the management of the Boardof Directors. You can classify members of the Board of Directors
into three groups: Executive Directors, Outside Directors and Audit& Supervisory Board Members. All the officers speak freely fromtheir respective viewpoints, and there are no problems that could
threaten the independence between the business management andthe Board of Directors.
Shimbo: Firstly, the Company has a free-spirited, open andtransparent corporate culture. In addition, practical and constructive
discussions are conducted by the Board of Directors under theoutstanding, and fair leadership of its chairperson, President Okada.
Also, when I go to the office, I also hold a meeting with the Standing
Audit & Supervisory Board Members who are outside officers to
exchange honest views and develop a common understanding of
the issues. I think we have formed good collaborative relationships.

This is , ENEX

Exclusive discussion
betweentwo Outside Directors

Management supporting value creation

ENEX REPORT 2018 41

Management

Management supporting value creation

Directors, Audit & Supervisory Board Members andExecutive Officers
Board of Directors' Members
This is , ENEXOur Vision

3

4

5

6

7

8

9

10

12

Hisato Okubo

Segment2

Strategy

1

11

Audit & Supervisory Board's Members
Directors
2.

3.

4.

5.

6.

7.

Representative Director, President and Chief
Executive Officer, Itochu Enex Co., Ltd.

Director and Senior Managing Officer

Director and Managing Officer

Director and Executive Officer

Director and Executive Officer

Director

Director

Masahiko Takasaka

New election

New election

New election

Kyosuke Wakamatsu

Tatsuro Utsumi

Atsushi Katsu

Seiichi Shimbo

Ichiro Saeki

Chief Operating Officer for Energy & Logistics
Group, Chief Operating Officer for Home-Life
Division, Itochu Enex Co., Ltd.
1985 Joined Itochu Enex Co., Ltd.
2018 Director, Itochu Enex Co., Ltd.
Number of the Company’s shares owned
14,200 shares
Board of Directors Meeting Attendance: –Chief Compliance Officer, General Manager
for Corporate Planning Department, Itochu
Enex Co., Ltd.
1987 Joined Itochu Enex Co., Ltd2018 Director, Itochu Enex Co., Ltd.
Number of the Company’s shares owned
13,100 shares
Board of Directors Meeting Attendance: –Chief Financial Officer, Chief Information
Officer, and Chief Operating Officer,
Corporate Administration Division
1983 Joined ITOCHU Corporation2018 Director, Itochu Enex Co., Ltd.
Number of the Company’s shares owned shares
Board of Directors Meeting Attendance: –1975 Joined Tokio Marine & Nichido Fire
Insurance Co., Ltd.
2015 Director, Itochu Enex Co., Ltd.
Number of the Company’s shares owned
6,500 shares
Board of Directors Meeting Attendance: 12
Significant concurrent positions outside theCompany: Outside Director, Carlit Holdings
Co., Ltd.

1975 Joined The Nippon Fudosan Bank
1995 Registered with the Daini Tokyo Bar
Association as an attorney-at-law
2004 Established Shi-Go-Roku Law Officeas Representative Attorney
2016 Outside Director, Itochu Enex Co., Ltd.
Number of the Company’s shares owned
4,100 shares
Board of Directors Meeting Attendance: 12
Significant concurrent positions outside theCompany: Representative Attorney, Shi-GoRoku Law Office
Professor, Law School, Aoyama Gakuin
University

Kenji Okada
1974 Joined ITOCHU Corporation2012 Representative Director, President andChief Executive Officer
Number of the Company’s shares owned
95,800 shares
Board of Directors Meeting Attendance: 12
Significant concurrent positions outside theCompany: Outside Director, Cosmos Initia
Co., Ltd.

Chief Operating Officer, Power & UtilityGroup, Chief Operating Officer, Power &Utility Division, and Executive Advisory Officer
for Mobility Life Department, Itochu Enex
Co., Ltd.
1980 Joined ITOCHU Corporation2018 Director and Senior Managing Officer
Number of the Company’s shares owned
11,300 shares
Board of Directors Meeting Attendance: 12
Significant concurrent positions outside theCompany: Director, Osaka Car Life Group
Co., Ltd.
Director, Nissan Osaka Sales Co., Ltd.

10.

11.

12.

Standing Audit &Supervisory Board Member

Audit & Supervisory Board Member

Audit & Supervisory Board Member

1974 Joined The Nippon Fudosan Bank,
Limited2015 Standing Audit & Supervisory Board
Member (outside), Itochu Enex Co.,
Ltd.
Number of the Company’s shares owned
6700
Board of Directors Meeting Attendance: 12
Significant concurrent positions outsaide
the Company: Audit & Supeervisory Board
Member of OSAKA CAR LIFE GROUP CO.,LTD., Nissan Osaka Sales CO., LTD., andECORE CO.,LTD.

OutsideToyohiro Sunayama
1983 Joined ITOCHU Corporation2018 Standing Audit & Supervisory Board
Member, Itochu Enex Co., Ltd.
Number of the Company’s shares owned : –Board of Directors Meeting Attendance: –Significant concurrent positions outsaide
the Company: Audit & Supeervisory Board
Member of Tokyo Toshi Service CO., LTD.,
ENEX Electric Power CO., LTD.,
ENEX FLEET CO., LTD.

Satoshi Nakajima
1987 Joined ITOCHU Corporation
2016 Audit & Supervisory Board Member,
Itochu Enex Co., Ltd.
Number of the Company’s shares owned : –Board of Directors Meeting Attendance: 12
Significant concurrent positions outsaide theCompany:Chief Financial Officer for Energy &Chemicals Company, ITOCHU Corporation
Audit & Supervisory Board Member, C.I.
TAKIRON Corporation.

OutsideIndependent

Shozo Tokuda
1981 Joined Asahi & Co.
1985 Registered as Certified Public
Accountant
2017 Audit & Supervisory Board Member,
Itochu Enex Co., Ltd.
Number of the Company’s shares owned : –Board of Directors Meeting Attendance: 7
Significant concurrent positions outsaide
the Company: Audit & Supervisory Board
Member (outside), Mitsui Chemicals, Inc.

*The Number of the Company’s shares owned is stated, as of the end of March 2018.
*Independent: Director / Audit & Supervisory Board Member registered at the Tokyo Stock Exchange as an independent officer.
*This system is stated, as of August 2018.
*Executive Officers are not the members of Board of Directors and Audit & Supervisory Board.
*Board of Directors Meeting Attendance is out of the 12 attendance times as of FY 2017.
(As long as Mr.Okubo and Mr.Tokuda, 8 attendance times as of FY 2017.)

ENEX REPORT 2018 42

Director
Independent

1986 Joined ITOCHU Corporation2017 Director, Itochu Enex Co., Ltd.
Number of the Company’s shares owned- shares
Board of Directors Meeting Attendance: 8
Significant concurrent positions outside
the Company: Executive Officer, Chief
Operating Officer for Energy Division,
ITOCHU Corporation
Director, Sakhalin Oil and Gas
Development Co., Ltd.

Managing Officer

Keiichi Matsuzuka

Executive Officer

Toshiyuki Tsuruoka

Deputy Chief Operating Officer,
Power & Utility Group

Deputy Chief Operating Officer,
Life & Industrial Energy Division,
Energy & Logistics Group

Executive Officer

Executive Officer

Ichiro Sekiguchi

Toshihisa Fuse

Assistant to Chief Operating Officer,
Life & Industrial Energy
Division, Energy & Logistics Group

Chief Operating Officer,
Life & Industrial Energy Division,
Energy & Logistics Group

Executive Officer

Executive Officer

Shigeru Kondo

Tsukasa Motegi

President, and Chief Executive Officer,
Itochu Industrial Gas Co., Ltd.

President, and Chief Executive Officer,
Enex Fleet Co., Ltd.

Executive Officer

Naohiro Matsuzawa
General Manager, Mobility Life
Department

Executive Officer

Takeo Fukushima
President, and Chief Executive Officer,
Tokyo Toshi Service Co., Ltd.

Company Information

Yuji Moritsuka

New election

OutsideData Section

9.
Standing Audit &Supervisory Board Member
Independent

Independent

Executive Officers

Audit & Supervisory Board Members

OutsideOutside8.

Management

1.

ENEX REPORT 2018 43

Management

Management supporting value creation

Corporate Governance

Company with the Board of
Directors and Audit & Supervisory
Board Members (the Audit &Supervisory Board)

Number of Dir ctors (of whom, thenumber of Outside Directors)

8 (2)Number of Audit & Supervisory
Board Members (of whom,
the number of Outside Audit &Supervisory Board Members)

4 (3)Term of office of Directors

One year (same for Outside
Directors)

Roles of Governance Committee(1) Verification of policies and proposals for nomination ofindividual candidates for Directors and Audit & Supervisory
Board Members(2) What the remuneration system for officers should be(policy on the determination of remuneration and theappropriateness of remuneration levels, etc.)(3) Analysis and evaluation of the effectiveness of the Boardof Directors as a whole(4) Other important matters regarding governance

Governance Committee has been
established.

Accounting auditor

Deloitte Touche Tohmatsu LLC

2. Appropriate
collaboration with
non-shareholding
stakeholders

In accordance with the Code of Conduct and Declaration of the Group Code of Conduct, the Company works for
its stable development over the long term and constantly improves corporate value as a company that is attractive
to customers, business partners, employees, national and other public authorities, local communities and all otherstakeholders that are positioned as important by the Company.

3. Appropriate information
disclosure and ensuringtransparency

In addition to proper disclosure in accordance with laws and regulations, the Company proactively undertakes
information disclosure as required in the principles of Japan’s Corporate Governance Code from the perspectivesof ensuring transparency and fairness of the Company’s decision-making and of achieving effective corporate
governance.

4. Duties of the Boardof Directors and otherbodiesThe Board of Directors determines the fundamental management policy of the Company and assumes the roleof supervising management. In addition to the exclusive rights defined by laws and regulations, the Board makes
decisions on the execution of important business matters based on quantitative and qualitative aspects. On the other
hand, in light of the importance of prompt decision-making, the Board also delegates decision making on ordinary
business execution to the Directors and Executive Officers wherever possible and supervises the status of theirbusiness execution. The Directors, who act as trustees appointed by shareholders to engage in management, bear
the duties of loyalty and of due care as prudent managers in their performance of duties, and they contribute to thesustained growth of the Company and medium- to long-term improvement in corporate value.
The Company endeavors to facilitate dialogues with investors, including shareholders, with a view to building excellent
relationships in accordance with its IR Basic Policy. The department responsible (Corporate Communications Office)and the officer responsible for IR operations (CFO) facilitate such dialogues as part of IR communications activities.
The opinions and requests obtained through IR communications activities are fed back to management as necessary,and the Company endeavors to use this feedback to continually improve the corporate value.
IR Basic Policy https://www.itcenex.com/english/ir/policy/basicpolicy/

Outside Audit &Supervisory Board
Members
Composition (independent officer)
Independent Outside
Directors
Internal Directors

2Outside Audit &Supervisory Board
Members(independent officer)

1

2

Independent Outside
Directors

1

1
Total 5Internal Directors

2
Total 4General meeting of shareholders

Appointment and dismissal
Audits and reporting

Board of Directors(Directors)
Consultation andreportingAppointment and dismissal

Audit & Supervisory Board(Audit & Supervisory Board Members)

Selection and supervision

GovernanceCommittee

Appointment and dismissal
ReportingAccounting Auditor

Accounting audits

AuditsPresident
Management Advisory Conference
CCO*1
Reporting

CFO*2

Risk Management Committee

CIO*3

Internal Control Committee
Disclosure Committee

Audit Department

Company Information

The Company takes appropriate actions to effectively secure shareholders’ voting rights at general meetings ofshareholders and other rights.

Outside Audit & Supervisory Board
Internal Directors
Members (independent officer)

Data Section

1. Ensuring shareholders’rights and equality

Chair

Management

A voluntary advisory body to theBoard of Directors

After change (from the 58th ordinary
Before change
general meeting of shareholders)

Corporate governance system

Adoption of executive officer system Yes

Basic policy for corporate governance

5. Dialogues withshareholders

Enhancement of the functions of Governance Committee
To strengthen management supervision, the Company establishedthe Governance Committee in 2015 as an advisory body for the
Board of Directors and has held meetings about six times per
year since that time. This Committee consists primarily of Outside
Directors and Outside Audit & Supervisory Board Members andconducts deliberations ahead of the Board of Directors on material
matters on governance such as nominations and remuneration of
officers, serving an important role in reporting deliberation results
to the Board of Directors. Through such measures, the Company

Changes in management structure of Governance Committee

Segment

Corporate governance system
The Company has the Board of Directors and udit & Supervisory
Board Members (the Audit & Supervisory Board). The Board of
Directors comprises eight members (two of whom are Outside
Directors). In accordance with laws and regulations, the Company’s
Articles of Incorporation, Rules of the Board of Directors and otherForm of organization design

believes that it has secured additional transparency with respect todecision-making on important corporate governance issues.

Strategy

Response to the June 2018 revisions to the Corporate
Governance CodeWe plan to release details on the Company’s response to the June2018 revisions to the Corporate Governance Code in the revised
version of the Company’s Corporate Governance Report to beissued by December 2018.

Corporate governance system summary chart

Board of Directors
The Board of Directors determines the fundamental management
policy of the Company and assumes the role of supervising
management. In addition to the exclusive rights defined by laws
and regulations, the Board makes decisions on the execution ofimportant business matters based on quantitative and qualitative
aspects. On the other hand, in light of the importance of prompt
decision-making, the Board also delegates decision making on
ordinary business execution to the Directors and Executive Officers
wherever possible and supervises the status of their businessexecution. The Directors, who act as trustees appointed byshareholders to engage in management, have the obligation to
exercise the due care of a prudent manager in the performance of
duties and to contribute to the sustained growth of the Company
and medium- to long-term improvement in corporate value.

Our Vision

Response to the Japan’s Corporate Governance Code
The Company agrees with the spirit of “growth-oriented governance”
called for in the Tokyo Stock Exchange, Inc.’s Corporate Governance
Code and its efforts regarding governance are carried out with theaim of demonstrating sound leadership by senior managers andmaking transparent and fair decision making. For details on the
Company’s response to the Corporate Governance Code, please
see the Company’s website(https://www.itcenex.com/english/governance/20180620/180620e.pdf).

internal rules, the Board of Directors makes decisions on material
matters and oversees the Directors’ performance of duties.
Each Director executes his or her duties based on the roles
defined by the Board of Directors in accordance with laws andregulations, the Articles of Incorporation and internal rules. To
strengthen the Board of Directors’ decision-making and oversightfunctions and increase the efficiency of business execution, theCompany has adopted an executive officer system. As delegatedby the Board of Directors and Representative Directors, Executive
Officers execute the duties assigned to them based on decisions
made by the Board of Directors. The Audit & Supervisory Board
comprises four members (three of whom are Outside Audit &Supervisory Board Members), and performs audits to examine theappropriateness of the Directors’ business execution in accordancewith the Rules of the Audit & Supervisory Board and Audit Standards
for Audits by Audit & Supervisory Board Members.

This is , ENEX

Basic approach to corporate governance
Based on the Code of Conduct “Be Ethical (Reliability and sincerity,
creativity and ingenuity, transparency and integrity)” and Declarationof the Group Code of Conduct, the Company remains committed tothorough compliance as a corporate citizen, focusing on shareholderinterests and ensuring management transparency when it engages inbusiness management, emphasizes positive initiatives for information
disclosure with a view to securing managerial transparency, andendeavors to make prompt and accurate disclosure.

Outside consultant

Internal audit

Consultation

Business Groups, divisions and group companies*1 CCO: Chief Compliance Officer *2 CFO: Chief Financial Officer *3 CIO: Chief Information Officer

ENEX REPORT 2018 44

ENEX REPORT 2018 45

Management

Management supporting value creation

Corporate Governance

Risk
Management
Committee

Comprehensive deliberations on matters ranging
from identification of companywide risks to devising,
implementing, evaluating and examining measures to
respond to material risks

Internal
ControlCommittee

Deliberations on matters concerning the development andimprovement of internal control systems

Disclosure
Committee

Deliberations on matters concerning the development,
improvement and operation of internal controls in relation
to disclosure of corporate information, etc. and financial
reporting(1) Person who is not or has never served in the past ten (10)years as a business executor* (with respect to Outside Audit& Supervisory Board Member, this includes Directors who do
not execute business operations) of the Company or any of its
subsidiaries;(5) Person who has not served in the past three (3) years as aconsultant, accounting specialist, legal specialist or tax specialist
receiving annual compensation of 10 million yen or more fromthe Company (if the person receiving such compensation
is a corporate entity, association or other organization, thisincludes persons who belong to such organization) in addition to
Director’s compensation.
* Business executor means executive director, executive officer, other employees, etc.

ENEX REPORT 2018 46

2015 Election of one (1) Independent Outside Director
2016 Election of two (2) Independent Outside Directors
2017 Introduction of performance-linked stock-based
remuneration plan2018 Changed structure of Governance Committee to centeron outside officers

Evaluator
Members of the Board of Directors as of April 2018

Outline of implementation
A questionnaire with questions on the composition of the Board of
Directors (four items), the operation of the Board of Directors (nineitems), frameworks supporting the Board of Directors, dialogues withshareholders (five items), and frameworks for fulfilling roles and duties(two new items) was carried out and free comments (transparency was
ensured by requiring the respondents to indicate their names) wereallowed. Based on the aggregate results of the questionnaire, individualinterviews with Outside Directors and Audit & Supervisory Board
Members were held.

Evaluation results
Effectiveness of the Board of Directors is generally positive.
Operation in FY2017 was generally appropriate overall, and theevaluation indicated that the Board of Directors as a whole has secured
effectiveness. Regarding the operation of the Board of Directors, while
presentations from presenters showed improvement over the previous
year, there were some indications that deliberations on broad direction,such as corporate strategy, and officer training, etc., were areas that
required improvement. The Company will draw on these evaluation
results to seek to further improve the oversight and decision-making
functions of the Board of Directors.

Internal controls
To comply with laws and regulations and the Articles of Incorporation,and to execute business properly, the Company has established aninternal control system and works to continuously strengthen andimprove the system. In April 1, 2015, it revised the “Basic Policy
on Internal Control System,” seeking to improve and strengthen its
internal systems for ensuring the appropriateness, etc. of corporate
governance, compliance and financial reporting.
The Company’s internal control system:
https://www.itcenex.com/english/corporate/governance/control/

Policies and procedures on determination of remuneration for
Directors
Remuneration for Directors excluding Outside Directors and Nonexecutive Directors is composed of monthly remuneration, bonuses,and performance-linked stock-based remuneration. Monthly
remuneration and bonuses are appropriately determined based on
predefined payment standards in consideration of factors such as
short-term business performance and contributions to the Company,
with foundations in standardized amounts according to each position.
Amounts of stock-based remuneration are determined based on net
profit attributable to Itochu Enex’s shareholders (consolidated) for apredefined performance evaluation period. Outside Directors and Nonexecutive Directors receive payment only of monthly remuneration,and do not receive bonuses nor stock-based remuneration.

Elimination of anti-social forces
The Company steps up groupwide efforts to preclude any
relationship with anti-social forces in any way whatsoever. This
policy is explicitly set out in the Declaration of the Group Code of
Conduct, and the Company has established a system that allows
quick action to respond to an unexpected event by maintaining close
collaborative relationships with outside specialized agencies, etc.
and by promoting the inclusion of the clause for the elimination oforganized crime groups in contracts, etc.

Unit: million yen

Total
remuneration

Total remuneration, etc., by type
Basic
Stock-based
Bonus
remuneration
remuneration

Number of applicableofficers

Directors (excluding Outside Directors)

272

175

94

3

6

Audit & Supervisory Board Members(excluding Outside Audit & Supervisory
Board Member)

4

4

–

–

1

Outside officers

78

78

–

–

6

Company Information(4) Person who was not in the latest financial year or had not beenin the three (3) financial years preceding the latest financial year
either a large business partner whose transaction volume (netsales or purchases) with the Company accounted for more than
2% of the Company’s overall transaction volume in the latest
financial year or a business executor of said large business
partner; or2015 Establishment of Governance Committee

Meetings of the Board of Directors held between April 2017 and March2018 (a total of 12 meetings)

Data Section(3) Person who is not or has not been in the past three (3) years
either a large shareholder directly or indirectly holding not lessthan 10% of the Company’s shares or a business executor ofsuch large shareholder;

Changes in measures to strengthen corporate governance

Subject of evaluation

Management(2) Person who is not or has not served in the past three (3) years
as an officer or a business executor of the Company’s parent
company or a business executor of any of the Company’s fellow
subsidiaries under the parent company;

Policy on cross-shareholding
The Company has a policy of holding shares of any customer orbusiness partner solely on the condition that the holding of suchshares is deemed to contribute to maintaining medium- and longterm relationships, expanding transactions, acquiring know-how,
etc. or otherwise improving the Company’s corporate value. The
Company exercises voting rights related to cross-shareholdings
appropriately, not based on standard criteria but by closely
examining the content of the relevant proposal and determining
whether the proposal contributes to the improvement of shareholder
value, and from perspectives such as whether the proposal would
lead to the realization of medium- to long-term corporate value
in consideration of the management policy, strategy, etc. of theportfolio company.

Self-evaluation was implemented using a questionnaire and interviews
that were conducted in the following manner.

Performance-linked stock-based remuneration plan
Based on a resolution of the 57th ordinary general meeting ofshareholders held on June 21, 2017, the Company introduced
a new performance-linked stock-based remuneration plan for
Directors, excluding Outside Directors and non-executive Directors,
to add to basic remuneration and bonuses, for the purpose ofraising their awareness of contributing to improving the mediumand long-term business performance and enhancing the corporate
value of the Company. The plan is a performance-linked andstock-based remuneration system, under which points are given
to Directors according to certain criteria, including the attainmentof performance targets, and a number of shares of the Company
corresponding to the number of points are granted to Directors at
the time of their retirement from office, in principle. In introducing theplan, the Company adopted a system for “Stock Distribution Trustfor Directors,” whereby a trust created by the Company and fundedwith its money acquires shares of the Company and provides sharesfrom the trust to the eligible Directors.

Segment

Criteria for judgment of outside officers’ independence
In regard to criteria for judging the independence of outside
officers, the Company makes a judgment on their independenceby confirming whether they fall under items (1) to (5) below and inaccordance with the requirements for independence of outside
officers prescribed by Tokyo Stock Exchange, Inc. and otherfinancial instrument exchanges in Japan.

Evaluation method

Additionally, remuneration for Audit & Supervisory Board Members
is determined through deliberation of the Audit & Supervisory Board(Members), and there is no payment of bonuses nor stock-based
remuneration. Director remuneration for FY2017 was as follows.

Strategy

Discussion on material matters concerning the Company’s
overall management policy and business administration as
an advisory body for the President

Evaluation of the effectiveness of the Board of Directors
The Company requested all Directors and Audit & Supervisory Board
Members to submit opinions about the effectiveness of the Boardof Directors as a whole for FY2017 based on each Director’s selfevaluation. After deliberations made by the Governance Committee
based on these opinions, the Board of Directors conducted ananalysis and evaluation at a meeting.

Our Vision

Management
Advisory
Conference

Parent company
As the parent company, ITOCHU Corporation owns 54.0% of thevoting rights of the Company and the Company is a consolidated
subsidiary of ITOCHU Corporation. Within the ITOCHU Group, theCompany is positioned as a core company with respect to domestic
sales and the import/export business of petroleum products inwhich Japan is a business base. As an important business partner,
the Company engages in petroleum products trade and facilitates
an exchange of information concerning conditions in domestic
and international markets for crude oil and petroleum products,
personnel exchange and other business initiatives relating toelectrical power, environmental businesses, overseas projects, etc.
The Company recognizes no business constraints being exerted
by the parent company and believes that it can make its own
management decisions while maintaining its independence andautonomy. In addition, there are concurrent holding of positions by
Directors and loaning of employees among the Company, ITOCHU
Corporation and their group companies. This does not impede theCompany from making independent managerial decisions, and the
independence of the Company is secured.

This is , ENEXManagement Advisory Conference and committees
The Company has established the Management Advisory
Conference and several committees with the objective ofcontributing to decision-making by the President and the Boardof Directors relating to the appropriate and flexible execution ofoperations.

ENEX REPORT 2018 47

Management

Management supporting value creation

Basic policy for IR activities
Based on the corporate philosophy, the Employee Code of Conduct and the Declaration of the Group Code of Conduct as well as theobjectives of the Corporate Governance Code issued by the Tokyo Stock Exchange, the Company has established its IR Basic Policy withthe aim of establishing fair and excellent relationships with all stakeholders, ensuring a fair market evaluation and achieving a continuous
improvement of the corporate value, while pursuing proactive investor relations activities on the principles of “timeliness,” “fairness,” “accuracy,”“clarity” and “continuity.”

Risk Management Committee
The Committee aims to create the best possible systems to achievebusiness continuity by promptly and correctly dealing with all eventsand risks that may impede the operation of the Company, so as
not to damage public confidence in, and the corporate value of, theCompany. Amid rising threats of various risks, the Risk Management
Committee leads efforts to continuously manage and mitigate risks
by identifying and analyzing risks that could have a material impact
on management, implementing countermeasures, preventing
the occurrence and materialization of risks and promoting risk
awareness.

Principles in IR activities

Timeliness, Fairness, Accuracy, Clarity, Continuity
Information disclosure covered by this policy
This policy covers information disclosure and dialogues to be
conducted by the following means:

Disclosure inaccordance with
the Companies Act

Business reports, financial statements andconsolidated financial statements, etc.

Disclosure requiredby the Tokyo Stock
Exchange

Timely disclosure information
Decisions, events and other information requiredby the Tokyo Stock Exchange to be disclosed in atimely mannerDisclosure of corporate governance reports andothersInformation that is voluntarily disclosed
IR-relatedMaterials for financial results briefing sessions, fact
disclosure materials books, etc.
Shareholder newsletters, integrated reports, annual
reports in English, etc.

Complying fair disclosure rule
Although the Financial Services Agency’s fair disclosure rule (fairinformation disclosure by listed companies) came into effect in April
2018, the Company has historically made fair and timely disclosure ofvarious information based on its basic policies for IR activities. Moving
forward, the Company will swiftly disclose unannounced material facts,
material information, and corporate relationship information definedin insider trading regulations, the fair disclosure rule, and corporate
relationship information regulations should such information be disclosed
to transaction partners, etc.

ENEX REPORT 2018 48

Quiet period
For the purpose of preventing the leakage of information concerning
financial results and ensuring fairness in information provision, theCompany observes a quiet period of two weeks preceding eachquarterly and full year earnings announcement and provides nocomment or explanation regarding account settlement or earnings
estimates during the quiet period.
Understanding shareholder structure
The Company obtains the information on the shareholder registerfrom the administrator of the register and information concerningbeneficial shareholders, etc. from a research company to understandand analyze the shareholder structure. It uses the data for IR and SR
activities.

◎Bulk fuel systems equipped for disaster response to ensure enough LP
gas to maintain a broad range of functions including meal preparations, hotwater, and power◎Fuel stations with disaster-response functions designated by the Japanese
government as core filling stations for oil and gas in the event of large-scaledisaster◎Use of heat storage tanks in district heat supply as community tanks in theevent of disaster

Strengthening IT security
The Company sees management of information security as an important business issue.
Basic Policy for Information Management of the Group
Itochu Enex Co., Ltd. and its group companies (hereinafter collectively the “Group”) recognize appropriate management of information as animportant business issue, and while protecting information assets from various threats surrounding the Group, efforts are made to maintain andimprove the Group’s information management systems via appropriate handling of information assets.
1. Compliance

Officers and employees of the Group comply with laws, regulations, and other guidelines, etc., regarding information
management.

2. Management
systems

To realize appropriate management of information required for business activities, the Group defines regulations concerning
information management, establishes appropriate information management systems under the Chief Information Officer, andmaintains systems to swiftly ascertain information management conditions and implement information security measures.

3. Awarenessandeducation

The Group ensures that all officers and employees are aware of the importance of information security and implements
continuous education and training for thorough and appropriate management of information assets.

4. Response toaccidents

Should an accident occur regarding information management, the discoverer swiftly reports the fact based on predefinedrules, and as required, the Group minimizes damages through enactment of appropriate measures to prevent magnification.
Furthermore, through analysis of reasons the accident occurred, the Group establishes appropriate management measuresand measures to prevent recurrence.

Please visit https://www.itcenex.com/english/privacy/ for details on policies regarding measures in personal information protection.

Company Information

Method of information disclosure
The Company discloses information covered by the Timely
Disclosure Rules, using the Timely Disclosure Network (TDnet) inaccordance with the rules, as well as on the Company’s website.
The Company also takes care to ensure that information not coveredby the rules is made available to general investors and shareholders
in an appropriate manner based on the objectives of the rules.

Handling of insider information
The Company adheres to the fundamental principle of not disclosing
information to any third party until disclosure is made to the public,
and takes reasonable care in handling information, for instance with
two or more persons attending dialogues with investors in individualinterviews, etc.

◎Disaster response stations to secure energy lifelines in the event of disaster◎Kizuna Net Centers to enable handle energy distribution in the event ofdisaster

Data Section

IR-related
publications

Headquarters for BCP and Disaster Response
The Company has formulated a business continuity plan (BCP),
primarily in preparation for major natural disasters. The BCP and
Disaster Response Headquarters plays the central role in the plan.
Headed by the President and with the Chief Compliance Officer(CCO) serving as Deputy Head, the headquarters comprise the Chief
Operating Officers of Corporate Administration Division. In the eventof a major disaster, the members gather at the designated locationand lead company-wide activities to respond to the situation,

Safe and secure facilities in preparation of disaster risk
By learning lessons from various disasters, the Company isstrengthening its facilities to protect safety and security of energy.

Management

Other information disclosure
The Company also takes care to ensure that information not coveredby the Timely Disclosure Rules of the Tokyo Stock Exchange
is made available in an appropriate manner to all stakeholders,
including general investors.

Dialogues with shareholders and investors
When disclosing information to, and having dialogues with,shareholders, investors and others, the Company complies with
relevant laws, regulations and rules and emphasizes two-way
communications through dialogues, making efforts to explain its
business status, management policy and other information in atimely, fair, accurate and clear manner and on a continuous basis.
Feedback from stakeholders, including requests and opinions, isprovided to management.

Heavy rains that occurred at various locations in Western Japan in
July 2018 caused the Group’s business locations, sales partners,
and employees in these areas to suffer great damage. The Company
enacted BCP immediately after the disaster occurred, beginningconfirmation on the safety of employees active in the affected areas,
working to determine disaster conditions at each facility and initiate
repairs, in addition to providing support to customers in affectedareas. Response initiatives included recovery of gas tanks that
had been washed away by overflowing rivers, providing repairs forcustomers with damaged water heaters, and in areas where thewater supply had been cut off, swift deliveries for drinking water
were made via the group network. In hopes of a recovery as earlyas possible, 5.03 million yen in donations were collected across theGroup (5 million yen donation to the Japan Platform and 30,000
yen donation to the Japanese Red Cross Society), and donations
collected from employees were given to the Japan Platform.
Additionally, a portion of directly-managed CSs were provided as
temporary storage locations for relief supplies.

Segment

Securities reports, quarterly reports, internal control
reports, extraordinary reports, etc.

Response to heavy rain event in Western Japan

Strategy

Disclosure inaccordance with
the Financial
Instruments andExchange Act

Disclosure Committee
The Company has established Disclosure Committee for the
purpose of contributing to appropriate and flexible decision-making
by the Board of Directors and Management Advisory Conference,
exhaustively and swiftly collecting important company information in
the Group, discussing whether to disclose relevant information andthe accuracy, clarity, sufficiency, fairness and constructiveness ofthe content of the information and publishing information subject todisclosure.

Systems for handling emergency situations
The Company has developed an “emergency contact network”
that allows the Company, when an accident occurs or a risk arisesin the Group, to quickly obtain accurate information and respond
appropriately and, when an earthquake, typhoon, heavy rain or othernatural disaster occurs, to quickly grasp the damage to the Group’s
facilities and distributors and secure lifelines. As an integrated
contact system that connects group companies, business divisions
and the president, routes for reporting “large-scale earthquakes
and natural disasters” and “incidents other than disaster” have beendeveloped and are in operation around the clock, 365 days a year,
including non-working hours.

by unifying the chain of command and order and focusing on
systematic collaboration. In addition, the Company has establisheda backup system to transfer the Headquarters’ functions to Kyushu
Branch (Fukuoka) and Chushikoku Branch (Hiroshima).

Our Vision

Risk management

This is , ENEX

Proper information disclosure

Revised in January 1, 2016

ENEX REPORT 2018 49

Management

Management supporting value creation

CSR and compliance

Code of Conduct

Together with stakeholders
By strengthening connections with all stakeholders and sincerely
lending an ear to their voices, the Group will fulfill its social
responsibility.

Customers

Be EthicalTraining at Enex head office(reliability and sincerity, creativity and ingenuity, transparency and integrity)

Local
communities

Employees

ENEX REPORT 2018 50

Relationship with shareholders and investors
We strive to improve our corporate performance and stably distributeprofits to our shareholders. We clearly communicate with ourshareholders and investors by disclosing adequate information ina timely manner, and endeavor to enhance shareholder returns byconducting active investor and public relations activities.
Moderation in corporate behavior
We observe public rules and internal regulations, and take action
within the scope of common sense and social norms. In addition, we
never engage in insider trading or act in a manner that would raisesuch suspicions. We also comply with the Political Funds Control
Act and the Public Office Election Act, handle political matters
appropriately as a good corporate citizen, and refrain from any andall relationships with antisocial forces in any capacity whatsoever.
And, in compliance with the drinking alcohol rules in our company,
we take care to drink moderately, always care about healthmanagement and carry out operations with good physical condition.

President
Management
Advisory Conference
CCO

Risk Management
Committee

Human Resources& General Affairs
Department(Compliance Committee)

Legal & Credit Control
Department

Outside consultant

R&C Promotion OfficeConsultation

Business Groups/Divisions/Group companies and compliance manager*1: CSR and compliance manager
CSR and compliance managers of ITOCHU ENEX (hereinafter “Enex”) shall be
appointed by the CCO, with one person from each division. Additionally, in principle atgroup companies, presidents at companies where Enex has an ownership of over 50%
shall serve as CSR and compliance managers, also supervising subsidiaries for which
said group company has an ownership of over 50%.
*2: CSR and compliance personnel
CSR and compliance personnel shall be appointed by CSR and compliance managers,
promoting awareness regarding CSR and compliance, serving as the point of contact
when troubles accidents, scandals, or claims occur, and working in environmental
preservation and soil contamination prevention.

◎Compliance program
An easy to understand description on CSR and compliance promotion
activities, including objectives, systems, incident and accident response,
and whistleblowing and consulting contact points.
◎Compliance case studies
An easy to understand description on examples and response methods
for various big and small compliance violations, including improprieties,
harassment, labor, claims, legal and regulatory violations, and information
leakage.

Itochu Enex Group awareness survey
In the present day, as scandals in areas such as accounting
improprieties, embezzlement, harassment, and labor at various
companies, organizations, and bodies are on the rise, the Group
conducts a compliance awareness survey for officers andemployees at group companies with the intent of ascertaining thestate of compliance awareness within the Group and preventing
the occurrence of misconducts within the Group. These evaluation
results are used to create new initiatives and to improve compliancetraining.

Company Information

Relationship with employees
We consider the health and safety of all employees with whom
we are involved, and duly strive to create a safe and comfortableworkplace environment for them. Accordingly, we comply with
relevant laws and regulations, prohibit all sorts of harassment
including sexual and power harassment. Moreover, we respecthuman rights of individuals, never discriminate by reason of gender,
ethnicity, origin, religion, personal values or otherwise, nor do we
infringe on the privacy of individuals. We immediately inform ourdedicated consulting staff, and attempt to resolve issues, in theevent that a situation should emerge whereby an individual himself or
herself, or an officer or an employee commits a violation against the
Declaration of the Group Code of Conduct, or otherwise in the eventthat a situation should arise where there has been an act in violationof relevant laws and regulations, internal rules or other rules that theindividual cannot identify.

Environmental activities
We take the global environment into account in the course of
performing the Company’s ongoing business activities. We also
comply with environment-related laws and ISO standards and haveestablished an internal system of environmental management. In
addition, we endeavor to address environmental preservation andactively engage in environment-friendly businesses.

◎Compliance Handbooks
With the corporate philosophy in its mind, the Company works to ensure
thorough recognition and awareness of the Code of Conduct, basic
policies on compliance, Declaration of the Group Code of Conduct, andcommentary on internal rules, laws, and regulations. In cases where theGroup employees are faced with difficult decisions, they can refer to thishandbook, seek a solution to the problem, think carefully on compliance,
achieve correct understanding, and reflect these in their actions.

Data Section

Relationship with suppliers
We afford our suppliers fair treatment and select them on the basisof objective criteria. We strictly observe laws and regulations, and ourinternal rules regarding business transactions, and never participate
in bid-rigging, cartels or any suspicious misconduct that mightprovide an unfair impression.

Relationship with local communities
We help support and develop local communities through extensive
communications and revitalization efforts involving such communities.
Moreover, we maintain sound and appropriate relations with public
servants and administrative bodies and never engage in illegal acts
such as those that involve committing bribery or providing businessentertainment or gifts.

CSR and Compliance systems
The Company has taken steps to improve its compliance system,
such as appointing a CCO, establishing a department that oversees
matters concerning compliance, developing a CSR and complianceprogram, appointing a CSR and compliance manager*1 andpersonnel*2 in each department, providing compliance educationand training, writing a compliance manual, clarifying responses tocompliance incidents and establishing a whistleblowing system. In
addition, each Director, Executive Officer and employee is required tosubmit an oath of compliance with the Employee Code of Conduct.

Promoting awareness of compliance
To promote awareness of compliance, the Company periodically
prepares documents for distribution within the Group and sharing
on the internal network with the intent of increasing awareness oncompliance.

Management

Relationship with business partners
We appropriately manage all forms of business partner information
retained by the Company, adequately protect such confidential
information, while conducting commercial activities under principles
of fair and free competition, and maintaining sound, reasonable
and transparent relations with the political world and administrative
bodies.

Relationship with corporate properties
We use corporate assets and properties in an effective and efficientmanner, comply with laws and regulations and internal rules, andperform proper and transparent accounting procedures. Moreover,
we rigorously manage the Company’s important confidential
information in order so that it is not divulged to parties outside theCompany.

Segment

Relationship with customers
We are committed to maintaining the quality of products handled by
the Itochu Enex Group and ensuring their safe and stable supply,
while endeavoring to prevent accidents and disasters from occurring.
We also strive to create an environment that makes it possible forour customers to make their own rational decisions with respect
to selecting better products and services, and accordingly we donot mislabel products nor do we offer excessively high premiums.
Furthermore, we appropriately manage personal information
provided to us by our customers, and strive to conduct business forthe purpose of providing products and services that will consistently
satisfy our customers.

Strategy

Shareholders
andinvestors

Declaration of the Group Code of Conduct

Education and training activities for CSR and compliance(1) For the Group employees (collective training, training byorganizational level, e-learning training)(2) For CSR and compliance managers and CSR and compliance
personnel(3) For employees of group companies

Our Vision

Business
partners
Suppliers

Environment

Education and training in CSR and complianceWith the objective of maintaining and making universally known CSR
and compliance systems, the Company holds education and training
in CSR and compliance for theGroup officers and employees
on an annual basis. In particular,
compliance trainings are held
across Japan twice a year, during
the first and second halves of the
fiscal year.

This is , ENEX

Basic policy of CSR and compliance
We deploy various business activities, mainly on the energy distribution field.
And, we regard rewarding the expectations of all our stakeholders, which are customer (consumer)/ business partner/supplier/community/
shareholder/investor/employee/environment, as an important management task.
To realize the task, under our corporate philosophy "The best partner for life and society", we are striving to penetrate and develop social
responsibility as our whole group, through the understanding and compliance of all employees with regard to our original code of conduct,declaration of the Group Code of Conduct.

ENEX REPORT 2018 51

Management

Management supporting value creation

Important challenges of CSR and compliance
Environmental management

Environmental Policy
Under the Itochu Enex Group’s “the best partner for life andsociety” Corporate Philosophy, we will provide “energy for all
applications, whether as a key component of social infrastructureor as a means of enriching people’s lives,” and will continue
engaging in the following activities geared to improving theenvironment in order to achieve a more harmonious coexistencewith the global environment and society.

1. Helping to Realize a Low-Carbon Society

In April 2018, we began engaging
in activities to improve theenvironment under an organizationalframework for environmental
management consisting of 2
business groups, 6 divisions, and
19 Itochu Enex Group companies.

(1) Compliance with laws and regulations, environmental protocols,and independent standards(2) Safety enhancements and upgrades

Representative Director

Kenji Okada

President
Management Advisory
Conference
CCO
Risk Management Committee

Internal Audit Team
Environment
Administrative Office

Energy & Logistics Group

Home-Life Division

3. Preserving Local Environments

Life & Industrial Energy Division

Environmental
Management Officer

Environmental Information
Coordinating Committee

Power & Utility GroupPower & Utility Division

Planning & Administration Department

Planning & Administration Department

Administration Department

Supply Department

Administration Department

Security System Department

Oil Products Trading Department

Power Project Financial Department

Asphalt Department

Power & Heat Business Development
Department

Itochu Enex Home-Life

Marine Fuels Department

Hokkaido Co., Ltd.

Hokkaido Branch

Itochu Enex Home-Life Tohoku Co., Ltd.

Tohoku Branch

ENEARC Kanto Co.,Ltd.

Higashi-Nihon Branch

ENEARC Chubu Co.,Ltd.

Chubu Branch

ENEARC Kansai Co.,Ltd.

Kansai Branch

Itochu Enex Home-Life Nishi-Nihon Co., Ltd.

Chushikoku Branch

Itochu Industrial Gas Co., Ltd.

Kyushu BranchPower Supply & Management Department
Power Sales Department

Corporate Administration Division
Finance & General Accounting
Department

Corporate Planning
Department

Human Resources & General Affairs
Department

Audit Department

IT Planning Department
Legal & Credit Control Department
R&C Promotion Office

Enex Electric Power Co., Ltd.
Hofu Energy Service Co., Ltd.
Joetsu Energy Service Co., Ltd.
JEN Tainai Wind Farm Co., Ltd.

Enex Petroleum Sales Nishi-Nihon Co., Ltd.
Tohoku Tanku Shoukai Co., Ltd.
Kyushu Energy Co., Ltd.
Enex Fleet Co., Ltd.
Enexauto Co., Ltd.
Kokura Enterprise Energy Co., Ltd.

ENEX REPORT 2018 52

General power

104%

Motive power

87%

Site fuelVehicle fuelCity gas

92%

LP gas98%

Kerosene

98%

Residual oil

95%

Gasoline

99%

Diesel107%

Auto gas

116%

Copier paper

102%

Water

89%

FY2018 targets

Vs. FY2017 results
99%

Participation in the Ministry of the Environment’s COOL CHOICE
In approval of the COOL CHOICE citizen’s movement led by the
Ministry of the Environment, which is a climate change campaign
aiming for a low-carbon society,
the Group promotes energy
conservation activities including
wearing light clothing in summer,
heavy clothing in winter, ecodriving, green purchasing, andturning off unused lighting.

Divisions under
the direct controlof the President

Enex Petroleum Sales Higashi-Nihon Co., Ltd.

Etajima Oil Terminal Co., Ltd.

FY2017 results(Vs. FY2016 results)

Thermal power plants with reduced environmental burden
The latest environmentally-conscious exhaust gas processing
facilities have been installed at Sendai Power Station Co., Ltd., whichbegan operation in 2017, demonstrating the Group’s efforts toward
reducing its environmental burden. The Group employs a systemof control that ensures there are no incidents of exceeding thepredetermined exhaust targets, which are stricter than those definedin the Air Pollution Control Act. Concerning wastewater treatment
as well, the Group is reducing its effect on the environment withappropriate management methods, alongside countermeasuresagainst noise pollution and vibrations and ensuring that the spreadof particulate matter is minimized by storing coal indoors with direct
vent systems. Environmental burden measurements are conductedmonthly with results posted on the website.

Safety management of industrial waste and preventive
measures against soil contamination
The Company has defined group waste management standards
and group waste management procedures and ensures thoroughcompliance with laws and regulations regarding waste. The process
involves audits and external ISO evaluations by departments tasked
with division oversight, with checks on required documentation andstorage locations by processes such as group internal ISO audits.
Reasons and countermeasures are sought for points that require
improvement with the intent of advance prevention of industrial
waste accidents. Additionally, regarding preventive measures against
soil contamination, the Group has established soil contamination
prevention regulations in response to preventing occurrenceof contamination, etc., as defined by the Soil Contamination
Countermeasures Act and Water Pollution Prevention Act.

Company Information

Planning & Administration Department

Thorough implementation of eco-driving in the supply chain
As a specified shipper under the amended Act on the Rational
Use of Energy, we’re moving forward with efforts to reduce CO2
emissions generated by the shipping of the products we offer. With
the cooperation of Isuzu Motors Sales Ltd., and Itochu Corporation,
we offer eco-driving courses taught by experts for representatives,
dispatchers, and drivers from the companies to which the Group
subcontracts shipping. While also
promoting safe driving practices
aimed at zero tolerance toward
accidents during transit, thesecourses support thorough ecodriving efforts by covering such
topics as vehicle idling when
Eco-driving training(Kanto area) held in October 2017
stopping, fuel-saving driving

Item

Data Section

MobilityLife
Department(1) Routine energy and resource conservation in office work
(2) Energy efficiency in facilities use(3) CO2 reductions at the transportation stage

Shared across Itochu Enex Group companies
Ongoing training of Internal Environmental Auditors
Internal audits required to maintain environmental ISO certification
are performed by employees who have gained approval as stipulated
in our environmental management regulations at the Itochu Enex
Group. Also, to continue to maintain the high standards of internal
audits, we are working to improve the knowledge and skills of
the people in charge of audits and putting effort into the ongoingtraining of Internal Environmental Auditors. The number of Internal
Environmental Auditors trained within the Group for environmental
ISO certification during FY2017 was 34 persons.

Management

Organizational framework forenvironmental management

2. Reducing the Environmental Impact of Our Business
Activities

Groupwide eco-office activities
In view of the voluntary 1% year-on-year reduction target stipulatedby the Act on the Rational Use of Energy, the Itochu Enex Groupwill work toward the same goal via eco-office activities in FY2018 as
well. The state of initiatives at each business location is available inan objective format at all times via the environmental data collection
system, which serves to support goal achievement as part ofquarterly progress inspections.

Segment

Promoting effective environmental management practices
under the environmental ISO
Under the CSR and compliance systems set up by Itochu Enex,
we have developed an Environmental Management Systemthat is fundamentally based around the ISO 14001 international
standard for environmental management and have built functional
environmental management systems. We engage in businessactivities that are highly effective with respect to reducing our impact
on the environment, which involves proper implementation of theplan-do-check-act (PDCA) cycle in all Itochu Enex Group companies.

Use of Energy during FY2017 are provided on page 63.

Strategy(1) Promoting the advanced use of fossil fuels(2) Expanding the energy solutions business(3) Implementing environmental and social contribution activities*Environmental improvement plans and performance for FY2017 are provided on page 62.

*Achievements in CO2 emissions reduction activities in response to the Act on the Rational

Our Vision

Our environmental Policy voted by CEO
We’ve established an Environmental Policy that consists of eightthemes grouped under three focal areas and functions as guidelines
for our activities contributing to the environment and society.
Accordingly, we aim to function as an energy company that achieves
sustainable growth in harmony with the global environment, towhich end we will facilitate proper understanding of the policy
across the entire Itochu Enex Group while forging ahead with policy
implementation.

techniques, and anger management, and they are positively
contributing toward CO2 emission reductions throughout the entire
supply chain.

This is , ENEX

In order to realize a low-carbon society and preservation of the local environment, we try to reduce the environmental impact in our own
business activities. In the production and the distribution facilities such as petroleum product terminals nationwide, oil and gas reservoirs,
gas filling plants, power plants, and other business facilities such as offices, we set annual goals and promoted initiatives to reduce CO2
emissions, energy conservation and resource conservation , we continuously report the achievement level of the target.

Measures for environmental improvement activities in the
Itochu Enex GroupAs an ISO14001 certified business, the Itochu Enex Group works
to clarify the environmental improvement activities undertaken
throughout the Group and formulates an environmental improvement
plan. Under three focal areas stipulated in the Environmental
Policy, specific environmental objectives with numerical targets
are established in the Home-Life Division, Life & Industrial Energy
Division, Power & Utility Division, and Corporate Administration
Divisions, with efforts being made throughout the group towardachievement. These environmental improvement plans are revisedannually, and in consideration of societal and lifestyle changes
and business trends in the Group, efforts are made to ensure that
activities are rational and effective.

(As of August 1, 2018)

ENEX REPORT 2018 53

Management

Management supporting value creation

Important challenges of CSR and compliance

Social contribution activities

Ultimate Frisbee course

You can watch the movie showing theCompany’s social contribution activities byscanning this code with a smartphone.

Nurturing the next generation
Ultimate Frisbee course
In cooperation with the Japan Flying Disc Association, we invitedmembers of the Japanese national team to hold courses at schools.
These activities not only serve to teach rules and techniques, but
aids in activating the spirit of self-control and ethics for children. (Heldfive times during FY2017)*Ultimate Frisbee is a competitive team sport featuring flying discs.

Basic policies for the Itochu Enex Group’s social contribution activities.

Environmental
preservation◎We support social contribution activities conducted by employees
as a citizen.
◎We proactively disclose details and results of our social
contribution activities and share them with the society.

Contributing tocommunities

Recovery support

Environmental preservation

Coexistence and Cooperation Forest Development Project (Oume City)

ENEX REPORT 2018 54

Itochu Enex Home-Life
Hokkaido Co., Ltd.

Cleanup in Sapporo City

Itochu Enex Home-Life
Tohoku Co., Ltd.

Cooperated in a cleanup of theFisheries Cooperative Association of
Fukaura, Aomori

Itochu Industrial Gas Co., Ltd.

Kita-Kanto Brach cleaned up
elementary school roads.

Enex Electric Power Group
Hofu Energy Service Co., Ltd.

Cleanup of areas around the plants
and neighborhoods.

Support for the Hokkaido Guide Dog Association

Project to protect Japanese squirrels~ Support for heavy rain event in Western Japan ~In 2018, a donation from the Company of 5 million yen was donated to thenonprofit corporation, Japan Platform, 30,000 yen from Itochu Enex HomeLife Nishi-Nihon Co., Ltd. was donated to the Japanese Red Cross Society,and 687,000 yen from employees was donated to Japan Platform. Enex
Petroleum Sales Nishi-Nihon Co., Ltd. provided temporary storage locations
for relief supplies.

Support for people with disabilities~ Self-reliance and promoting art ~Aside from sponsoring the Artbility project which is operated by Tokyo Colony,the social welfare corporation, we issue an original calendar annually featuring
artwork registered by Artbility in the calendar’s design and wrapping tosupport self-reliance of people with disabilities.
~ Sports activities ~We support the activities of the nonprofit Yumeken, an
organization that engages in sports, health activities, and interaction withpeople with disabilities.

Self-reliance support via using designs by artists with disabilities

Promoting social welfareGroup member companies Enex Fleet Co., Ltd. and Ecore Co., Ltd.
invite local children to sports team matches. Additionally, Nissan
Osaka Sales Co., Ltd., which is a participant in Vaccines for theWorld’s Children, has initiated activities to collect PET bottle caps at
all of its business offices and has been successful in providing over
10,000 vaccinations for children.
Employee volunteer activities
To nurture personnel that contribute to and are trusted by society,
we have established a system wherein volunteer activity expenses
for employees and their families are borne by the Company.
Participation by employees in the Walk the World charity event
organized by the United Nations World Food Program is encouraged,
and contributions are made to school lunch programs in an effort toeliminate global poverty. Activities to contribute to improvement ineducational opportunities and lifestyles in impoverished nations are
ongoing.

Sports support for people with disabilities

Company Information

Project to protect Japanese squirrels
The population of Japanese squirrels (Sciurus lis) has decreased
in recent years due to changes in the habitat environment. Due tounceasing roadkill of road-crossing squirrels, we have co-sponsoreda project to build a bridge for squirrels and support an activity aiming
at coexistence between people and creatures living in the forests andundeveloped woodland (Tokamachi City, Niigata).

Cleanup activities
Each company in the Itochu Enex Group, which is rooted in local
communities, has joined cleanup activities sponsored by local
municipalities and residents’ associations and is working to conserveand beautify the community environment together with community
residents.

~ Support for areas affected by the Great East Japan Earthquake ~Donations collected from employees (27,288,000 yen in total since 2011)
have been sent to bodies such as the Iwate no Manabi Kibo Kikin scholarshipfund, Miyagi Kodomo Ikuei scholarship fund for child victims of Eastern Japan,
and Fukushima Kodomo Kifukin donations to child victims of Eastern Japan,
serving useful purposes in recovery support. Additionally, Enexauto Co., Ltd.
participated in a maritime forest regeneration project as recovery support for
the Great East Japan Earthquake.

Welcoming facility tours
Group member company Enex Electric Power Co., Ltd. welcomes
students from local elementary schools for tours as a component ofregional contribution activities.

Data Section

Developing healthy forests
In response to a call of the Tokyo Development Foundation for
Agriculture, Forestry and Fisheries, we have participated, since 2010,
in the “Coexistence and Cooperation Forest Development Project”
in which cedar, cypress and broad-leaved trees are planted in the
Nariki district, Oume City, Tokyo, which is located in the westernarea of Tokyo, with the aim of developing a forest where forestry
development and biodiversity conservation coexist.

Regional contributions

Management

Nurturing
the next
generation◎Under the theme of developing an environment, developing
human resources and developing communities to foster the next
generation, we carry out activities to pass down a sustainable
society to the future.

Segment

Three themes ofsocial contribution activities◎Based on the corporate philosophy “The best partner for life andsociety,” we contribute to the society in business activities and asa good corporate citizen.

Activities to introduce children to the workings of society
At Enex Family Day, employees are joined by their children for a dayon the job to share their work and the company. Activities include
business card exchanges with the President. (Held once per year)
Group company Itochu Enex Home-Life Hokkaido Co., Ltd. hasparticipated in the Mini-Sapporo event in Hokkaido since 2017,
which aims for children to experience a sense of self-fulfillment ofbeing a social participant through workplace experience. Children
can experience safety inspections by being a gas mechanic.

Strategy

As “The best partner for life and society”
Develop an environment, develop humanresources and develop communities
to be passed on to the future

Dietary and fire education activities
At kindergartens and nursery schools across Japan, we conductdietary education activities that convey to children gratitude for foodand the importance of cooking, alongside fire education activities
that convey to children the power of fire and the importance ofenergy. (Held 11 times during FY2017)

Word and voice activities“Enjoy the Power of Words,” an oral recital event that seeks tomaintain remembrance of earthquake disasters, was held throughout
Japan. Former television announcers Motoyo Yamane and Masako
Shindo were the reciters. In the “Power of Voice” lecture series,
we provide support to activities that promote personal growth withvoices and words from various genres.

Our Vision

Video introducing the Itochu Enex Group’ssocial contribution activities

Events for children to experience security facilities

This is , ENEX

Under the corporate philosophy “The best partner for life andsociety – with Energy, with the Car, with the Home –,” the Itochu
Enex Group endeavors to contribute to the realization of affluent
local communities and quality life for people living there, as wellas to the sustainable development of society by implementing
business activities to achieve the creation of diverse values andactivities to contribute to society.

Dietary education program to foster strength for living via foodParticipation in events to aid in resolving world hunger

ENEX REPORT 2018 55

Management

Management supporting value creation

Top priority challenges on CSR and compliance“Be Ethical,” in the Group’s Code of Conduct includes a meaningof respect for human rights, and reliable and sincere responses toprotection of human rights are thoroughly ensured. As a measure
to fulfill corporate social responsibilities, we also work to expand job
opportunities for people with disabilities.

Since our founding in 1961, we at Itochu Enex have held the firm
conviction that our people represent the Company’s greatest asset.
Accordingly, we see securing safety in operations, daily maintenanceof health, creating a welcoming workplace, and the creation of acompany that values employee input as priority management issues.

Toward zero harassment
At Itochu Enex, the following types of harassment are included in theprohibited items of the work regulations in an effort to work toward
zero harassment.

Securing labor safety
In accordance with its basic policy of “we cannot conduct businesswithout security – security takes precedence over all businessconduct,” the Group not only complies with related laws andregulations but also observes voluntary work standards that it hasestablished, including safety manuals and guidelines, and is actively
improving systems for ensuring security and preventing danger.

(1) Sexual harassment
Having a detrimental influence on other employees, etc., or damaging theworking environment through sexual speech and conduct.

(3) Maternity harassment and paternity harassment
Having a detrimental influence on other employees, etc., or damaging
the working environment through undue speech and conduct regarding
matters such as pregnancy, childbirth, or childcare leave.

Additionally, harassment prevention posters are posted across theGroup’s business locations, power harassment guidelines are issued
and distributed, and we work to include harassment as part ofperiodic training.

The Company recognizes communication with customers and safe
and stable delivery of energy as significant consumer issues andpromotes continuous measures in these areas.

Interaction with employees: Sound labor-management relations
To ensure that each employee can work with motivation, improve
performance, and achieve his or her mission, the Company has alabor union and holds labor-management council meetings on aregular basis in order to receive frank opinions from employees andreflect in management the issues that they view as important. (TheCompany’s labor union operates under a union shop system.)
Furthermore, employees also participate in Health Committee
meetings held monthly to deliberate on labor safety and sanitation
improvements, prevention of health disorders, and promotion ofhealth. Through such measures, the Company is working to createa workplace environment where a diverse field of personnel canleverage their respective strengths.
◎ Selected deliberation themes for FY2017
About occupational accident prevention, prevention of various infectious
diseases, survey on tobacco use, promotion of fitness club use, etc.

300,000 yen for first child, 500,000 yen for eachsubsequent child

Reducedworking hours

Until the child reaches the third grade of elementary
schoolStaggeredworking hours

Rules on Childcare Leave clearly stipulate thatparents may work staggered working hours whencaring for young children.

Supportfor childcare

Opened the “Enex Nursery” corporate nursery
facility

Program for
returning to work

For selected employees who previously left the Company
to accompany family members on job transfers but stillwant to work, we provide reemployment opportunities
that tap into the knowledge and experience gathered
during their time with the Company.

Senioremployment

Pursuant to the amended Act on Stabilization of
Employment of Elderly Persons, this program gives
Group employees who reach the mandatory retirement
age of 60 the opportunity to continue working until 65.

A full range of leave programs
20 days for every employee

Paid vacation time

* Employees can also carry over up to 20 days from theprevious year.
* Employees absent for extended periods due to illness
may use any paid vacation time waived over the past two
years.

Special leave

Job transfer; marriage; death of a relative; maternity;
spouse childbirth; natural disaster and otherunavoidable reasons; leave for occupational illness
or injury; taking a preschool child to the hospital, fora vaccination, or for a health checkup; caring for afamily member who requires nursing care; jury duty;
pregnancy leave.

Refreshment leave

Years of service determine the number of days
provided.

Personnel data

Employee satisfaction survey
With the objective of implementing improvements and reforms byascertaining issues involving the entire company and organization,
the Company conducted an employee satisfaction survey to collectopinions on employee attitude and satisfaction and the various
measures and programs introduced by the Company. The survey
results will be incorporated in personnel system improvements,
the Enex Early Bird workstyle reforms, and measures to prevent
employees from leaving the Company, ultimately leading to
improvements in employee motivation and productivity.

Fiscal year ended
March 2016

Fiscal year ended
March 2017

Unit: persons
Fiscal year ended
March 2018

6,096

5,958

5,613

650

642

656

(557)

(541)

(Women)(93)

Average age (non-consolidated)

Unit: persons
As of July 1, 2018

Number of employees by division(non-consolidated)
Home-Life Division

144

Power & Utility Division

103

(545)

Life & Industrial Energy Division

299

(101)

(111)

Mobility Life Department

16

41.1

41.0

41.0

Corporate Administration Division

71

(Men)

(41.7)(41.1)(41.08)Divisions under the direct control of the President

17(Women)(39.6)(39.1)(38.07)

Generalist and management (non-consolidated)

Number of employees (consolidated)
Number of employees(non-consolidated, including employees
at subsidiaries)(Men)

Average years of service (non-consolidated)

17.5

16.8

16

Generalist

575

(Men)

(17.1)(17.3)(16.8)

(Men)

(529)

(Women)(46)(Women)(15.3)(14.3)(12.8)FY2015FY2016FY20171

Single-geographic-area job

75

(Men)

(6)

1

(Women)(69)

Persons taking childcare leave
Men

2

Women

9

9

7

Management

195

Persons taking nursing care leave

7

10

12

(Men)

(194)

Persons utilizing reduced working hours

9

10

11

(Women)Persons utilizing staggered working hours

11

12

16

Persons taking family care leave

1

3

2

Number of new graduates hired

Joined in April 2016

Joined in April 2017

Joined in April 2018

Men

18

17

16

Women

9

10

8

(1)
As of March 31, 2018

Number of employee labor union members

416
FY2017¥9,958,780

Average salary of the employees

2016.72 hours

Yearly average actual working hours
Unit: %

Rate of employment of people with disabilities

ENEX REPORT 2018 56

Reemployment programs in response to employees’ motivation
The Company maintains reemployment programs to enable people withwork experience at the Company to continue to leverage their strengths.

As of June 2016

As of June 2017

As of June 2018

1.66

1.66

1.16

Company Information

Resolving inconveniences in areas lacking service stations
On July 28, 2018, Enex Fleet Co., Ltd. opened the Ota-Godo
Parking Area Westbound Store and Eastbound Store in the OtaGodo Parking Area of the Kita-Kanto Expressway. This area waspreviously in the top five areas on Japan’s expressway network
lacking service stations, and through opening these stores, we will
provide strong support for an age of logistics that expands acrossthe nation with a foundation in the Greater Tokyo Metropolitan Area.

The Company not only implements periodic health checkups based onJapan’s Industrial Safety and Health Act, but employees aged 40 andabove are required to undergo a thorough physical checkup, with theexpenses for the procedures borne by the Company.

Childbirth
lump-sum grant

Data Section

Customer Helpdesk
The Group has a Customer Helpdesk as a point of contact to hearcustomers’ opinions directly with the aim of strengthening activities
to communicate with customers. The Group works to provide
products and services that can better meet customers’ needs byusing the valuable comments and opinions from customers and to
improve the Group’s CSR and compliance initiatives.

Subsidy program for expense of thorough physical checkup

10 daysManagement

Consumer issues

Health Support Section
A Health Support Section has been established to aid in
employee health management. Two health nurses support healthy
management through implementing health checkups and providing
aftercare, providing mental and physical advice, and promotionand education on health issues. All employees also undergostress checks with advice provided in the areas of mental healthcountermeasures, lifestyle-related diseases, and reduction of
metabolic syndrome.

Specialpregnancy leave

Segment(4) Care harassment
Having a detrimental influence on other employees, etc., or damaging
the working environment through undue speech and conduct regarding
matters such as family care leave.

Employee protection in the event of disasterOur disaster preparedness efforts involve maintaining andestablishing systems that ensure the safety of employees. Our
efforts in that regard have included forming autonomous frameworks
for disaster prevention at our respective business offices, evacuation
training, stockpiling food items, distributing personal emergency
supply kits to all employees, and establishing the Itochu Enex Group
Emergency Contact Network (safety confirmation system).

Leave and support programs for pregnancy, childbirth, andchildcare above and beyond legal requirements

Promoting advancement of women in the workplace andcompliance with Japan’s Act on Advancement of Measures to
Support Raising Next-Generation Children
The Company has formulated an action plan regarding thepromotion of advancement of women in the workplace and works
to enable all employees to leverage their abilities by maintaining an
employment environment and creating a working environment where
women can perform. An action plan as a general business operator
pursuant to the Act on Advancement of Measures to Support
Raising Next-Generation Children has also been formulated, andwe have received certification as a Kurumin company that helps
employees balance professional and personal obligations.

Strategy(2) Power harassment
Utilizing power such as official authority to continuously infringe upona person’s personality and respect in excess of standard operatingprocedures, worsening the employee’s working environment or causing theperson to become anxious about employment security.

Striking a balance between work and family
The Company has enriched systems to support the coexistence ofwork with different events and phases in employees’ lives such as
childbirth, childcare, and family care obligations.

Our Vision

Labor practices

This is , ENEX

Protection of human rights

15.56 hours

Monthly average overtime hours

80%

Rate of paid vacation taken
Ratio of employees leaving for personal reasons

2.74%

ENEX REPORT 2018 57

Management

Management supporting value creation

Top priority challenges on CSR and ComplianceFair business practices

information magazine
for stores of businesses
related to CS

ENEX REPORT 2018 58

family member associated with the Group. This consulting contact
point can also respond to issues concerning harassment, mental
health, physical health, and daily living. Responses are provided
by specialists such as clinical psychologists, health nurses, andconsumer affairs advisors, maintaining a system where issues onmental health care can also be resolved.
Whistleblower protection
The ITOCHU ENEX Group has established clear regulations on
responsibilities with respect to concerned parties within the report
processing structure including ensuring that the whistleblower
does not receive any detrimental treatment, including termination,
as a result of whistleblowing, and ensuring confidentiality ofmatters regarding whistleblowing. The Group operates an effective
whistleblowing system as a result.

Company Information

The ITOCHU ENEX Group has established whistleblowing contact
point within the Group and outside that an employee can contact
promptly when he or she has violated or is likely to violate the
Declaration of the Group Code of Conduct or laws, when he or sheknows of a violation committed by an officer or another employee
and cannot point out the violation to said officer or other employee,or when he or she determines that a violation is likely to occur.
The ITOCHU ENEX Group ensures that all employees understand,through CSR and compliance training that is given repeatedly within
the Group, how whistleblowing contact point functions and how
whistleblowers are protected, and has developed a system that
ensures an appropriate response to whistleblowing while maintaining
transparency.
Additionally, the ITOCHU ENEX Group has made available anoutside consulting contact point that is available for any employee orData Section

Whistleblowing and consulting contact points

Environment-related data

Management

Responsible advertising activities
For all corporate communication, the ITOCHU ENEX Grouppractices responsible advertising activities pursuant to the corporate
philosophy, Code of Conduct, and the Declaration of the Group
Code of Conduct. In particular, maximum effort is made in the areasof reliability and sincerity, creativity and ingenuity, transparency andintegrity as stated in the Code of Conduct “Be Ethical,” and theCompany endeavors to improve understanding and empathy for its
corporate activities through frank and clear dialogue in an effort tofurther raise corporate value.

A decade of financial summary

Segment

Communication with business partners
To create increasingly better results from partnerships with business
partners, the ITOCHU ENEX Group periodically and continuously
engages in close communication with them through venues such as

information magazine for
LP gas sales stores

Data Section

Strategy

Compliance with the Anti-monopoly Law, Subcontract Act, andrelated laws and regulations
To realize fair transactions, the ITOCHU ENEX Group has
formulated its own Anti-monopoly Law Manual with the intent of
ensuring awareness and compliance with the Anti-monopoly Law,
Subcontract Act, and related laws and regulations. This manual
describes the objectives of laws such as the Anti-monopoly Law andSubcontract Act, consequences for violations, and specific types ofactions that are unacceptable. Details are also provided on specificactions that are unacceptable and require particular care when
undertaking operations that are a part of the Group’s corporate
activities.

the Enex Meeting, jointly held with business partners, and informal
gatherings held in various locations. Additionally, an information
magazine is issued for business partners in the Home-Life Divisionand business related to CS as an activity to promote understanding
and sharing of information related to the Group’s business activities.
As the Company’s business environment undergoes significant
change, dialogue withbusiness partners will
become increasingly
important for the cocreation of various
businesses, and theGroup will work towardfurther invigoration bylistening to the voices
and wishes of our
e-STYLE for HOME LIFE
e-STYLE for LIFE ENERGY
business partners.

Our Vision

The Itochu Enex Group’s policy on procurement and purchasing
Pursuant to the Declaration of the Group Code of Conduct, the
ITOCHU ENEX Group implements evaluation and selection of
suppliers while establishing continuous partnerships with business
partners in an effort to seek mutual benefits through transactions.
Additionally, based on the Group’s Environmental Policy, we arepromoting procurement activities that are considerate of environment
protection via initiatives such as procurement of materials with low
environmental burdens. In offices as well, we promote the use of
products that take the environment into account under Japan’sGreen Purchase Act.

This is , ENEXThe ITOCHU ENEX Group assures customers and suppliers of its commitment to fair business practices by engaging in commercial activities
on the basis of fair and free competition, performing fair purchasing activities, adhering to rules for commercial transactions and neverengaging in any bid-rigging, cartels or other unfair practices. The ITOCHU ENEX Group also seeks development together with its customers
and suppliers by maintaining and strengthening mutual trust.

ENEX REPORT 2018 59

Data Section

A decade of financial summary
Japanese GAAP

Japanese GAAP

Japanese GAAP

Japanese GAAP

IFRS

IFRS

IFRS

IFRS

IFRS

2009/3

2010/3

2011/3

2012/3

2013/3

2014/3

2015/3

2016/32017/3

2018/3

1,164,708

1,083,760

1,185,731

1,414,161

1,430,745

1,506,606

1,373,393

1,071,629

1,028,939

1,156,344

966,044936,841

723,645

695,060

744,767(million yen)
Total trading transaction
Revenue

64,90064,60470,054

71,59985,72089,56293,60488,822

Selling, general andadministrative expenses

64,57858,46155,87355,631

56,32857,862

71,18473,226

74,69770,931

Profit from operating activities

9,881

6,095

9,027

8,973

13,726

11,875

13,10016,384

19,67817,153

Net profit attributable to Itochu
Enex's shareholders

5,418

4,360

3,883

3,893

5,576

7,124

5,503

7,469

10,405

11,025

Total assets

247,587

263,096

277,585

305,053

323,747

321,032

329,059

304,053

344,603382,621

Shareholders' equity

98,05799,011

101,088

102,050

105,970

94,14497,432

100,526

108,511116,104

Net profit attributable to Itochu
Enex's shareholders

52.44

37.46

34.12

34.22

49.36

63.05

48.71

66.10

92.09

97.63

Equity759.66791.24805.95826.68868.69833.20862.30889.70960.37

1,028.57

16

16

20

16

16

20

22

24

32

40

ROE

6.4

4.9

4.3

4.2

5.8

7.8

5.7

7.5

10.0

9.8

ROA

4.1

2.7

3.6

3.3

4.1

4.3

3.7

4.7

6.0

5.3

A dividend payout ratio

30.5

42.7

58.6

46.8

32.4

31.7

45.2

36.3

34.8

41.0

Segment

64,557

Strategy

74,459Our Vision

Gross profit

This is , ENEX

Japanese GAAP

Figures per share

Management

Annual dividends
Major financial indicators (%)

As of August 28, 2018

ObjectRatingOutlookLong-term issuer rating

A+

StableObjectMaximum amountRatingCommercial paper¥10 billion

J-1

Annual sales volume of major products
Gasoline(Thousandsof kiloliters)

Kerosene(Thousandsof kiloliters)

Diesel oil

Object

Issue
price

Issue date

Maturity date

Interest Rating
rate

Series 13 unsecured bonds(with inter-bond pari passu clause)¥5billionMay 22, 2012

May 22, 2019

0.736%

A+

Series 14 unsecured bonds(with inter-bond pari passu clause)¥10billionMay 22, 2012

May 20, 2022

1.202%A+(Thousandsof kiloliters)

LP gas(Thousandsof tons)

Electricity(GWh)

FY2015FY2016FY2017

3,722

3,587

3,328

1,471

1,448

1,590

3,321

3,271

3,401

601

597

619

1,616

3,190

4,674

Company Information

ENEX REPORT 2018 60

Rating *Rating agency: Japan Credit Rating Agency, Ltd. (JCR)

Data Section(Notes)1.The figures of revenue are without consumption taxes.
2.The figures of this page are based on IFRS(International Financial Reporting Standards).
3.In accordance with the application of IFRIC 21 from the fiscal year ended March 2015, we have retroactively revised figures for the fiscal year ended
March 2014.
4.The figures of this page round off less than 1 million yen.

ENEX REPORT 2018 61

Data Section

Environment-related data
FY2017 environmental improvement plan performance and assessment
DivisionPU

PU

Environmental target

PeriodRate ofperformance progress

Deliberations are ongoing toward development of biomass power generation, etc.
Measures are underway toward development of other new renewable energy power generation businesses.

Promoting the generation of renewableenergyA deterioration in wind conditions at Tainai Wind Farmcaused power generated by wind power to decrease.
107% However, power generation was at full capacity owing toprogress in FIT construction at Joetsu Energy Service,and the overall plan was achieved.

75,450 MWh

2016

104

67

—

1

85

69

—

8

8

—

124

48

—

—

124

88

93

—

39

2015

124

90

—

4

96

68

—

23

8

—

129

45

—

—

122

114

106

—

43

2014

103

69

—

1

81

69

—

13

8

—

121

44

—

—

118

87

102

—

34

2017 2,175 5,313 7,488

086

1,211 1,297

9

1,392 1,402 1,229 553

1,781

14,30020,37429

48,828

11

48,83992016 2,143 7,169 9,312

089

1,077 1,166

8

1,461 1,469 1,305 516

1,822

15,527

20,45541

43,846

10

43,857

9•Focused on profits instead of sales volume.

2015 2,202 6,464 8,665

0

86

1,142 1,228

7

1,473 1,480 1,216 485

1,701

15,292

21,07733

52,55918

52,5779

customers.

2014 2,249 5,682 7,931

0

96

1,261 1,357

7

1,467 1,474 1,288 490

1,778

15,501

20,29735

27,71325

27,738

6

City
gas

LP
gas

Auto
gas

VehicleGasoline Diesel fuels
total

CO2 total

Copier
paper

Water

Specially
Industrial managed
wastes industrial
wastesWastes
total

PRTR

KL

t-CO2

Penetration of SCR vehicle: 60%.

SCR is an acronym, standing for Selective Catalytic Reduction.

•Focused on profits instead of sales volume.
•Focused on electric power sales and capturing new gas
customers.
•The Market sluggish.

356

PU

Deployment of community development
businesses

One employee was seconded to Enecoop to begin strengthening the partnership ahead of expanding electric
power transactions. Additionally, to strengthen our foundation in Hokkaido, we made an investment in Todok
Denryoku and enhanced cooperation. Not limited to Hokkaido, the Company is seeking municipalities to workwith toward expanding business and employment, and we continue to support the expansion of local privatecompanies into the electric power business.

Planning and implementation of socialcontribution activities(1) Donated 1,865,000 yen to provide medium- to long-term recovery support for the Great East Japan
Earthquake.
(2) Held Ultimate Frisbee courses (five times during the year) for elementary, junior high, and high school
students.
(3) Sponsored the Tokyo Colony social welfare corporation and used pictures created by people withdisabilities for the corporate calendar.
(4) Held the Seventh Enjoy the Power of Words in Fukuoka and the Eighth in Tokyo with a combined total of
619 participants.
(5) Sponsored the Eighth Yumeken Cup held at the Tokyo Tatsumi International Swimming Center withparticipation from eight volunteers.
(6) Total of 30 employee family members participated in the Walk the World charity event held by the United
Nations World Food Program.

105% 5% over target, 4% higher than FY2016.

106

113% 13% over target, 3% higher than FY2016.

3,024

106% 6% over target, 1% higher than FY2016.

20,631102% 2% over target, 2% higher than FY2016.

Preservation of local environments

LL

IL

HL

Preventing facility accidents and legal and regulatory
violations(1) Prepared FY2018 budget based on facility inspection results.
(2) Held CSR safety personnel meeting on Monday, February 26. Held at the Tatsuno Tsurumi
Plant and attended by a total of 13 people from among group companies, area managers,
administrative staff, etc.
(3) Operations associated with change in Kyushu area personnel.
(4) Summary: Safety was secured despite organizational changes.

Strengthening autonomous safety management
systems

1. Energy conservation proposals (shifting to LED lighting at terminals).
2. Countermeasures against salt damage to facilities (verification on facility maintenancemanagement and durability).
3. Asphalt terminal repair construction support (construction management and methods).
4. Shared information via monthly environmental and safety bulletins.
5. Collected information and implemented countermeasures on laws related to business.
Emphasizing asset value (efficiency and safety), provided support for repair methods andprocess adjustments at facilities.

Preventing accidents through consistent and advanced
security management system based on autonomous
safety standards

ENEX REPORT 2018 62•Autonomous safety audits completed pursuant to laws and regulations and the Enexautonomous safety standards. Conditions in safety management improved at each company
compared to FY2016.
•Created 3,500 badges to raise awareness of preventing carbon monoxide poisoning anddistributed them to employees at sales companies.

Unit

Motive
power

Power
total

Thousand kWh

Gas
total

Kerosene Residual
oilThousand m3

KL

Fuels
total

Thousand Thousand
sheetsm3(A4 equivalent)

t

t

2017

—

—

244,144 18,342 208 1,218 19,769 353 1,721 2,074 2,306 753

3,058

710,825

25,661389

50,795

11

50,80644

Performance 2016——

365,722 18,418 221 1,085 19,724 279 1,993 2,272 2,365 709

3,074

956,000

26,922

108

49,33421

49,355

56

2015

—

—

215,122 44,430 158 1,142 45,730 299 7,104 7,403 2,120 681

2,801

954,000

24,085

107

57,74823

57,772

67*Conversion values (emissions coefficients for individual power companies in the case of power) for each fiscal year based on the Act on the Rational Use of Energy are used as CO2
conversion factors.
*Total figures for business sites that collect environmental data, including Group members companies, are presented for reference above.

Reports on compliance with the Act on the Rational Use of Energy (CO2 emissions reductions)
Specified shipper

Specified business operator

FY

2013

2014

2015

2016

2017

FY

2013

2014

2015

2016

2017

Shipments in
ton-kilometers(thousand t-km)

773,254794,162

415,717542,801

436,155

Energy use (KL)

3,022

2,629

2,704

2,536

2,415

CO2 emissions (t-CO2)

36,17336,59821,457

26,94923,466CO2 emissions (t-CO2)

7,321

6,475

6,658

6,051

5,802

0.0200Intensity(sales volume)0.20850.1968———Intensity(vs. shipment volume)

0.01730.01700.01910.0184*Intensity not indicated for FY2015 and later due to change in reporting method.

Tokyo Toshi Service’s heat supply business site was evaluated highly as a business site that contributes to global warming
countermeasures◎Certified as an Near-Top-Level Facility under the Tokyo Metropolitan Government’s Cap-and-Trade Program
FY2015: Kanda-Surugadai District Heat Supply Center, Hakozaki District Heat Supply Center, Harumi Island District Heat Supply Center
FY2017: Fuchu Nikkocho District Heat Supply Center*1*2◎Certified as low-carbon district heat supply business under the Tokyo Metropolitan Government’s Cap-and-Trade Program<Of 33 districts within Tokyo that received certification during FY2018, 11 districts were operated by the Company>
Ginza 2-chome/3-chome, Shinkawa, Kanda-Surugadai, Shibaura 4-chome, Ginza 5-chome/6-chome, Hakozaki, Fuchu Nikkocho, Kyobashi
2-chome, Hachioji Asahicho, Osaki 1-chome, Harumi 1-chome*3◎Registered as a business making the CO2CO2 (kotsukotsu) smart declaration (premium course) in Chiba Prefecture
2018: Makuhari New City High-Tech Business District Heat Supply Center

Company Information

Improving energy conservation awareness through ecoHeld a course for 32 people belonging to 20 companies at the head office on October 24.
driving training for subcontractor trucking companies
Began discussions on venue and training content for FY2018 as a specified shipper.
and group companies

Generalpower

Data Section

Reducing environmental impact

ThousandDue to transfer of contracts to KANOU FA CO., LTD., a

3% new fly ash company.

FY

Management

13,250

Reference: All sites

Segment

Promoting fly-ash (FA) initiatives

Performance

StrategyIL20,239 sheets

Numberof sitescoveredOur Vision

Achieving a low-carbon society

43

2,160

Reductions incopier-paper use

t

—

8,390

CA

t

89

Promoting initiatives for slop

2,860 KL

PRTR

85

Failed to reach targets despite achievements in collection.
26% Aim to expand volume in FY2018 through synergies from
integrating operations in different departments.

Reductions in
vehicle fuel use

Thousand Thousand
sheetsm3(A4 equivalent)

Wastes
total

116

9,793

Eco-office activities

t-CO2

Specially
Industrial managed
wastes industrial
wastes

Water—•Focused on profits instead of sales volume.
69% •Focused on electric power sales and capturing new gas
customers.

Thousand

KL

KL

Copierpaper—

83% •Focused on electric power sales and capturing new gas

94 m3·KL

CO2 total

48

9,982

Reductions in site
fuel use

VehicleGasoline Diesel fuels
total

121

12,087 Units

2,221

Thousand m3

Fuels
total

—

Sales of EcoJozu

ThousandKerosene Residual
oil

8

86% January: 197 units; February: 213 units; March: 98 units

2,120 kWh

Gas
total

7

1,200

Reductions ingeneral power use

Auto
gas

—

IL

CA

Thousand kWh

LP
gas

63

1,400 Units

14,208 Units

City
gas

83

Sales/promotion of electric vehicles (Leaf)

Sales of glass top stoves

Power
total

1

34%

HL

Unit

Motive
power

—

205

LL

Generalpower

65

609 Units

Growing sales of solar power systems

FY

101

105%

HL

Covered sites

2017

47,317Growing sales of AdBlue

45,029 KL

80,677FY2017 ISO 14001 activities

Status of progress

Promoting development of renewableenergyLL

HL

FY targets

LL: Life Energy & Logistics Division
IL: Industrial Energy & Logistics DivisionThis is , ENEX

Area

PU: Power & Utility Division
HL: Home-Life Division◎Certified as 3-star Tochigi Prefecture Eco-Keeper Operator
2017: Make use of unused energy from substation waste heat at the Utsunomiya City Chuo District Heat Supply Center was rated highly*4*1 To promote countermeasures against global warming, the Tokyo Metropolitan Government has implemented Cap-and-Trade Program for large-scale business offices that requires a
reduction in total greenhouse gas emissions and a transaction program for emissions quota trading.
*2 Low-carbon heat certified under this system is for districts with a COc exhaust coefficient (COv exhaust volume per unit of electric power or heat provision) of 0.058t-CO2/GJ or less, andif customers procure heat in these districts, this is deemed as equivalent to a reduction in CO2.
*3 As a global warming countermeasure, Chiba Prefecture registers business offices actively engaged in global warming countermeasures including energy conservation and introduction ofrenewable energy as “CO2CO2 smart declaration business offices” and widely introduces these initiatives.
*4 To promote autonomous global warming countermeasures by business offices, Tochigi Prefecture certifies business offices that implement superior measures regarding global warming
measures during the course of business activities as “Eco-Keeper Operators.”

ENEX REPORT 2018 63

Consolidated Financial Statements
1.

Consolidated Statement of Financial Position
Notes

ASSETS
Current assets
Cash and cash equivalents
Trade receivables
Other current financial assets
Inventories
Trade advances paid
Other current assets

As ofMarch 31, 2017

8
9, 41
10
11

Total current assets
Non-current assets
Investments accounted for by the equity
methodOther investments
Non-current financial assets other thaninvestments
Property, plant and equipment
Investment property
Goodwill
Intangible assets
Deferred tax assets
Other non-current assets

22,727
94,75929,70927,1551,900
1,877

22,573
119,541
38,86028,3801,690
1,725

178,127

212,769

Total current liabilities

11,74926,145

10, 41

7,461

3,406

10, 41

10,803

11,40087,58885,326

11,986533
23,638
11,3591,359

10,166692
20,79810,502
1,417

166,476

169,852

344,603382,621

13, 16,39, 4114
15
15, 16
17

5

Notes
LIABILITIES AND EQUITYCurrent liabilities
Short-term bonds and borrowings
Trade payables
Other current financial liabilities
Income taxes payable
Advances from customers
Other current liabilities

12, 41

Total non-current assets
Total assets(Millions of yen)
As ofMarch 31, 2018

Non-current liabilities
Non-current bonds and borrowings
Other non-current financial liabilities
Non-current liabilities for employee benefits
Deferred tax liabilities
Provisions
Other non-current liabilities

As ofMarch 31, 201718, 41
19, 41
20

21, 2218, 41
20
23
17
22(Millions of yen)
As ofMarch 31, 2018

9,318
101,902
8,719
5,258
6,460
12,094

12,432
127,4458,539
3,650
10,583
12,280143,751

174,929

31,702
24,501
9,761
1,961
5,052
398

30,27323,335
9,820
2,185
4,757
256

Total non-current liabilities

73,37570,626

Total liabilities

217,126

245,555

19,87818,74073,300ሺ1,655)
ሺ1,752)

19,87818,89280,352
ሺ1,145)
ሺ1,873)EquityCommon stock
Capital surplus
Retained earnings
Other components of equity
Treasury stock

24
24
24
25
24

Total shareholders’ equity
Non-controlling interests

108,51138

18,966

Total equity
Total liabilities and equity

116,104

20,962

127,477

137,066

344,603382,621* See accompanying notes to consolidated financial statements.

-1-

ENEX REPORT 2018 64-2-

ENEX REPORT 2018 65

2.

Consolidated Statement of Comprehensive Income
Notes

Revenue
Cost of sales

28

Gross profit
Other income and expense
Selling, general and administrative expenses
Loss from tangible assets, intangible assets and goodwill
Other – net

29
30, 3132

Total other income and expense
Profit from operating activities
Financial income and costs
Interest income
Dividends received
Interest expense
Other financial income and costs – net

Fiscal year ended
March 31, 2017

(Millions of yen)
Fiscal year ended
March 31, 2018

695,060(601,456)

744,767(655,945)

93,60488,822(74,697)
(982)
1,753

(70,931)(1,544)806(73,926)(71,669)

19,67817,153

89
246
(966)
(203)

92
296
(950)
(241)

(834)

(803)

500
–

493
2,326

19,344

19,16933

Total financial income and costs
Share of profit of investments accounted for by the equity method
Gains on business reorganization and others

127Profit before tax
Income tax expense

17

Net profit
Net profit attributable to:
Net profit attributable to Itochu Enex’s shareholders
Net profit attributable to non-controlling interests
Total(6,599)(5,945)

12,745

13,224

10,4052,340

11,025
2,199

12,745

13,224

Notes
Other comprehensive income, net of tax effectItems that will not be reclassified to profit or loss
FVTOCI financial assets
Remeasurement of net defined benefit liability
Other comprehensive income of investments accounted for by the equity
methodItems that may be reclassified to profit or loss
Exchange differences on translating foreign operations
Cash flow hedges
Other comprehensive income of investments accounted for by the equity
method12

12

Fiscal year ended
March 31, 2017

(Millions of yen)
Fiscal year ended
March 31, 2018

78
206

892
105

0

ሺ9)

ሺ37)
111

ሺ38)
74

224
582

ሺ519)

Comprehensive income

13,327

13,729Comprehensive income attributable to:Comprehensive income attributable to Itochu Enex’s shareholders
Comprehensive income attributable to non-controlling interests

10,866
2,461

11,4602,269

13,327

13,729Total other comprehensive income, net of tax effect

25

Total

(Yen)

Earnings per share attributable to Itochu Enex’s shareholders
Basic
Diluted34
34

Total trading transactions(Note)

505

92.09
–

1,028,939

97.63–(Millions of yen)
1,156,344

Total trading transactions are presented in accordance with Japanese accounting practices and represent the total amounts oftransactions that Itochu Enex Co., Ltd. and its subsidiaries conducted as a party in contracts and for which they acted as an agent.
This item is not audited and voluntarily disclosed by Itochu Enex Co., Ltd. for investors’ convenience, and is not required to bedisclosed under International Financial Reporting Standards (―IFRSs‖).

* See accompanying notes to consolidated financial statements.

ENEX REPORT 2018 66-3-4-

ENEX REPORT 2018 67

3.

4.

Consolidated Statement of Changes in Equity
Notes

EquityCommon stock
Balance at the beginning of the year

Fiscal year ended
March 31, 2017

(Millions of yen)
Fiscal year ended
March 31, 201824

Balance at the end of the year
Capital surplus
Balance at the beginning of the year
Acquisition of subsidiary shares from non-controlling interests andothers19,87819,87819,87819,87818,74018,740–152

18,74018,892

66,024
10,405
ሺ248)
ሺ2,881)73,30011,025
ሺ75)
ሺ3,898)

ሺ2,364)

ሺ1,655)

24

Balance at the end of the year
Retained earnings
Balance at the beginning of the year
Net profit attributable to Itochu Enex’s shareholders
Transfer from other components of equity
Cash dividends paid to Itochu Enex’s shareholders

24

26

Balance at the end of the year

73,300

Other components of equity
Balance at the beginning of the year
Other comprehensive income attributable to Itochu Enex’s
shareholders
Transfer to retained earnings

25

461

Balance at the end of the year
Treasury stock
Balance at the beginning of the year
Purchase and disposal of treasury stock

24

Balance at the end of the year
Total shareholders’ equity
Non-controlling interests
Balance at the beginning of the year
Net profit attributable to non-controlling interests
Other comprehensive income attributable to non-controlling interests
Cash dividends paid to non-controlling interests
Changes due to additional acquisitions and sales of interests in
subsidiaries
Balance at the end of the year
Total equity* See accompanying notes to consolidated financial statements.

38

80,352

435

248

75

ሺ1,655)

ሺ1,145)

ሺ1,752)

108,511

ሺ1,873)

116,104

16,636
2,340
120
ሺ345)

18,966
2,199
69
ሺ615)

ሺ1,752)ሺ0)215

Consolidated Statement of Cash Flows

ሺ1,752)
ሺ121)

343

18,966

20,962

127,477

137,066

Notes
Cash flows from operating activities
Profit before tax
Depreciation and amortization
Loss from tangible assets, intangible assets and goodwill
Financial income and costs
Share of profit of investments accounted for by the equity method
Gains on business reorganization and others
Increase in trade receivables
Increase in inventories
Increase in trade payables
Other – net
Interest and dividends received
Interest expense
Income taxes paid
Net cash flows provided by operating activities

Fiscal year ended
March 31, 201719,344
10,856
982
834
ሺ500)
–
ሺ22,938)
ሺ1,337)
21,158
ሺ4,629)510
ሺ927)
ሺ5,522)

19,16910,824
1,544
803
ሺ493)
ሺ2,326)
ሺ25,998)
ሺ1,964)
26,522
3,461
737
ሺ873)
ሺ7,167)

ሺ2,649)
ሺ30)
1,472
ሺ645)
3,001
–
ሺ1,661)1,710

ሺ5,972)
ሺ256)
5,411
ሺ3,751)
–
ሺ598)
ሺ444)
5,675

ሺ8,436)2,810

ሺ11,887)

ሺ1,622)169
ሺ9,000)169

ሺ2,545)136
ሺ7,000)237

17,831

Cash flows from investing activities
Purchase of investments accounted for by the equity method
Purchase of investments
Proceeds from sales of investments
Acquisition of subsidiaries, net of cash acquired
Sales of subsidiaries, net of cash held by subsidiaries
Loss of control of subsidiaries
Payment for loans receivableCollection of loans receivable
Payments for purchase of property, plant and equipment and investment
property
Proceeds from sales of property, plant and equipment and investment
property
Purchase of intangible assets
Proceeds from sales of intangible assets
Increase in deposits paid – net
Other – net

35
35
35

Net cash flows used in investing activities
Cash flows from financing activities
Proceeds from bonds and borrowings
Repayments of bonds and borrowings
Net increase (decrease) in short-term borrowings
Proceeds from share issuance from non-controlling interests
Cash dividends paid to Itochu Enex’s shareholders
Cash dividends paid to non-controlling interests
Purchase of treasury stock
Other – net

26
38

Net cash flows used in financing activities
Net increase (decrease) in cash and cash equivalents

2,536

ሺ18,458)

ሺ1,195)

ሺ5,850)7,500
ሺ3,858)
ሺ1,743)132
ሺ2,881)
ሺ345)
–
ሺ0)

–
ሺ8,615)
7,323
76
ሺ3,898)
ሺ615)
ሺ121)
ሺ0)
ሺ69)

8

20,82422,727

8

ሺ21)

ሺ85)

Effect of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the year

24,239

ሺ14,712)

1,924

Cash and cash equivalents at the beginning of the year

(Millions of yen)
Fiscal year ended
March 31, 2018

22,727

22,573* See accompanying notes to consolidated financial statements.

ENEX REPORT 2018 68

-5-

-6-

ENEX REPORT 2018 69

Notes to Consolidated Financial Statements
1.

Reporting Entity(5)

Itochu Enex Co., Ltd. (the ―Company‖) is an entity located in Japan. The addresses of the Company’s registered head
office and principal offices are available on its website (URL: https://www.itcenex.com/english/). The Company’s
consolidated financial statements, the closing date of which is March 31, 2018, comprise the accounts of theCompany and its subsidiaries (the ―Group‖) and the Group’s equity interests in associates and joint ventures. The
Group’s principal activities are sales of petroleum products and liquefied petroleum gas (―LPG‖) and the provision ofrelated services in Japan and overseas as well as supply of electricity and heat in Japan.
2.

The following major IFRSs or interpretations that were newly established or amended were issued by the date of
approval of the consolidated financial statements. However, these IFRSs or interpretations are not necessarily
required to be adopted on or before the fiscal year ended March 31, 2018, and the Group has not early adopted
them.
The effect of adoption of IFRS 9 is insignificant.
No significant effect of adoption of IFRS 15 on the Company’s consolidated financial statements, excluding
presentation of revenue, is expected. Under IFRS 15, whether revenue is presented on a gross basis or a net
basis is determined based on whether or not an entity controls the goods or services before the entity transfers
those goods or services to a customer. In line with this, an increase is expected in the presentation of revenue inand after the fiscal year ending March 31, 2019. However, the effect on the Company’s consolidated financial
statements is under consideration and cannot be estimated at this time.

Basis of Consolidated Financial Statements(1)

IFRSs or Interpretations Issued, But Not Yet Adopted

Compliance with International Financial Reporting Standards (―IFRSs‖)
The Group’s consolidated financial statements are prepared in accordance with IFRSs.
These consolidated financial statements were approved at the Board of Directors’ meeting of the Company heldon June 20, 2018.

The effect of adoption of IFRS 16 is under consideration and cannot be estimated at this time.
Standard(2)

Basis of Measurement
Except for the cases (e.g., financial instruments) stated in Note 3, ―Significant Accounting Policies,‖ the Company’s
consolidated financial statements are prepared on a historical cost basis.

(3)

Functional Currency and Presentation Currency
The consolidated financial statements of the Group are presented in Japanese yen, which is the Group’s functional
currency. All financial information presented in millions of yen has been rounded to the nearest million yen.

(4)

Title

Early Adoption of New or Amended IFRSs or Interpretations
In preparing these consolidated financial statements, the Group has early adopted IFRS 9, ―Financial Instruments‖(issued in November 2009; revised in October 2010, December 2011, and November 2013).

Mandatory adoption(From fiscal years
beginning on or after)

Fiscal year
in which the Groupwill adopt standards

Summary of new or revised standards

Fiscal year ending
March 31, 2019

Limited amendments to the classificationand measurement method for financial
assets, and introduction of the expectedcredit loss impairment model

Fiscal year ending
March 31, 2019

Establishment of accounting and disclosure
on revenue from contracts with customers

Fiscal year ending
March 31, 2020

Principles for recognition, measurement,
presentation, and disclosure of leaseagreements for the lessee and the lessor ofleasesIFRS 9Financial Instruments

January 1, 2018

IFRS 15

Revenue from Contracts
with Customers

January 1, 2018

IFRS 16

3.

LeasesJanuary 1, 2019

Significant Accounting Policies
Accounting policies described below are applied to all of the periods presented in the consolidated financial
statements, unless otherwise specified.
(1)

Basis of Consolidation
The consolidated financial statements include financial statements of the Group companies and equity interests inassociates and joint ventures.
A.

Subsidiaries
A subsidiary is an entity that is controlled by the Group. The Group controls an investee if the Group has powerover the investee, exposure, or rights, to variable returns from its involvement with the investee, and the ability
to use its power over the investee to affect the amount of the Group’s return. The acquisition date of a
subsidiary is the date on which the Group obtained control of the subsidiary, and the subsidiary is included in
the consolidation from the date of acquisition until the date on which the Group loses control.
In cases where the accounting policies applied by a subsidiary are different from those applied by the Group,
adjustments are made to the subsidiary’s financial statements, if necessary. Comprehensive income forsubsidiaries is attributed to owners of the parent and non-controlling interests even if this results in the noncontrolling interests having a deficit balance.
Changes in an equity interest in a subsidiary due to acquisition, sale, etc., of interests that do not result in lossof control of the subsidiary by the Group are accounted for as equity transactions.

-7-

ENEX REPORT 2018 70

If the Group loses control of a subsidiary, the Group derecognizes assets and liabilities of the former subsidiaryand non-controlling interests in the subsidiary, and remeasures the residual interest retained in the former
subsidiary at its fair value as of the date of the loss of control and recognizes any resulting gain or loss in profit
or loss.
-8-

ENEX REPORT 2018 71

B.

Associates and Joint Ventures(3)

Foreign Currency Translation

An associate is an entity of which the Group has significant influence over the financial and operating policy. In
determining whether the Group has significant influence, various factors, such as holding of voting rights (theGroup is presumed to have significant influence over an investee if the Group owns 20% or more, but 50% orless of the voting rights of the investee directly or indirectly) and existence of virtually exercisable potential
voting rights, and proportion of employees seconded from the Group to all the directors of the investee aretaken into account comprehensively.

Transactions in foreign currencies are translated into the functional currency at the exchange rate at the date oftransaction or its approximate rate. Monetary assets and liabilities denominated in foreign currencies aretranslated into the functional currency at the rates of exchange prevailing at the fiscal year end. Differences arisingfrom the translation and settlement are recognized in profit or loss. However, exchange differences arising fromthe translation of financial assets measured at fair value through other comprehensive income (―FVTOCI‖) andcash flow hedges are recognized in other comprehensive income.

A joint venture is a contractual arrangement whereby two or more parties including the Group have joint control
which requires unanimous consent of the parties in making important decisions on business activities. The
business of a joint venture is undertaken by an entity independent of its investors and each investor has rights
only to the net assets of the arrangement.

The assets and liabilities of foreign operations are translated into Japanese yen at the rates of exchange at the
fiscal year end, while income and expenses of foreign operations are translated into Japanese yen at theexchange rate at the date of transaction or its approximate rate. The resulting exchange differences on translating
foreign operations are recognized in other comprehensive income. In cases where foreign operations are disposedof, the cumulative amount of translation adjustments related to foreign operations is recognized in profit or loss inthe period of disposition.

Investments in associates and joint ventures are initially recognized at cost and adjusted thereafter for theamount equivalent to the Group’s share of net assets of the investees. Profit or loss and other comprehensive
income recorded by the investees after the acquisition are included in the Group’s profit or loss and othercomprehensive income using the equity method and they are reflected in the investment value. For goodwill
recognized in the acquisition of associates and joint ventures, the balance is included in the carrying amount of
the investment. Dividends received from associates and joint ventures are deducted from the investment value.
In cases where the accounting policies of associates and joint ventures are different from the accounting
policies adopted by the Group, adjustments are made to the financial statements of associates and joint
ventures, if necessary, to ensure use of the Group’s policies.

(4)

Financial Instruments
A.

Financial Assets Other Than Derivatives(i)

For financial assets other than derivatives, trade receivables and other receivables are initially recognized on
the day on which they arise. All other financial assets are initially recognized on the transaction date on
which the Group becomes a party to the contract of the financial instrument.

If the Group loses significant influence over an associate or joint control of a joint venture and ceases to apply
the equity method, the Group recognizes a gain or loss from the sale of the equity interest in profit or loss, andremeasures the residual interest at fair value and recognizes the resulting valuation difference in profit or loss
for the fiscal year in which the significant influence or the joint control is lost.
C.

Financial assets other than derivatives are classified into financial assets measured at amortized cost or
financial assets measured at fair value. They are classified into financial assets measured at amortized cost
if both of the following conditions are met; otherwise, they are classified into financial assets measured at fairvalue:

Transactions Eliminated in Consolidation• The purpose of holding these assets is to collect contractual cash flows.

Inter-group company balances of receivables and payables and transactions, and any unrealized gains andlosses arising from inter-group company transactions are eliminated in the preparation of the consolidated
financial statements.

• 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.

For unrealized gains and losses arising from transactions between the Group and associates accounted for by
the equity method, the amount equivalent to the Group’s equity interest in such gains and losses is eliminated.
(2)

For financial assets measured at fair value, investments in equity instruments, such as ordinary shares inother entities, except for equity instruments held for the purpose of obtaining gains from short-term sales,
are classified as FVTOCI financial assets in principle. Other financial assets measured at fair value areclassified as financial assets measured at fair value through profit or loss (―FVTPL financial assets‖), of
which the change in fair value after acquisition is recognized in profit or loss, in principle.

Business Combinations
Business combinations are accounted for by the acquisition method. Identifiable assets acquired, liabilities
assumed, and any non-controlling interest in the acquiree are measured at fair value (except for assets andliabilities that are required to be measured on a basis other than fair value, which are measured at the value
specified in IFRS 3, ―Business Combinations‖) at the time of acquisition. Goodwill is recognized and measured as
the excess of the aggregate of the consideration transferred, the acquisition-date fair value of the acquirer’s
previously held equity interest, and the amount of any non-controlling interest over the net of the acquisition
amounts of the identifiable assets acquired and liabilities assured. However, if the aggregate of fair values ofidentifiable assets and liabilities assumed exceeds the sum of acquisition value, the value of pre-existing equity
interest after the remeasurement, and the fair value of non-controlling interest in the acquiree, such an excess isimmediately recognized in profit as the bargain purchase gain.
If the initial accounting treatment for a business combination has not been completed by the last day of the period
in which the business combination occurred, the business combination is accounted for using provisional amounts.
Retrospective adjustments to provisional amounts are made during the measurement period, which is within one
year from the acquisition date. Acquisition-related costs incurred by the acquirer to achieve the businesscombination are recognized as expenses.
For a business combination where all parties to the business combination are under control of the Group before
and after the business combination (business combination under common control), carrying amounts of assets
and liabilities of the acquiree are taken over by the acquirer.

ENEX REPORT 2018 72-9-Initial Recognition and Measurement

Such classifications are made upon initial recognition of each asset and applied consistently without any
change.
Financial assets measured at amortized cost and FVTOCI financial assets are initially recognized at fairvalue (including transaction costs that are directly attributable to the acquisition of financial assets). FVTPL
financial assets are initially recognized at fair value and transaction costs are recognized in profit or loss
when they are incurred.
(ii)

Subsequent Measurement
After initial recognition, financial assets are measured based on the classification as follows:(a)Financial Assets Measured at Amortized Cost
Financial assets measured at amortized cost are measured at amortized cost using the effective interest
method.

(b)

Other Financial Assets
Financial assets other than those measured at amortized cost are measured at fair value. Changes in thefair value of financial assets measured at fair value are recognized in profit or loss. However, changes in
the fair value of FVTOCI financial assets are recognized in other comprehensive income. Dividends
received on the financial assets are recognized in profit or loss for the year.
- 10 -

ENEX REPORT 2018 73

(iii)

Derecognition

F.

Financial assets are derecognized when the contractual rights to the cash flows from the asset expire, or
when the contractual right to receive cash flows from financial assets are transferred in transactions in which
substantially all the risks and rewards incidental to ownership of the asset are transferred to another entity.
When an FVTOCI financial asset is sold, the difference between the latest carrying amount and theconsideration received is recognized in other comprehensive income, and the balance of accumulated othercomprehensive income that has been recognized due to sales of the financial asset is transferred to retained
earnings.
B.

Derivatives, including forward foreign exchange contracts, commodity futures, and interest rate swaps, areutilized to hedge currency risk, commodity price risk, and interest rate risk. These derivatives are recognized asassets or liabilities at fair value on the contract date on which the Group becomes a party to the contractual
provisions, and also remeasured at the fair value subsequently. Changes in the fair value of derivatives areaccounted for as follows depending on the intended use of the derivatives and resulting hedge effectiveness:• Derivatives that are hedging instruments to changes in fair value of recognized assets or liabilities, or of an
unrecognized firm commitment, and are deemed highly effective as a hedge, and for which, at the inceptionof the hedge, written designation of the hedge relationship and the risk management objective and strategy
for undertaking the hedge are established are designated as fair value hedges. Changes in fair value of suchderivatives are recognized in profit or loss, together with changes in the fair value of hedged items.

Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand, deposits, and short-term investments that are readily
convertible into cash and that are exposed to insignificant risk of change in value and due within three months
from the date of acquisition.

C.

• Derivatives that are hedging instruments to changes in future cash flows generated in association with theforecasted transactions or recognized assets or liabilities and are deemed highly effective as a hedge andfor which, at the inception of the hedge, written designation of the hedge relationship and the risk
management objective and strategy for undertaking the hedge are established are designated as cash flow
hedges. Changes in fair value of such derivatives are recognized in other comprehensive income. Thisaccounting treatment is continued until changes in future cash flows generated in association with theunrecognized forecasted transactions or already recognized assets or liabilities that are designated ashedged items are realized. The ineffective portion of the hedge is recognized in profit or loss.

Impairment of Financial Assets Measured at Amortized Cost
At the end of each fiscal year, whether there is any indication that financial assets measured at amortized cost
are impaired is assessed by individual asset or by unit grouped according to credit risks. Indication that financial
assets measured at amortized cost are impaired includes a default or delinquency in interest or principal
payments, reduction in the repayment amount and rescheduling of the repayment, significant deterioration in
the financial position of the obligor, and bankruptcy of the obligor.

• Changes in fair value of derivatives other than the above are recognized in profit or loss.

If there is any indication that financial assets measured at amortized cost have been impaired, the difference
between the asset’s carrying amount and the recoverable amount, which is the present value of estimatedfuture cash flows discounted at the initial effective interest rate of the asset, is recognized as an impairment
loss in profit or loss.

In applying the above fair value hedges and cash flow hedges, the Group assesses whether the hedge is
expected to be highly effective at the inception of the hedge and after the application of the hedge.
Hedge accounting is ceased when the hedge is no longer effective, in which case changes in fair value of thederivative are recognized in profit or loss.

If, in a subsequent period, an event resulting in a decrease in the amount of the impairment loss occurs, thepreviously recognized impairment losses are reversed up to the carrying amount based on amortized cost.
D.

Financial Liabilities Other Than Derivatives
(i)

(5)

Initial Recognition and Measurement

Financial liabilities other than derivatives are classified as financial liabilities measured at amortized cost.
Financial liabilities measured at amortized cost are initially measured at fair value with the transaction costs
that are directly attributable to the issue of the financial liabilities deducted from the acquisition value.
Subsequent Measurement
After initial recognition, financial liabilities other than derivatives are measured at amortized cost using theeffective interest method. Amortization under the effective interest method and gains or losses onderecognition are recognized in profit or loss.
(iii)

Derecognition

Financial liabilities are derecognized when the financial liability is extinguished, i.e. when the obligation thatwas specified in the contract is discharged due to performance of the obligation through repayment or iscanceled or lapsed.
E.

Presentation of Financial Assets and Financial Liabilities
Financial assets and financial liabilities are presented on a net basis in the consolidated statement of financial
position when both of the following conditions are met; otherwise, financial assets and financial liabilities arepresented on a gross basis:• The Group has an unconditional and legally enforceable right to set off the recognized amounts.
• The Group intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

ENEX REPORT 2018 74- 11 -

Inventories
Inventories held for purposes other than trading are measured at the lower of cost or net realizable value, and thecosts are determined mainly using the specific identification method or the monthly moving-average method. For
inventories with sales contracts, net realizable value is the sale value under the sales contract, less the estimatedcosts necessary to make the sale. For inventories without sales contracts, net realizable value is the estimatedselling price, less the estimated costs necessary to make the sale.

The Group initially recognizes debt securities issued by the Group on the date of issuance. All other financial
liabilities are recognized on the transaction date on which the Group becomes a party to the contract of thefinancial instrument.

(ii)

Derivatives and Hedge Activities

Inventories held for trading purposes are measured at fair value, less costs to sell, with changes in the fair value
recognized in profit or loss for the period in which the change occurred.
(6)

Property, Plant and Equipment
Property, plant and equipment are measured using the cost model and are stated at cost, less accumulated
depreciation and accumulated impairment losses. The costs of an item of property, plant and equipment comprisethe following amounts, and depreciation begins when the asset is available for use.
• Purchase price• Any costs directly attributable to bringing the asset to the location and condition necessary for it to be capableof operating• Estimated costs of dismantling and removing the item and restoring the site on which it is located• Interest expense required up to the operation on borrowings for acquisition, construction, and manufacturing ofproperty, plant and equipment that meet the criteria for capitalization
If different material components are identifiable in an item of property, plant and equipment, each component isaccounted for as a separate item of property, plant and equipment.
Assets are depreciated using the straight-line method over their estimated useful lives. The estimated useful livesof major assets are as follows:- 12 -

ENEX REPORT 2018 75

• Buildings and structures:

2 to 50 years• Machinery and vehicles:

2 to 22 years• Vessels:

5 to 14 years

A.

Finance leases are capitalized at the lower of the fair value of the leased property at the inception of the leaseor the present value of the total minimum lease payments.
Total lease payments are classified into the principal portion and the interest portion of the lease obligations.
The amount of lease payments allocated to the interest portion is calculated by the interest method.

The estimated useful lives and depreciation method are reviewed at each fiscal year end, and if there are anychanges made to the estimated useful lives and depreciation method, such changes are applied prospectively aschanges in accounting estimates.
(7)

A lease asset is depreciated using the straight-line method over the estimated useful life of the asset if thelease involves the transfer of ownership or the lessee has a bargain purchase option; otherwise, it isdepreciated over the shorter of the lease term or the estimated useful life.

Goodwill and Intangible Assets
A.

Under operating leases, leased properties are not recognized as assets, and lease payments are recognized in
profit or loss on a straight-line basis over the lease term.

Goodwill
Goodwill arising from the acquisition of subsidiaries is recognized in assets at the amount of the ―aggregate offair values of consideration transferred, non-controlling interests, and shareholders’ interests previously held by
the acquirer in the acquiree‖ exceeding the ―net amount of identifiable acquired assets and assumed liabilities‖
on the acquisition date. Goodwill is not amortized, but initially recognized at cost in assets, and is tested for
impairment each fiscal year. Goodwill is carried at cost, less any accumulated impairment losses in the
consolidated statement of financial position.
Goodwill is allocated to cash-generating units (minimum units or groups of units) that are expected to contributeto obtaining cash flows considering the synergies of the business combination. Cash-generating units to which
goodwill was allocated are tested for impairment at the end of each fiscal year, or at any time when there is any
indication of impairment.
When a subsidiary is disposed of, the amount of related goodwill is included in profit or loss for the disposal.

B.

Intangible Assets
Intangible assets are measured using the cost model and are stated at cost, less accumulated amortization andaccumulated impairment losses. Intangible assets acquired separately are measured at cost at the initialrecognition, and the costs of intangible assets acquired through business combinations are recognized at fairvalue at the date of acquisition. All expenditures on internally generated intangible assets are recognized as an
expense in the fiscal year in which they are incurred, except for development expenses that satisfy thecapitalization criteria.
The period in which intangible assets, directly or indirectly, contribute to their estimated future cash flows is
considered as the useful life. If the useful life of an intangible asset is reasonably projected, the intangible asset
is amortized using the straight-line method over the estimated useful life. Intangible assets are tested for
impairment whenever there is any indication of impairment. The estimated useful lives and amortization methodof intangible assets are reviewed at each fiscal year end, and if there are any changes made to the estimateduseful lives and amortization method, such changes are applied prospectively as changes in accounting
estimates.
The estimated useful lives of major intangible assets are as follows:• Relationships with customers:

5 to 42 years• Brand and relationships with suppliers:

40 years• Software

5 years

Intangible assets with indefinite useful lives and intangible assets that are not yet ready to use are notamortized, but they are tested for impairment individually or by cash-generating unit annually or whenever there
is any indication of impairment.
(8)

LeasesLeases are classified as finance leases whenever substantially all the risks and rewards incidental to ownership
are transferred to the Group. Leases other than finance leases are classified as operating leases. Whether thecontract is a lease or whether the contract includes a lease is determined in consideration of economic conditionsof the transaction regardless of whether the form of the nominal contract is a lease contract.

ENEX REPORT 2018 76

Leases as Lessee- 13 -

B.

Leases as Lessor
Under finance leases, net investment in the lease is recognized as finance receivables. Total lease payments
receivable are classified into the principal portion and the interest portion of lease receivables. The amount oflease payments receivable allocated to the interest portion is calculated using the interest method.
Under operating leases, lease payments income is recognized in income on a straight-line basis over the lease
term.

(9)

Investment Property
Investment property is land and/or buildings, among others, held to earn rentals or for capital appreciation due toan increase in real estate prices or both.
Investment property is measured using the cost model, in the same manner as property, plant and equipment, andis stated at cost, less accumulated depreciation and accumulated impairment losses.
Except for assets that are not subject to depreciation, such as land, investment property is depreciated using thestraight-line method over its estimated useful life, which is between 2 and 50 years. The estimated useful lives anddepreciation method are reviewed at each fiscal year end, and if there are any changes made to the estimateduseful lives and depreciation method, among others, such changes are applied prospectively as changes inaccounting estimates.

(10) Impairment of Non-Financial Assets
Each fiscal year, the Group assesses whether there is any indication that a non-financial asset has been impaired.
If there is any indication that an asset has been impaired, the asset is tested for impairment. Goodwill andintangible assets with indefinite useful lives are tested for impairment at least annually, at the same time each year,
regardless of whether there is any indication of impairment. When a cash-generating unit, including goodwill, istested for impairment, an impairment test is performed first for assets other than goodwill, and then for goodwill
after necessary impairment losses are recognized for the assets other than goodwill.
An impairment test is performed by cash-generating unit. If cash flows from an asset are identifiable independentlyof other assets, the asset is considered its own cash-generating unit. If an asset from which cash flows are not
identifiable independently of other assets, a cash-generating unit is the smallest identifiable group of assets thatindependently generates cash flows.
Goodwill is allocated to cash-generating units (minimum units or groups of units) that are expected to contribute toobtaining cash flows considering the synergies of the business combination.
An impairment test is performed by estimating the recoverable amount of the asset by cash-generating unit andcomparing the estimated recoverable amount with the carrying amount of the cash-generating unit. The
recoverable amount is calculated at the higher of the fair value of the cash-generating unit, less costs to sell, or thevalue in use. If the carrying amount of the cash-generating unit exceeds the recoverable amount, an impairment
loss is recognized for the asset and the carrying amount is written down to the recoverable amount. In theassessment of value in use, estimated future cash flows are discounted to the present value using a pre-tax
discount rate reflecting the current market valuation on the time value of money, risks inherent in the asset, andother factors. To determine the fair value, less costs to sell, the Group uses an appropriate valuation model- 14 -

ENEX REPORT 2018 77

D.

supported by available indicators of fair value.

The undiscounted amount of short-term employee benefits expected to be paid in exchange for the service
rendered by employees during the fiscal period is recognized in profit or loss. For bonuses, the estimatedamount of payments is recognized as a liability when the Group has legal or constructive obligations to makesuch payments and reliable estimates of the obligations can be made.

Recognized impairment losses are allocated so that the carrying amount of each asset in the cash-generating unit
is reduced proportionally. Goodwill is first allocated so that the carrying amount of goodwill allocated to the cashgenerating unit is reduced and then the carrying amount of each asset other than goodwill in the cash-generating
unit is reduced proportionally.
Whether there is any indication that an impairment loss recognized in prior years may have decreased or may nolonger exist is assessed. If any such indication exists, the recoverable amount of the asset or cash-generating unit
is estimated. If the recoverable amount exceeds the carrying amount of the asset or cash-generating unit, an
impairment loss is reversed up to the lower of the calculated recoverable amount or the carrying amount thatwould have been determined (net of depreciation) if no impairment loss had been recognized for the asset in prioryears. However, an impairment loss recognized for goodwill is not reversed.
Goodwill on the acquisition of investments accounted for by the equity method is included in the part of thecarrying amount of the investments with other components, and investments in the companies accounted for by
the equity method may be impaired as a single asset.
(11) Non-Current Assets Held for Sale
When the carrying amount of a non-current asset (or disposal group) is expected to be recovered principally
through a sale transaction rather than through continuing use, the asset (or disposal group) is classified as an
asset held for sale. The criteria to be classified as an asset held for sale are only met if the sale of the asset ishighly probable and the asset is available for immediate sale in its present condition. Because the sale of the asset
will be completed within one year from the day of classification, the asset is presented in current assets.
Assets held for sale are measured at the lower of carrying amount or fair value, less costs to sell. Property, plantand equipment and intangible assets classified as assets held for sale are not depreciated or amortized.

(13) Provisions
A provision is recognized when there is a present legal or constructive obligation as a result of past events, when it
is probable that an outflow of resources embodying economic benefits will result from the settlement of theobligation, and when a reliable estimate of the obligation can be made. The amount recognized as a provision isthe best estimate of the expenditure required to settle the present obligation (future cash flows), taking into
account risks and uncertainty related to the obligation at the end of the fiscal year. When the time value of money
for the provisions is material, the amount of the provisions is measured at the present value calculated bydiscounting estimated future cash flows at a pre-tax discount rate, reflecting risks inherent in the liabilities.
Unwinding of the discount reflecting the passage of time is recognized as a financial cost.
Major provisions are provisions for asset retirement obligations, which are recognized and measured by estimating
asset retirement obligations individually and specifically taking into account the status of each property based on
expected usable years, etc., determined in light of past records of restoration and useful lives of inside fixtures in
offices and other places, in preparation for obligations for restoration of rental offices, buildings and stores andremoval of harmful materials related to non-current assets. An outflow of economic benefits in the future is
expected to be principally in a period after one year from the end of each fiscal year.
(14) Equity
A.

(12) Employee Benefits
A.

Defined Benefit Retirement Plans

Changes in the present value of defined benefit obligations for employees’ service in prior periods arising due toan amendment to the plan are recognized in profit or loss in the period in which the amendment was made.
The Group recognizes all actuarial gains and losses arising from the Group’s defined benefit retirement plans inother comprehensive income (―defined benefit remeasurement‖) and immediately reclassifies these gains andlosses to retained earnings.

B.

When treasury stock is sold, consideration received is recognized as an increase in equity.
(15) Revenue
A.

Multi-Employer Plans

ENEX REPORT 2018 78- 15 -

Sale of Goods
Revenue from the sale of goods is recognized when the significant risks and rewards incidental to ownership of
the goods have been transferred to a customer, the Group retains neither continuing managerial involvement to
the degree usually associated with ownership nor effective control over the goods sold, it is probable that theeconomic benefits associated with the transaction will flow to the Group, and the costs and revenue that
occurred in respect of the transaction can be measured reliably. Specifically, the Group recognizes revenue on
the date when the goods are shipped or delivered to the customer or when the customer performs aninspection of the delivered goods, depending on the timing when ownership and risks to be borne aretransferred from the Group to the customer.

Defined Contribution Retirement Plans

Some subsidiaries have participated in multi-employer plans. Multi-employer plans are classified into defined
benefit retirement plans and defined contribution retirement plans in accordance with terms of each plan andthe accounting treatment for each plan type is applied. However, for multi-employer plans classified as defined
benefit retirement plans, when information sufficient to account for the plans as defined benefit retirement plans
is not available, the accounting treatment for defined contribution retirement plans is applied to them.

Treasury Stock
When treasury stock is acquired, the treasury stock is recognized at cost and presented separately as an itemin equity. Transaction costs directly attributable to the acquisition are deducted from equity.

Contributions to be made for employees’ service corresponding to each fiscal period are recognized as
expenses for the fiscal year.
C.

Common Stock and Capital Surplus
Equity instruments issued by the Company are recorded in equity and capital surplus. Transaction costs directly
attributable to the issuance are deducted from capital surplus.

For defined benefit retirement plans, the net amount of the present value of defined benefit obligations and thefair value of plan assets is recognized as liabilities or assets. The present value of defined benefit obligations
and related service costs are calculated using the projected unit credit method, in principle. The discount rateused to calculate the present value of defined benefit obligations is determined by reference to market yield at
the end of the fiscal year on high-rating corporate bonds that are consistent with the estimated periods of theretirement benefit obligations, in principle.

B.

Short-Term Employee Benefits

B.

Rendering of Services
Services provided by the Group are principally requested repairs that occur in association with sales of
products, etc., and contracted maintenance services that are completed in the short term. For thesetransactions, revenue is recognized at the time of completion of the performance of obligation by persons
providing these services or when the customer accepts the completion of services rendered.

- 16 -

ENEX REPORT 2018 79

C.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period in which
the asset is realized or the liability is settled, based on a tax rate (and tax laws) that has been enacted or
substantively enacted by the end of the fiscal year.

Gross Presentation and Net Presentation of Revenue
For a transaction in which the Group has functions to increase the added value of goods or services
themselves and to provide them as a party to the transaction and bears significant risks associated with thetransaction, revenue is presented on a gross basis. On the other hand, revenue for the following transactions ispresented at a net amount calculated by deducting the cost from the total amount of transactions with thecustomer.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax assets against
current tax liabilities and the taxes are levied by the same taxation authority on the same taxable entity.

• Transactions in which the Group, as an agent, makes arrangements for other third parties to sell goods orprovide services(19) Earnings per Share
Basic earnings per share are calculated by dividing profit or loss attributable to Itochu Enex’s shareholders by theweighted-average number of ordinary shares outstanding during the period.

• Transactions in which the Group is involved as a party to the transaction but neither has functions toincrease the added value of goods or services nor bears significant risks associated with the transaction
4.

(16) Government Grants
Proceeds from government grants are recognized at fair value when there is reasonable assurance that theconditions attached to them will be complied with, and that the grant will be received. Grants for expenses incurred
are recorded as revenue in the fiscal year in which the expenses are incurred. For grants for acquisition of assets,
the amount is deducted from the cost of the assets.
(17) Financial Income and Costs
Financial income consists of interest income, dividends received, gains on changes in fair value and sale of
FVTPL financial assets, and gains on changes in fair value of derivatives. Interest income is recognized using theeffective interest method when it arises. Dividends received are recognized when the Group’s right to receive thepayment is established.
Financial costs consist of interest expense, losses on changes in fair value and sale of FVTPL financial assets,
impairment losses of financial assets measured at cost other than trade receivables, and losses on changes in fairvalue of derivatives. Interest expense is recognized using the effective interest method when incurred.

In the preparation of the consolidated financial statements, management uses estimates and judgments. Estimatesand judgments made by the management have an impact on the amounts of assets and liabilities as of the reporting
date and disclosure of contingent liabilities, and the amounts reported as revenue and expenses.
Major items in which the carrying amounts of assets, liabilities, revenue, and expenses are affected by judgments
made in application of the accounting policies are as follows.
• Indication of impairment for property, plant and equipment, goodwill, intangible assets, etc. (refer to Note 3,―Significant Accounting Policies (10) Impairment of Non-Financial Assets‖)• Recognition and presentation of revenue (refer to Note 3, ―Significant Accounting Policies (15) Revenue‖)
Assumptions used in accounting estimates may differ from actual figures because these assumptions are set basedon past experience and appropriately collected, available information. Estimates and assumptions are reviewed bymanagement on an ongoing basis. Effects of these reviews of estimates and assumptions are recognized in the
period in which the estimates and assumptions are reviewed and subsequent periods.
Information on uncertainty of assumptions and estimates that have a risk of resulting in significant adjustments in thenext fiscal year is as follows.

(18) Income Taxes
Income taxes, which comprise current taxes and deferred taxes, are recognized in profit or loss, except for taxes
arising from items that are recorded directly in equity or accumulated other comprehensive income and taxes
arising from the initial recognition of business combinations.
Current taxes are measured at the amount that is expected to be paid to, or refunded from, the taxation authorities.
In calculating the amount of taxes, the Group applies tax rates and tax laws that have been enacted or
substantively enacted by the end of the fiscal year in countries where the Group operates business activities andhas taxable profit or tax loss.
Deferred taxes are calculated based on the temporary differences between the tax basis of an asset or liability andits carrying amount at the fiscal year end. Deferred tax assets are recognized for deductible temporary differences,carryforward of unused tax credits, and unused tax losses to the extent that it is probable that future taxable profit
will be available against which they can be utilized. Deferred tax liabilities are, in principle, recognized for taxable
temporary differences.
The deferred tax assets or liabilities are not recognized for the following temporary differences:• Temporary differences from the initial recognition of goodwill• Temporary differences from the initial recognition of assets and liabilities arising from transactions (excluding
business combination transactions) that affect neither accounting profit nor taxable profit
Deferred tax liabilities for taxable temporary differences associated with investments in subsidiaries, associates,and joint ventures are not recognized if the Group is able to control the timing of the reversal of the temporary
differences and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax
assets for deductible temporary differences arising from investments in subsidiaries and associates are recognized
only to the extent it is probable that the temporary differences will reverse in the foreseeable future and taxable
profit will be available against which temporary differences can be used.
ENEX REPORT 2018 80

Use of Estimates and Judgments- 17 -• Impairment of Non-Financial Assets
Impairment tests of non-financial assets are performed based on many assumptions and estimates, such asassumptions for measurement of fair value, less costs to sell, in the calculation of the recoverable amount or
estimated future cash flows of cash-generating units as bases for calculation of value in use and discount rate. Thereis a risk that changes in uncertain future economic conditions may result in significant adjustments to the amount of
impairment losses.
The content and amount related to impairment of non-financial assets are discussed in Note 31, ―Impairment Loss‖.
• Estimates of Income Taxes
In calculation of income taxes, estimates and judgments are required for various factors, including interpretation oftax regulations and history of past tax examinations. Therefore, the carrying amount of income taxes may differ fromthe actual amount of tax payment.
Deferred tax assets are recognized to the extent it is probable that taxable profit will be available against which
deductible temporary differences can be used. As the timing when taxable profit is earned and the amount thereof
may be affected by changes in uncertain future economic conditions, there is a risk that the amount recognized insubsequent fiscal years may change significantly if the actual timing and amounts differ from the estimates.
The content and amount related to income taxes are discussed in Note 17, ―Deferred Taxes and Income Taxes‖.
• Measurement of Defined Benefit Obligations in Defined Benefit Retirement Plans
Defined benefit obligations are computed based on actuarial calculations, and assumptions used in those actuarial
calculations include estimates of discount rates, employee turnover, mortality rates, salary increase rates, etc. Theseassumptions are determined with all available information, such as market trends of interest rate fluctuations judged- 18 -

ENEX REPORT 2018 81

comprehensively. These assumptions may be affected by economic conditions and revisions of laws and regulations,and there is a risk that such effects may cause significant changes in the measurement of defined benefit obligations
in subsequent fiscal years.

(2)

The accounting method for the reportable segments is generally the same as the method described in Note 3,―Significant Accounting Policies‖.

Details on measurement of defined benefit obligations in defined benefit retirement plans and the amounts are
discussed in Note 23, ―Employee Benefits‖.

For the fiscal year ended March 31, 2017

• Measurement of Provisions
The Group records asset retirement obligations as a provision in the consolidated statement of financial position. The
amount recorded is the present value calculated by discounting the best estimate of expenditures required to settle
the obligations, which takes into account risks and uncertainty as of the end of the fiscal year, at a pre-tax discountrate, reflecting risks inherent in the liabilities.
Although the amount of expenditures required to settle the obligations is calculated comprehensively taking into
account future possible outcomes, this amount may be affected by unpredictable events or changes in situation. If theactual amount of payment differs from the estimate, or if there is any significant change in the discount rate fordiscounting the estimated expenditure due to changes in economic conditions and other factors, the amountrecognized in subsequent fiscal years may be affected significantly.
The amount of recognized asset retirement obligations is discussed in Note 22, ―Provisions‖.
5.

Segment Information(1)

Outline of Reportable Segments
The reportable segments of the Group are components of the Group for which separate financial information isavailable. These segments are periodically evaluated by the Board of Directors in deciding how to allocate
management resources and in assessing performance.
The Group is organized into four divisions (reportable segments). Each division plans strategies for each categoryof target customers and markets and develops business activities. The Group has four reportable segments that
correspond to the divisions, namely the ―Home-Life Division,‖ ―Power & Utility Division,‖ ―Life Energy & Logistics
Division,‖ and ―Industrial Energy & Logistics Division.‖
The Home-Life Division is engaged in the sale of LPG, town gas (Nakatsu City, Oita Prefecture), high-pressuregas, electricity, kerosene, equipment (kitchen equipment, air conditioning, other household equipment, etc.), smart
energy equipment (solar power generation systems and ENEFARM residential fuel cells), and ENE-POWABO L
residential lithium-ion electricity storage systems, remodeling, and a gas container pressure resistance inspection
business.
The Power & Utility Division is engaged in the sale of electricity (coal-fired thermal power, natural gas thermal
power, wind, hydropower, and photovoltaic power) and steam, the supply of district heating services,comprehensive energy services, electricity/heat supply services, and electricity supply/demand management
services.
The Life Energy & Logistics Division is engaged in the sale of gasoline, kerosene, diesel oil, fuel oil, liquefied
natural gas (―LNG‖), coal, high-grade urea solution (AdBlue), automotive lubricants, automobiles and automobile
products, motor-vehicle inspections, auto maintenance, the supply of rental cars, and the development andpromotion of overseas businesses.

Information on Reportable Segments(Millions of yen)

Reportable segments
Home-Life

Power &
Utility

Life Energy &Logistics

Industrial
Energy &Logistics

Total

86,48462,827479,568

66,181

344

715

1,768

491

86,82863,542

481,336

Gross profit

27,446

9,259

Selling, general and administrative expenses(23,385)

Loss from tangible assets, intangible assets andgoodwill

Adjustment

Consolidated

695,060–

695,060

3,318(3,318)–66,672

698,378(3,318)695,060

52,785

4,114

93,604–

93,604(3,424)(46,213)(1,782)(74,804)

107(74,697)

526

(253)

(1,238)

(16)

(981)

(1)

(982)

Other profit

244

1,058

431

12

1,745

8

1,753

Profit from operating activities

4,831

6,640

5,766

2,327

19,564114

19,678Financial income and costs

67

(307)

(506)

–

(746)

(88)

(834)

Share of profit of investments accounted for by
the equity method

441

0

16

43

500

–

500

Profit before tax

5,339

6,333

5,276

2,370

19,31826

19,344

Net profit attributable to Itochu Enex’s
shareholders

2,823

3,407

2,571

1,649

10,450(45)

10,405(3,475)(3,264)(3,207)(610)(10,556)(300)(10,856)

Revenue
Revenue from external customers
Intersegment revenue
Total revenue

Other items
Depreciation and amortization
Impairment loss

(40)

–

(952)

–

(992)

–

(992)

Total assets

65,03370,700149,422

29,429314,584

30,019344,603

Investments accounted for by the equity method

7,682

3,530

387

150

11,749–11,749

Capital expenditures

3,683

2,990

1,787

540

9,000

1,058

10,058

Total trading transactions

90,76865,654725,481

147,036

1,028,939–

1,028,939(Note)

Intersegment transactions have been decided by reference to the market price.
The adjustment of negative ¥45 million to net profit attributable to Itochu Enex’s shareholders represents corporate profit notallocated to reportable segments.
The adjustment of ¥30,019 million to total assets represents corporate assets not allocated to reportable segments.
Total trading transactions are unaudited items voluntarily disclosed by the Company and represent the amount of sales inaccordance with Japanese accounting practices.

The Industrial Energy & Logistics Division is engaged in the sale of industrial energy and materials (gasoline,
kerosene, diesel oil, and fuel oil), asphalt, marine fuel, and lubricating oil; the import/export and domestic
supply/demand adjustment trading of petroleum products; provisions of logistics functions, such as storage
facilities for petroleum; and the sale of recycled oil.
In the fiscal year ended March 31, 2018, the Car-Life Division and the sale of industrial fuels and materials andother operations in the Energy Innovation Division were integrated to form the Life Energy & Logistics Division,
while the Energy Innovation Division was reorganized into the Industrial Energy & Logistics Division. As a result,effective from the fiscal year ended March 31, 2018, the Company reclassified its reportable segments.
Due to the change in segments, segment information for the previous fiscal year has been adjusted based on the
new segment classifications used for the fiscal year ended March 31, 2018.

ENEX REPORT 2018 82- 19 -- 20 -

ENEX REPORT 2018 83

For the fiscal year ended March 31, 2018

(3)

Home-Life

This information is omitted because the classification of products and services is the same as the classification ofreportable segments.

(Millions of yen)

Reportable segments
Power &
Utility

Life Energy &Logistics

Industrial
Energy &Logistics

Total

74,541

488,399

88,235

744,767–

Adjustment

Consolidated(4)

Revenue
Revenue from external customers
Intersegment revenue

93,592
336

5,899

3,252

472

9,959

(9,959)–80,440491,651

88,707754,726(9,959)744,767

Gross profit

24,458

8,891

51,916

3,557

88,822–

88,822

Selling, general and administrative expenses(21,374)(4,328)(43,808)(1,850)(71,360)

429(70,931)

(75)

(288)

(680)

79

(964)

(580)

(1,544)

Loss from tangible assets, intangible assets andgoodwill
Other profit (loss)

269

351

583

18

1,221

(415)

806

Profit from operating activities

3,278

4,626

8,011

1,804

17,719(566)

17,153Financial income and costs

166

(316)

(518)

(25)

(693)

(110)

(803)

Share of profit (loss) of investments accounted
for by the equity method

540

(180)

92

41

493

–

493

Gains on business reorganization and others

2,326

–

–

–

2,326

–

2,326

Profit before tax

6,310

4,130

7,585

1,820

19,845(676)

19,169Net profit attributable to Itochu Enex’s
shareholders

3,958

2,210

4,070

1,253

11,491(466)

11,025

Geographic Information
This information is omitted because revenue from external customers in Japan accounts for a large percentage ofthe revenue recorded in the consolidated statement of comprehensive income for the fiscal years ended March 31,2017 and 2018.

744,767

93,928

Total revenue

Products and Services Information(5)

Major Customers Information
This information is omitted because there is no major external customer from which revenue accounts for 10% ormore of the revenue recorded in the consolidated statement of comprehensive income for the fiscal years ended
March 31, 2017 and 2018.

6.

Business Combinations
For the fiscal year ended March 31, 2017
There were no significant business combinations during the fiscal year ended March 31, 2017.
For the fiscal year ended March 31, 2018
There were no significant business combinations during the fiscal year ended March 31, 2018.

Other items
Depreciation and amortization(3,246)(3,468)(3,006)(595)(10,315)(509)(10,824)

Impairment loss

(132)

(13)

(710)

–

(855)

(574)

(1,429)Total assets

66,08980,189165,406

44,352356,036

26,585

382,621

Investments accounted for by the equity method

17,699

7,936

351

159

26,145–

26,145

Capital expenditures

4,182

6,014

2,290

1,252

13,738694

14,432

104,941

78,560799,001

173,842

1,156,344–

1,156,344

Total trading transactions(Note)

Intersegment transactions have been decided by reference to the market price.
The adjustment of negative ¥466 million to net profit attributable to Itochu Enex’s shareholders represents corporate profit notallocated to reportable segments.
The adjustment of ¥26,585 million to total assets represents corporate assets not allocated to reportable segments.
Total trading transactions are unaudited items voluntarily disclosed by the Company and represent the amount of sales inaccordance with Japanese accounting practices.

7.

Loss of Control of SubsidiariesFor the fiscal year ended March 31, 2017
There was no significant loss of control during the fiscal year ended March 31, 2017.
For the fiscal year ended March 31, 2018
(Reorganization and Integration of the Liquefied Petroleum Gas (LPG) Wholesale and Retail Business)
On October 1, 2017, the Company and OSAKA GAS established a joint-venture company with each company owning
a 50% stake. The joint venture was formed through respective exchanges of shares whereby the former OSAKA GAS
subsidiary NISSHO PETROLEUM GAS CORPORATION (―Nissho LP‖), which was designated as the wholly owningparent company for the share exchanges, exchanged its shares for the shares of each of the three former
subsidiaries of the Company – ITOCHU ENEX HOME-LIFE KANTO CO., LTD. (―HOME-LIFE KANTO‖), ITOCHUENEX HOME-LIFE CHUBU CO., LTD. (―HOME-LIFE CHUBU‖) and ITOCHU ENEX HOME-LIFE KANSAI CO., LTD.
(―HOME-LIFE KANSAI‖), and one former subsidiary of OSAKA GAS – Osaka Gas LPG Co., Ltd., which were
designated as the wholly owned subsidiary companies for the share exchanges. The merged company, Nissho LP,
was renamed ―ENEARC‖ on the same day.
In addition, as part of the reorganization and integration, effective the same day, the Company acquired all NisshoLP-owned shares in Nissho Propane Sekiyu Co., Ltd., Ehime Nissho Propane Co., Ltd., and Kochi Nissho Propane
Corporation, making them subsidiaries of the Company.
The Company has determined that ENEARC meets the conditions for a joint venture. As such, the company istreated as an equity-method affiliate for accounting purposes.
As a result of the share exchange used to establish ENEARC, the Company has lost management control of HOMELIFE KANTO, HOME-LIFE CHUBU and HOME-LIFE KANSAI. This has resulted in a gain of ¥2,326 million (including
a gain of ¥1,163 million from a fair value remeasurement of the Company’s remaining stakes in the three companies
as of the date management control was lost), which has been recognized as ―gains on business reorganization andothers.‖ENEX REPORT 2018 84- 21 -- 22 ENEX REPORT 2018 85

Other income and expenses associated with the business reorganization and integration are shown below.

As of March 31, 2017

(Millions of yen)Classification

Non-current financial assets other than investments
Non-current loans receivable
Non-current lease receivables
Guarantee deposits
Other
Allowance for credit losses

Fiscal year ended March 31, 2018(302)

Selling, general and administrative expenses
Share of loss of investments accounted for by the equity method

(848)
2,326

Gains on business reorganization and others
Income tax expense

(75)
1,101

Total

8.

The components of non-current financial assets other than investments are shown below:

Total

Cash and Cash Equivalents

11.

Cash and cash equivalents as of March 31, 2017 and 2018 were composed of cash and deposits.
9.

10,803

11,400Inventories

Merchandise and finished goods
Raw materials

The components of trade receivables are shown below:

Trade receivables
Trade receivables
Trade notes receivable
Allowance for credit losses
Total(Millions of yen)
As of March 31, 2018

89,9295,312(482)

113,043
7,022
(524)

94,759119,541

The components of other current financial assets are shown below:
As of March 31, 2017
Other current financial assets
Short-term loans receivable
Other accounts receivable
Derivative assets
Deposits paid
Other
Total

Total

(Millions of yen)
As of March 31, 2018

1,283
14,90380
13,000443

1,108
14,531
1,570
20,0001,651

29,70938,860The components of other investments are shown below:- 23 -

28,30575

27,15528,380For the fiscal year ended March 31, 2018, the amount of inventories expensed as cost of sales was ¥638,227 million,
compared with ¥580,591 million for the fiscal year ended March 31, 2017.
For the fiscal year ended March 31, 2018, the amount of inventories written down to net realizable value was ¥11
million, compared with ¥22 million for the fiscal year ended March 31, 2017. These amounts written down are
included in cost of sales in the consolidated statement of comprehensive income.

12.

Investments Accounted for by the Equity Method
In the Group, all investments in associates and joint ventures are accounted for by the equity method. There is no
investment in associates and joint ventures for which stock quotations have been published.

(1)

Investments in Associates and Joint Ventures
Total carrying amounts of investments in associates and joint ventures in the consolidated statement of financial
position as of March 31, 2017 and 2018 are shown below:(Millions of yen)
As of March 31, 2018

Associates
Joint ventures
Total

Total

27,07877

As of March 31, 2017
As of March 31, 2017

Other investments
FVTPL financial assets
FVTOCI financial assets(Millions of yen)
As of March 31, 2018

The carrying amount of inventories recorded at fair value, less cost to sell, on a recurring basis as of March 31, 2017and 2018 was ¥1,955 million and ¥2,344 million, respectively. The fair value is measured based on the amountobtained from a pricing service agency that was principally evaluated by the market approach and classified as Level
2.

Securities and Other Financial Assets

ENEX REPORT 2018 86

345
2,471
6,913
2,216
(545)

The components of inventories are shown below:

Trade Receivables

10.

425
2,545
6,342
1,984
(493)

As of March 31, 2017

As of March 31, 2017

(Millions of yen)
As of March 31, 2018

269
7,192

289
3,117

7,461

3,406

- 24 -(Millions of yen)
As of March 31, 2018

8,518

8,072

3,231

18,073

11,74926,145ENEX REPORT 2018 87

(2)Breakdown of Comprehensive Income from Associates and Joint Ventures
For investments in associates and joint ventures, the amounts of corresponding share of comprehensive income
recorded in the fiscal years ended March 31, 2017 and 2018 are shown below:
A.

Profit or Loss

(Millions of yen)
Fiscal year ended
March 31, 2018

Fiscal year ended
March 31, 2017

reorganization and integration of the liquefied petroleum gas (LPG) wholesale and retail business, please refer toNote 7, ―Loss of Control of Subsidiaries‖.
JAPAN GAS ENERGY CORPORATION(Millions of yen)
As of March 31, 2018

As of March 31, 2017
Current assets

38,857

37,955

Non-current assets

4,166

3,942

Associates

542

350

Current liabilities

29,814

27,179

Joint ventures

(42)

143

Non-current liabilities

122

124

500

493

Equity13,087

14,594Total

B.

Other Comprehensive Income(Millions of yen)
Fiscal year ended
March 31, 2018

Fiscal year ended
March 31, 2017
Associates
Joint ventures
Total

C.

78

(467)

Other comprehensive income

166

(13)

(528)

Comprehensive income

1,312

1,761

–

51

(Millions of yen)
Fiscal year ended
March 31, 2018

688

289

Joint ventures

36

(324)

724

(35)

Major Associates and Joint Ventures
Details of major associates and joint ventures are as follows:
As of March 31, 2017

AssociateJAPAN GAS ENERGY CORPORATION

Sale of LPG products

Location

Percentage ofequity held(%)

Minato-ku, Tokyo

20.0

As of March 31, 2018
Name

Major business

ENEARC Co., Ltd.
(Millions of yen)
As of March 31, 2018
Current assets

15,324Non-current assets

24,365Current liabilities

16,010Non-current liabilities

6,597

Equity17,082

Cash and cash equivalents included in the above current assets are ¥3,951 million. Financial liabilities (excluding
trade and other payables, and provisions) included in current liabilities are ¥6,750 million, and financial liabilities(excluding trade and other payables, and provisions) included in non-current liabilities are ¥4,662 million.
(Millions of yen)
Fiscal year ended
March 31, 2018
Revenue

32,693

Depreciation and amortization(1,295)

Financial income

8

Location

Percentage ofequity held(%)

Financial costs(15)

Income tax expense

AssociateJAPAN GAS ENERGY CORPORATION

Sale of LPG products

Minato-ku, Tokyo

20.0

Net profit (loss)

Joint venture

ENEARC Co., Ltd.

Sale of LPG products

Minato-ku, Tokyo

50.0

Other comprehensive income

1
1,217
(22)

Comprehensive income

(4)

1,774

224

Associates

Major business

157,400

1,146

Net profit (loss)

Dividends received by the GroupName

123,465(61)

Fiscal year ended
March 31, 2017

(3)

Revenue146

Total Comprehensive Income

Total(Millions of yen)
Fiscal year ended
March 31, 2018

Fiscal year ended
March 31, 2017

Summarized Financial Information of Major Associates and Joint Ventures

1,195

Dividends received by the Group–

Summarized financial information of major associates and joint ventures accounted for by the equity method isshown below.
In summarized financial information on the statement of income and the statement of comprehensive income of
ENEARC Co., Ltd. for the fiscal year ended March 31, 2018, amounts arising during the period since the said
company became a joint venture due to the reorganization and integration of the liquefied petroleum gas (LPG)
wholesale and retail business (from October 1, 2017 to March 31, 2018) are presented. For details on the
ENEX REPORT 2018 88- 25 -- 26 -

ENEX REPORT 2018 89

(5)Reconciliation Between Carrying Amounts and Summarized Financial Information of Major Associates and Joint
Ventures
JAPAN GAS ENERGY CORPORATIONAs of March 31, 2017

(Millions of yen)
As of March 31, 2018

Net assets

13,087

14,594The Group’s share of net assets

2,617

2,919

–

–

2,617

2,919

Goodwill and consolidation adjustments
Carrying amounts of the Group’s equity interest in JAPAN GAS ENERGYCORPORATIONENEARC Co., Ltd.
(Millions of yen)
As of March 31, 2018
Net assets

17,082The Group’s share of net assets

8,541

Goodwill and consolidation adjustments

2,220

Carrying amounts of the Group’s equity interest in ENEARC Co., Ltd.

10,76113.

Property, Plant and Equipment

Changes in acquisition cost, accumulated depreciation, and accumulated impairment loss of property, plant andequipment are shown below:[Acquisition Cost](Millions of yen)

Buildings andstructures

Machinery,equipment
and vehicles

Vessels

18,78839,30967,3301,335

10,882

1,251

138,895

Acquisition

38

891

1,292

–

1,219

7,662

11,102

Reclassification

284

736

1,667

–

410

(3,946)

(849)

–

–

–

–

–

–

–

(1,394)(2,263)(7,299)

–

(513)

(2)

(11,471)

(9)

1,390

1,627

–

693

(592)

3,109

Land
As of April 1, 2016

Acquisition throughbusiness combinations
Disposal
Other
As of March 31, 2017

Constructionin progress

Other

17,70740,06364,617

1,335

12,691

4,373

140,786

Acquisition

–

1,408

1,311

143

1,227

6,775

10,864

Reclassification

22

1,771

3,844

415

317

(6,525)(156)

Acquisition throughbusiness combinations

1,889

558

488

–

23

79

3,037

Decrease due to disposal
and change in the scopeof consolidation(3,548)(3,535)(9,284)–(3,886)(54)(20,307)

8

26

1,608

–

1,044

(358)

2,328

16,07840,29162,584

1,893

11,416

4,290

136,552

Other
As of March 31, 2018

[Accumulated Depreciation and Accumulated Impairment Loss]
Buildings andstructures(183)(13,731)(30,310)(373)(5,987)–(50,584)

Depreciation–(1,825)(4,942)(122)(1,535)–(8,424)

Impairment loss

(66)

(404)

(96)

–

(19)

–

(585)

Reclassification

–

766

90

–

–

–

856

Disposal

58

1,422

5,547

–

450

–

7,477

As of April 1, 2016

Other

Vessels

Constructionin progress

Other

Total

0

(908)

(822)

–

(208)

–

(1,938)(191)(14,680)(30,533)(495)(7,299)–(53,198)

Depreciation–(1,777)(5,067)(152)(1,652)–(8,648)

Impairment loss

(52)

(529)

(143)

–

(272)

–

(996)

Reclassification

–

129

–

–

–

–

129

104

2,173

8,075

–

2,182

–

12,534

–

(401)

(424)

(3)

(219)

–

(1,047)(139)(15,085)(28,092)(650)(7,260)–(51,226)

As of March 31, 2017

Decrease due to disposal
and change in the scopeof consolidation
Other
As of March 31, 2018

- 27 -(Millions of yen)

Machinery,equipment
and vehicles

Land

ENEX REPORT 2018 90

Total- 28 -

ENEX REPORT 2018 91

[Carrying Amount]
Land(Millions of yen)

Buildings andstructures

Machinery,equipment
and vehicles

Vessels

Constructionin progress

Other

17,51625,38334,084

840

5,392

4,373

87,588

As of March 31, 201815,93925,20634,492

1,243

4,156

4,290

85,326

Carrying amounts of finance lease assets (net of accumulated depreciation and accumulated impairment loss)
included in property, plant and equipment are shown below:(Millions of yen)

Buildings andstructures

Machinery,equipment andvehiclesAs of March 31, 2017

7,216

1,879

100

1,203

10,398

As of March 31, 2018

6,737

1,740

86

1,463

10,026

Other

Balance at the beginning of the year

(13,583)

Depreciation

(323)

(245)

Impairment loss

(346)

(397)

Reclassification

(766)

(129)

Decrease due to disposal and change in the scope of consolidation

2,170

2,514

Other

(166)

–

(13,583)(11,840)

The rental income from investment property for the fiscal years ended March 31, 2017 and 2018 was ¥3,473 millionand ¥3,061 million, respectively, which was included in revenue in the consolidated statement of comprehensive
income. The direct operating expenses incurred incidental to rental income were ¥1,521 million and ¥1,460 million,
respectively, which were included in cost of sales in the consolidated statement of comprehensive income.
[Carrying Amount and Fair Value]

Expenditures related to property, plant and equipment under construction are presented as construction in progressin the above table.
The balance of property, plant and equipment includes property, plant and equipment of which disposal throughtransfer, sale, etc. is restricted in association with bank loans of ¥12,809 million and ¥12,535 million as of March 31,2017 and 2018, respectively.
There were no borrowing costs capitalized in the fiscal years ended March 31, 2017 and 2018.

(Millions of yen)
Fiscal year ended
March 31, 2018

(14,152)

Balance at the end of the year

Total

The depreciation expense of property, plant and equipment is included in cost of sales and selling, general andadministrative expenses in the consolidated statement of comprehensive income.

Carrying amount(Millions of yen)
Fair value

As of March 31, 2017

11,986

11,730

As of March 31, 2018

10,166

10,129The Group has rental facilities for selling petroleum products, such as gas stations, and rental storage facilities for
petroleum products throughout Japan.
Fair value of the above investment property is classified into Level 3. The fair value is calculated based on theamount measured using the sales comparison method and the discounted cash flow method, taking into account themarket conditions adjustment, area-specific value, and other factors computed by the Group.

For the commitments for acquisition of property, plant and equipment, please refer to Note 39, ―Commitments‖.
14.

Fiscal year ended
March 31, 2017

Total

As of March 31, 2017

Vessels[Accumulated Depreciation and Accumulated Impairment Loss]

Investment Property

Changes in acquisition cost, accumulated depreciation, and accumulated impairment loss of investment property are
shown below:[Acquisition Cost]
Fiscal year ended
March 31, 2017
Balance at the beginning of the year

(Millions of yen)
Fiscal year ended
March 31, 201827,41425,569Acquisition

135

40

Expenditure after acquisition

142

351

Reclassification

94

156

(2,390)(4,268)174

158

25,56922,006

Decrease due to disposal and change in the scope of consolidation
Other
Balance at the end of the year

- 29 ENEX REPORT 2018 92- 30 -

ENEX REPORT 2018 93

15.

Goodwill and Intangible Assets

included in intangible assets are shown below:

Changes in acquisition cost, accumulated amortization, and accumulated impairment loss of goodwill and intangible
assets are shown below:[Acquisition Cost](Millions of yen)

Relationships withcustomers

Brand andrelationships with
suppliers

749

14,014

11,0693,977

29,809Acquisition

–

510

–

1,245

1,755

Acquisition through businesscombinations

–

–

–

156

156

Disposal(187)(2,023)–(1,786)(3,996)

Other

–

313

–

227

540

562

12,814

11,0693,819

28,264

–

1,568

–

869

2,437

Acquisition through businesscombinations

171

288

–

12

471

Decrease due to disposal
and change in the scope of
consolidation–(4,062)–(620)(4,682)

Other

(41)

69

–

(42)

(14)

As of March 31, 2018

692

10,677

11,0694,038

26,476

Goodwill
As of April 1, 2016

As of March 31, 2017
Acquisition

Other

Total

[Accumulated Amortization and Accumulated Impairment Loss]
Relationships withcustomers(161)(1,742)(508)(2,481)(4,892)–(1,331)

(277)

(501)

(2,109)Goodwill
As of April 1, 2016

(Millions of yen)

Brand andrelationships with
suppliers

Amortization
Impairment loss

Other

Total

–

–

–

(6)

(6)

Disposal

132

1,139

–

1,764

3,035

Other

–

(26)

–

(95)

(121)

(29)

(1,960)(785)(1,319)(4,093)

Amortization–(1,068)

(276)

(586)

(1,930)

Impairment loss

–

–

–

(3)

(3)

Decrease due to disposal
and change in the scope of
consolidation

–

448

–

547

995

Other

29

4

–

12

45

As of March 31, 2018–

(2,576)(1,061)(1,349)(4,986)

As of March 31, 2017

[Carrying Amount]
Goodwill

Relationships withcustomers

Brand andrelationships with
suppliers(Millions of yen)
Other

Total

As of March 31, 2017

533

10,854

10,2842,500

24,171

As of March 31, 2018

692

8,101

10,0082,689

21,490Carrying amounts of finance lease assets (net of accumulated amortization and accumulated impairment loss)
ENEX REPORT 2018 94- 31 -

Software(Millions of yen)

As of March 31, 20172

As of March 31, 20182

The amortization expense of intangible assets is included in cost of sales and selling, general and administrative
expenses in the consolidated statement of comprehensive income.
Of the above intangible assets, significant assets are relationships with customers recognized in the businesscombination with TOKYO TOSHI SERVICE COMPANY (as of March 31, 2017: ¥3,343 million, and March 31, 2018:¥3,222 million) and brand and relationships with suppliers recognized in the business combination with Osaka Car
Life Group Co., Ltd. (as of March 31, 2017: ¥10,284 million, and March 31, 2018: ¥10,008 million). The remaining
amortization periods of these intangible assets as of March 31, 2017 and 2018, are 22 to 37 years and 21 to 36 years,
respectively, for relationships with customers, and 37 years and 36 years, respectively, for brand and relationships
with suppliers.
There were no intangible assets pledged as collateral as of March 31, 2017 and 2018.
Impairment Test for Goodwill
In performing an impairment test for goodwill, the Group allocates goodwill to the petroleum product sales businessand the LP gas sales business and calculates the recoverable amount of the petroleum product sales business andthe LP gas sales business, which are cash-generating units, based on value in use.
The Group calculates value in use by discounting estimated future cash flows based on the latest business plan
approved by the Board of Directors to the present value.
The Group uses a pre-tax discount rate reflecting the current market valuation of the time value of money, risks
inherent in the asset, and other factors as the discount rate (as of March 31, 2017: 4.0%, and March 31, 2018: 3.6%).
The Group considers that significant impairment is unlikely to arise in the cash-generating unit even if the discountrate used in the above impairment test changes within a reasonably predicable range.
16.

Leases(1)

LesseeA.

Finance Leases
The total future minimum lease payments under finance leases and the present value thereof as of March 31,2017 and 2018 are shown below:
Total future minimum lease payments
As ofMarch 31, 2017

As ofMarch 31, 2018

(Millions of yen)
Present value of
total future minimum lease payments
As ofMarch 31, 2017

As ofMarch 31, 2018

Not later than 1 year

2,020

1,887

1,829

1,706

Later than 1 year and not later
than 5 years

4,949

5,332

4,348

4,760

Later than 5 years

4,993

4,503

4,519

4,099

Total

11,962

11,722

10,696

10,565

Less: Accrued financial costs(1,266)(1,157)

Present value of total future
minimum lease payments

10,696

10,565The total of future minimum sublease payments expected to be received under noncancelable subleases as ofMarch 31, 2017 and 2018 were ¥452 million and ¥676 million, respectively.
Lease agreements do not have any contingent rent payable, renewal or purchase options, escalation clauses,- 32 -

ENEX REPORT 2018 95

and restrictions imposed by the lease agreements (such as those concerning dividends, additional debt, andfurther leasing).
B.

17.
(1)

Operating Leases

Deferred Taxes and Income Taxes
Deferred Taxes
The details of changes in deferred tax assets and liabilities are shown below:

The total future minimum lease payments under noncancelable operating leases as of March 31, 2017 and2018 are shown below:
As ofMarch 31, 2017
Not later than 1 year

1,989

1,807

Later than 1 year and not later than 5 years

2,212

3,720

Later than 5 years

1,436

1,874

5,637

7,401

Total

As of
April 1, 2016

(Millions of yen)
As ofMarch 31, 2018

As of March 31, 2017 and 2018, lease payments recognized as expenses under cancelable or noncancelable
operating leases were ¥13,237 million and ¥12,453 million, respectively.
Lease agreements do not have any contingent rent payable, renewal or purchase options, escalation clauses,
and restrictions imposed by the lease agreements (such as those concerning dividends, additional debt, andfurther leasing).
(2)

Amount recognizedin otherAmount recognizedcomprehensive
in profit or loss
income(Millions of yen)
Other
(Note)

As ofMarch 31, 2017

Deferred tax assets:
Non-current assets
Securities
Post-employment benefits
Tax loss carryforwards
Other

8,829
135
3,189
138
5,107

(909)
37
(77)
149
416

–
(33)
(106)
–
(84)

–
–
–
–
–

7,920
139
3,006
287
5,439

Total deferred tax assets

17,398

(384)

(223)

–

16,791

Deferred tax liabilities:
Non-current assets
Other(7,207)
(672)

533
59

–
–

(48)
(58)

(6,722)(671)

Total deferred tax liabilities(7,879)

592

–

(106)

(7,393)(Note)

The ―Other‖ column represents the amount of deferred tax assets and deferred tax liabilities recognized due to acquisition ofsubsidiaries through business combinations and other amounts.

LessorFinance Leases
The total future minimum lease payments receivable under finance leases and the present value thereof as ofMarch 31, 2017 and 2018 are shown below:(Millions of yen)
Present value of
total future minimum lease payments

Total future minimum lease payments
As ofMarch 31, 2017

As ofMarch 31, 2018

As ofMarch 31, 2017

As ofMarch 31, 2018

Not later than 1 year

362

486

355

472

Later than 1 year and not later
than 5 years

1,240

1,368

1,226

1,333

Later than 5 years

1,319

1,139

1,319

1,139

Total

2,921

2,993

2,900

2,944

Less: Unearned financial income

(21)

(49)

2,900

2,944

Present value of total future
minimum lease payments
receivable

As ofMarch 31, 2017

Amount recognizedin otherAmount recognizedcomprehensive
in profit or loss
income(Millions of yen)
Other
(Note)

As ofMarch 31, 2018

Deferred tax assets:
Non-current assets
Securities
Post-employment benefits
Tax loss carryforwards
Other

7,920
139
3,006
287
5,439

(168)
291
(137)
(8)
(811)

–
(390)
(55)
–
(30)

329
–
217
–
98

8,081
40
3,031
279
4,696

Total deferred tax assets

16,791

(833)

(475)

644

16,127

Deferred tax liabilities:
Non-current assets
Other(6,722)
(671)

(337)
(80)

–
–

–
–

(7,059)(751)

Total deferred tax liabilities(7,393)

(417)

–

–

(7,810)(Note)

The ―Other‖ column represents the amount of deferred tax assets and deferred tax liabilities recognized due to acquisition ofsubsidiaries through business combinations and other amounts.

Deferred tax assets and liabilities in the consolidated statement of financial position are shown below:
As of March 31, 2017
Deferred tax assets
Deferred tax liabilities

11,359
1,961(Millions of yen)
As of March 31, 2018
10,5022,185

In recognizing deferred tax assets, the Group assesses recoverability, taking into account expected future taxable
profits and tax planning. As a result of the assessment of recoverability, deferred tax assets have not beenrecognized for some deductible temporary differences and unused tax loss carryforwards.

ENEX REPORT 2018 96- 33 -- 34 -

ENEX REPORT 2018 97

Deductible temporary differences for which no deferred tax asset is recognized and unused tax loss carryforwards
are shown below:
As of March 31, 2017
Deductible temporary differences
Unused tax loss carryforwards
Total(Millions of yen)
As of March 31, 2018

2,388
1,094

2,216
2,499

3,482

4,715

The amounts of unused tax loss carryforwards for which deferred tax assets are not recognized by expiration are
shown below:
As of March 31, 2017
First year
Second year
Third year
Fourth year
Fifth year or later
Total

(2)

(Millions of yen)
As of March 31, 2018

–
–
–
0
1,094

–
–
–
49
2,450

1,094

2,499

18.

The components of bonds and borrowings are shown below:

Current tax expense
Deferred tax expense
Recognition and reversal of temporary differences(6,601)(5,080)2(865)

Total deferred tax expense
Income tax expense

2

(865)

(6,599)(5,945)The Company is subject principally to corporate income taxes, inhabitant taxes, and business taxes. The effective
statutory tax rates based on these taxes were 30.9% for the fiscal year ended March 31, 2017, and 30.9% for the
fiscal year ended March 31, 2018. However, foreign subsidiaries are subject to income taxes and other taxes intheir respective locations.
The reconciliation between the effective statutory tax rate and the effective tax rate for income tax expenses
recognized in the consolidated statement of comprehensive income is shown below:
Fiscal year ended
March 31, 2017

Short-term borrowings
Current portion of non-current borrowings

1,667
7,651

10,317
2,115

0.179
1.187

Non-current borrowings (excluding current portion)

16,741

15,302

1.513

Bonds payable (excluding current portion)(Note 2)

14,961

14,971(Note 2)

(Note 2)

41,02042,705––

9,318
31,702

12,43230,27341,02042,705

Total
Current liabilities
Non-current liabilities
Total

Effective statutory tax rate

30.9%

30.9%

Effect of expenses not deductible permanently
Other

1.4
1.8

1.3
(1.2)

Effective income tax rate after application of tax-effect accounting

34.1

31.0

- 35 -––March 2020–
October 2037

1. The average interest rate is based on each agreed-upon interest rate or weighted-average interest rate for the closing balance.
2. Summary of issuing conditions of bonds is shown below:(Millions of yen)
As of
As of
Interest rate
March 31,
March 31,
EntityBond
Date of issue
Collateral
Maturity date
(%)
2017
2018

ITOCHU Enex
Co., Ltd.

Series 13
Unsecured Bonds

May 22, 2012

4,992

4,996

0.736

Unsecured

May 22, 2019

ITOCHU Enex
Co., Ltd.

Series 14
Unsecured Bonds

May 22, 2012

9,969

9,975

1.202

Unsecured

May 20, 2022––

14,961

14,971

–

–

–

Total

19.

Trade Payables

The components of trade payables are shown below:
As of March 31, 2017
Trade payables
Notes payable
Other payables

20.

(Millions of yen)
As of March 31, 2018

96,65566
5,181

120,531
113
6,801

101,902

127,445

Other Financial Liabilities

The components of other current financial liabilities are shown below:
As of March 31, 2017
Lease obligations
Other payables (Non-operating)
Deposits received
Derivative liabilities
Other
Total

ENEX REPORT 2018 98

Repayment date

(Notes)

Total

Fiscal year ended
March 31, 2018

(Millions of yen)

As ofMarch 31, 2018

Current tax expense and the components of deferred tax expense are shown below:(Millions of yen)
Fiscal year ended
March 31, 2018

Average interest
rate(%)(Note 1)As ofMarch 31, 2017

Income Tax Expense

Fiscal year ended
March 31, 2017

Bonds and Borrowings- 36 -(Millions of yen)
As of March 31, 2018

1,829
4,140
2,669
81
–

1,706
2,178
2,371
1,447
837

8,719

8,539

ENEX REPORT 2018 99

23.

The components of other non-current financial liabilities are shown below:
As of March 31, 2017
Long-term lease obligations
Guarantee deposits received
Derivative liabilities
Total

21.

(Millions of yen)
As of March 31, 2018

8,867
14,858776

8,859
13,805671

24,501

23,335

Employee Benefits(1)

Post-Employment BenefitsA.

The Company and some subsidiaries have defined benefit retirement plans, lump-sum retirement benefits, anddefined contribution retirement pension plans, which cover almost all of their employees. The amount ofpension benefits provided under defined benefit retirement plans is set based on service years of eligible
employees. Extra retirement payments may be made upon an employee’s normal retirement or termination
before the prescribed retirement date.

Other Current Liabilities

Under defined contribution retirement plans, the responsibility of the Company and some subsidiaries is limited
to making contributions at the amount specified in the rules on retirement allowance that has been establishedfor each company.

The components of other current liabilities are shown below:
As of March 31, 2017
Short-term obligations on employee benefits
Current provisions (Note)
Accrued expenses
Other
Total
(Note)

22.

(Millions of yen)
As of March 31, 2018

7,827
37
2,343
1,887

7,378
42
3,000
1,860

12,094

12,280

Nissan Osaka Sales Co., Ltd., a subsidiary, has participated in ―Zenkoku Nissan Jidosha Hambai Kigyo
Pension Fund,‖ which is a multi-employer plan. This plan differs from a single employer plan in the following
respects:- Assets contributed by the employer to the multi-employer plan may be used for benefits to employees of theother member employers. The amount of contributions is calculated by multiplying standard pay of plan
members by a fixed rate.

For details of current provisions, please refer to Note 22, ―Provisions‖.

- If some employers suspend contributions, other member employers may be required to make additional
contributions for unfunded liabilities.
- If the multi-employer plan is wound up or a member employer withdraws from the multi-employer plan, themember employer may be required to make contributions for unfunded liabilities as special contributions inwinding up or withdrawal contributions.

Provisions

The components of changes in provisions are shown below:
Provision for asset
retirement obligations(Millions of yen)
Other

B.

Total

As of April 1, 2016
Increase during the year
Amount used during the year (utilization)
Increase due to passage of time
Other

5,452
151
(348)
63
(235)

5
6
(5)
–
–

5,457
157
(353)
63
(235)

As of March 31, 2017
Increase during the year
Amount used during the year (utilization)
Increase due to passage of time
Other

5,083
212
(298)
95
(337)

6
2
(6)
–
42

5,089
214
(304)
95
(295)

As of March 31, 2018

4,755

44

4,799

The components of provisions by current and non-current classification are shown below:
As of March 31, 2017
Current liabilities (Note)
Non-current liabilities
Total(Note)

Outline of Post-Employment Benefit Plans Adopted(Millions of yen)
As of March 31, 2018

37
5,052

42
4,757

5,089

4,799

Defined Benefit Retirement Plans
Changes in present value of defined benefit obligations are shown below:
Fiscal year ended
March 31, 2017
Balance at the beginning of the year

ENEX REPORT 2018 100- 37 -

18,381

17,738Service cost
Interest expense
Remeasurement
Changes in demographic assumptions
Changes in financial assumptions
Benefits paid
Effect of business combinations and disposals

819
74

895
94

104
(257)
(1,383)–172
39(1,340)118

Balance at the end of the year

17,73817,716(Note)

Service cost is recognized in profit or loss (cost of sales or selling, general and administrative expenses). Interests on
net amount of present value of defined benefit obligations and fair value of plan assets are recognized in profit or loss
(interest income or interest expense).

Changes in fair value of plan assets are shown below:
Fiscal year ended
March 31, 2017

Provisions classified into current liabilities are included in other current liabilities.

Provision for asset retirement obligations mostly relates to restoration obligations for rental offices, buildings, andstores and removal of harmful materials related to non-current assets. An outflow of economic benefits in the future is
expected principally in a period after one year from the end of each fiscal year, but the timing may be affected by afuture business plan and other factors.

(Millions of yen)
Fiscal year ended
March 31, 2018

Balance at the beginning of the year

(Millions of yen)
Fiscal year ended
March 31, 2018

8,254

8,220

Interest income
Remeasurement
Return on plan assets
Contributions by the employer
Benefits paid

34

48

165
(151)
(82)

870
111
(340)

Balance at the end of the year

8,220

8,909

- 38 -

ENEX REPORT 2018 101

The assumption of defined benefit obligations is shown below:

The Company and certain subsidiaries will make contributions of ¥258 million in the fiscal year ending March 31,
2019.
The effect of change in the asset ceiling is shown below:

Fiscal year ended
March 31, 2017
Discount rate

(Millions of yen)
Fiscal year ended
March 31, 2018

Fiscal year ended
March 31, 2017
Balance at the beginning of the year––

Change in the effect of limiting a net defined benefit asset to theasset ceiling

–

(493)

Balance at the end of the year

–

(493)

Level 1
(Active market)
Cash and cash equivalents
Stock trusts
Bond trusts
General accounts
Separate accounts
Other
Total

Level 2
(No active market)

Since this calculation is an estimation based on the assumptions, the actual calculation may be affected bychanges in other variables.

(Millions of yen)

–
3,083
4,003
161
180
766

27
3,083
4,003
161
180
766

27

8,193

8,220

As of March 31, 2018
Level 1
(Active market)
Cash and cash equivalents
Stock trusts
Bond trusts
General accounts
Other
Total

Level 2
(No active market)

Total

0
–
–
–
–

–
3,353
4,450
324
782

0
3,353
4,450
324
782

0

8,909

8,909

For assets classified into Level 1 (there is an active market), fair value is estimated based on quoted prices in
active markets. For assets classified into Level 2 (there is no active market), which mainly consist of investment
trusts in domestic and foreign stocks and bonds, fair value is estimated using valuations provided by the plantrustee. Additionally, as part of plan assets, there are general accounts that are composed of stocks and bonds
with quoted market prices in active markets. Other includes funds of hedge funds and real estate investment
trusts.
Information on maturity analysis of defined benefit obligations is as follows:
Defined benefit obligations are calculated by discounting the amount of benefits that are deemed to have been
incurred to date, over the remaining service period up to the time of payment. Because the timing of payment
affects the amounts of defined benefit obligations and service cost, International Accounting Standard 19,―Employee Benefits‖ requires an entity to disclose information on the timing of incurrence of benefits. The
Group believes that disclosure of weighted duration of defined benefit obligations that represents the average
period taking into account benefit amount, timing, and discount is useful information to meet this requirement.
The Company’s weighted duration of defined benefit obligations was 13 years in the fiscal year ended March 31,
2017, and 13 years in the fiscal year ended March 31, 2018.
- 39 -

Defined Contribution Plans
Expenses related to contributions required for defined contribution pension plans were ¥776 million and ¥686
million for the fiscal years ended March 31, 2017 and 2018, respectively.

D.

Extra Retirement Payments
The Company made extra retirement payments of ¥512 million and ¥305 million for the fiscal years ended
March 31, 2017 and 2018, respectively.

(2)

Employee Benefits Expense
Total employee benefits expense included in cost of sales and selling, general and administrative expenses in the
consolidated statement of comprehensive income for the fiscal years ended March 31, 2017 and 2018 was¥47,150 million and ¥45,442 million, respectively.

(Millions of yen)

In managing plan assets, the Group aims to secure return on assets necessary to ensure payment of future
pension benefits in the long term only with acceptable risks. To this end, the Group formulates the optimal
portfolio in consideration of past performance in addition to projection of return on assets subject to investment,
and manages investment performance based on this portfolio.

ENEX REPORT 2018 102

C.

Total

27
–
–
–
–
–

0.5 – 0.6%

In the assumption of actuarial calculation described above, the calculation for defined benefit retirement plans issusceptible to the effects of the assumption of discount rate. If the discount rate had changed by 0.25% as ofMarch 31, 2018, the effect on defined benefit obligations would be ¥387 million, which was calculated
supposing that only the discount rate changes without any change in actuarial assumptions other than the
discount rate.

The composition of the Group’s plan assets by asset category as of March 31, 2017 and 2018 is shown below:
As of March 31, 2017

0.5 – 0.7%

Fiscal year ended
March 31, 2018

24.
(1)

Common Stock, Capital Surplus, and Retained Earnings
Common Stock
The number of shares authorized, the number of shares issued, and the number of shares of treasury stock of theCompany are as follows.
All the shares issued by the Company are non-par value ordinary shares. All shares issued are fully paid.
Fiscal year ended
March 31, 2017

(Shares)
Fiscal year ended
March 31, 2018

Number of shares authorized

387,250,000

387,250,000

Number of shares issued
Balance at the beginning of the year
Increase (decrease) during the year
Balance at the end of the year

116,881,106–
116,881,106

116,881,106–
116,881,106

Number of shares of treasury stock
Balance at the beginning of the year
Increase (decrease) during the year
Balance at the end of the year

3,891,809
565
3,892,374

3,892,374
109,761
4,002,135(Note)The balance of the number of shares of treasury stock at the end of the fiscal year ended March 31, 2018 includes
109,300 shares of the Company owned by the stock distribution trust for directors.

- 40 -

ENEX REPORT 2018 103

(2)

25.

Capital Surplus and Retained Earnings
The Companies Act of Japan provides that upon payment of dividends of surplus, an amount equal to 10% of thereserves, which decrease due to the dividends paid, must be appropriated as capital reserve (in case of dividends
of capital surplus) or as retained earnings reserve (in case of dividends of retained earnings) until the total
aggregate amount of capital reserve and retained earnings reserve equals 25% of the common stock.
The Companies Act imposes a certain restriction on the amount available for distribution in association withdividends of surplus or acquisition of treasury stock. The amount available for distribution is determined based onretained earnings, among others, in the Company’s separate financial statements calculated in accordance withJapanese Generally Accepted Accounting Principles (―GAAP‖). The Company’s amount available for distributionwas ¥62,505 million as of March 31, 2018 (however, this amount available for distribution may change due tosubsequent acquisition of treasury stock and other factors).
Under the Companies Act, in addition to year-end dividends, dividends of surplus can be paid at any time during
the fiscal year by resolution of the General Meeting of Shareholders. The Companies Act provides that companies
meeting certain requirements (setup of a board of corporate auditors and appointment of an accounting auditor in
addition to the board of directors, and the term of office for directors limited to one year) may determine dividendsof surplus (excluding dividends in kind) by resolution of the board of directors if the articles of incorporation specify
so. The Companies Act also provides that companies with a board of directors may pay dividends of surplus (onlycash dividends) by resolution of the board of directors only once during a business year, if the articles ofincorporation specify so.
Moreover, companies are allowed to dispose of treasury stock by resolution of the board of directors, or acquire
treasury stock if the articles of incorporation specify so. However, acquisition of treasury stock is limited to theextent the above amount is available for distribution.

ENEX REPORT 2018 104- 41 -(1)

Other Components of Equity and Other Comprehensive Income
Other Components of Equity
Changes in each item of other components of equity are shown below:(Millions of yen)
Fiscal year ended
March 31, 2018

Fiscal year ended
March 31, 2017Classification
FVTOCI financial assets
Balance at the beginning of the year
Increase (decrease) during the year
Reclassification to retained earnings

(898)
78
333

(487)
883
110

Balance at the end of the year

(487)

506

–
85
(85)

–
35
(35)

–

–

219
17

236
(205)

Remeasurement of net defined benefit liability
Balance at the beginning of the year
Increase (decrease) during the year
Reclassification to retained earnings
Balance at the end of the year
Exchange differences on translating foreign operations
Balance at the beginning of the year
Increase (decrease) during the year
Balance at the end of the year
Cash flow hedges
Balance at the beginning of the year
Increase (decrease) during the year

236

31

(1,685)281(1,404)(278)

Balance at the end of the year

(1,404)(1,682)Other components of equity
Balance at the beginning of the year
Increase (decrease) during the year
Reclassification to retained earnings(2,364)461
248(1,655)435
75

Balance at the end of the year

(1,655)(1,145)- 42 -

ENEX REPORT 2018 105

(2)

(2)

Other Comprehensive Income
The details of each item of other comprehensive income and their related tax effects (including non-controllinginterests) are shown below:(Millions of yen)
Fiscal year ended
March 31, 2018

Fiscal year ended
March 31, 2017Classification

FVTOCI financial assets
Amount arising during the year
Increase (decrease) during the year
Remeasurement of net defined benefit liability
Amount arising during the year
Increase (decrease) during the year

Before tax
effects

Tax effects

Net of tax
effects

Before tax
effects

Tax effects

Net of tax
effects

111

(33)

78

1,282

(390)

892

111

(33)

78

1,282

(390)

892

312

(106)

206

160

(55)

105

312

(106)

206

160

(55)

105

Exchange differences on translating foreign
operations
Amount arising during the year

(37)

–

(37)

(38)

–

(38)

Increase (decrease) during the year

(37)

–

(37)

(38)

–

(38)

Cash flow hedges
Amount arising during the year
Reclassification adjustments to profit

16
139

(5)
(39)

11
100

(30)
134

8
(38)

(22)
96

Increase (decrease) during the year

155

(44)

111

104

(30)

74

Other comprehensive income of investments
accounted for by the equity method
Amount arising during the year
Reclassification adjustments to profit

222
2

–
–

222
2

(630)
102

–
–

(630)
102

Increase (decrease) during the year

224

–

224

(528)

–

(528)

765

(183)

582

980

(475)

505

Total other comprehensive income

Resolution

Class ofsharesOrdinary General Meeting of
Shareholders held on June 21,
2017

Ordinaryshares(1)

Dividends per
share
(Yen)

Record date

Effective date

Retainedearnings

18.5

March 31, 2017

June 22, 2017

Dividends Paid
Class ofsharesTotal dividends(Millions of yen)

Dividends per
share
(Yen)

Record date

Effective dateOrdinary General Meeting of
Shareholders held on June 21,
2017

Ordinaryshares

2,090

18.5

March 31, 2017

June 22, 2017

Board of Directors’ meeting heldon October 31, 2017

Ordinaryshares1,808

16September 30, 2017

December 4, 2017(2)

Dividends whose record date is in the current fiscal year, but whose effective date falls in the next fiscal year
Resolution

Class ofsharesOrdinary General Meeting of
Shareholders held on June 20,
2018

OrdinarysharesTotal dividends(Millions of
yen)
2,712

Source ofdividends

Dividends per
share
(Yen)

Record date

Effective date

Retainedearnings

24

March 31, 2018

June 21, 2018

Financial Instruments
Capital Management
The Group conducts capital management to continue sustainable growth and maximize corporate value.

The Company pays an interim dividend and year-end dividend annually, with the former determined by the Board of
Directors and the latter by the General Meeting of Shareholders.

To achieve sustainable growth, the Group recognizes that it is essential to secure sufficient financing capacity tomake agile investment in businesses when an opportunity for such investments for business growth (such as
acquisition of external resources) arises in the future. Therefore, the Group aims to ensure financial health andflexibility for future investment in businesses and maintain the capital structure with balanced return andinvestment.

Dividends paid for the fiscal years ended March 31, 2017 and 2018 are shown below:
For the fiscal year ended March 31, 2017
(1)

2,090

Source ofdividends

Resolution(1)

Dividends

Total dividends(Millions ofyen)

For the fiscal year ended March 31, 2018

27.
26.

Dividends whose record date is in the current fiscal year, but whose effective date falls in the next fiscal year

Dividends Paid

There is no significant capital restriction that applies to the Company (excluding general provisions of theCompanies Act and other laws and regulations).

Resolution

Class ofsharesTotal dividends(Millions of yen)

Dividends per
share
(Yen)

Ordinary General Meeting of
Shareholders held on June 22,2016

Ordinaryshares1,356

12March 31, 2016

June 23, 2016

Board of Directors’ meeting heldon October 31, 2016

Ordinaryshares

1,525

13.5

September 30, 2016

December 5, 2016

Record date

Effective date(2)

Financial Risk Management Policy
In the course of management activities, the Group is exposed to financial risks (such as credit risks, liquidity risks,currency risks, interest rate risks, and market price risks) and performs risk management in accordance withcertain policies to avoid or reduce these risks.
In accordance with the Group’s policy, its fund management is limited to short-term deposits, etc., and the Groupdepends on bank loans, among others, for raising funds. The Group utilizes derivatives for the purpose of hedging
risks of changes in market conditions, and interest rate and exchange fluctuations, but does not enter into suchtransactions for speculative purposes.

(3)

Credit Risk Management
The Group grants credit to many customers in various trading transactions and bears credit risks.

ENEX REPORT 2018 106- 43 -- 44 -

ENEX REPORT 2018 107

In line with the rules on credit management, the Group manages due dates and balances of trade receivables andloans by business partner, and pursues early identification or reduction of uncollectible receivables due todeteriorated financial conditions. The Group is not overly exposed to credit risks by concentration on a specificcounterparty.

A.

Carrying amounts of non-derivative financial liabilities by maturity are shown below:
As of March 31, 2017

In utilizing derivatives, since the Group has transactions only with exchange members or banks with good credit
standing, the Group believes there to be few credit risks.
When collateral held and other credit enhancements are not taken into account, the Group’s maximum exposure
to credit risks is the carrying amount after impairment of financial assets presented in the consolidated financial
statements.
The analysis of the age of financial assets that are past due, but not impaired as of March 31, 2017 and 2018, is
as follows. These amounts include amounts considered recoverable by credit insurance and collateral provided.
Within 30 days

More than 30 days, More than 60 days,
within 60 days
within 90 days

(Millions of yen)More than 90 days

Total

Non-Derivative Financial Liabilities

Carrying amountContractual cashflows

Not later than
1 yearTrade payables
Short-term bonds andborrowings
Short-term borrowings
Current portion of
non-current borrowings
Non-current bonds andborrowings
Non-current
borrowings
Bonds payable

101,902

101,902

101,902

–

–

1,667

1,667

1,667

–

–

7,651

7,651

7,651

–

–

16,741

16,884–

10,0686,816

14,961

15,000–5,000

10,000142,922

143,104

111,220

15,06816,816

As of March 31, 2017
Trade receivables
Non-current receivables

91
–

–
–

–
–

2
–

93
–

Total

91

–

–

2

93

Total

As of March 31, 2018
Trade receivables
Non-current receivables

76
–

–
–

–
–

1
–

77
–

As of March 31, 2018

Total

76

–

–

1

77

The Group reviews collectibility of trade receivables depending on the credit conditions of customers andrecognizes allowance for credit losses. Changes in the allowance for credit losses for the fiscal years ended March
31, 2017 and 2018 are shown below:
Fiscal year ended
March 31, 2017

(Millions of yen)
Fiscal year ended
March 31, 2018

Balance at the beginning of the year

946

975

Increase during the year
Decrease during the year (Utilization)
Decrease during the year (Reversal)
Other increase (decrease)

471
(83)
(276)
(83)

273
(16)
(317)
154

Balance at the end of the year

975

1,069

In the fiscal years ended March 31, 2017 and 2018, the balance of trade receivables, etc., individually determined
to be impaired, in light of the customer’s financial conditions, delay state of payments, and other factors, was ¥928
million and ¥1,167 million, respectively, and allowance for credit losses provided against these receivables was¥662 million and ¥639 million, respectively.
(4)

Liquidity Risk Management
The Group manages liquidity risks by formulating a funding plan based on the annual business plan, and by
conducting periodic assessment and collection of information on situations of liquidity in hand and interest-bearing
debts and timely monitoring of cash flows. Through these means, the Group strives to ensure agility in financing to
respond to changes in the financial situation and reduce funding costs while diversifying funding sources andfinancing methods.

- 45 -

Later than
5 years(Millions of yen)

Carrying amountContractual cashflows

Not later than
1 yearLater than 1 year
and not later than
5 years

Trade payables
Short-term bonds andborrowings
Short-term borrowings
Current portion of
non-current borrowings
Non-current bonds andborrowings
Non-current
borrowings
Bonds payable

127,445

127,445

127,445––

10,317

10,317

10,317

–

–

2,115

2,115

2,115

–

–

15,302

15,433

–

8,985

6,448

14,971

15,000–15,000–

Total

170,150

170,310

139,877

23,9856,448

B.

Later than
5 years

Derivative Financial Liabilities
The results of liquidity analysis of derivatives are shown below:

As of March 31, 2017
Interest rate derivatives
Currency derivatives
Commodity derivatives
Total
As of March 31, 2018
Interest rate derivatives
Currency derivatives
Commodity derivatives
Total

ENEX REPORT 2018 108(Millions of yen)

Later than 1 year
and not later than
5 years(Millions of yen)

Not later than
1 yearLater than 1 year
and not later than
5 years

Later than 5 years

–
25
56

–
–
–

776
–
–

776
25
56

81

–

776

857

–
127
1,320

–
–
–

671
–
–

671
127
1,320

1,447

–

671

2,118

- 46 -

Total

ENEX REPORT 2018 109

(5)Market Risk Management

Interest Rate Sensitivity Analysis

The Group is exposed to market risks arising from fluctuations in foreign exchange rates, interest rates, commodity
markets, and equity prices. As per its policy, the Group minimizes risks arising from fluctuations in foreignexchange rates, interest rates, and other factors by building a management structure through establishment ofbalance limits, using various derivatives and others.

The table below shows the effect on the Group’s profit before tax of gains or losses arising from instruments
affected by interest rate fluctuations, if the interest rate increases 1% in the fiscal years ended March 31,2017 and 2018. This analysis is calculated by multiplying the net balance of floating-rate financial
instruments held by the Group as of March 31, 2017 and 2018, by 1% with no future changes in thebalances, effects of foreign exchange fluctuations, effect of diversified timing of rollover, and repricing ofvariable-rate borrowings taken into account. The analysis assumes that all other variables remain constant.

For execution and management of derivative transactions, in accordance with the internal rules that provide
transaction authority, limit amounts, etc., departments engaged in such transactions rigorously manage and reporton the transactions conducted according to their authority. In addition, a system of effective internal checking has
been developed by setting up a transaction control department.

In calculation of sensitivity, interest-bearing debts with a variable interest condition, interest-bearing debts
that have a fixed interest condition but actually have a variable interest condition through interest rate swaps,
and cash and cash equivalents are deemed as instruments affected by interest rate fluctuations.

Market risks that the Group assumes are shown below:••••

Currency risks
Interest rate risks
Commodity price risks
Price risks of equity instruments

A.

Currency Risk Management

Fiscal year ended
March 31, 2017
Profit before tax

C.

(Notes)(Millions of yen)[Thousands of U.S. dollars]

Foreign currency sensitivity analysis shows the effect on profit before tax in the Group’s consolidated
statement of comprehensive income of 1% appreciation of the Japanese yen to the Company’s short-termand long-term foreign exchange balances as of the end of each fiscal year. However, this analysis assumes
that other variable factors (such as balances and interest rates) remain constant.

B.

(Millions of yen)
Fiscal year ended
March 31, 2018
0

1

Interest Rate Risk Management
The Group is exposed to interest rate fluctuation risks in raising and managing funds accompanying investment
activities and operating transactions. In addition, fixed-rate debt obligations are exposed to risks of fluctuations
in fair value due to fluctuations in interest rates. The Group works to quantify interest rate risks to appropriately
control volatility in profit or loss due to interest rate fluctuations. Specifically, the Group strives to reduce interest
rate risks by conducting hedging transactions through interest rate swaps.

ENEX REPORT 2018 110

The sensitivity analysis presents the effects on profit before tax in the consolidated statement ofcomprehensive income of a 1% increase in crude oil prices. This analysis assumes that other variablefactors remain constant.
Fiscal year ended
March 31, 2017
Profit before tax

D.

Foreign Currency Sensitivity Analysis

Profit before tax
U.S. dollar- 47 -

Commodity Price Risk Management

The table below shows the Group’s sensitivity analysis to fluctuations of quoted prices of crude oil andpetroleum products.

As of March 31, 2018(89)[(840)]

1. The foreign exchange balance is the amount in foreign currencies for which exchange fluctuation risks are nothedged with forward foreign exchange contracts, etc., in terms of receivables and payables in foreign currencies inimport and export transactions and firm commitments in foreign currencies. The foreign exchange balance that is duefor settlement within one year is classified as short-term foreign exchange balance, while the foreign exchangebalance that is due for settlement due after one year is classified as long-term foreign exchange balance, if any.
2. Positive figures represent a receivable position, while negative figures (figures in parentheses), if any, represent apayable position.

Fiscal year ended
March 31, 2017(90)

Commodity Price Sensitivity Analysis

The Group’s exposure to currency risks (net amount) as of March 31, 2017 and 2018 is shown below:
Short-term foreign exchange balance(14)

The Group principally deals with petroleum products and is exposed to commodity price risks arising fromfluctuations in crude oil prices, quoted prices of petroleum products, and other prices. The Group strives toreduce commodity price risks using derivatives (such as commodity futures contracts and commodity swaps) as
hedging instruments to commodity price risks caused by price fluctuation.

Because the Group is engaged in import and export transactions, which are exposed to exchange fluctuation
risks for transactions denominated in foreign currencies, the Group strives to reduce such exchange fluctuation
risks through hedging transactions utilizing derivatives, including forward foreign exchange contracts.

As of March 31, 2017
8[75]

(Millions of yen)
Fiscal year ended
March 31, 2018

(Millions of yen)
Fiscal year ended
March 31, 2018

81

87

Management of Price Risks of Equity Instruments
The Group holds shares of third parties with which the Group has business relationships for the purpose ofsmoothly implementing its business strategy, and is exposed to risks of fluctuations in prices of equity
instruments. The Group periodically assesses current market prices and financial conditions of issuers andcontinuously reviews its holding.
The Group has no equity instruments held for short-term trading purposes and does not actively trade theseinvestments.
Sensitivity Analysis of Equity Instruments to Price Risks
The Group’s sensitivity analysis of risks of fluctuations in prices of equity instruments is as follows. Thissensitivity shows the effects on other comprehensive income (before tax effects) of a 10% decrease in pricesof listed stocks as of the end of each fiscal year. The sensitivity assumes that other variable factors remain
constant.
Fiscal year ended
March 31, 2017
Other comprehensive income(661)- 48 -(Millions of yen)
Fiscal year ended
March 31, 2018(255)

ENEX REPORT 2018 111

(6)The following shows levels in the fair value hierarchy:

Fair Value of Financial Instruments
A.

Level 1— Quoted prices in active markets for identical assets or liabilities

Method of Fair Value Measurement
Fair values of major financial assets and financial liabilities are determined as follows. In measurement of fairvalue of financial instruments, market prices are used when available. For financial instruments of which market
prices are unavailable, the fair value is measured by discounting future cash flows or by other appropriate
valuation methods.
Cash and cash equivalents

Trade receivables, trade payables, and other current financial assets (deposits paid)

The level in the fair value hierarchy used for fair value measurement is determined based on the lowest level
input that is significant to the fair value measurement.

Financial assets and financial liabilities recognized at fair value in the consolidated statement of financial
position that are classified into levels in the fair value hierarchy are shown below:

The fair value approximates the carrying amount because it is settled in a short time.
Other current financial assets (securities) and other investments
The fair value of marketable securities is based on quoted prices on the stock exchange. The fair value of
non-marketable securities is principally measured by the net asset approach, whereby the fair value iscalculated by referring to the fair values of assets and liabilities held by the investee company.
Non-current financial assets other than investments (non-current loans receivable) and other current financial
assets (current portion of non-current loans receivable)
The fair value of non-current loans receivable is measured by discounting future cash flows using interest
rates offered for loans or credit with the same remaining maturities and the same terms to borrowers or
customers with similar credit ratings.
Other current financial assets (derivatives), other current financial liabilities (derivatives), and other non-current
financial liabilities (derivatives)
The fair value of a derivative is measured based on the market price, the price presented by counterparty
financial institutions, etc.
Bonds and borrowings
Except for cases where the carrying amount is virtually equal to the fair value, fair value of bonds andborrowings is measured by discounting future cash flows using interest rates offered for borrowings with thesame remaining maturities and terms.

Level 1
Assets:Other current financial assets (securities)
FVTPL financial assets
Other investments
FVTPL financial assets
FVTOCI financial assets
Other current financial assets (derivatives)
Derivatives not designated as hedges
Total

Fair value

Carrying amount

Fair value

501

509

408

413

41,02042,24042,70543,733

Hierarchy of Fair Value Measurement Recognized in the Consolidated Statement of Financial Position
IFRS 7, ―Financial Instruments: Disclosure‖, requires an entity to classify fair value measurements using the fairvalue hierarchy reflecting significance of inputs used for measurement of fair value.

ENEX REPORT 2018 112- 49 -

Level 3

Total

–

–

–

–
6,606

–
–

269
586

269
7,192

16
6,622

64
64

–
855

80
7,541

56

25

–

81

–

776

–

776

56

801

–

857

Total

Level 1
(Millions of yen)
As of March 31, 2018

As of March 31, 2017
Financial assets measured at amortized cost:Non-current financial assets other than investments(non-current loans receivable) and other current
financial assets (current portion of non-current loans
receivable)
Financial liabilities measured at amortized cost:
Bonds and borrowings

Level 2–

Liabilities:
Other current financial liabilities (derivatives)
Derivatives not designated as hedges
Other non-current financial liabilities(derivatives)
Derivatives designated as hedges

Financial Instruments Measured at Amortized Cost

Carrying amount(Millions of yen)

As of March 31, 2017

(Millions of yen)

As of March 31, 2018

Fair values of financial instruments measured at amortized cost are shown below:

C.

Level 3— Unobservable inputs for the asset or liability

Transfers between levels in the fair value hierarchy are recognized on the date on which an event or change inthe situation resulting in the transfers arises.

The fair value approximates the carrying amount because the remaining period to maturity is short.

B.

Level 2— Inputs other than quoted market prices that are observable for the asset or liability, either
directly or indirectly

Assets:Other current financial assets (securities)
FVTPL financial assets
Other investments
FVTPL financial assets
FVTOCI financial assets
Other current financial assets (derivatives)
Derivatives not designated as hedges
Total
Liabilities:
Other current financial liabilities (derivatives)
Derivatives not designated as hedges
Other non-current financial liabilities(derivatives)
Derivatives designated as hedges
Total

Level 2

Level 3

Total

–

–

–

–

–
2,554

–
–

289
563

289
3,117

27
2,581

1,543
1,543

–
852

1,570
4,976

203

1,244

–

1,447

–

671

–

671

203

1,915

–

2,118

- 50 -

ENEX REPORT 2018 113

B.

There were no transfers between Level 1, Level 2, and Level 3 in the fiscal years ended March 31, 2017 and2018.

Some FVTOCI financial assets were sold or disposed of due to review of business relationships with investees,
etc. FVTOCI financial assets derecognized due to sale or disposal during the fiscal years ended March 31,2017 and 2018 are shown below:

The components of changes in financial instruments classified into Level 3 of fair value hierarchy are shown
below:(Millions of yen)
Fiscal year ended
March 31, 2018

Fiscal year ended
March 31, 2017
FVTPL
Balance at the beginning of the year

FVTOCIFVTPL

FVTOCI

–

1,068

269

586

Total gains or losses (realized/unrealized)
Other comprehensive income
Purchase
Sale
Redemption/other

–
–
–
269

7
21
(14)
(496)

–
271
–
(251)

13
–
–
(36)

Balance at the end of the year

269

586

289

563

Gains or losses recognized in other comprehensive income in the consolidated statement of comprehensive
income are presented as ―FVTOCI financial assets‖. There were no gains or losses recognized in profit.
For financial instruments classified into Level 3, no significant increase or decrease in the fair value is expected
if one or more of the unobservable inputs are changed to reasonably possible alternative assumptions.
(7)

The fair values of major FVTOCI financial instruments are shown below:
As of March 31, 2017
Stock

AmountSINANEN HOLDINGS CO., LTD.
MAEDA ROAD CONSTRUCTION Co., Ltd.
JX Holdings, Inc.
KOHNAN SHOJI CO., LTD.
HACHI-BAN CO., LTD.

(Millions of yen)
4,440
1,176
424
171
126

As of March 31, 2018
Stock

Amount

MAEDA ROAD CONSTRUCTION Co., Ltd.
JXTG Holdings, Inc.
KOHNAN SHOJI CO., LTD.
Tonami Holdings Co., Ltd.
HACHI-BAN CO., LTD.

(Millions of yen)
1,286
500
206
156
126

- 51 -

Accumulated gains (losses)(306)

Fair value at date of sale
5,418(Millions of yen)

Accumulated gains (losses)(160)

Accumulated gains or losses (net of taxes) in other comprehensive income that were transferred to retained
earnings as a result of the above are negative ¥333 million and negative ¥110 million for the fiscal years ended
March 31, 2017 and 2018, respectively.
C.

Dividends Received

Investments derecognized during the year
Investments held at the end of the year

Fiscal year ended
March 31, 2017
12
234

Total

246

(Millions of yen)
Fiscal year ended
March 31, 2018
211
85
296

Derivatives and Hedges
A cash flow hedge is a hedge of the exposure to variability in future cash flows arising in association with theforecasted transactions or already recognized assets or liabilities. Changes in fair value of derivatives
designated as a cash flow hedge are recognized in other comprehensive income. This accounting treatment
continues until changes in future cash flows arising in association with the unrecognized forecasted
transactions or already recognized assets or liabilities that are designated as a hedged item are recognized ingains or losses. The ineffective portion of the hedge is recognized in profit or loss.

Fair Value of FVTOCI Financial Instruments

ENEX REPORT 2018 114

Fair value at date of sale
464

Fiscal year ended March 31, 2018

Cash flow hedges

The Group classifies all equity instruments other than those accounted for by the equity method as FVTOCI
financial instruments. These equity instruments are held for the purpose of maintaining and strengthening
business relationships with investees.
A.

Fiscal year ended March 31, 2017(8)

FVTOCI Financial Assets

Derecognition of FVTOCI Financial Assets

In accordance with its policy, the Group has a floating rate position for long-term funds raised to satisfy fundmanagement. These floating rate positions are hedged as the Group enters into interest rate swaps to hedge
the risks of fluctuations in cash flows arising from future changes in interest rates. The interest rate swaps aredesignated as cash flow hedges.
In applying hedge accounting, as a general rule, the Group tries to match notional amounts, periods (maturities)
and fundamental figures of interest rates of hedging instruments and hedged items to maintain theeffectiveness of hedging relationships over the hedge period. Hedge effectiveness also continues to beassessed after the application of hedge accounting. If an ineffective portion arises, the Group analyzes thecause for the ineffective portion. In the fiscal years ended March 31, 2017 and 2018, the amounts included in
profit or loss in association with the ineffective portion of hedging and the portion excluded from the assessmentof hedge effectiveness were not significant.
As of March 31, 2018, the notional amount balance for interest rate swaps as hedging instruments was ¥9,735
million, and the period when the cash flows are expected to occur and when they are expected to affect profit orloss is 14 years. The average of interest rates hedged with the interest rate swaps is 1.8%.

- 52 -

ENEX REPORT 2018 115

As of March 31, 2017 and 2018, effects of hedging instruments designated as hedges on the Group’s
consolidated statement of financial position are as follows:
As of March 31, 2017
Notional
amountCarrying amount
Derivative assets

Line item in the
consolidated statement offinancial position

Derivative
liabilities

As of March 31, 2017

Cash flow hedges
Interest rate risks
Interest rate swaps

10,600–776

Other non-current financial
liabilities

As of March 31, 2018
Notional
amountCarrying amount
Derivative assets

Line item in the
consolidated statement offinancial position

Derivative
liabilities–

671

Financial assets:
Trade receivables

3,284

1,578

1,706

1,192

–

514

Total

3,284

1,578

1,706

1,192

–

514

Total amountof financial
liabilities

Total amountof financial
assets offset

Net amount offinancial liabilities
presented in the
consolidated
statement offinancial position

Amount offinancialliabilities that
do not meetrequirementsfor offsetting

Amount ofcollateralprovided

Net amount

4,555

1,578

2,977

1,192

–

1,785

4,555

1,578

2,977

1,192

–

1,785

Total amountof financial
assetsTotal amountof financial
liabilities
offsetNet amount offinancial assets
presented in the
consolidated
statement offinancial position

Amount offinancialassets that do
not meetrequirementsfor offsetting

Amount ofcollateral
received

Net amountFinancial assets:
Trade receivables

8,521

2,143

6,378

2,929

–

3,449

Total

8,521

2,143

6,378

2,929

–

3,449

Total amountof financial
liabilities

Total amountof financial
assets offset

Net amount offinancial liabilities
presented in the
consolidated
statement offinancial position

Amount offinancialliabilities that
do not meetrequirementsfor offsetting

Amount ofcollateralprovided

Net amount

6,933

2,143

4,790

2,929

–

1,861

6,933

2,143

4,790

2,929

–

1,861

(Millions of yen)
Change in fair value usedas the basis for recognitionof the ineffective portion

Interest rate risks
9,735

Total amountof financial
liabilities
offset–Cash flow hedges
Interest rate swaps

Total amountof financial
assets(Millions of yen)
Change in fair value usedas the basis for recognitionof the ineffective portion

Other non-current financial
liabilities

Financial liabilities:
Trade payables
Total

–

Change in fair value used as the basis forrecognition of the ineffective portion(Millions of yen)

Balance recorded as other components of equity

Cash flow hedges
Interest rate risks
Borrowing at a floating
rate

(155)

(Millions of yen)

Balance recorded as other components of equity

Cash flow hedges

Financial liabilities:
Trade payables

Interest rate risks
Borrowing at a floating
rate

(9)

–

Some financial assets and financial liabilities are offset and the net amount is presented in the consolidated
statement of financial position since the Group has a legally enforceable right to set off the recognized amounts
and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.
For financial assets and financial liabilities recognized for the same counterparties, the components of amounts
offset and not offset in the consolidated statement of financial position by type of financial instruments as of March
31, 2017 and 2018 are shown below:- 53 -

Total

(483)

Offsetting of Financial Assets and Financial Liabilities

ENEX REPORT 2018 116

Amount ofcollateral
received

Net amount(Millions of yen)

(Millions of yen)(559)

As of March 31, 2018
Change in fair value used as the basis forrecognition of the ineffective portion

Amount offinancialassets that do
not meetrequirementsfor offsetting

As of March 31, 2018

As of March 31, 2017 and 2018, effects of hedged items designated as hedges on the Group’s consolidated
statement of financial position are as follows:
As of March 31, 2017

(Millions of yen)

Net amount offinancial assets
presented in the
consolidated
statement offinancial position

28.

(Millions of yen)

Revenue

The components of revenue are shown below:
Fiscal year ended
March 31, 2017
Revenue from sales of merchandise
Other
Total

- 54 -(Millions of yen)
Fiscal year ended
March 31, 2018

659,599
35,461

710,734
34,033695,060

744,767

ENEX REPORT 2018 117

29.

Selling, General and Administrative Expenses

The components of selling, general and administrative expenses are shown below:
Fiscal year ended
March 31, 2017
Personnel expense
Rent expense
Depreciation and amortization
Commission fee
Traveling expense
Taxes and dues
Other
Total

30.

(Millions of yen)
Fiscal year ended
March 31, 2018

39,356
10,416
5,594
6,860
1,389
1,702
9,380

36,766
9,546
5,492
6,861
1,459
1,577
9,230

74,69770,931belonging to the Life Energy & Logistics Division. These impairment losses were incurred due to reduction of thecarrying amount of the assets to the recoverable amount, as a result of decreased profitability caused by changes inthe business environment and other factors.
The recoverable amount of these assets was measured based on fair value less costs of disposal.
32.

The components of other – net of other income and expenses are shown below:
Fiscal year ended
March 31, 2017
Commission fee
Compensation income for expropriation
Sale of shares
Compensation income received
Other

Profit or Loss from Tangible Assets, Intangible Assets, and Goodwill

Gain on sales
Loss on sales
Loss on disposal
Impairment loss
Other
Total
(Note)

31.

194
367
–
269
1,176

2,489

2,006

(31)
(705)

(31)
(1,169)Total expenses(736)(1,200)

Total

1,753

806

Foreign exchange losses (Note)
Other(Millions of yen)
Fiscal year ended
March 31, 2018

1,175
(621)
(544)
(992)
–

985
(374)
(718)
(1,429)(8)(982)(1,544)For impairment loss of non-current assets, please refer to Note 31, ―Impairment Loss‖.

(Note)

33.

Gain or loss on valuation of foreign currency derivatives is included in foreign exchange losses. In addition to the above, in thefiscal years ended March 31, 2017 and 2018, net gain or loss on valuation of commodity-related derivatives was recognized at¥36 million and ¥246 million, respectively, in revenue and cost of sales.

Financial Income and Costs

The components of financial income and financial costs are shown below:

Impairment Loss

Fiscal year ended
March 31, 2017

The components of impairment loss are as follows.
Impairment loss was recognized in loss from tangible assets, intangible assets, and goodwill in the consolidated
statement of comprehensive income.
Fiscal year ended
March 31, 2017
Property, plant and equipment
Buildings and structures
Machinery, equipment and vehicles
Land
Other
Intangible assets
Software
Other
Investment property
Other(Millions of yen)
Fiscal year ended
March 31, 2018

404
96
66
19

Total

(Millions of yen)
Fiscal year ended
March 31, 2018

165
78
1,081
411
754

Total income

The components of profit or loss from tangible assets, intangible assets, and goodwill are shown below:
Fiscal year ended
March 31, 2017

Other Profit or Loss

529
143
52
272

2
4
346
55

–
3
397
33

992

1,429

Interest income
Financial assets measured at amortized cost
Other

(Millions of yen)
Fiscal year ended
March 31, 2018

88
1

82
10

89

92

246

296

246

296

(917)
(49)

(863)
(87)

(966)

(950)

(203)

(241)

Subtotal

(203)

(241)

Total

(834)

(803)

Subtotal
Dividends received
FVTOCI financial assets
SubtotalInterest expense
Financial liabilities measured at amortized cost
Other
Subtotal
Other financial income (costs)
FVTPL financial assets

Items of the Group’s property, plant and equipment are grouped in the smallest unit for which independent cash flows
can be identified.
In the fiscal years ended March 31, 2017 and 2018, there was no individually significant impairment loss.
Major impairment losses in the fiscal years ended March 31, 2017 and 2018 are on property, plant and equipment
ENEX REPORT 2018 118- 55 -- 56 -

ENEX REPORT 2018 119

34.

Earnings per Share

Basic earnings per share for the fiscal years ended March 31, 2017 and 2018 were calculated as follows:

Net profit attributable to Itochu Enex’s shareholders

Fiscal year ended
March 31, 2018

10,405

11,025112,989

112,921

92.09

97.63

(Millions of yen)

Basic earnings per share attributable to Itochu Enex’s shareholders(Note)

35.

Consideration paid

Fiscal year ended
March 31, 2017

Weighted-average number of ordinary shares outstanding(Thousands of shares)(Yen)

Cash and cash equivalents included in assets at time of acquisition ofcontrol
Net payment from acquisition of subsidiaries(3)

Changes in liabilities arising from financing activities
Changes in liabilities arising from financing activities are shown below:
As of March 31, 2018
Non-current
borrowings(Note)

Bonds payable(Note)

Lease
obligations(Note)(Millions of yen)
Liabilities held tohedge noncurrent
borrowings

Components of assets at time of loss of control
Current assets
Non-current assets
Components of liabilities at time of loss of control
Current liabilities
Non-current liabilities

1,667

24,392

14,961

10,696776

Cash flows from financing activities

7,323(7,041)–(1,574)–

Consideration received
Cash and cash equivalents included in assets at time of loss of control

1,360

164

–

–

–

Change occurring due to loss of control ofsubsidiaries

–

(110)

–

(420)

–

Foreign exchange translation differences

(33)

–

–

–

–

Change in fair value

–

–

–

–

(105)

Interest expense

–

12

10

–

–

Increase in new contracts

–

–

–

1,863

–

10,317

17,417

14,971

10,565671(Note)(2)

Net proceeds from sales of subsidiaries(4)

Acquisition of subsidiaries
The major components of assets and liabilities related to companies that newly became subsidiaries at the time ofacquisition of control and reconciliation between consideration paid and net payment from the acquisition are
shown below:
Fiscal year ended
March 31, 2017

ENEX REPORT 2018 120- 57 -(645)(3,751)(Millions of yen)
Fiscal year ended
March 31, 2018

(Millions of yen)
Fiscal year ended
March 31, 2018

766
171

2,808
4,587

(99)
(444)

(3,082)
(937)

40
2,029

–
–

–
(421)

–
–

(Millions of yen)
Fiscal year ended
March 31, 2018

3,001

–

–

–

3,001

–

Loss of control of subsidiaries
The major components of assets and liabilities related to companies that ceased to be subsidiaries following theshare exchange at the time of loss of control and cash and cash equivalents in the assets at the time of loss ofcontrol are shown below:

The amounts include current portion of non-current borrowings, current portion of bonds payable, and current portion of leaseliabilities.

Components of assets at time of acquisition of control
Current assets
Non-current assets
Components of liabilities at time of acquisition of control
Current liabilities
Non-current liabilities

645

Fiscal year ended
March 31, 2017

Balance as of April 1, 2017

Balance as of March 31, 201860

Fiscal year ended
March 31, 2017

Supplementary information about cash flows is shown below.

Change occurring due to acquisition ofcontrol of subsidiaries(4,396)The major components of assets and liabilities related to companies that ceased to be subsidiaries following thesale of shares at the time of loss of control and reconciliation between consideration received and net proceedsfrom the sales are shown below:

Diluted earnings per share attributable to Itochu Enex’s shareholders are not presented because there were no potentiallydilutive shares.

Short-termborrowings(705)

Sales of subsidiaries

Cash Flow Information(1)(Millions of yen)
Fiscal year ended
March 31, 2018

Fiscal year ended
March 31, 2017

(Millions of yen)
Fiscal year ended
March 31, 2018

Fiscal year ended
March 31, 2017
Components of assets at time of loss of control
Current assets
Non-current assets
Components of liabilities at time of loss of control
Current liabilities
Non-current liabilities

–
–

5,105
11,721––(8,134)(1,195)(Millions of yen)
Fiscal year ended
March 31, 2018

Fiscal year ended
March 31, 2017
Cash and cash equivalents included in assets at time of loss of control- 58 -–(598)

ENEX REPORT 2018 121

36.

Non-Cash Transactions

38.

Parent, Subsidiaries, and Associates

Significant Non-Cash Transactions

The Company’s parent is ITOCHU Corporation, which is located in Japan.

The amount of assets acquired under finance leases is ¥1,897 million and ¥2,415 million for the fiscal years ended
March 31, 2017 and 2018, respectively.

The status of major subsidiaries as of March 31, 2018 is shown below:

37.

In the fiscal year ended March 31, 2018, there were no individual subsidiaries with material non-controlling interests.

Related Parties(1)

Company name

Compensation for Key Management Personnel(Millions of yen)
Fiscal year ended
March 31, 2018

Fiscal year ended
March 31, 2017
Total

(2)

363

354

363

354

Transactions with the parent, associates, and other companies owned by the parent and the balance ofreceivables from and payables to them are shown below:
For the fiscal year ended March 31, 2017

ParentName

ITOCHU Corporation

Relationship with related party

Transaction
amount(Millions of yen)
Unsettled balance

2,435

264

Sale of land

728

–

560

–

Cash transactions

4,000

–

AssociateJAPAN GAS ENERGY CORPORATION

Purchases of LPG products

15,206

2,237

Subsidiary ofparent

ITOCHU Treasury Corporation

Cash transactions

13,00013,000ITOCHU ENEX HOME-LIFE NISHI-NIHON CO., LTD.

Naka-ku, Hiroshima City, Hiroshima

100.0

Nissho Propane Sekiyu Co., Ltd.

Chuo-ku, Sapporo City, Hokkaido

100.0

Itochu Industrial Gas Co., Ltd.

Minato-ku, Tokyo

100.0

ITOCHU ENEX HOME-LIFE TOHOKU CO., LTD.

Miyagino-ku, Sendai City, Miyagi

100.0

Oji-Itochu Enex power retailing Co., Ltd.

Minato-ku, Tokyo

60.0

TOKYO TOSHI SERVICE COMPANY

Chuo-ku, Tokyo

66.6

Enex Electric Power Co., Ltd.

Minato-ku, Tokyo

100.0

ENEX LIFE SERVICE CO., LTD.

Minato-ku, Tokyo

100.0

ENEX FLEET CO., LTD.

Yodogawa-ku, Osaka City, Osaka

100.0

KOKURA ENTERPRISE ENERGY CO., LTD.

Kokurakita-ku, Kitakyushu City,
Fukuoka

100.0

Osaka Car Life Group Co., Ltd.

Nishi-ku, Osaka City, Osaka

52.0

KYUSHU ENERGY CO., LTD.

Oita City, Oita

75.0

ENEX PETROLEUM SALES HIGASHI-NIHON CO., LTD.

Minato-ku, Tokyo

100.0

39 other companies

39.

–

Commitments

As of March 31, 2017

Name

Relationship with related party

Transaction
amount

Total

Unsettled balance

N-REIF1 Investment Limited Partnership

Investments in investment limited
partnerships

5,216

–

Subsidiary ofparent

ITOCHU Treasury Corporation

Cash transactions

7,000

20,000

There is no balance of collateral and guarantee transactions, and no allowance for credit losses was recognized
for the receivables from associates and other companies owned by the parent.

- 59 -

Acquisition of property, plant and equipment(Millions of yen)

Associate

ENEX REPORT 2018 122

51.0

Contractual commitments for acquisition of property, plant and equipment are shown below:

For the fiscal year ended March 31, 2018
Category

Hakata-ku, Fukuoka City, Fukuoka

Life Energy & Logistics Division

Sales of petroleum products(Gain on sales of land)

ECORE CO., LTD.

Power & Utility Division

Transactions with the Parent, Associates, and Other Companies Owned by the Parent

Category

Percentage of voting
rights owned(%)

Home-Life Division

Compensation for key management personnel of the Group is shown below:

Short-term compensation

Location

40.

(Millions of yen)
As of March 31, 2018

11,344

12,766

11,344

12,766

Contingent Liabilities

The Group provides various forms of guarantees for general business partners. When a guaranteed entity defaults,
payment obligations are assumed by the Group. The Group’s total amount and actual amount of guarantees provided
for general business partners as of March 31, 2017 and 2018 are as follows:
The total amount of guarantees is the total amount of maximum payment limits under guarantee contracts withguaranteed entities and the maximum amount at which payment obligations may arise to the Group. The actual
amount of guarantees is based on the total amount of debts recognized by guaranteed entities within the maximum
payment limits, and is the amount that is deemed as the amount of actual risks taken after deduction of re-guarantees
given by a third party to the Group, etc.

- 60 -

ENEX REPORT 2018 123

As of March 31, 2017

(Millions of yen)
As of March 31, 2018

Guarantees on distributors’ payment of gas oil delivery tax
Total amount of guarantees
Actual amount of guarantees
Guarantees for other transactions (Note)
Total amount of guarantees
Actual amount of guarantees

7
1

–
–

1,147
871

184
135

Total
Total amount of guarantees
Actual amount of guarantees

1,154
872

184
135

(Note)

Guarantees for other transactions include guarantees on operating transactions and guarantees on the balance of leasing
agreements.

For guarantees provided by the Group for general business partners, those with the longest guarantee period will
expire on March 31, 2025.
Currently there is no litigation, arbitration, or other legal proceedings that may have a significant impact on theGroup’s financial position or operating results. However, the Group gives no guarantee that there is no possibility thatsuch significant lawsuits or other legal proceedings may be filed with regard to the Group’s operating activities inJapan and overseas in the future that may have a negative impact on the Group’s financial position and operating
results.
41.

Collateral

The components of assets pledged as collateral and their corresponding debts are shown below:
As of March 31, 2017
Assets pledged as collateral
Trade receivables
Investments accounted for by the equity method
Other investments
Non-current financial assets other than investments
Property, plant and equipment
Total
Corresponding debts
Short-term bonds and borrowings
Trade payables
Non-current bonds and borrowings
Total(Millions of yen)
As of March 31, 2018

80
–
13
1,206
12,809

95
2,312
16
1,469
12,535

14,10816,427

868
228
9,645

967
257
8,852

10,741

10,076

In addition to the above, other investments pledged as substitute for brokerage margin payments for commodity
futures transactions as of March 31, 2017 and 2018 were ¥1,589 million and ¥1,772 million, respectively.
42.

Events after the Reporting Period

No items to report.

ENEX REPORT 2018 124- 61 -

ENEX REPORT 2018 125

Company Information

Stock information

Corporate overview

Shares and shareholders

General meeting of shareholders

Authorized shares・・・・・・・・・・・・・・・ 387,250,000

Regular general meeting of shareholders

Company nameHead office address

Held annually in June

Basis dates*Planned to move to the following (February 2019~)

For regular general meeting of shareholders: March 31 of each year
For year-end dividends: March 31 of each year
For interim dividends: September 30 of each year

Name

January 28, 1961

Paid-in capital

19,877.67 million yen

Main sites

Kita-Nihon, Higashi-Nihon, Chubu,
Kansai, Chushikoku, Kyushu(Other sales facilities are located acrossJapan.)

Stake (%)

ITOCHU Corporation

60,978

53.97

Japan Trustee Services Bank, Ltd. (trust account)

4,504

3.99

The Master Trust Bank of Japan, Ltd. (trust account)

4,174

3.69

(equity method applied)

Enex Fund

3,025

2.68

Japan Trustee Services Bank, Ltd. (trust account 9)

2,207

1.95

Numberof employees

2,010

1.78

Nippon Life Insurance Co.

1,542

1.36

GOVERNMENT OF NORWAY

1,411

1.25

1,239

1.10

MAEDA ROAD CONSTRUCTION Co., Ltd

957

0.85

21

656 (non-consolidated basis,including 205 at subsidiaries)
5,613 (consolidated basis)

Stock exchange
listing

Tokyo (first section; stock name: ENEX);
securities code: 8133

Main financial
institutions

Sumitomo Mitsui Trust Bank, Ltd.;
Sumitomo Mitsui Banking Corp.; Resona
Bank, Ltd.; Mizuho Bank, Ltd.

Higashi-Nihon Branch

GeneralMeetings ofShareholders

President

MobilityLife Department

Power & Heat
Buisiness Development
Department

URL: https://www.itcenex.com/corporate/commercial/

11.3%

180%

This report uses environmentally friendly vegetable oil ink.
Also, it is created by E3PA's gold plus standards that is gentle to the global environment.
(E3PA: Environmental Protection Printing Promotion Council http://www.e3pa.com)
This printed material selects a universal design font that allows for more appropriate
information to be conveyed to more people. It is excellent in visibility and readability withcharacters that have plenty of space, and it has a simple shape that prevents misreadingand has readability and high designability. By repeating the verification under difficult
conditions, it is designed to be easily recognized by a wide range of age without being
influenced by vision and environment.

160%

Banking

15.9%
individual

15.7%

Other domestic

140%

56.4%

120%
100%
80%

Itochu Enex

TOPIX

60%
April 1, 2014

ENEX REPORT 2018 126

April 1, 2015

April 1, 2016

April 1, 2017

April 1, 2018

Power Project Financial
Department
Planning & Administration
Department

Finance & General
Accounting Department
Human Resources &General Affairs Department
IT Planning Department
Legal & Credit Control
Department

Company Information

Foreign

Power & Supply
Management Department

Data Section■・Company CM is also published on the website.

Corporate Administration Division

Financial instruments broker

220%Power Sales Department

Administration
Department

Selected as a constituent of the FY2018 JPX-Nikkei Mid and Small Cap Index.

220%

International Supply &Logistics Department

CIO

Share price trend

0.7%

Marine Fuels Department

CFO
CCO

Power & Utility Division

Shareholding ratio by owners

Kyushu Branch
Asphalt Department

Administration
Department

Audit &
Supervisory
Board Members

Power & Utility GroupURL: https://www.itcenex.com/english

Chushikoku Branch

Planning & Administration
Department■・Detailed company information is released on our website.

* Excluding treasury stock (3,893 thousand shares)

Kansai Branch

Supply Department
Audit &
Supervisory
Board

Board ofDirectors

Chubu BranchManagement

Itochu Enex Employee Stock Ownership Plan

Affiliates

Tohoku Branch

Segment

JXTG Holdings, Inc.

Subsidiaries

53

Administration Department

Strategy

Shares (thousand)

Planning & Administration
Department

Hokkaido BranchLife & Industrial Energy DivisionPrincipal Shareholders

Established

Security System
Department

Our Vision

Sumitomo Mitsui Trust Bank, Ltd., Stock Transfer Agency Business
Planning Dept.

3-2-5, Kasumigaseki, Chiyoda-ku,
Tokyo, Japan

Energy & Logistics Group

List of shareholders managed by:

2-10-1, Toranomon, Minato-ku,
Tokyo 105-8430, Japan

This is , ENEX

Number of shareholders・・・・・・・・・・・・・・・ 8,061
Number of shares per trading unit・・・・・・・・・・・ 100

As of April 1, 2018

Home-Life Division

Number of shares issued and outstanding・・・ 116,881,106

Organization Chart
As of March 31, 2018

As of March 31, 2018

Corporate Planning
Department
Audit Department

ENEX REPORT 2018 127

https://www.itcenex.com/english/

Published in September 2018