6-K 1 d118225d6k.htm FORM 6-K FORM 6-K

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 OF THE

SECURITIES EXCHANGE ACT OF 1934

For the month of May 2021

Commission File Number 001-34919

SUMITOMO MITSUI FINANCIAL GROUP, INC.

(Translation of registrant’s name into English)

1-2, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-0005, Japan

(Address of principal executive offices)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

   Form 20-F ☒    Form 40-F ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

     

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

     

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

   Yes  ☐    No ☒

* If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):

   82-                 

THIS REPORT ON FORM 6-K SHALL BE DEEMED TO BE INCORPORATED BY REFERENCE INTO THE PROSPECTUS FORMING A PART OF SUMITOMO MITSUI FINANCIAL GROUP, INC.’S REGISTRATION STATEMENT ON FORM F-3 (FILE NO. 333-228913) AND TO BE A PART OF SUCH PROSPECTUS FROM THE DATE ON WHICH THIS REPORT IS FURNISHED, TO THE EXTENT NOT SUPERSEDED BY DOCUMENTS OR REPORTS SUBSEQUENTLY FILED OR FURNISHED.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  Sumitomo Mitsui Financial Group, Inc.
  By:    

  /s/ Jun Okahashi

    Name:   Jun Okahashi
    Title:   General Manager, Financial Accounting Dept.

Date:    May 31, 2021


This document has been translated from a Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail. Sumitomo Mitsui Financial Group, Inc. assumes no responsibility for this translation or for direct, indirect or any other forms of damages arising from the translation.

Documents Attached to the Notice of Convocation of the Ordinary General Meeting of Shareholders

Business Report for the 19th Fiscal Year

April 1, 2020 to March 31, 2021

 

Sumitomo Mitsui Financial Group, Inc.


(Documents Attached to the Notice of Convocation of the Ordinary General Meeting of Shareholders)

Business Report for the 19th Fiscal Year

(April 1, 2020 to March 31, 2021)

1.  Matters Regarding the Current Condition of the Company

 

(1)

Business Progress and Results of the Group

Economic and Financial Environment

During fiscal 2020 (fiscal year ended March 31, 2021), following the major slowdown due to the spread of the 2019 novel coronavirus disease (COVID-19), the global economy returned to the path of recovery, thanks to positive fiscal policy and monetary easing policy around the world and restart of economic activities. However, since last fall, the pace of recovery slowed down as the spread of COVID-19 in each country gained momentum again. As for the Japanese economy, personal consumption showed a drastic slump due to factors such as restraint of sales activities in response to the state of emergency declared in April last year, and exports also showed a drastic slowdown affected by the deterioration of the global economy. Afterwards, personal consumption as well as exports started to increase thanks to the resumption of economic activities both domestically and globally, along with the recovery in capital investment, in particular by IT investments for promoting working from home, which, however, has been reversed from January 2021 onward as the state of emergency was declared again, with growing downward pressure on consumption activities not least those involving food service or accommodation.

In the Japanese financial and capital markets, short-term interest rates trended largely within a range between minus 0.07% and minus 0.01% led by the Bank of Japan (BOJ)’s Quantitative and Qualitative Monetary Easing with Yield Curve Control. Long-term interest rates, meanwhile, trended largely within a range between 0% and 0.05% but temporarily rose to the 0.16% range in February this year, in line with the increase in the long-term interest rates in the U.S. supported by the surging expectation of economic recovery, followed thereafter by a period up to fiscal year end in which the interest rate was trending around 0.1% level. In the areas of foreign exchange, yen appreciated up until early January this year reaching the range of 102 yen per U.S. dollar buoyed by an expectation of prolonged low interest rates in the U.S. However, it was followed by a period of weaker yen up until the fiscal year end, resulting in the exchange rate beyond the level of 110 yen per U.S. dollar. The Nikkei Stock Average recovered to the level of 30,000 yen for a while in February this year, backed up by an anticipation of the improvement in corporate earnings associated with the recovery of the global economy, to be followed by a calming-down period up to the end of the fiscal year in which the index was trending around the range of 29,000 yen due to the growing concerns over the potential increase in the long-term interest rates in the U.S.

Regarding financial-related laws and regulations, the “Act for Partial Amendments to the Act on the Sales of Financial Instruments, etc. for the Enhancement of the Convenience for and the Protection of Users of Financial Services” was enacted in June last year, which involves the establishment of financial services intermediary business and the review of the regulations on funds transfer service providers. Furthermore, in January this year, amendment was also made to the “Principles Concerning Customer-Oriented Business Conduct” published by the Financial Services Agency, whereby financial business operators are now required to clarify the status of compliance with each item under the aforementioned principles.

Business Progress and Results

Under these economic and financial circumstances, Sumitomo Mitsui Financial Group, Inc. (hereinafter, “the Company”) and its subsidiaries (hereinafter, collectively with the Company, “the Group”), conducting mainly commercial banking and other financial services, including leasing, securities, and consumer finance, have been working hard to fulfill its social mission of providing financial services smoothly, despite the enormous impact on customers and society caused by the spread of COVID-19. Specifically, in order to meet the urgent financial needs of customers, Sumitomo Mitsui Banking Corporation took measures including the smooth funding and loans with lower interest rate burden for customers using special operations by the BOJ, and more flexible loan examination procedures, while the Group expanded online services for various procedures so that various services are available for customers without visiting its branches. In addition, as a contribution to the local communities and society, support was provided for medical research, medical activities, and the promotion of culture and arts. Furthermore, services have been continued while ensuring the safety of its customers and employees by preventing the spread of COVID-19 at business offices and promoting working from home among its employees.

 

1


In the first year of the Medium-Term Management Plan to realize the vision of “Becoming a highly trusted global solution provider committed to the growth of our customers and advancement of society,” the Company has been implementing various initiatives based on the three core policies that the Company has established to achieve sustainable growth for the Group.

 

 

<Business Strategy>

With the aim of improving the profitability and efficiency of the main businesses and expanding the revenue base, the Group has focused on the following seven key strategies, prioritizing thoroughly the allocation of resources to businesses, working to fundamentally reform the Group’s business model and cost structure, steadily making investments for the future, and striving to capture new growth opportunities and create added value including non-financial business.

 

 

 

(Note 1)

 

CIB stands for Corporate and Investment Banking, a business model for corporate customers in which commercial banking business such as deposits and loans, and investment banking business such as fund raising in capital markets and M&A advisory are developed together.

Specifically, the following initiatives were advanced in the Retail, Wholesale, Global, and Global Markets Business Units.

(a) Retail Business Unit

The Retail Business Unit engages mainly in business aimed at retail customers.

In order to pursue the sustainable growth of the wealth management business, a new brand, SMBC Private Wealth, was launched mainly targeting high-net-worth individuals, and established a one-stop system to provide various services that had been provided separately by each company in the Group. In addition, Sumitomo Mitsui Banking Corporation promoted the shift of its branches from conventional ones to ones that focus on providing customers with wealth management consultations by improving efficiency through the use of IT technology. With regard to the payment business, Sumitomo Mitsui Card Company, Limited implemented a full-scale launch of “stera,” a comprehensive payment platform for businesses, in order to meet the growing needs of customers for cashless services. In the consumer finance business, SMBC Consumer Finance Co., Ltd. continued to focus on initiatives such as the implementation of “App Loans” service, which allows customers to complete the entire process starting from application to completion of loan using a smartphone app, in an effort to improve customer convenience.

 

2


(b) Wholesale Business Unit

The Wholesale Business Unit engages in business mainly aimed at corporate clients in Japan.

In the midst of a drastically changing market and business environment, sales and product development departments have worked together to conduct business promotion for customers confronting increasingly sophisticated and complex management issues, and have provided high value-added services such as support for corporate acquisitions domestically and globally. In addition, for customers who suffered from struggling business performance and financial deterioration due to COVID-19, smooth funding and support for fund procurement in the capital market was provided, and mainly through SMBC Capital Partners Co., Ltd. which was established in February last year, supported business structure reform, business model reform, and business succession. Furthermore, through “PlariTown,” a platform that provides one-stop access to the digital services of the Group and various service providers collaborating with the Group, the Group has been providing various digital solutions including non-financial services such as an electronic contract service provided by SMBC CLOUDSIGN, Inc. and support for the introduction of working from home.

(c) Global Business Unit

The Global Business Unit engages in business aimed at Japanese and non-Japanese corporate clients and financial institutions operating business overseas, and foreign corporate clients operating inside Japan.

For overseas customers, the Global Business Unit has worked to further refine the CIB business and provided Group-wide solutions in areas such as support in corporate acquisition and bond underwriting. In addition, expansion in businesses in which the Group has strengths, such as subscription finance, a type of financing method for real estate funds, was continued. In Asia, in order to establish a comprehensive financial group centered the consolidated subsidiary, PT Bank BTPN Tbk in Indonesia, the Global Business Unit has reinforced business foundations by measures such as strengthening digital banking.

(d) Global Markets Business Unit

The Global Markets Business Unit carries out ALM operations (Note 2) that comprehensively manage the liquidity risk and interest rate risk, and provides customers with services through marketable products such as foreign currency, derivatives, bonds, and stocks.

Amidst significant fluctuations in the market environment due to factors including the spread of COVID-19 and monetary policies on a global level, the Global Markets Business Unit secured profits by boldly and flexibly replacing the portfolio in investments of bond and other assets. In addition, by strengthening the global collaboration among the Group companies led by SMBC Nikko Securities Inc., the solution for financial needs to meet the diverse investment needs of corporate and investor clients were promoted.

 

(Note 2)

 

Asset Liability Management: A risk management method that optimizes future asset and liability balance and seeks to maximize revenue.

Furthermore, the Group strengthened the asset management business with high asset efficiency by investing in Affirmative Investment Management Partners Limited, a U.K.-based asset management company, and by making Alternative Investment Capital Limited, which has one of the prominent operating bases in the private equity fund investment field in Japan, a subsidiary.

<Management Base>

In order to realize sustainable growth as a global financial institution, consistent effort has been made to enhance the management system and corporate infrastructure.

First, the Group has ensured customer-oriented approach as a basic management policy, by taking measures such as the preparation of proposal materials that take universal design into consideration in order to provide information that is easy for customers to understand.

 

3


As part of the effort to realize a sustainable society, the Company has launched “GREEN × GLOBE Partners” as a community to solve environmental and social issues, and issued disclosure reports in line with the recommendations of the Task Force on Climate-related Financial Disclosure (TCFD (Note 3)). In addition, Sumitomo Mitsui Banking Corporation and SMBC Nikko Securities Inc. have worked proactively to address risks in climate change by focusing on investment and finance (green finance) that limits the use of funds to environmentally-friendly projects.

Moreover, the Group took steps to sophisticate its human resource management and development, including the focused allocation of personnel from each company in the Group to business domains with growth potential, as well as the construction of IT infrastructure that combines improved customer convenience with robust cyber security, such as expanded measures to prevent unauthorized withdrawal of funds via payment service providers.

Furthermore, with the aim of further strengthening the management system on a global basis, the Company transferred the risk management and compliance functions of the major overseas offices to independent departments and appointed an Outside Director as a Chairman of the Risk Committee, an internal committee of the Board of Directors, in order to strengthen independence of the Risk Committee.

 

(Note 3)

 

Task Force on Climate-related Financial Disclosures: Established by the Financial Stability Board to enhance corporate disclosure on climate change.

As a result of these initiatives, the Company recorded consolidated ordinary profit and consolidated profit attributable to owners of parent of 711.0 billion yen and 512.8 billion yen, respectively, in fiscal 2020.

[Summary of Performance]

Sumitomo Mitsui Financial Group (Consolidated)

 

 

 

 

 

                    FY2019                     

 

 

 

 

 

 

 

                    FY2020                     

 

 

 

 

Ordinary profit

 

 

 

 

 

932.0 billion yen

 

 

 

 

 

 

 

711.0 billion yen

 

 

 

 

Profit attributable to owners of parent

 

 

 

 

 

703.8 billion yen

 

 

 

 

 

 

 

512.8 billion yen

 

 

 

 

(Note)

  Amounts less than one hundred million yen have been rounded down.

Sumitomo Mitsui Banking Corporation (Non-Consolidated) (For reference)

 

 

 

 

 

                    FY2019                     

 

 

 

 

 

 

 

                    FY2020                     

 

 

 

 

Ordinary profit

 

 

 

 

 

483.9 billion yen

 

 

 

 

 

 

 

436.0 billion yen

 

 

 

 

Net income

 

 

 

 

 

317.3 billion yen

 

 

 

 

 

 

 

338.0 billion yen

 

 

 

 

(Note)

  Amounts less than one hundred million yen have been rounded down.

Issues to be Addressed

While COVID-19 continues to have an enormous impact on customers and society, the Group will continue to fulfill the social mission as financial infrastructure essential for maintaining social functions, by providing financial services through the Group and striving to further digitize and adopt cashless services.

In addition, the Group will accelerate the achievement of measures based on the three core policies mentioned above, taking into account the changes in lifestyles and values triggered by COVID-19, and the growing momentum toward the realization of a sustainable society, while addressing medium-term and long-term issues such as global continuous of low growth, low interest rates, and low inflation, and structural changes in the society and the economy due to the advancement of technology.

 

4


<Business Strategy>

The Group will continue to focus on the seven key strategies, while prioritizing thoroughly the allocation of resources to businesses, working to fundamentally reform its business model and cost structure, steadily making investments for the future, and striving to capture new growth opportunities and create additional value, including non-financial business.

Specifically, in the Retail Business Unit, the Group will seek to increase the profitability of the wealth management business by utilizing digital technology and strengthening the ability to respond to high-net-worth individuals, as well as to expand its market share and improve profitability in the payment and consumer finance businesses. In the Wholesale Business Unit, the Group will aim to increase non-interest income by strengthening the ability to respond to needs for financial soundness and business restructuring, as well as by strengthening the ability to provide solutions, including non-financial services. In the Global Business Unit, the Group will work to further strengthen the competitiveness of the CIB business and expand its business platform in Asia. In the Global Markets Business Unit, the Group will strive to secure profits by nimble portfolio management of stocks and bonds in response to changes in the market environment, and will also work to strengthen the ability to provide solutions that meet the diverse investment targets of customers. In addition, the Group will continue to focus on strengthening the asset management business as a business with high asset efficiency.

<Management Base>

The Group will make a consistent effort to enhance the management system and corporate infrastructure as a global financial institution to realize sustainable growth.

Specifically, the Group will set short-term, medium-term, and long-term targets for climate change-related efforts to realize a sustainable society, and consider policies for addressing businesses that are expected to have a relatively large impact on climate change. In addition, as a key measure of the long-term plan for sustainability “SMBC Group GREEN × GLOBE 2030”, the Group will further promote initiatives for investing and financing in environment-related fields and enhancement of financial and economic education for all generations. Furthermore, the Group will strengthen its corporate governance system for sustainable society initiatives by appointing a Group Chief Sustainability Officer (CSuO) and considering the prompt establishment of a Sustainability Committee as an internal committee of the Board of Directors.

In addition, the Group will continue to improve the refinement of personnel allocation and organizational productivity so that each employee can maximize his or her capabilities, and the Group will also further promote strategic system investment and cyber security enhancement to drive business transformation through digitalization. Furthermore, as a basic management policy, the Group will continue to ensure its customer-oriented approach and strengthen its efforts to enhance the integrity of risk management and compliance on a group and global basis.

The Group aims to respond to shareholder expectations by showing steady results regarding the initiatives described above. The Group looks forward to the continued understanding and support of its shareholders.

 

5


(2)

Changes in Financial Position and Results of Operations (Consolidated Basis and Non-Consolidated Basis)

a.  Changes in Financial Position and Results of Operations (Consolidated Basis)

Unit: millions of yen

     

 

FY2017  

(Fiscal year ended  
March 31, 2018)  

 

  

FY2018  

(Fiscal year ended  
March 31, 2019)  

 

  

FY2019  

(Fiscal year ended  
March 31, 2020)  

 

  

FY2020  

(Fiscal year ended  
March 31, 2021)  

 

         

Ordinary income

 

  

4,777,018     

 

  

4,804,428     

 

  

4,591,873     

 

  

3,902,307     

 

         

Ordinary profit

 

  

1,164,113     

 

  

1,135,300     

 

  

932,064     

 

  

711,018     

 

         

Profit attributable to owners of parent

 

  

734,368     

 

  

726,681     

 

  

703,883     

 

  

512,812     

 

         

Comprehensive income

 

  

984,133     

 

  

795,191     

 

  

372,971     

 

  

1,465,014     

 

         

Net assets

 

  

11,612,892     

 

  

11,451,611     

 

  

10,784,903     

 

  

11,899,046     

 

         

Total assets

 

  

199,049,128     

 

  

203,659,146     

 

  

219,863,518     

 

  

242,584,308     

 

(Notes)

  1.  

Amounts less than one million yen have been rounded down.

  2.  

The Company has 177 consolidated subsidiaries and 98 unconsolidated subsidiaries and related companies accounted for by the equity method as of March 31, 2021.

  3.  

The Company has changed the recognition of installment-sales-related income and installment-sales-related expenses from fiscal 2020, and as a result of comparing before and after the retroactive application, ordinary income decreased by 987,154 million yen for fiscal 2017, 930,884 million yen for fiscal 2018, and 722,440 million yen for fiscal 2019.

 

6


b.   Changes in Financial Position and Results of Operations (Non-Consolidated Basis)

Unit: millions of yen

               

 

FY2017  

(Fiscal year ended  

March 31, 2018)

 

  

 

FY2018  

(Fiscal year ended  

March 31, 2019)  

 

  

 

FY2019  

(Fiscal year ended  

March 31, 2020)  

 

  

 

FY2020  

(Fiscal year ended  

March 31, 2021)  

 

 

Operating income

 

  

 

366,321      

 

  

 

522,543     

 

  

 

833,835     

 

  

 

483,459     

 

   

 

Dividends received

 

  

 

257,001     

 

  

 

371,805     

 

  

 

659,428     

 

  

 

304,866     

 

     

 

Dividends received from banking subsidiaries

 

  

 

223,334     

 

  

 

325,332     

 

  

 

637,702     

 

  

 

272,952     

 

     

 

Dividends received from other subsidiaries

 

  

 

31,034     

 

  

 

40,281     

 

  

 

10,701     

 

  

 

23,440     

 

 

Net income

 

  

 

229,300     

 

  

 

474,196     

 

  

 

636,128     

 

  

 

281,966     

 

 

Earnings per share

 

  

 

(yen)     

162.57     

 

  

 

(yen)     

339.29     

 

  

 

(yen)     

462.60     

 

  

 

(yen)     

205.78     

 

 

Total assets

 

  

 

12,104,930     

 

  

 

12,991,386     

 

  

 

14,225,470     

 

  

 

15,025,382     

 

     

 

Investments in banking subsidiaries

 

  

 

4,613,843     

 

  

 

4,613,790     

 

  

 

4,613,790     

 

  

 

4,613,790     

 

       

 

Investments in other subsidiaries

 

  

 

1,489,721     

 

  

 

1,265,717     

 

  

 

1,533,632     

 

  

 

1,533,207     

 

(Notes)

  1.  

Amounts less than one million yen have been rounded down.

  2.  

“Partial Amendments to Accounting Standard for Tax Effect Accounting” (ASBJ Statement No. 28, February 16, 2018) has been adopted from fiscal 2018, whereby deferred tax assets are presented under investments and other assets, while deferred tax liabilities are presented under fixed liabilities. This change has been reflected in fiscal 2017 as well.

 

7


(3)

Employees of the Group

 

     March 31, 2021
           
     Wholesale   Business Unit      Retail   Business Unit      Global   Business Unit      Global  Markets  Business Unit        Head Office       Account    

 

Number of employees

 

  

9,193    

 

  

31,285    

 

  

29,875    

 

  

1,533    

 

  

14,895    

 

(Notes)

  

1.

  

The number of employees is the number of persons engaged in the Group, including local staff overseas, but not including employees on short-term contracts and temporary employees (13,200 persons as of March 31, 2021).

  

2.

  

The number of employees is the number of persons engaged in the Company and consolidated subsidiaries.

  

3.   

  

The businesses handled by each business unit are the following.

     

Wholesale Business Unit:

  Businesses dealing with domestic medium-to-large-sized and small-to-medium-sized enterprises
     

Retail Business Unit:

  Businesses mainly dealing with domestic individual customers
     

Global Business Unit:

  Businesses dealing with international (including Japanese) corporate customers
     

Global Markets Business Unit:

  Businesses dealing with financial markets
     

Head Office account:

  Businesses other than those above

 

8


(4)

Principal Offices of the Group

 

Company name      Reportable segment     Principal office          Number of branches 
    As of March 31,     2021  

Sumitomo Mitsui Banking Corporation

 

Wholesale Business Unit

Retail Business Unit

Global Business Unit

Global Markets Business Unit

  Domestic      

Head Office

 

Tokyo Main Office  

 

Osaka Head Office

 

Kobe Main Office, etc.

  959  
  Head Office Account   Overseas   New York Branch, etc.  

44  

SMBC Trust Bank Ltd.

 

Wholesale Business Unit

Retail Business Unit Global Business Unit

  Head Office, etc.       35  

SMBC Nikko Securities Inc.

 

Wholesale Business Unit

Retail Business Unit Global Business Unit Global Markets Business Unit

Head Office Account

  Head Office, etc.    

Sumitomo Mitsui Card Company, Limited

 

Wholesale Business Unit

Retail Business Unit

 

Tokyo Head Office

Osaka Head Office, etc.

   

SMBC Finance Service Co., Ltd.

 

Wholesale Business Unit

Retail Business Unit

 

Head Office

Tokyo Head Office, etc.

   

SMBC Consumer Finance Co., Ltd.

  Retail Business Unit   Head Office, etc.    

The Japan Research Institute, Limited

  Head Office Account  

Tokyo Head Office

Osaka Head Office, etc.

   

Sumitomo Mitsui DS Asset Management Company, Limited

  Head Office Account   Head Office, etc.    

  (Note)

 

The businesses handled by each business unit are the following.

 

Wholesale Business Unit:

  

Businesses dealing with domestic medium-to-large-sized and small-to-medium-sized enterprises

 

Retail Business Unit:

  

Businesses mainly dealing with domestic individual customers

 

Global Business Unit:

  

Businesses dealing with international (including Japanese) corporate customers

 

Global Markets Business Unit:

  

Businesses dealing with financial markets

 

Head Office account:

  

Businesses other than those above

 

9


(5)

Capital Investment of the Group

a. Total Amount of Capital Investment

Unit: millions of yen

Company name    

 

Reportable segment

 

  

 

 

 

 

    Amount         

 

 

 

 

Sumitomo Mitsui Financial Group, Inc.

 

Head Office Account

     44,726  

Sumitomo Mitsui Banking Corporation

 

Wholesale Business Unit

Retail Business Unit

Global Business Unit

Global Markets Business Unit

Head Office Account

     130,033  

SMBC Trust Bank Ltd.

 

Wholesale Business Unit

Retail Business Unit

Global Business Unit

     4,632  

SMBC Nikko Securities Inc.

 

Wholesale Business Unit

Retail Business Unit

Global Business Unit

Global Markets Business Unit

Head Office Account

     33,678  

Sumitomo Mitsui Card Company, Limited

 

Wholesale Business Unit

Retail Business Unit

     22,195  

SMBC Finance Service Co., Ltd.

 

Wholesale Business Unit

Retail Business Unit

     8,279  

 

SMBC Consumer Finance Co., Ltd.

 

 

Retail Business Unit

 

    

 

15,447

 

 

 

 

The Japan Research Institute, Limited

 

 

Head Office Account

 

    

 

9,757

 

 

 

 

Sumitomo Mitsui DS Asset Management Company, Limited

 

 

Head Office Account

 

    

 

4,089

 

 

 

 

Others

 

 

-

 

    

 

41,119

 

 

 

 

Total

 

        

 

313,959

 

 

 

(Notes)    1.    Amounts less than one million yen have been rounded down.
   2.    The businesses handled by each business unit are the following.
      Wholesale Business Unit:   Businesses dealing with domestic medium-to-large-sized and small-to-medium-sized enterprises
      Retail Business Unit:   Businesses mainly dealing with domestic individual customers
      Global Business Unit:   Businesses dealing with international (including Japanese) corporate customers
      Global Markets Business Unit:   Businesses dealing with financial markets
      Head Office account:   Businesses other than those above

b. Establishment of Principal Facilities, etc.

Unit: millions of yen

 

Company name  

 

 

 

Reportable segment  

 

 

 

Description  

 

  

 

 

 

 

    Amount    

 

 

 

 

Sumitomo Mitsui Financial Group, Inc.

 

Head Office Account

 

Branch facilities, etc.

     41,196  

Sumitomo Mitsui Banking Corporation

 

Wholesale Business Unit

Retail Business Unit

Global Business Unit

Global Markets Business Unit

Head Office Account

 

Branch facilities, etc.

     24,005  
 

Software

     82,668  

(Notes)

  

1.

  

Amounts less than one million yen have been rounded down.

  

2.

  

The businesses handled by each business unit are the following.

     

Wholesale Business Unit:

 

Businesses dealing with domestic medium-to-large-sized and small-to-medium-sized enterprises

     

Retail Business Unit:

 

Businesses mainly dealing with domestic individual customers

     

Global Business Unit:

 

Businesses dealing with international (including Japanese) corporate customers

     

Global Markets Business Unit:

 

Businesses dealing with financial markets

     

Head Office account:

 

Businesses other than those above

 

10


(6)

Parent Company and Principal Subsidiaries, etc.

 

a.  

Parent Company

Not applicable.

 

b.  

Principal Subsidiaries, etc.

 

Company name         Location         Main business       

Capital    

(millions of    
yen)    

   Percentage    
of the    
Company’s    
voting    
rights (%)    
       Other    

 

Sumitomo Mitsui Banking Corporation

 

   Chiyoda-ku, Tokyo    Commercial banking    1,770,996      100.00    -

 

SMBC Trust Bank Ltd.

 

   Minato-ku, Tokyo    Commercial banking and trust services    87,550     

100.00

(100.00)

   -

 

Sumitomo Mitsui Finance and Leasing Company, Limited

 

   Chiyoda-ku, Tokyo    Leasing    15,000      50.00    -

 

SMBC Nikko Securities Inc.

 

   Chiyoda-ku, Tokyo    Securities    10,000      100.00    -

 

Sumitomo Mitsui Card Company, Limited

 

   Chuo-ku, Osaka    Credit card    34,000      100.00    -

 

SMBC Finance Service Co., Ltd.

 

   Naka-ku, Nagoya   

Credit card and

Installment

Transaction business

   82,843     

100.00

(100.00)

   -

 

SMBC Consumer Finance Co., Ltd.

 

   Chuo-ku, Tokyo    Consumer lending    140,737      100.00    -

 

The Japan Research Institute, Limited

 

   Shinagawa-ku, Tokyo   

System development,

data processing, management consulting, and economic research

   10,000      100.00    -

 

Sumitomo Mitsui DS Asset Management Company, Limited

 

   Minato-ku, Tokyo    Investment advisory and investment trust management    2,000      50.12    -

 

SMBC Bank International plc

 

   London, U.K.    Commercial banking   

354,279  

[USD 3.2 billion] 

  

100.00

(100.00)

   -

 

Sumitomo Mitsui Banking Corporation (China) Limited

 

   Shanghai, People’s Republic of China    Commercial banking   

168,600  

[RMB 10   billion] 

  

100.00

(100.00)

   -

 

PT Bank BTPN Tbk

 

   Jakarta, Republic of Indonesia    Commercial banking   

1,238  

[IDR 162.9 billion] 

  

93.52

(93.52)

   -

 

SMBC Americas Holdings, Inc.

 

   Wilmington, Delaware, U.S.A.    Bank Holding Company   

0  

[USD 2,100] 

  

100.00

(100.00)

   -

 

SMBC Guarantee Co., Ltd.

 

   Minato-ku, Tokyo    Credit guarantee    187,720     

100.00

(100.00)

   -

 

Sumitomo Mitsui Auto Service Company, Limited

 

   Shinjuku-ku, Tokyo    Leasing    13,636      26.82    -

(Notes)

    1.    

The capital has been rounded down to the nearest unit and the percentage of the Company’s voting rights in subsidiaries has been rounded down to the nearest second decimal place.

    2.    

The capital denominated in foreign currency has been translated into Japanese yen at the exchange rate as of the account closing date.

    3.    

Figures in parentheses ( ) in the voting rights column indicate voting rights held indirectly.

    4.    

Cedyna Financial Corporation was merged with SMBC Finance Service Co., Ltd., the Company’s consolidated subsidiary, and changed its name to SMBC Finance Service Co., Ltd.

    5.    

Sumitomo Mitsui Banking Corporation Europe Limited changed its name to SMBC Bank International plc.

 

11


(7)

Major Borrowings

 

Creditor  

  

Balance of borrowings   

(millions of yen)   

   Investment in the Company 
  

Number of shares held

(100 shares)

   Percentage of voting
rights (%)

Sumitomo Mitsui Banking Corporation

   1,278,030    -    -

   (Note) Amounts less than one million yen have been rounded down.

 

(8)

Material Matters regarding Business Transfer, etc.

Not applicable.

 

12


2.  Matters regarding Directors and Corporate Executive Officers

 

(1)

Directors and Corporate Executive Officers

 

  a.

Directors

(As of March 31, 2021)

Name     Position and responsibility   Significant concurrent positions    Other 

Takeshi Kunibe

 

Chairman of the Board

Member of the Nominating Committee

Member of the Compensation Committee

 

Director of Komatsu Ltd.

Director of TAISHO PHARMACEUTICAL HOLDINGS Co., Ltd.

Auditor of Nankai Electric Railway Co., Ltd.

  -

Jun Ohta*

 

Director

Member of the Compensation Committee

  Director of NEC Corporation   -

Makoto Takashima

  Director  

President of Sumitomo Mitsui Banking Corporation

(Representative Director)

  -

Haruyuki Nagata*

  Director   Director of Sumitomo Mitsui Banking Corporation   -

Toru Nakashima*

 

Director

Member of the Risk Committee

  Director of Sumitomo Mitsui Banking Corporation   -

Atsuhiko Inoue

 

Director

Member of the Audit Committee

  Director of Sumitomo Mitsui Banking Corporation   -

Toru Mikami

 

Director

Member of the Audit Committee

  -   -

Yoshihiko Shimizu

  Director   Representative Director, Chairman of the Board of SMBC Nikko Securities Inc.   -

Masayuki Matsumoto

 

Director (outside)

Member of the Nominating Committee

Member of the Audit Committee (Chairman)

  Special Advisor of Central Japan Railway Company   -

Arthur M. Mitchell

 

Director (outside)

Member of the Nominating Committee

Member of the Compensation Committee

 

Attorney at Law, admitted in New York

Registered Foreign Attorney in Japan

Status of other concurrent positions shall be as described in “Concurrent Positions and Other Details on Outside Directors” below.

  -

Shozo Yamazaki

 

Director (outside)

Member of the Audit Committee

Member of the Risk Committee (Chairman)

  Certified Public Accountant   He has considerable expertise in finance and accounting.

 

13


       
Name    Position and responsibility    Significant concurrent positions    Other 

Masaharu Kohno

 

Director (outside)

Member of the Nominating Committee

Member of the Risk Committee

  Status of concurrent positions shall be as described in “Concurrent Positions and Other Details on Outside Directors” below.   -

Yoshinobu Tsutsui

 

Director (outside)

Member of the Nominating Committee (Chairman)

Member of the Compensation Committee

 

Chairman of NIPPON LIFE INSURANCE COMPANY

Status of other concurrent positions shall be as described in “Concurrent Positions and Other Details on Outside Directors” below.

  -

Katsuyoshi Shinbo

 

Director (outside)

Member of the Audit Committee

Member of the Compensation Committee (Chairman)

 

Attorney at Law

Status of other concurrent positions shall be as described in “Concurrent Positions and Other Details on Outside Directors” below.

  -

Eriko Sakurai

 

Director (outside)

Member of the Nominating Committee

Member of the Compensation Committee

 

President of Dow Chemical Japan Limited

Status of other concurrent positions shall be as described in “Concurrent Positions and Other Details on Outside Directors” below.

  -

(Notes)

 

1.

  

Directors Messrs. Masayuki Matsumoto, Arthur M. Mitchell, Shozo Yamazaki, Masaharu Kohno, Yoshinobu Tsutsui, Katsuyoshi Shinbo and Ms. Eriko Sakurai are Outside Directors as provided for in Article 2, Item 15 of the Companies Act.

 

2.

  

To ensure audit effectiveness, the Company has elected two non-executive Directors Messrs. Atsuhiko Inoue and Toru Mikami as full-time members of the Audit Committee.

 

3.

  

Directors with an asterisk (*) concurrently serve as Corporate Executive Officers.

 

4.

  

The Company has designated Directors Messrs. Masayuki Matsumoto, Arthur M. Mitchell, Shozo Yamazaki, Masaharu Kohno, Yoshinobu Tsutsui, Katsuyoshi Shinbo and Ms. Eriko Sakurai as Independent Directors in accordance with the requirements of the financial instruments exchanges in Japan, such as Tokyo Stock Exchange, Inc.

 

5.

  

Changes in positions and responsibilities and in significant concurrent positions as of April 1, 2021:

 

Director   

Haruyuki Nagata

  

Resigned from Director

  
     

Senior Managing Executive Officer of Sumitomo Mitsui

Banking Corporation

  
Director   

Yoshihiko Shimizu

  

Advisor of SMBC Nikko Securities Inc.

  

    Directors who resigned during fiscal 2020

Not applicable.

 

14


  b.

Corporate Executive Officers

(As of March 31, 2021)

Name    Position and responsibility    Significant concurrent positions    Other 

Jun Ohta*

 

President

(Representative Corporate Executive Officer)

Group CEO

  Director of NEC Corporation   -

Gotaro Michihiro

 

Deputy President and Corporate Executive Officer (Representative Corporate Executive Officer)

Co-Head of Wholesale Business Unit

 

Director of Sumitomo Mitsui Banking Corporation

(Representative Director)

  -

Masahiko Oshima

 

Deputy President and Corporate Executive Officer (Representative Corporate Executive Officer)

Head of Global Business Unit

 

Director of Sumitomo Mitsui Banking Corporation

(Representative Director)

  -

Toshikazu Yaku

 

Deputy President and Corporate Executive Officer (Representative Corporate Executive Officer)

Group CHRO

Responsible for General Affairs Dept., Human Resources Dept., Quality Management Dept. and Administrative Services Dept.

 

Director of Sumitomo Mitsui Banking Corporation

(Representative Director)

  -

Katsunori Tanizaki

 

Senior Managing Corporate Executive Officer

Group CDIO

Responsible for Digital Solution Division and Digital Strategy Dept.

 

Senior Managing Executive Officer of Sumitomo Mitsui Banking Corporation

Representative Director, President and CEO of The Japan Research Institute, Limited

  -

Naoki Tamura

 

Senior Managing Corporate Executive Officer

Head of Retail Business Unit

  Senior Managing Executive Officer of Sumitomo Mitsui Banking Corporation   -

Kimio Matsuura

 

Senior Managing Corporate Executive Officer

Co-Head of Wholesale Business Unit

  Senior Managing Executive Officer of Sumitomo Mitsui Banking Corporation   -

Haruyuki Nagata*

 

Senior Managing Corporate Executive Officer

Group CRO

Responsible for Corporate Risk Management Dept., Risk Management Dept., Americas Division and Credit & Investment Planning Dept.

  Director of Sumitomo Mitsui Banking Corporation   -

 

15


Name    Position and responsibility    Significant concurrent positions    Other 

Toru Nakashima*

 

Senior Managing Corporate Executive Officer

Group CFO and Group CSO

Responsible for Public Relations Dept., Corporate Planning Dept., Business Development Dept. and Financial Accounting Dept.

  Director of Sumitomo Mitsui Banking Corporation   -

Tetsuro Imaeda

 

Senior Managing Corporate Executive Officer

Group CCO

Responsible for Compliance Dept.

  Director of Sumitomo Mitsui Banking Corporation   -

Fumiharu Kozuka

 

Senior Managing Corporate Executive Officer

Group CAE

Responsible for Audit Dept.

  -   -

Masamichi Koike

 

Senior Managing Corporate Executive Officer

Head of Global Markets Business Unit

  Senior Managing Executive Officer of Sumitomo Mitsui Banking Corporation   -

Shoji Masuda

 

Senior Managing Corporate Executive Officer

Group CIO

Responsible for IT Planning Dept., System Security Planning Dept., Data Management Dept. and Operations Planning Dept.

 

Director of Sumitomo Mitsui Banking Corporation

Director of The Japan Research Institute, Limited

  -

(Notes)

  1.  

Corporate Executive Officers with an asterisk (*) concurrently serve as Directors.

  2.  

CEO:

 

Chief Executive Officer

   
   

CHRO:

 

Chief Human Resources Officer

   
   

CDIO:

 

Chief Digital Innovation Officer

   
   

CRO:

 

Chief Risk Officer

   
   

CFO:

 

Chief Financial Officer

   
   

CSO:

 

Chief Strategy Officer

   
   

CCO:

 

Chief Compliance Officer

   
   

CAE:

 

Chief Audit Executive

   
   

CIO:

 

Chief Information Officer

   
  3.   Changes in positions and responsibilities and in significant concurrent positions as of April 1, 2021:
    Deputy President and Corporate Executive Officer (Representative Corporate Executive Officer)  

Gotaro Michihiro

 

Resigned from Deputy President and Corporate Executive Officer (Representative Corporate Executive Officer)

Resigned from Director of Sumitomo Mitsui Banking Corporation (Representative Director)

    Deputy President and Corporate Executive Officer (Representative Corporate Executive Officer)  

Masahiko Oshima

 

Discharged from Head of Global Business Unit

Co-Head of Wholesale Business Unit

   

Senior Managing Corporate Executive Officer

 

Naoki Tamura

 

Resigned from Senior Managing Corporate Executive Officer

Resigned from Senior Managing Executive Officer of Sumitomo Mitsui Banking Corporation

   

Senior Managing Corporate Executive Officer

 

Kimio Matsuura

 

Resigned from Senior Managing Corporate Executive Officer

Resigned from Senior Managing Executive Officer of Sumitomo Mitsui Banking Corporation

   

Senior Managing Corporate Executive Officer

 

Haruyuki Nagata

 

Resigned from Senior Managing Corporate Executive Officer

Senior Managing Executive Officer of Sumitomo Mitsui Banking Corporation

 

16


       

Assumption of Corporate Executive Officers as of April 1, 2021:

     

Ryuji Nishisaki

 

Senior Managing Corporate Executive Officer

Co-Head of Global Business Unit (Head office departments (Global Business Unit),

Asia Pacific Division, East Asia Division)

Senior Managing Executive Officer of Sumitomo Mitsui Banking Corporation

     

Akihiro Fukutome

 

Senior Managing Corporate Executive Officer

Co-Head of Global Business Unit (Americas Division, Europe, Middle East and Africa Division)

Senior Managing Executive Officer of Sumitomo Mitsui Banking Corporation

     

Muneo Kanamaru

 

Senior Managing Corporate Executive Officer

Co-Head of Wholesale Business Unit (Head office departments (Wholesale Business Unit))

Senior Managing Executive Officer of Sumitomo Mitsui Banking Corporation

     

Teiko Kudo

 

Senior Managing Corporate Executive Officer

Group CRO

Responsible for Corporate Risk Management Dept., Risk Management Dept., Americas Division and Credit & Investment Planning Dept.

Director of Sumitomo Mitsui Banking Corporation

Director of Toyota Motor Corporation

     

Takashi Yamashita

 

Senior Managing Corporate Executive Officer

Head of Retail Business Unit

Senior Managing Executive Officer of Sumitomo Mitsui Banking Corporation

    Corporate Executive Officers who resigned during fiscal 2020

 

Name     Position and responsibility   Significant concurrent positions   Other  

Hiroshi Munemasa

 

Senior Managing Corporate Executive Officer

Head of Global Markets Business Unit

  Senior Managing Executive Officer of Sumitomo Mitsui Banking Corporation   Resigned on April 1, 2020

(Note)

  

Position and responsibility and significant concurrent positions are reported as of the date of resignation.

 

17


(2)    Compensation, etc. for Directors and Corporate Executive Officers

Unit: millions of yen

 

Classification

 

 

 

Persons paid 

 

 

 

Compensation, 
etc. 

 

               
 

 

Monetary compensation

 

 

 

Non-monetary compensation

 

 

 

Non- 

performance-

linked 

 

 

 

Performance-linked

 

 

 

Non- 

performance- 

linked 

 

 

 

Base salary 

 

 

 

Cash bonus 

 

 

 

Stock 
Compensation 
Plan I/II 

 

 

 

Stock 
Compensation 
Plan III 

 

 

Directors

 

 

 

13

 

 

 

404

 

 

 

336

 

 

 

32

 

 

 

35

 

 

 

-

 

 

Corporate Executive Officers

 

 

 

13

 

 

 

741

 

 

 

426

 

 

 

157

 

 

 

157

 

 

 

-

 

 

Total

 

 

 

26

 

 

 

1,146

 

 

 

763

 

 

 

189

 

 

 

193

 

 

 

-

 

 

(Notes)

 

1.

 

Amounts less than one million yen have been rounded down.

 

2.

 

Corporate Executive Officers do not receive an employee salary nor do they receive consideration for the performance of other duties.

 

3.

 

Compensation, etc. paid to Directors concurrently serving as Corporate Executive Officers is included in the amount for Corporate Executive Officers.

 

4.

 

Stock Compensation Plan I and Stock Compensation Plan II represent the amount of compensation in the form of shares of the Company’s restricted stock corresponding to fiscal 2020.

 

5.

 

The above-written amounts include “Compensation, etc. for Outside Directors” as mentioned below.

Policy for individual remuneration for directors, corporate executive officers and executive officers

The Company hereby establishes the Executive Compensation Policy (the “Policy”) in order to provide guiding principles for its Compensation Committee to determine individual remuneration for its directors, corporate executive officers and executive officers (the “Executives”).

The Policy’s aim is that executive compensation pursuant to it shall provide the appropriate incentives for the Executives to pursue Our Group Mission and Our Vision.

 

  1.

Core Principles

Our executive compensation shall be determined in accordance with the core principles below:

  1)

The Group’s executive compensation aims at providing appropriate incentives toward the realization of our Mission and Vision.

  2)

The Group’s executive compensation shall reflect the changing business environment and the short-, medium- and long-term performance of the Group, and shall account for the contribution to shareholder value, customer satisfaction and a sustainable society.

  3)

Individual remuneration shall reflect the assigned roles and responsibilities as well as the performance of each Executive.

  4)

The Company shall research and review market practices, including the use of third-party surveys, in order to provide its Executives with a competitive remuneration package.

  5)

The Company’s executive compensation shall discourage excessive risk-taking and foster a prudent risk culture expected of a financial institution.

  6)

Both external and internal regulations/guidelines on executive compensation shall be observed and respected.

  7)

The Company shall establish appropriate governance and controls of the compensation process, and shall regularly review to update its executive compensation practices according to changing market practices and/or business environment.

 

18


  2.

Compensation Programme

  1)

The Company’s executive compensation programme (the “Programme”) shall have three components: base salary, cash bonus, and stock compensation.

    

However, compensation of outside directors and Audit Committee members is composed of base salary only, in light of their role to oversee the execution of duties of executive officers, etc.

  2)

In order to hold the Executives accountable and provide them with appropriate incentives for the performance of the Group, the Programme targets the variable compensation component of total remuneration at 40%, if paid at standard levels. Corresponding with performance and the business environment, the variable component could range from 0% to 150% of the standard levels, which shall be determined by corporate titles of the Executives.

  3)

In order to enhance shareholding of the Executives and align their interests with shareholders, the Programme targets its stock-based compensation components at 25% of total remuneration, if paid at standard levels.

  4)

The above target levels shall be appropriately set in accordance with the roles, responsibilities, etc. of each Executive.

  5)

Base salary shall be periodically paid in cash and shall be, in principle, determined by the corporate titles of each Executive, reflecting the roles, responsibilities, etc.

  6)

Annual incentives shall be determined based on the performance of previous fiscal year of the Group and the business unit each Executive is accountable for, as well as on the performance of each Executive reviewed both from short-term and medium-/long-term perspectives. 70% of the determined amount shall be, in principle, paid as a cash bonus and the remaining 30% shall be paid under Stock Compensation Plan II (annual performance share plan).

Weight by each target index is as follows:

 

Target index

 

 

 

        Weight        

 

 

 

SMBC Banking profit*1

 

  

 

Annual growth/Target achievement

 

 

 

50%

 

              

 

SMBC Net income (Pre-Tax)*2

 

  

 

Annual growth/Target achievement

 

 

 

25%

 

 

 

SMFG Net income*3

 

  

 

Annual growth/Target achievement

 

 

 

25%

 

 
  *1

Adding collaboration incentives between each company in the Group and Sumitomo Mitsui Banking Corporation to the banking profit at Sumitomo Mitsui Banking Corporation

  *2

Income before income taxes at Sumitomo Mitsui Banking Corporation

  *3

The Company’s consolidated profit attributable to owners of parent

 

  7)

Stock compensation plans consist of Stock Compensation Plan I (the “Plan I”), under which the remuneration of the Executives shall be determined based on the Group’s medium-term performance, etc., Stock Compensation Plan II (the “Plan II”), determined based on the Group’s annual performance, etc. and Stock Compensation Plan III (the “Plan III”), determined based on corporate titles, etc.

  (1)

Under the stock compensation plans, the Executives shall receive remuneration via shares of the Company’s common stock. The transfer of such stock shall be restricted for appropriately defined periods.

  (2)

Remuneration under Plan I shall be determined based on the Group’s performance against the Medium-term Management Plan, performance of the Company’s shares, and the results of customer satisfaction surveys, etc. after the term of the Group’s Medium-term Management Plan ends.

    

80% of the target index is determined based on Financial performance (Medium-term Management Plan target), and 20% is determined based on Share performance of the Company.

Weight by each target index is as follows:

 

Target index*1, 2

 

  

 

                Weight                 

 

 

Financial performance

  

 

ROCET1*3

 

  

 

  20%

 

  

 

Base expense*4

 

  

 

  20%

 

  

 

Gross profit*5

 

  

 

  20%

 

  

 

Net income

 

  

 

  20%

 

 

 

Share performance

 

  

 

TSR (Total shareholder return)

 

  

 

  20%

 

  *1

(Qualitative evaluation) The Compensation Committee determines the score of maximum 10% plus or minus such figure taking into account comprehensively four items, which are “Customer satisfaction,” “ESG initiative,” “Employee engagement,” and “Efforts to develop new business areas.”

  *2

(Knock-out provision) In case “CET1 ratio (Post-Basel III reforms basis, excludes net unrealized gains (losses) on other securities)” falls below a designated level at the end of each fiscal year, Stock compensation Plan I for the respective fiscal year becomes null and void

  *3

Post-Basel III reforms basis, excludes net unrealized gains (losses) on other securities

  *4

General and administrative expenses excluding “revenue-linked cost,” “prior investment cost” and others

  *5

The Company’s consolidated gross profit

 

19


  (3)

Remunerations under Plan II shall be determined based on the performance of the previous fiscal year of the Group and the business unit each Executive is accountable for, as well as on the performance of each Executive reviewed both from a short-term and medium-/long-term perspectives. Remuneration paid by restricted shares shall effectively act as deferred compensation.

  (4)

Remuneration under Plan III shall be determined based on corporate titles, roles, and responsibilities, etc.

  8)

In the event of material amendments to the financial statements or material reputational damages caused by the Executives, remunerations under the Plans could be reduced or fully forfeit.

  9)

Notwithstanding the above, executive compensation for the Executives domiciled outside Japan shall be individually designed and determined not only in accordance with the above Core Principles, but also with consideration to local regulations, guidelines, and other local market practices, whilst ensuring the compensation should not incentivize for excessive risk-taking.

 

  3.

Governance and Control of the Compensation Processes

  1)

The Company, as a Company with Three Committees, has established a Compensation Committee to resolve the following:

 

The Policy, the Programme and relevant regulations.

 

Individual remunerations for the Company’s directors and corporate executive officers.

  2)

In addition to the above, Compensation Committee shall review and discuss the below:

 

The individual remuneration for the Company’s other executive officers.

 

Executive compensation programmes/practices of the group companies.

 

  4.

Amendments to and Abolition of the Policy

  Amendments

to and abolition of the Policy shall be resolved at the Compensation Committee.

 

20


Reason of the selection of target index used for calculating performance-linked compensation and the actual performance

 

  1.

Annual Performance-linked compensation

  1)

Reason of the selection

The Company shall pay annual performance-linked compensation in the form of “Cash bonus” and “Stock Compensation Plan II.”

The Company adopts as target indices, “SMFG Net income” which indicates the bottom line business results, “SMBC Banking profit” and “SMBC Net income (Pre-Tax)” which indicates earnings level of main subsidiaries, with a view to enhancing the linkage between corporate performance and Executives’ compensation, and ensuring adequacy of its function as performance incentive.

  2)

Actual Performance

For fiscal 2020, with respect to “Cash bonus” and “Stock Compensation Plan II,” the actual performance of each target index and performance evaluation coefficient are as follows.

 

 

Cash bonus/Stock Compensation Plan II

 

Target index

   Weight          u        Actual       Performance*4         

 

    Performance     evaluation coefficient

 

 

SMBC Banking profit*1

 

 

Annual growth/

Target achievement  

 

        50%          55%    118%

 

SMBC Net income (Pre-Tax)*2

 

 

Annual growth/

Target achievement  

 

   25%      37%

 

SMFG Net income*3

 

 

Annual growth/

        Target achievement          

 

   25%      26%
  *1

Adding collaboration incentives between each company in the Group and Sumitomo Mitsui Banking Corporation to the banking profit at Sumitomo Mitsui Banking Corporation

  *2

Income before income taxes at Sumitomo Mitsui Banking Corporation

  *3

The Company’s consolidated profit attributable to owners of parent

  *4

Level of performance against each target index multiplied by evaluation weight

The Compensation Committee determines performance evaluation coefficient based on the actual performances of each target index for fiscal 2020, which then will be multiplied by the sum of the standard bonus amount by corporate titles to determine bonus fund. Based on this bonus fund, the amounts of performance-linked remuneration for individual Executives shall be determined considering short-term and medium-/long-term of the individual performance of duties of each Executives.

 

  2.

Medium-term performance-linked compensation

  1)

Reason of the selection

The Company pays medium-term performance-linked compensation in the form of “Stock Compensation Plan I.”

In order to hold the Executives accountable and provide them with appropriate incentives for contribution to the medium-term to long-term corporate performance, enhancement of shareholder value and realization of sustainable society, “TSR (Total Shareholder Return)” is adopted as share performance index in addition to four financial performance indices of “ROCET 1,” “Base expense,” “Gross profit” and “Net income.”

In addition to the aforementioned quantitative indices, the four qualitative areas of evaluation, namely, “Customer satisfaction,” “ESG initiative,” “Employee engagement” and “Efforts to develop new business areas” shall be comprehensively assessed at the Compensation Committee, and reflected on the evaluation.

The Compensation Committee shall, following the final year of the period covered under the current Medium-Term Management Plan, determine its evaluation of the aforementioned target index based on the actual performance against the Medium-Term Management Plan as basis for calculating the amount of remuneration.

  2)

Actual Performance

As the actual result of the target index for the medium-term performance-linked compensation shall be determined only after the end of the final year of the period covered under the current Medium-Term Management Plan, only the description of each target index and the evaluation weight are described here.

 

21


 

Stock Compensation Plan I

 

 

Target index*1

  

 

Weight  

       u         

 

Actual  

    Performance      

 

  

 

    Evaluation      

Financial performance

 

 

ROCET1*2

  

 

    20%      

  

    Evaluation will be finalized after the    

final year of the period covered

under the current Medium-Term

Management Plan

 

 

Base expense*3

  

 

    20%      

 

 

Gross profit*4

  

 

    20%      

 

 

Net income

  

 

    20%      

Share performance

 

 

TSR

(Total shareholder

return)

       20%      

Qualitative evaluation

 

 

Customer

satisfaction,

ESG initiative,

Employee

engagement, and

Efforts to develop         new business areas        

       ±10%    
  *1

(Knock-out provision) In case “CET1 ratio (Post-Basel III reforms basis, excludes net unrealized gains (losses) on other securities)” falls below a designated level at the end of each fiscal year, Stock compensation Plan I for the respective fiscal year becomes null and void.

  *2

Post-Basel III reforms basis, excludes net unrealized gains (losses) on other securities

  *3

General and administrative expenses excluding “revenue-linked cost,” “prior investment cost” and others

  *4

The Company’s consolidated gross profit

Reason of the decision by the Compensation Committee that individual remuneration for corporate executive officers and other executives are in line with the Policy

The Company decided at its Compensation Committee “Executive compensation policy” and the executive compensation programme including the compensation programme as prescribed under the Policy, and individual remuneration for corporate executive officers and other executives are decided in accordance with the procedures set out under the Policy. The Compensation Committee decided that individual remuneration for corporate executive officers and other executives were in line with the Policy, based on the results of the third-party surveys on the Executive’s compensation, and the multilateral review and examination on various factors such as whether the executive compensation programme is working as appropriate incentive in view of the business environment surrounding the Group and the corporate performance over short-term, medium-term, and long-term.

 

22


(3)    Liability Limitation Agreement

 

 

Name

 

 

 

Summary of Liability Limitation Agreement

 

 

Masayuki Matsumoto

 

 

Arthur M. Mitchell 

  Shozo Yamazaki            

 

In accordance with the provisions provided for in Article 427, Paragraph 1 of the Companies Act (the “Act”), the Company has entered into agreements with the Outside Directors stated in the left column to limit the liability provided for in Article 423, Paragraph 1 of the Act to the higher of either (i) 10 million yen or (ii) the minimum amount provided for in Article 427, Paragraph 1 of the Act.

 

 

Masaharu Kohno

 

 

 

Yoshinobu Tsutsui

 

 

 

Katsuyoshi Shinbo

 

 

Eriko Sakurai

 

   

(4)    Indemnity Agreement

a.   Indemnity agreement with incumbent directors and corporate executive officers

 

 

Directors and Corporate Executive Officer’s Name

 

 

 

Summary of Indemnity Agreement

 

Takeshi Kunibe          

  Jun Ohta   

Makoto Takashima

 

 

 

The Company has entered into indemnity agreements as set out under Article 430-2, Paragraph 1 of the Act with the directors and corporate executive officers stated in the left column, for them to be committed to making bold management decisions without flinching from potential pursuit of responsibility. Under the agreements, the following measures have been mainly taken to ensure that the appropriateness of the execution of duties by directors and corporate executive officers is not impaired.

(1)  The Company shall indemnify legal fees and other contentious expenses, which is stipulated in Article 430-2, Paragraph 1, Item 1 of the Act as “expenses incurred in response to suspected violations of laws and regulations in connection with the execution of duties or claims related to the pursuit of responsibility,” to the extent provided for by laws and regulations. However, the Company shall not indemnify any loss arising from “compensation for damages caused to a third party in connection with the execution of duties” as provided for in Item 2 of the said Paragraph.

(2)  After the payment of the indemnity to a director or corporate executive officer, if the Company comes to know that there is bad faith or gross negligence involved in the execution of his or her duties or other similar fact, the Company shall request him or her for the refund of whole or part of the indemnity paid.

 

Haruyuki Nagata

 

  Toru Nakashima   Atsuhiko Inoue

Toru Mikami

 

Yoshihiko Shimizu 

 

 

Masayuki Matsumoto

 

Arthur M. Mitchell

 

  Shozo Yamazaki  

Masaharu Kohno

 

Yoshinobu Tsutsui

 

 

Katsuyoshi Shinbo

 

  Eriko Sakurai

Gotaro Michihiro

 

 

Masahiko Oshima

 

  Toshikazu Yaku

Katsunori Tanizaki

 

  Naoki Tamura   Kimio Matsuura  

Tetsuro Imaeda 

 

Fumiharu Kozuka

 

 

Masamichi Koike

 

 

Shoji Masuda

 

       

b.   Matters concerning the fulfillment of the indemnity agreement, etc.

      Not applicable.

 

23


(5)    Matters Concerning Directors and Officers Liability Insurance Contract

 

 

Scope of the Insured

 

 

 

Summary of the Directors and Officers Liability Insurance

Contract

 

Directors, Corporate Executive Officers and Executive Officers of the Company

 

The Company has entered into a Directors and Officers liability insurance contract as set out under Article 430-3, Paragraph 1 of the Act with an insurance company, for directors and officers, etc. of the Company or its subsidiary to be committed to making bold management decisions without flinching from potential pursuit of responsibility. Under the contract, the insured shall be covered for damages by bearing costs of compensation for damages and contentious expenses as a result of claims for damages arising from acts (including omissions) committed by the insured in the course of his or her duties as director or officer, etc. of the Company or its subsidiaries. However, this insurance excludes damages incurred by the insured as a result of his or her own criminal conduct, illegal act committed knowingly by the insured, or his or her gaining of benefits or providing others with benefits in an illegal manner, as measures to ensure that the appropriateness of the execution of duties by directors or officers, etc. is not impaired.

 

 

Directors, Corporate Auditors and Executive Officers of the following subsidiaries of the Company:

Sumitomo Mitsui Banking Corporation,

SMBC Trust Bank Ltd.,

SMBC Nikko Securities Inc.,

Sumitomo Mitsui Card Company, Limited,

SMBC Finance Service Co., Ltd. and

The Japan Research Institute, Limited

 

24


3.    Matters regarding Outside Directors

(1)    Concurrent Positions and Other Details on Outside Directors

 

 

(As of March 31, 2021)

 

Name    

 

  Concurrent positions and other details        

Masayuki Matsumoto

 

 

Special Advisor of Central Japan Railway Company

 

Arthur M. Mitchell

 

 

Director of Komatsu Ltd. (outside)

 

Masaharu Kohno

 

 

Director of DOUTOR • NICHIRES Holdings Co., Ltd. (outside)

 

Yoshinobu Tsutsui

 

 

Chairman of NIPPON LIFE INSURANCE COMPANY

Director of Imperial Hotel, Ltd. (outside)

Director of West Japan Railway Company (outside)

Director of Panasonic Corporation (outside)

 

Katsuyoshi Shinbo

 

 

Corporate Auditor of Mitsui Chemicals, Inc. (outside)

 

Eriko Sakurai

 

 

President of Dow Chemical Japan Limited

Representative Director of Dow Japan Holdings K.K.

Representative Director of Performance Materials Japan Kabushiki Kaisha

(Note)  

There is no other relationship to be disclosed between the Company and the companies or entities in which the Outside Directors of the Company concurrently serve.

 

25


(2)    Major Activities of Outside Directors

 

Name   

 

Term of

Office

 

 

Attendance of the Board of

Directors meeting, etc.

 

 

Opinions issued at the Board of 

Directors meeting, etc. and other activities 

Masayuki Matsumoto

 

3 years and  

9 months  

 

Board of Directors meetings

Nominating Committee meetings

Audit Committee meetings

  10/10

    4/4

15/15

  On the basis of his expertise and experience in the area of corporate management, he participates in the deliberation at the Board of Directors from an objective standpoint, and he leads the Audit Committee as Chairman, while expressing proper suggestions and useful opinions at the Nominating Committee.

Arthur M. Mitchell

  5 years and   9  months    

Board of Directors meetings

Nominating Committee meetings

Compensation Committee meetings

  10/10

    4/4

    6/6

  On the basis of his expertise and experience in the areas of corporate management, financial business and international legal affairs, he participates in the deliberation at the Board of Directors from an objective standpoint, expressing proper suggestions and useful opinions at the Nominating Committee and the Compensation Committee.

Shozo Yamazaki

 

3 years and  

9 months  

 

Board of Directors meetings

Audit Committee meetings

Risk Committee meetings

  10/10

15/15

    4/4

  On the basis of his expertise and experience in the area of financial accounting, he participates in the deliberation at the Board of Directors from an objective standpoint, and he leads the Risk Committee as Chairman, while expressing proper suggestions and useful opinions at the Audit Committee.

Masaharu Kohno

  5 years and   9  months    

Board of Directors meetings

Nominating Committee meetings

Risk Committee meetings

  10/10

    4/4

    4/4

  On the basis of his expertise and experience in the area of diplomacy, he participates in the deliberation at the Board of Directors from an objective standpoint, while expressing proper suggestions and useful opinions at the Nominating Committee and the Risk Committee.

Yoshinobu Tsutsui

 

3 years and  

9 months  

 

Board of Directors meetings

Nominating Committee meetings

Compensation Committee meetings

  10/10

    4/4

    6/6

  On the basis of his expertise and experience in the areas of corporate management and financial business, he participates in the deliberation at the Board of Directors from an objective standpoint, and he leads the Nominating Committee as Chairman, while expressing proper suggestions and useful opinions at the Compensation Committee.

Katsuyoshi Shinbo

 

3 years and  

9 months  

 

Board of Directors meetings

Audit Committee meetings

Compensation Committee meetings

  10/10

15/15

    6/6

  On the basis of his expertise and experience in the legal matters, he participates in the deliberation at the Board of Directors from an objective standpoint, and he leads the Compensation Committee as Chairman, while expressing proper suggestions and useful opinions at the Audit Committee.

Eriko Sakurai

  5 years and   9  months    

Board of Directors meetings

Nominating Committee meetings

Compensation Committee meetings

  10/10

    4/4

    6/6

  On the basis of her expertise and experience in the global corporate management, she participates in the deliberation at the Board of Directors from an objective standpoint, while expressing proper suggestions and useful opinions at the Nominating Committee and the Compensation Committee.

 (Note)    Periods of service of the Directors above of less than one month have been rounded down.

 

26


(3)    Compensation, etc. for Outside Directors

Unit: millions of yen  

                      Persons paid                      

Compensation, etc. paid by   

the Company  

  Compensation, etc. paid by parent company, etc. of the Company
Total amount of compensation, etc.   7           129               -

(Notes)

  

1.

  

Amounts less than one million yen have been rounded down.

  

2.

  

No expenses have been incurred in connection with the payment of bonuses to Outside Directors.

 

27


4.     Matters regarding Shares of the Company

(1)     Number of Shares

 

    (Number of shares)         

Total number of shares authorized to be issued

 

    

Common stock

 

    3,000,000,000     

Preferred stock (Type 5)

 

    167,000     

Preferred stock (Type 7)

 

    167,000     

Preferred stock (Type 8)

 

    115,000     

Preferred stock (Type 9)

 

    115,000     

Total number of shares issued

 

    

Common stock

    1,374,040,061     

(2)     Number of Shareholders as of March 31, 2021

 

    (Number of shareholders)         

Common stock

    388,065     

(3)     Major Shareholders

        Common Stock

Name of shareholder   

 

Number of shares held and percentage of shares held

 

 
  

 

Number of shares held 

(100 shares)

 

    

 

Percentage of shares held 
(%)

 

 

 

The Master Trust Bank of Japan, Ltd. (Trust Account)

 

     1,219,546            8.89      

 

Custody Bank of Japan, Ltd. (Trust Account)

 

     770,614            5.62      

 

Custody Bank of Japan, Ltd. (Trust Account 7)

 

     280,145            2.04      

 

NATSCUMCO

 

     273,376            1.99      

 

SSBTC CLIENT OMNIBUS ACCOUNT

 

     259,195            1.89      

 

STATE STREET BANK WEST CLIENT – TREATY 505234

 

     212,617            1.55      

 

Custody Bank of Japan, Ltd. (Trust Account 5)

 

     209,203            1.52      

 

Custody Bank of Japan, Ltd. (Trust Account 6)

 

     185,518            1.35      

 

Barclays Securities Japan Limited

 

     185,493            1.35      

 

JP Morgan Securities Japan Co., Ltd.

 

     168,498            1.22      

(Notes)

  1.  

Listed here are the top ten shareholders in terms of their respective ratio of stock holding against the total number of outstanding shares (excluding treasury shares).

  2.  

Numbers of shares less than one hundred have been rounded down and the percentage of shares held has been rounded down to the nearest second decimal place.

 

28


(4)     Shares delivered to Executives

 

    

 

 


 

 

Number of Executives

who received the delivered
shares

 

 

 

 
 

 

     Type and number of shares           

 

Directors (excluding Outside Directors) and Corporate

Executive Officers

 

     14            Common Stock        126,065      

 

Outside Directors

 

     0            Common Stock        0      

 

29


5.  Matters regarding the Accounting Auditor

 

(1)

Accounting Auditor

 

Name    

 

      

 

Compensation, etc. for the fiscal year     

 

 

Other 

 

     

 

KPMG AZSA LLC

 

Toshihiro Otsuka

Designated Limited Liability

Partner

 

Noriaki Habuto

Designated Limited Liability

Partner

 

Kazuhide Niki

Designated Limited Liability

Partner

   

 

Compensation, etc. pertaining to the activities specified in Article 2, Paragraph 1 of the Certified Public Accountants Act: 1,910 million yen

 

1. The Audit Committee confirmed and discussed the details of the audit plan, the status of performance of duties, and the basis for calculation of the estimate of compensation of the Accounting Auditor. As a result, the Audit Committee gave approval set forth in Article 399, Paragraphs 1 and 4 of the Companies Act for the compensation, etc. of the Accounting Auditor.

2. The Company paid the Accounting Auditor for case investigation of internal audit systems, etc., which fell outside the scope of the activities specified in Article 2, Paragraph 1 of the Certified Public Accountants Act.

   
   
   
   
   
     
     
     

 

Of the above, compensation, etc. as Accounting Auditor: 275 million yen

 

 

(Notes)

 

1. Amounts less than one million yen have been rounded down.

 

2. The audit agreement between the Company and the Accounting Auditor does not and cannot practically distinguish between compensation, etc. for audits stipulated by the Companies Act and those stipulated by the Financial Instruments and Exchange Act. For this reason, “Of the above, compensation, etc. as Accounting Auditor” above includes the compensation, etc. amount for audits based on the Financial Instruments and Exchange Act.

 

3. Total amount of moneys and other financial benefits payable by the Company and subsidiaries (excluding unconsolidated subsidiaries) to the Accounting Auditor is 4,155 million yen. This total includes fund auditing compensation.

 

(2)

Liability Limitation Agreement

Not applicable.

 

(3)

Indemnity Agreement

Not applicable.

 

(4)

Other Matters regarding the Accounting Auditor

 

  a.

Policy for Decisions on Dismissal or Nonreappointment of Accounting Auditor

The Audit Committee discusses whether to dismiss the Accounting Auditor where they fall under any of the grounds set forth in each item of Paragraph 1 of Article 340 of the Companies Act. In addition to that, when it is determined to be difficult for the Accounting Auditor to appropriately execute his or her duty, the Audit Committee discusses whether to forward a proposal for the dismissal or nonreappointment of the Accounting Auditor to the general meeting of shareholders in accordance with Article 404, Paragraph 2, Item 2 of the Companies Act.

 

  b.

From among the Company’s significant subsidiaries, SMBC Bank International plc, Sumitomo Mitsui Banking Corporation (China) Limited, PT Bank BTPN Tbk and SMBC Americas Holdings, Inc. were audited by an Accounting Auditor other than the Company’s (or by person(s) with equivalent qualifications in foreign countries).

 

30


Consolidated Balance Sheet

(As of March 31, 2021)

Unit: millions of yen

 

Account    Amount     Account    Amount  
       

(Assets)

       (Liabilities)     
       

Cash and due from banks

     72,568,875    

Deposits

     142,026,156  
       

Call loans and bills bought

     2,553,463    

Negotiable certificates of deposit

     12,570,617  
       

Receivables under resale agreements

     5,565,119    

Call money and bills sold

     1,368,515  
       

Receivables under securities borrowing transactions

     5,827,448    

Payables under repurchase agreements

     15,921,103  
       

Monetary claims bought

     4,665,244    

Payables under securities lending transactions

     2,421,353  
       

Trading assets

     6,609,195    

Commercial paper

     1,686,404  
       

Money held in trust

     309    

Trading liabilities

     5,357,649  
       

Securities

     36,549,043    

Borrowed money

     17,679,690  
       

Loans and bills discounted

     85,132,738    

Foreign exchanges

     1,113,037  
       

Foreign exchanges

     2,173,189    

Short-term bonds

     585,000  
       

Lease receivables and investment assets

     236,392    

Bonds

     9,043,031  
       

Other assets

     8,590,785    

Due to trust account

     2,321,223  
       

Tangible fixed assets

     1,458,991    

Other liabilities

     7,741,638  
       

Assets for rent

     465,147    

Reserve for employee bonuses

     89,522  
       

Buildings

     370,531    

Reserve for executive bonuses

     4,408  
       

Land

     457,920    

Net defined benefit liability

     35,334  
       

Lease assets

     23,589    

Reserve for executive retirement benefits

     1,081  
       

Construction in progress

     17,394    

Reserve for point service program

     24,655  
       

Other tangible fixed assets

     124,408    

Reserve for reimbursement of deposits

     9,982  
       

Intangible fixed assets

     738,759    

Reserve for losses on interest repayment

     140,758  
       

Software

     475,360    

Reserves under the special laws

     3,902  
       

Goodwill

     147,508    

Deferred tax liabilities

     532,193  
       

Lease assets

     769    

Deferred tax liabilities for land revaluation

     29,603  
       

Other intangible fixed assets

     115,120    

Acceptances and guarantees

     9,978,396  
       

Net defined benefit asset

     565,534    

Total liabilities

     230,685,262  
       

Deferred tax assets

     29,840    

(Net assets)

    
       

Customers’ liabilities for acceptances and guarantees

     9,978,396    

Capital stock

     2,341,274  
       

Reserve for possible loan losses

     (659,017  

Capital surplus

     693,205  
       
        

Retained earnings

     6,492,586  
       
        

Treasury stock

     (13,698
       
        

Total stockholders’ equity

     9,513,367  
       
        

Net unrealized gains (losses) on other securities

     2,094,605  
       
        

Net deferred gains (losses) on hedges

     14,723  
       
        

Land revaluation excess

     36,251  
       
        

Foreign currency translation adjustments

     40,390  
       
        

Accumulated remeasurements of defined benefit plans

     127,080  
       
        

Total accumulated other comprehensive income

     2,313,051  
       
        

Stock acquisition rights

     1,791  
       
        

Non-controlling interests

     70,836  
       
            

Total net assets

     11,899,046  
       

Total assets

     242,584,308    

Total liabilities and net assets

     242,584,308  

 

31


Consolidated Statement of Income

(From April 1, 2020 to March 31, 2021)

Unit: millions of yen

Account      Amount  

Ordinary income

          3,902,307  

Interest income

     1,853,039       

Interest on loans and discounts

     1,367,726       

Interest and dividends on securities

     283,786       

Interest on call loans and bills bought

     11,896       

Interest on receivables under resale agreements

     10,056       

Interest on receivables under securities borrowing transactions

     4,407       

Interest on deposits with banks

     17,891       

Interest on lease transactions

     6,540       

Interest on deferred payment

     24,712       

Other interest income

     126,021       

Trust fees

     4,895       

Fees and commissions

     1,298,373       

Trading income

     199,647       

Other operating income

     365,761       

Lease-related income

     32,155       

Other

     333,606       

Other income

     180,589       

Recoveries of written-off claims

     12,850       

Other

     167,739       

Ordinary expenses

          3,191,288  

Interest expenses

     517,822       

Interest on deposits

     152,094       

Interest on negotiable certificates of deposit

     35,876       

Interest on call money and bills sold

     1,786       

Interest on payables under repurchase agreements

     7,097       

Interest on payables under securities lending transactions

     203       

Interest on commercial paper

     6,029       

Interest on borrowed money

     37,667       

Interest on short-term bonds

     63       

Interest on bonds

     204,509       

Other interest expenses

     72,492       

Fees and commissions payments

     204,352       

Other operating expenses

     193,354       

Lease-related expenses

     23,419       

Other

     169,935       

General and administrative expenses

     1,747,144       

Other expenses

     528,613       

Provision for reserve for possible loan losses

     233,875       

Other

     294,737           

Ordinary profit

          711,018  

Extraordinary gains

          9,440  

Gains on disposal of fixed assets

     9,035       

Other extraordinary gains

     404       

Extraordinary losses

          48,222  

Losses on disposal of fixed assets

     4,939       

Losses on impairment of fixed assets

     42,525       

Provision for reserve for eventual future operating losses from financial instruments transactions

     757           

Income before income taxes

          672,237  

Income taxes-current

     225,523       

Income taxes-deferred

     (69,177     

Income taxes

          156,346  

Profit

          515,890  

Profit attributable to non-controlling interests

          3,077  

Profit attributable to owners of parent

              512,812  

 

32


Consolidated Statement of Changes in Net Assets

(From April 1, 2020 to March 31, 2021)

Unit: millions of yen

 

     Stockholders’ equity
     Capital stock     Capital surplus     Retained earnings     Treasury stock     Total stockholders’ equity
           

Balance at April 1, 2020

  2,339,964    692,003     6,336,311     (13,983)    9,354,296  
           

Cumulative effects of changes in accounting policies

          (41,849)        (41,849) 
           

Restated balance

  2,339,964    692,003     6,294,462     (13,983)    9,312,447  
           

Changes in the year

                   
           

Issuance of new stock

  1,309    1,308             2,618  
           

Cash dividends

          (267,143)        (267,143) 
           

Profit attributable to owners of parent

          512,812         512,812  
           

Purchase of treasury stock

              (61)    (61) 
           

Disposal of treasury stock

      (65)        347     281  
           

Changes in shareholders’ interest due to transaction with non-controlling interests  

      (106)            (106) 
           

Decrease due to decrease in affiliates accounted for by the equity method

          (48,054)        (48,054) 
           

Reversal of land revaluation excess

          574         574  
           

Transfer from retained earnings to capital surplus

      65     (65)        –  
           

Net changes in items other than stockholders’ equity in the year

                   
           

Net changes in the year

  1,309    1,202     198,123     285     200,920  
           

Balance at March 31, 2021

  2,341,274    693,205     6,492,586     (13,698)    9,513,367  

 

    

 

Accumulated other comprehensive income

 

 

Stock
acquisition 
rights

 

Non-
controlling 
interests

 

Total net
assets

    

 

Net
unrealized
gains (losses) 
on other
securities

 

  Net deferred
gains (losses) 
on hedges
  Land
revaluation  
excess
  Foreign
currency
translation
adjustments 
 

 

Accumulated
remeasure-

ments of
defined benefit 
plans

 

 

 

Total
accumulated 
other
comprehen- 

sive income

 

                   

Balance at April 1, 2020

  1,371,407    82,257     36,878     (32,839)    (92,030)    1,365,673    2,064     62,869    10,784,903 
                   

Cumulative effects of changes in accounting policies

                                  (41,849)
                   

Restated balance

  1,371,407    82,257     36,878     (32,839)    (92,030)    1,365,673    2,064     62,869    10,743,054 
                   

Changes in the year

                                   
                   

Issuance of new stock

                                  2,618 
                   

Cash dividends

                                  (267,143)
                   

Profit attributable to owners of parent

                                  512,812 
                   

Purchase of treasury stock

                                  (61)
                   

Disposal of treasury stock

                                  281 
                   

Changes in shareholders’ interest due to transaction with non-controlling interests  

                                  (106)
                   

Decrease due to decrease in affiliates accounted for by the equity method

                                  (48,054)
                   

Reversal of land revaluation excess

                                  574 
                   

Transfer from retained earnings to capital surplus

                                  – 
                   

Net changes in items other than stockholders’ equity in the year

  723,198    (67,533)    (627)    73,229     219,110     947,377    (272)    7,967    955,071 
                   

Net changes in the year

  723,198    (67,533)    (627)    73,229     219,110     947,377    (272)    7,967    1,155,992 
                   

Balance at March 31, 2021

  2,094,605    14,723     36,251     40,390     127,080     2,313,051    1,791     70,836    11,899,046 

 

33


Non-Consolidated Balance Sheet

(As of March 31, 2021)

Unit: millions of yen

 

Account  

 

  

 

Amount  

 

   

 

Account  

 

  

 

Amount

 

 
       

(Assets)

       (Liabilities)     
       

Current assets

     1,102,729     Current liabilities      2,085,555  
       

Cash and due from banks

     221,992    

Short-term borrowings

     1,278,030  
       

Prepaid expenses

     401    

Accounts payable

     17,913  
       

Accrued income

     45,877    

Accrued expenses

     45,025  
       

Accrued income tax refunds

     4,380    

Income taxes payable

     12  
       

Current portion of long-term loans receivable from subsidiaries and affiliates

     741,493    

Business office taxes payable

     65  
       

Other current assets

     88,583    

Reserve for employee bonuses

     747  
       
        

Reserve for executive bonuses

     569  
       
        

Current portion of bonds payable

     730,422  
       
        

Current portion of long-term borrowings

     11,071  
       

Fixed assets

     13,922,653    

Other current liabilities

     1,699  
       

Tangible fixed assets

     70,815     Fixed liabilities      6,956,170  
       

Buildings

     38,262    

Bonds

     6,718,181  
       

Land

     31,454    

Long-term borrowings

     237,989  
       

Equipment

     326    

Total liabilities

     9,041,726  
       

Construction in progress

     772     (Net assets)     
       

Intangible fixed assets

     474     Stockholders’ equity      5,981,865  
       

Software

     474    

Capital stock

     2,341,274  
       

Investments and other assets

     13,851,362    

Capital surplus

     1,562,751  
       

Investment securities

     2,200    

Capital reserve

     1,562,751  
       

Investments in subsidiaries and affiliates

     6,393,634    

Retained earnings

     2,091,538  
       

Long-term loans receivable from subsidiaries and affiliates

     7,454,394    

Other retained earnings

     2,091,538  
       

Long-term prepaid expenses

     438    

Voluntary reserve

     30,420  
       

Deferred tax assets

     472    

Retained earnings brought forward

     2,061,118  
       

Other

     220    

Treasury stock

     (13,698
       
        

Stock acquisition rights

     1,791  
       
         Total net assets      5,983,656  
       

Total assets

     15,025,382    

Total liabilities and net assets

     15,025,382  

 

34


Non-Consolidated Statement of Income

(From April 1, 2020 to March 31, 2021)

Unit: millions of yen

 

 

Account

 

  

 

Amount

 

     

Operating income

                            483,459      
     

Dividends on investments in subsidiaries and affiliates

                         304,866           
     

Fees and commissions received from subsidiaries and affiliates

   7,817          
     

Interest on loans receivable from subsidiaries and affiliates

   170,775          
     

Operating expenses

        195,322     
     

General and administrative expenses

   30,791          
     

Interest on bonds

   160,013          
     

Interest on long-term borrowings

   4,516          
     

Operating profit

        288,137     
     

Non-operating income

        465     
     

Interest income on deposits

   17          
     

Fees and commissions income

   0          
     

Other non-operating income

   446          
     

Non-operating expenses

        9,200     
     

Interest on short-term borrowings

   4,298          
     

Fees and commissions payments

   32          
     

Amortization of bond issuance cost

   4,695          
     

Other non-operating expenses

   174          
     

Ordinary profit

        279,402     
     

Extraordinary losses

        2,943     
     

Losses on valuation of stocks of subsidiaries and affiliates

   2,943          
     

Income before income taxes

        276,458     
     

Income taxes-current

   (5,511)         
     

Income taxes-deferred

   3          
     

Total income taxes

        (5,508)    
     

Net income

        281,966     

 

35


Non-Consolidated Statement of Changes in Net Assets

(From April 1, 2020 to March 31, 2021)

Unit: millions of yen

    

 

Stockholders’ equity

 

     Capital stock        

 

Capital surplus            

 

    

 

Capital reserve      

 

 

Other capital surplus      

 

 

Total capital surplus      

         

Balance at April 1, 2020

  2,339,964     1,561,442     –     1,561,442  
         

Changes in the year

               
         

Issuance of new stock

  1,309     1,308         1,308  
         

Cash dividends

               
         

Net income

               
         

Purchase of treasury stock

               
         

Disposal of treasury stock

          (65)    (65) 
         

Transfer from retained earnings to capital surplus

          65     65  
         

Net changes in items other than

stockholders’ equity in the year

               
         

Net changes in the year

  1,309     1,308     –     1,308  
         

Balance at March 31, 2021

  2,341,274     1,562,751     –     1,562,751  

 

     

 

Stockholders’ equity

 

   Stock  
acquisition  
rights  
   Total net  
assets  
     

 

Retained earnings

 

   Treasury  
stock  
   Total  
stockholders’  
equity  
  

 

Other retained earnings

 

  

 

 Total retained    
earnings    

 

    Voluntary reserve       

Retained earnings  
brought forward  

 

               

Balance at April 1, 2020

   30,420      2,046,360      2,076,780      (13,983)     5,964,203      2,064      5,966,267  
               

Changes in the year

                                  
               

Issuance of new stock

                       2,618           2,618  
               

Cash dividends

        (267,143)     (267,143)          (267,143)          (267,143) 
               

Net income

        281,966      281,966           281,966           281,966  
               

Purchase of treasury stock

                  (61)     (61)          (61) 
               

Disposal of treasury stock

                  347      281           281  
               

Transfer from retained earnings to capital surplus

        (65)     (65)          –           –  
               

Net changes in items other than stockholders’ equity in the year

                            (272)     (272) 
               

Net changes in the year

   –      14,757      14,757      285      17,661      (272)     17,388  
               

Balance at March 31, 2021

   30,420      2,061,118      2,091,538      (13,698)     5,981,865      1,791      5,983,656  

 

36


[This is an English translation of the Independent Auditor’s Report as required by the Companies Act of Japan for the conveniences of the reader.]

Independent Auditor’s Report

May 10, 2021

 

To the Board of Directors of

     

Sumitomo Mitsui Financial Group, Inc.:

     
  

KPMG AZSA LLC

  
  

Tokyo Office, Japan

  
  

Toshihiro Otsuka (Seal)

  
  

Designated Limited Liability Partner

  
  

Engagement Partner

  
  

Certified Public Accountant

  
  

Noriaki Habuto (Seal)

  
  

Designated Limited Liability Partner

  
  

Engagement Partner

  
  

Certified Public Accountant

  
  

Kazuhide Niki (Seal)

  
  

Designated Limited Liability Partner

  
  

Engagement Partner

  
  

Certified Public Accountant

  

Opinion

We have audited the financial statements, which comprise the balance sheet, the statement of income, the statement of changes in net assets, a summary of significant accounting policies and other explanatory information, and the supplementary schedules (“the financial statements and the supplementary schedules”) of Sumitomo Mitsui Financial Group, Inc. (“the Company”) as at March 31, 2021 and for the year from April 1, 2020 to March 31, 2021 in accordance with Article 436-2-1 of the Companies Act.

In our opinion, the financial statements and the supplementary schedules referred to above present fairly, in all material respects, the financial position and the results of operations of the Company for the period, for which the financial statements and the supplementary schedules were prepared, in accordance with accounting principles generally accepted in Japan.

Basis for Opinion

We conducted our audit in accordance with auditing standards generally accepted in Japan. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements and the supplementary schedules section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in Japan, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Responsibilities of Management and The Audit Committee for the Financial Statements and the Supplementary Schedules

Management is responsible for the preparation and fair presentation of the financial statements and the supplementary schedules in accordance with accounting principles generally accepted in Japan, and for such internal control as management determines is necessary to enable the preparation of financial statements and the supplementary schedules that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements and the supplementary schedules, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern in accordance with accounting principles generally accepted in Japan.

The Audit Committee are responsible for overseeing the directors’ performance of their duties with regard to the design, implementation and maintenance of the Company’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Financial Statements and the Supplementary Schedules

Our objectives are to obtain reasonable assurance about whether the financial statements and the supplementary schedules as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements and the supplementary schedules.

 

37


As part of our audit in accordance with auditing standards generally accepted in Japan, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

 

 

Identify and assess the risks of material misstatement of the financial statements and the supplementary schedules, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The selection and application of audit procedures depends on the auditor’s judgment.

 

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, while the objective of the audit is not to express an opinion on the effectiveness of the Company’s internal control.

 

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

 

Conclude on the appropriateness of management’s use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements and the supplementary schedules or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

 

Evaluate whether the presentation and disclosures in the financial statements and the supplementary schedules are in accordance with accounting standards generally accepted in Japan, the overall presentation, structure and content of the financial statements and the supplementary schedules, including the disclosures, and whether the financial statements and the supplementary schedules represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with The Audit Committee regarding, among other matters, the planned scope and timing of the audit, significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide The Audit Committee with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

Interest required to be disclosed by the Certified Public Accountants Act of Japan

We do not have any interest in the Company which is required to be disclosed pursuant to the provisions of the Certified Public Accountants Act of Japan.

 

38


[English Translation of the Audit Committee’s report Originally Issued in the Japanese Language]

Audit Report

The Audit Committee has audited the execution of duties by Directors and Corporate Executive Officers of the Company for the 19th fiscal year from April 1, 2020 to March 31, 2021, and hereby reports the method and the results of the audit as follows:

 

1.

Auditing Method and Details Thereof

The Audit Committee periodically received reports from the Directors, Corporate Executive Officers and other relevant personnel with respect to the content of resolutions made by the Board of Directors regarding matters prescribed by Article 416, Paragraph 1, Item 1 (b) and (e) of the Companies Act of Japan, and with respect to the status of establishment and operations of the systems that have been developed in compliance with such resolutions (internal control systems), sought their explanations as necessary, and expressed an opinion. In addition, the Audit Committee conducted audits based on the following methods.

  1)

In accordance with the auditing policies, including allocation of duties established by the Audit Committee, the Audit Committee attended important meetings, received reports from the Directors, Corporate Executive Officers and other relevant personnel on matters regarding the execution of their duties, sought explanations as necessary, inspected important internal-approval documents, and examined the operations and financial position of the Company, by deploying the department in charge of internal audits and in cooperation with the internal control departments of the Company. As for the subsidiaries of the Company, the Audit Committee shared information with the Directors and the Corporate Auditors and other related persons of the subsidiaries and, when necessary, received reports from the subsidiaries regarding their businesses. In regard to the Company’s internal control over financial reporting, the Audit Committee received reports on the assessment of such internal control from the Directors, Corporate Executive Officers and other relevant personnel and reports on the status of audit thereof from KPMG AZSA LLC, and also sought their explanations as necessary.

  2)

The Audit Committee monitored and examined whether the Accounting Auditor maintained its independence and implemented appropriate audits, as well as received reports from the Accounting Auditor regarding the execution of its duties and sought explanations as necessary. The Audit Committee also received notification from the Accounting Auditor that the “System for ensuring appropriate execution of the duties of the Accounting Auditor” (as enumerated in each Item of Article 131 of the Company Accounting Regulation Ordinance) has been prepared in accordance with the “Quality Control Standards for Auditing” (issued by the Business Accounting Council on October 28, 2005) and other relevant standards, and sought explanations as necessary.

Based on the foregoing method, the Audit Committee reviewed the business report and the supplementary schedules, the consolidated financial statements for this fiscal year (consolidated balance sheet, consolidated statement of income, and consolidated statement of changes in net assets) as well as the non-consolidated financial statements for this fiscal year (non-consolidated balance sheet, non-consolidated statement of income, and non-consolidated statement of changes in net assets) and supplementary schedules thereto.

 

39


2.

Audit Results

  (1)

Audit Results on the Business Report, etc.

  1)

In our opinion, the business report and the supplementary schedules fairly represent the Company’s condition in conformity with the applicable laws and regulations as well as the Articles of Incorporation of the Company.

  2)

We have found no evidence of misconduct or material facts in violation of the applicable laws and regulations, nor of any violation with respect to the Articles of Incorporation of the Company, related to performance of duties by the Directors and Corporate Executive Officers.

  3)

In our opinion, the content of the resolutions of the Board of Directors regarding the internal control systems is appropriate. In addition, we have found no matters on which to remark in regard to the content of the Business Report and the execution of duties by the Directors and Corporate Executive Officers regarding the internal control systems including the internal control over financial reporting.

  (2)

Results of Audit of the Consolidated Financial statements

In our opinion, the method and the results of the audit used and conducted by KPMG AZSA LLC, the Accounting Auditor, are appropriate.

  (3)

Results of Audit of the Non-Consolidated Financial statements and Supplementary Schedules

In our opinion, the method and the results of the audit used and conducted by KPMG AZSA LLC, the Accounting Auditor, are appropriate.

May 11, 2021

The Audit Committee of Sumitomo Mitsui Financial Group, Inc.

 

      Audit Committee Member       Masayuki Matsumoto (Seal)
      Audit Committee Member       Shozo Yamazaki (Seal)
      Audit Committee Member       Katsuyoshi Shinbo (Seal)
      Audit Committee Member       Atsuhiko Inoue (Seal)
      Audit Committee Member       Toru Mikami (Seal)

 

(Note)

  

Messrs. Masayuki Matsumoto, Shozo Yamazaki and Katsuyoshi Shinbo are Outside Directors pursuant to Article 2, Item 15 and Article 400, Paragraph 3 of the Companies Act of Japan.

 

40