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Basic Principles for Internal Control over Financial Reporting (ICOFR)

To maintain and enhance the credibility of Sojitz Corporation within the market and society as a listed company, the company recognizes reliability of financial reporting as one of the most important business objectives and following the “Internal Control Report System”under Article 24-4-4 of the Financial Instruments and Exchange Law, the Company has resolved the following basic principles

1. Establishment of Essential Financial Reporting Principles

ü Sojitz Corporation and its group companies shall always choose the most appropriate accounting standards, incorporate them into internal regulations, make them known to all the executives and employees of the company and its group companies, and have accountings made based on such standards.

ü All the executives and employees of the company and its group companies shall be made understood that the misstatement of financial reporting caused by dishonesty or other intention, or by misunderstanding of accounting standards or carelessness leads to unreliability of the financial reporting of the company and its group companies, and the executive or employee causing such misstatement will be sanctioned strictly.

2. Establishment of Organization Structure and Job Regulations/Business Procedures for Reliable Financial Reporting

ü The board of directors of Sojitz Corporation shall understand and fulfill their responsibilities for appropriately supervising and monitoring the management in regard to the financial reporting and relevant internal controls

ü A suitable organizational structure shall be established and segregation of duties, delegation of authority and responsibilities to personnel in charge shall be set up in order to ensure reliable financial reporting

ü Risks which may lead to critical misstatements shall be identified and analyzed, and the internal controls that can cover/mitigate the risks shall be established.

ü A structure to monitor internal control concerning financial reporting shall be introduced and an organizational formation shall be established to resolve any issues/problems arise from the monitoring activities

ü A structure shall be established to ensure that important information relevant to internal controls over financial reporting and risks associated therewith can be identified, captured, and communicated among appropriate executives, managers and persons in charge on a timely basis

3. Use of IT in Internal Control over Financial Reporting:

The importance of IT relevant to the internal control concerning financial reporting shall be recognized and technology (IT) should be leveraged effectively to cover/mitigate risks and to maintain appropriate internal control level.

4. Enforcement of "Management Assessment and Reporting of ICOFR" based on the Financial Instruments and Exchange Law:

ü “Management Assessment and Reporting of ICOFR” for the entire Sojitz group shall be established. Concrete approaches and plans are to be defined separately.

ü Any deficiencies and significant defects found through the process of “Management Assessment and Reporting of ICOFR” shall be corrected/remediate promptly.

30th April, 2008, Resolution by the Board of Directors of Sojitz Corporation

Internal Control Administration Department (ICAD), Tokyo

Title Basic Principles for Internal Control over Financial Reporting (ICOFR)

May 1st, 2008

Attention All executives and employees of Sojitz Corporation and Sojitz Group Companies

Issued from Sojitz Corporation Internal Control Administration Department (ICAD), Tokyo As a continuous effort to strengthen internal control over financial reporting defined under the Financial Instruments and Exchange Law (also known as the Japanese version of Sarbanes-Oxley Act, or. J-SOX) which was enforced in year 2008, the Board of Directors of Sojitz Corporation has made the resolution on "Basic Principles for Internal Control over Financial Reporting (ICOFR)" (hereinafter “Basic Principles for ICOFR") on 30th April, 2008 to follow the ‘’Internal Control Report System’’ based on this new regulation.

Following this resolution, “Management Assessment and Reporting of ICOFR” will be established and  carried out in the order as “2008 Fiscal Year ICOFR Management Assessment and Reporting Guideline (Tentative Title)” and “2008 Fiscal Year ICOFR Management Assessment and Reporting Plan (Tentative Title)” to be formulated. As a request from ICAD, all personnel shall grasp the key concepts of “Basic Principles for ICOFR” and give in best efforts to comply with this resolution and to faithfully operate business procedures accordingly.

< Framework of the Basic Principles>

1. Establishment of Essential Financial Reporting Principles

ü Selection and enforcement of suitable accounting treatments in accordance with appropriate financial principles and disclosure policies.

Monitoring of identified departures from approved policies and procedures or violations of the code of conduct, and enforcement of strict disciplinary action.

2. Establishment of Organization Structure and Job Regulations/Business Procedures for Reliable Financial Reporting

ü Supervision and monitoring of the board of directors on the management in regard to the financial reporting and relevant internal controls

ü Clarification in segregation of duties, delegation of authority and responsibilities to personnel in charge

ü Recognition of misstatement risks and establishment of ICOFR

ü Establishment of the scheme for monitoring and reporting routes

Establishment of the scheme to ensure that important information relevant to operating the business and to maintaining and recording of ICOFR, is identified, captured, and communicated to the appropriate individuals of the organization on a timely basis

3. Use of IT in Internal Control over Financial Reporting:

Recognition of the importance of IT and to control/mitigate risks

Enforcement of "Management Assessment and Reporting of ICOFR" based on the Financial Instruments and Exchange Law:

ü Promoting of faithful business operations

Prompt response/correction of identified deficiencies and significant defects

 

 
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