1H FY2022 Earnings
Results Briefing

December 5, 2022
Our challenges build our future.

Chugin Financial Group, Inc.

Today’s Key Message
1. 1H FY2022 Earnings Results and FY2022 Plan
 1H FY2022 earnings results: Consolidated profit was 13.9 billion yen(An increase of 3.6 billion yen from theannounced forecast (progress of the plan: 74%))
Corporate-related revenue centering on the net fee income
remained robust.
Replacement of the foreign-bond portfolio was advanced in
response to a rise in overseas interest rates.
 FY2022 Plan
: Profit attributable to owners of parent is expected to be
18.6 billion yen.
We will endeavor to attain, for the third year in a row, a yearon-year increase in profits by maintaining an upward trend.

2. Toward the next Medium-term Management Plan (starting from April 2023)
 Final stage of the Long-term Management Plan “Vision 2027: Plan for Creating the
Future Together,” which started in 2017
This is an extension of our ongoing efforts such as “enhancement of tangible aspects(thorough BPR),” “enhancement of intangible aspects (organization and human resources),”and “transition to a holding company,” and is positioned as a significant Medium-term Planfor sustainable development of the local community.
Our present orientation (key words) is “Creating innovation together” and “Expanding
investments in human resources.”2

I. Earnings Results for 1H FY2022 and Forecasts for
FY2022

III. Management Strategy

Summary5Long-term Management Plan “Vision 2027: Plan for Creating the
Future Together”

22

Net Interest Income

6

Medium-term Management Plan “Plan for Creating the Future
Together: Stage II”

23

Net Fee Income

7

Five Pillars and KPI of the Medium-term Management Plan

24

Corporate-solution-related Revenues

8

Abundant Business Foundation of the Chugin Group

28

Revenues Related to Assets in Custody

9

Missions to Be Fulfilled

29

Expenses

10

Foundation for Fulfilling Missions

30

Credit Costs and Non-performing Loans

11

Toward the Future of Affluent Communities

31

Major Accounts ((1), (2), (3), (4))

12

Reasons and Objectives for the Transition to a Holding
Company

33

Earnings Forecasts

16

Initiatives of the Newly Established Subsidiaries

34

Initiatives of Alliance/Partnership

40
42

II. Capital Policy
Capital Policy

18

Next Medium-term Management Plan

Shareholder Return Policy

19[Reference Materials]

Cross-held Shares

20

Initiatives for the Principal Measures (Sustainability)46

For inquiries regarding this document, please contact:
Management Planning Department, Chugin Financial Group, Inc.
Mr. Shimizu / Mr. Matsuo TEL: +81-86-234-6519 Email: souki01@chugin.jp
3Section I
Earnings Results for 1H FY2022(The Chugoku Bank)
andForecasts for FY2022 (Holding Company)

1H FY2022 Earnings Results –Summary–(billion yen)

1H[Consolidated]
FY2019Consolidated ordinary income
12.9
Profit attributable to owners of parent
8.6

1H
FY202011.9
8.2

1H
FY2021
15.2
10.1

1H
FY2022
19.9
13.9

YoY

vs. Plan*
4.7
4.9
3.8
3.6

[Non-consolidated]Core business gross profit

37.7

38.9

40.4

46.0

5.6

5.0

Net interest income

30.0

30.3

31.3

34.5

3.2

2.6

Net fee income

7.5

7.5

8.8

9.2

0.4

0.7

Net other operating profits

0.1

0.9

0.2

2.2

2.0

1.7

Expenses (-)

27.3

26.4

25.9

25.3

- 0.6

- 0.4

OHR（％）

72.6

67.7

64.0

55.0

- 9.0

- 7.8

Core business net profit
Excl. gains or losses oncancellation of investment

10.3

12.5

14.5

20.7

6.1

5.5

10.2

12.2

14.5

18.7

4.2

3.9

Credit cost (-)

1.0

3.2

1.4

1.2

- 0.2

- 1.5

Bond trading loss, write-off

1.0

0.8

- 0.4

- 15.3- 14.9- 15.6Equity trading and evaluation loss

0.4

0.9

1.5

15.7

14.2

14.3

Other

1.3

0.0

0.1

- 0.6

- 0.7

- 0.8

Ordinary profit

12.2

11.1

14.3

19.2

4.9

5.0

Profit

8.4

7.7

9.7

13.6

3.9

3.6

*Forecast published on May 13, 2022

• Profit attributable to owners of parent: 13.9 billion yen (+3.8 billion yen YoY; +3.6 billion yen vs. Plan)
Core business net profit increased by 6.1 billion yen year on year due to growth of net interest income, net fee income, andnet other operating profits (gains on derivatives trading, etc.)
Ordinary profit increased significantly by 4.9 billion yen year on year despite losses on sales of mainly foreign bonds, which
was covered by gains on sales of equity.

5Net Interest Income[Loan yield][Factors behind change in net interest income]■Foreign currency-based: ¥5.0 billion(+¥0.4 billion YoY)

■Yen based: ¥29.4 billion(+¥2.8 billion YoY)

(billion yen)-0.[値] 1.9

0.[値] -0.4-0.[値]

1.06
0.92

-0.[値]

3.6

1.00
0.87

0.84

0.81

0.80

0.79

1H FY2019

1H FY2020

1H FY2021

1H FY2022[Return on securities]

-4.9

0.6

Loan yield
Loan yield (yen)• Interest on loans and discounts:+¥4.2 billion YoY• Interest on securities: +¥1.5 billion YoY• Increase in foreign currency procurement:-¥5.8 billion YoY(from foreign currency deposits,
foreign exchange markets)• Interest on loans and discounts: Flat YoY• Interest on securities: +¥2.2 billion YoY(including +¥1.9 billion in gains on
cancellation of investment trusts)• Yen, other: +¥0.7 billion YoY(Gains on short-term management
such as BOJ’s special deposit facility)

0.0 0.7

(%)

0.5

2.3

34.5

1.24

(%)
1.20

31.3

+3.2 billion yen

0.91

0.89

1.06

0.94
0.84

0.82

1H FY20212

Foreign currency, other

Fund procurement fromforeign exchange
marketInterest on foreign
currency deposits

Return on foreign
currency securities

Avg. foreign currency
securities balance

Loan yield (foreign
currency)

Avg. foreign currency
loan balance

Yen, other

Interest on yen
deposits

Return on yen
securities

Avg. yen securities
balance

Loan yield (yen)Avg. yen loan balance

1H FY2021

Return on securities
Return on securities (yen)
1H 2019

1H 2020

1H 2021

1H 2022• Yen net interest income: Interest on loans remained almost unchanged year on year despite lower yield, which was coveredby the increased balance. Yen net interest income grew 2.8 billion yen year on year due to an increase in intereston securities arising mainly from gains on cancellation of investment trusts.
• Foreign currency net interest income: Increased by 0.4 million yen year on year due to our efforts to improve our portfolio by
reducing low-return assets despite an increase in fund procurement cost due to a rise in overseas interest rates.

6

Net Fee Income[Net fee income](million yen)(million yen)

10,000+564

20,000+402

17,723

17,159

9,243
8,841
+136
-104

7,588

8,000

2,338

15,000

4,903

4,767

2,442
Assets in custody*

+242

1,812
+580

6,000
Investmentbankingbusiness

2,199

1,619

10,000

3,903

3,661

1,464
-242

-177

4,000
2,189

Remittance/collection/interbank fees

2,378

Other

1,934

2,012

4,223

3,981

4,508

4,936

FY2021

FY2022

5,000

2,000
2,591

2,694

1H FY2021

1H FY2022

00
1H FY2020*Four products in custody (investment trusts, insurance, municipal bonds,
financial instrument brokerage) + inheritance-related business

Plan• In 1H FY2022, revenues from investment banking business such as syndicated loan commissions showed robust growth,
despite negative factors arising from revisions to interbank transfer fees.
• Going forward, we will improve profitability in fees and commissions and enhance fee income by further strengthening ourconsulting business.

7

Corporate-solution-related Revenues[Revenues from solutions for corporate customers](million yen) (Net interest income, net fee income, net
other operating profits, etc.)

12,872

7,253

224

560

1,886

*1. Gross profit of The Chugin Lease Co., Ltd.
*2. Foreign currency loans are extraordinary profit.
*3. Investment banking business included in net fee
income＋2,517[Breakdown of loans to the headquarters](Balance at end of Sep. 2022)
Corporate
loans

1,125

Marketable
loans

35%

4,713

27%

606

Other investmentbanking229

Intermediary fees655

(M&A, consulting,etc.)

Fees on corporate
bonds
Fees onsyndicated loans

*3

272
353
284

514

4,736
571

514

CLO*

*All CLOs are rated AAA or AA and areissued mainly in the U.S. (Managed within afixed investment value after conducting
stress tests)

135
185
249

284

514

1,052

1,652

[Breakdown of intermediary fees] (million yen)

Business
succession,
other

311
543

6,857

553
3,376

Interest on loans*2(Loans to theheadquarters)

965

347

Revenue fromderivatives
transactions

Business
matching
Consulting

353
42

514

47

43

116

150

80
105

57
272

M&A

1H FY2021

514

71

2,795
2,363

1H FY2020

Project finance

Asset finance
1,566

Other

30%

110
770

Leasing*1

8%

1H FY2022

FY2022Plan

184

1H FY2020

1H FY2021

217

1H FY2022• In 1H FY2022, fees for setting up syndicated loans and revenues from derivatives transactions forcustomers showed strong growth.
• We will continue to strengthen our consulting business to address customers’ business challenges.

8Revenues Related to Assets in Custody[Breakdown of revenues related toassets in custody] (million yen)

7,556
(4,903)-249(-104)

3,798(2,442)

3,549(2,338)Group total[Inheritance-related business]
No. of contracts
signed*Testamentary trusts, inheritance
support business, etc.

116
84

76

2,653

(Bank parent)Groupsubsidiaries

2,811(1,812)

1356
1,211

(Securities, asset
management)

Inheritance
relatedFinancial instrument
brokerage

Municipal
bondsLife insurance
Investment
trusts

999
79

110
148
645

564

10

18

416
24

558

1H FY2020

1H FY2021+412[Tsumitate NISA][iDeCo contracts]

52
Total number ofsubscribers

1,786

12,726640

970

11,427420

11,821290

1,119 -480
735

1H FY2022

1,259

Sales value (million yen)558

1H FY2020

278

1,529
639

1H FY2021

1H FY2022

FY2022

1H
2020

1H
2021

1H
2022

1H
2020

1H
2021

1H
2022

Plan

• In 1H FY2022, revenues related to assets in custody decreased year on year, mainly due to sluggish sales in investment
trusts amid an uncertain market environment.
• In the FY2022 Plan, we will respond to customer’s asset-related needs by strengthening cooperation among the Group
companies under the financial group system.

9Expenses[Expenses]-0.8(billion yen)(billion yen)
-0.6

30
300

26.4

50.0
500

25.9

Other property
expenses

200
20

1.5

51.1

2.8

25.3

Taxes

1.5

51.9

3.0
+1.7

11.4

1.5

13.1

400
40.0
5.7

5.7

Deposit insurance
premium

1.0

1.0

System expenses

4.2

3.5

2.1

5.9

-0.3

-1.1

1.0

-0.5

0.5

*Effect of conversion into a financial group system
Of personnel expenses, a decrease of 800 million
yen represents the concurrent portion of thefinancial group, and has been transferred to the“Management control fee” under “Other property
expenses.”

30.0
300

7.5

-0.9

6.6

3.2

*The effect ofconversion
into afinancialgroup system
is reflected.

200
20.0
10
100

-0.8
+0.1
Personnel expenses(of which, retirement
benefit cost portion)

14.0

14.1

(0.6)

(0.4)

(0.3)

1H FY2020

1H FY2021

1H FY2022

13.7

0

100
10.0

28.0

27.2

(0.9)

(0.6)

FY2021

FY20220
Plan• In 1H FY2022, total expenses decreased by 600 million yen year on year due to a drop in system expenses
and deposit insurance premium despite an increase in personnel expenses such as a rise in bonuses.
• In 2022, we will control expenses, as a whole, while implementing strategic expenditures (such as new
businesses, branding and training).

10

1H of FY2022 Earnings ResultsｰCredit Costs and Non-performing Loansｰ[Status of non-performing loans][Credit costs](billion yen)

Other credit costs (*)
Provision of general allowance for loan losses
Provision of specific allowance for loan losses(Loans disclosed under the Financial Revitalization Law) (billion yen)

*The Chugoku Bank does not carry out partial direct write-offs.

*Other credit costs include written-off loans, allowance for specific overseas
claims, allowance for loss on sales of claims, loss on sales of claims, andrecoveries of written-off claims.

NPL ratio

1.68%

1.77%

1.78%

*NPL ratio afterpartial direct
write-offs

1.45%

1.53%

1.55%

95.7

98.9

28.3

29.6

46.4

48.8

19.6

20.9

20.3

End of Sep.
2021

End of Mar.
2022

End of Sep.
2022

3.2
89.0

0.0
Substandard

2.1

1.4

1.2

0.2
0.4

-0.0
0.6

0.7

0.6

1H FY2021

1H FY2022

30.2

Doubtful

1.1
1H FY2020

39.1
Bankrupt

 Calculation method of general allowance for loan losses• The expected loss rate is calculated based on the actual loan loss rates for one calculation period consisting of three years (each period moved forward
by six months).
• The expected loss rate shall be either the “most recent three-period average” or the “most recent five-period average,” or the “long-term average startingfrom 1H FY2008,” whichever is larger (changed from 1H FY2022).
• Loans to healthy accounts and substandard I accounts are adjusted by taking into consideration the average remaining period of the receivables.

• We have provided positive support since the beginning of the COVID-19 pandemic. Currently, credit
costs remain low.
• With the NPL ratio remaining low, we maintain excellent asset quality.

11

(Reference) Major Accounts (1) –Deposits & Assets in Custody–[Average balance of deposits
and assets in custody](billion yen)
Total assets incustody(Deposits + NCD)

8,500
85,000Financial instrument
brokerage

Municipal bonds

7,500
75,0008,250.7(7,278.5)

143.5
265.9

144.9
277.7

431.6

416.6

Investment trusts

133.2

Other
Deposits + NCD

9,083.4(8,086.3)

8,772.3(7,776.5)

Insurance

+3.1%

+3.5%

174.9
226.4
448.1
147.8

4,500
45,000

152.1
257.3

454.3

436.2

150.3
676.4

590.1

607.2

585.6
+1.4%

2,049.8+1.6%

2,049.4

2,015.2

1,802.0

+2.9%

+3.4%
Domestic retailclients
Deposits + NCD

173.9
217.7

710.4

2,020.5

5,500
55,0008,803.4(7,801.5)

156.3

155.0

6,500
65,000

Domestic
corporate clients
Deposits + NCD

9,078.3(8,075.8)

4,890.8

5,148.7

5,326.0

5,196.2

5,349.9

1H FY2022

FY2021

FY20223,500
35,0001H FY2020

1H FY2021*Financial instrument brokerage represents the average balance based on the acquisition price. Municipal bonds are based on the face value. Insurance is based on the
average balance, which takes into account cancellations. Investment trusts are based on the average balance of net assets (including defined contribution pensions).

Plan• Deposits + NCD of both retail and corporate clients have steadily increased, although the trends of securing funds inhand and reducing consumer spending due to the COVID-19 pandemic are coming to a halt.
• In the FY2022 plan, the upward trend of deposits + NSD is expected to continue, although deceleration is forecasted.

12

(Reference) Major Accounts (2) –Loans–＋3.8％[Average loan balance]
+3.3％

6,000
60,000(billion yen)

5,000
50,0004,994.2
Hong Kong Branch

Personal loans

4,000
40,00030,0003,000

Loans to theheadquarters*3
Local government
loans
Urban
development*2

24.7

1,164.1

5,329.4

5,155.8

30.0

23.7

5,375.2

5,175.7

31.2

25.1

50,000
5,000

+3.2％

1,197.3+3.8%

1,243.3

1,249.9

1,210.0+22.2％+23.0%

529.9

612.9

753.9

474.1

458.5

437.1

609.1

634.2

636.2

60,0006,000

40,000
4,000

633.7

774.8

451.3

428.8

631.1

633.1

3,000
30,00020,0002,000

2,000
20,000+1.5％
Remained
flat

1,000
10,000Local
development*1

2,224.3

2,192.2

2,228.9

2,228.7

1H FY2020

1H FY2021

1H FY2022

2,257.3
10,0001,000

00*1. Local: Regions other than Tokyo and Osaka *2. Urban: Tokyo and Osaka*3. Loans to the headquarters: Non-Japanese loans and SF centers

FY2021

FY2022Plan•

In 1H FY2022, local development remained flat, reflecting customers’ financing needs in the COVID-19 pandemic coming to an end.
Total loans increased by 3.3% year on year due to robust personal loans centering on housing loans, initiatives for loans to theheadquarters responding to an increase in deposits, and the impact of the increase in foreign currency loans arising from a weakeryen.
• We will continue to boost quality loans based on initiatives for sustainable financing, and by expanding our share in local
development.

13

(Reference) Major Accounts (3) –Securities–[Average balance of securities]-100.1[Unrealized gains/losses](billion yen)

End of Sep. End of Mar. End of Sep.
Change from end
2021
2022
2022
of Mar. 2022

2,438.8
2,342.7
Investment
partnerships

20,0002,000

15.1

Equity84.7

Investment trusts

147.2

Foreign currency
bonds*

303.8

2,338.7

16.4
85.3

16.5
74.0

172.0

148.5

385.0

-57.1

327.9

2,380.7(billion yen)
Total

148.4

94.5

41.3

- 53.2

17.3
79.4

Held to maturity

0.2

0.1

0.1

0.0

Other securities

148.2

94.4

41.1

- 53.3164.2

Equity

65.8

53.7

36.2

- 17.5Investment trusts

57.9

48.3

32.8

- 15.52.2- 12.0- 19.5

- 7.5

21.4

3.8

- 7.7

- 11.5

Foreign currency
bonds
Yen bonds

319.0[Duration of bonds](year)

5.8

5.5

4.4

4.2

5.8

5.6

3.4

3.1

End of Sep.
2022

End of Mar.
2023
Plan

-8.3
Yen bonds

1,791.9

1,780.1

1,771.8

1,800.8

Yen bonds
Foreign currency bonds

1,000
10,0001H FY2020

1H FY2021*Includes foreign currency investment trusts

1H FY2022

FY2022Plan

End of Sep.
2021

End of Mar.
2022

• In 1H FY2022, the average balance of securities decreased by 100.1 billion yen year on year due to sales of lower returnassets such as foreign currency bonds, etc.
• In the FY2022 Plan, we will carefully manage assets while taking into consideration the interest rate trends in Japan andoverseas and the unstable market environment.

14

(Reference) Major Accounts (4) –Impact of Rising Interest Rate–• Investment in yen assets:

With a large amount of deposits, we will seek the expansion of astable profit margin when interest rates are rising.
• Investment in foreign currency assets: We will continue the ongoing improvement of foreign bonds portfolio
to reduce risks and secure medium- to long-term revenues.
Investment inforeign currency
assetsInvestment inyen assets
Asset
Composition ofcomposition interest rates(by asset)

Securities
30%

Out of yen bonds:
・Fixed rate: 90%
・Floating rate:10%

Status of yen bonds• Yen bonds take into account the
impact of worsening unrealized
gains/losses on capital.
• While watching signs forchanges in financial policy, we
will make reinvestments to raise
returns.
(billion y en)

End of Sep.
2021

End of Mar.
2022

End of Sep.
2022

10BPV

-9.6

-9.2

-10.4

*BPV: Changes in current value when theinterest rate rises 1 bp (0.01%).

Improvement of foreign currency
Asset
Composition of bond portfolio (1H FY2022)
composition interest rates
Loss on sales of foreign currency bonds(by asset)

Securities37%

was 16.9 billion yen.
• Loss was covered by gains on sales of
equity and investment trusts and an
Out of foreign
increase in revenues.
currency bonds: • Investment returns on foreign currency• Fixed rate: 34% bonds were improved by partial
replacement with high-return bonds.
• Floating rate:
We will make our portfolio capable of66%
securing profits in the medium- to longEnd of Sep.
End of Mar. End of Sep.
term.
(billion y en)
2021

Development:

Loans

70
%

• Short-term prime rate, Status of yen loans
etc.: Approx. 10%• When interest rates were rising,• Spread: Approx. 25%
loan interests were linked to the*Market-linked
market based on the short-term• Swap: Approx. 24%
prime rate and spread.
*Fixed-market• Profit margins steadily expanded
based on highly retentive andPersonal loans• Floating: Approx. 13% abundant liquid deposits.
• Fixed: Approx. 13%

Other: Approx. 14%

1H FY2022 (Averagebalance)

Reference: Status of deposits(including NCD)
Deposits + NCD: 8.1 trillion yen (1H
FY2022)• Of which, liquid deposits: 5.7 trillion yen

5.0
trillionyen

5.4
trillion
yen

2022

-1.6

-1.0

Trend of foreign
currency bond yield 3.4%
2.4%

Loans
63
%

1.2%
Fixed rate:
2% (rare)Floating
rate: 98%

1H 2021

1H 2022

Singlemonth ofSep. 2022

Floating rate
1H FY2022 (Averagebalance)・・・

Composition of interest rates
on foreign currency assets:

14%

5.7
trillionyen

1H FY2020 1H FY2021 1H FY2022

2022

-1.6

10BPV

Fixed
rate

86%

15

Earnings Forecasts
FY2021

FY2022(billion yen)

ResultForecast

Consolidated[Earnings forecasts]
Consolidated ordinary profit
Consolidated profit
Core business gross profit
Net interest income
Of which, gain on cancellationof investment trusts

The Chugoku BankNet fee income
Net other operating profits

Expenses (-)
Core business net profit
Credit cost (-)
Provision of general allowance forloan losses
Provision of specific allowance forloan losses

Securities-related gains/losses

Other
Ordinary profit
ProfitConsolidated profit

YoY

Change fromannouncement*

18.6

FY2021

FY2022(Forecast)

14.4

25.8
18.3

27.1
18.6

1.3
0.3

0.0
0.0

80.2
61.6

83.4
63.0

3.2
1.4

3.9
1.2

0.0
17.1
1.5
51.9

1.9
17.7
2.7
51.1

1.9
0.6
1.2
- 0.8

1.1
1.0
1.8
0.1

28.3
7.6
5.0
2.3

32.2
5.8
2.3
3.5

4.0
- 1.8
- 2.7
1.2

3.9
- 0.9
0.0
- 0.9

20.7

3.0
- 0.2
23.4
16.9

- 1.0
- 0.5
24.9
17.3

- 4.0
- 0.2
1.5
0.4

- 4.0
- 0.8
0.0
0.0

FY2019*Forecast announced on May 13, 2022

18.3
11.9

FY2019FY2020Core business net profit
28.3

32.2

23.5

FY2020

FY2021

FY2022(Forecast)(Note) Chugin Financial Group, Inc. was established on October 3,2022 as a wholly owning parent company of The Chugoku
Bank, Limited by means of sole share transfer from the latter.
The consolidated forecast includes the consolidated businessresults of The Chugoku Bank for the 1H FY2022.
(Period subject to the forecast: April 1, 2022 to March 31, 2023)• The top line increased significantly mainly in net fee income and net other operating profits (including gains on derivatives
trading, etc.) Profits are also expected to steadily increase, taking into consideration a decrease in expenses anddecreasing credit costs.
• Meanwhile, improvement of the securities portfolio will be implemented ahead of schedule for the future, and we will
endeavor to “increase profits for the three consecutive fiscal years” and “maintain the upward trend of profits,” while
maintaining the forecast of ordinary profit and profit announced in May 2022.

16

Section II
Capital Policy

Capital Policy[Capital balance]
The three points, consisting of soundness, profitability and enhanced
shareholder returns, will be well-balanced.
• Stable management base
• Response to local customers’ financing needs, implementationof growth investments• Improvement of profitability, enhancement of shareholder
returns

Soundness

Profitability

Enhanced
shareholder
returns Viewpoints of regional community/customers,
shareholders/investors and the soundness of thebanking business should be satisfied in good balance.

Consolidated ROE (%)

Consolidated capital adequacy (%, billion yen)
Consolidated
13.22
capital adequacy
ratio (%)

13.50
12.88

*

13.20

13.04

*

12.76

Risk assets(billion yen)

3,969.1

4,086.7

3,848.5

5% or more in the
final fiscal year of
the Long-termManagement Plan

13.83

4,155.6

4,028.6

4,024.6

4.03
3.29

3.01
2.68
2.27

Mar. 2018

Mar. 2019

Mar. 2020

Mar. 2021 Mar. 2022

Sep. 2022*Due to transfer to a holding company system, the capital adequacy ratio as of the end of September 2022 declined as a resultof distribution of dividends-in-kind (8.5 billion yen) and extraordinary dividend (9.0 billion yen) by The Chugoku Bank to the
Chugin Financial Group in the form of shares of subsidiaries, etc.
If the impact of the abovementioned transfer to a holding company is not considered, the consolidated capital adequacy ratio
would be 13.20% (as shown by the broken line).

*On a consolidated net assets basis,including valuation difference on
available-for-sale securities

FY2017 FY2018 FY2019 FY2020 FY2021

・・・

FY202618

Shareholder Return Policy[Shareholder return policy for FY2022]
Shareholder return ratio of at least 35% through dividends and share buybacks (consolidated basis)– Enhancement of shareholder returns by stable and continuous increase in dividends and flexible share buybacks –Shareholder
return ratio

35.1%

36.2%

38.2%

36.9%

*On a non-consolidated basis of The Chugoku Bank up to FY2019
On a consolidated basis of The Chugoku Bank since FY2020
On a consolidated basis of the Chugin Financial Group since FY2022(+5 yen)(+1 yen)(+2 yen)Dividend pershare

20 yenTotal amount ofreturns

6.8 billion yen

22 yen22 yen3.0*Share buybacks arethose carried out within ayear from the general
meeting of shareholders.

Total dividends
paid

28 yen35% ormore(+2 yen)

30 yen23 yen7.1 billion yen
5.5 billion yen

Share buybacks

38.9%

1.4

5.3 billion yen
4.1 billion yen

1.0

3.8

4.1

4.1

4.3

FY2017FY2018FY2019FY20201.9

1.0 billion yen
in progress

5.2

5.5

FY2021

FY2022• Given robust business performance, the dividend per share for FY2022 is expected to increase by 2 yen to 30 yen per
share (14 yen for interim dividend + 16 yen for year-end dividend).
• Share buyback is in progress with an upper limit of 1.0 billion yen.

19

Cross-held Shares
We pursue improvement of capital efficiency by constantly reducing cross-held shares.
The Board of Directors will examine
the status on a regular basis.

Initiatives toward reducing cross-held shares[Judging whether or not
the shares should be held] The relevant shares are held only when it is considered necessary
for continuous growth and corporate value improvement of theissuers of the shares and the Group.

• Profitability, taking cost of capital
into account• Relationship with local economy• Viewpoint on managerial strategy

 From the perspectives of capital efficiency and the reduction ofshareholding risks, we will reduce the shares throughcommunication with the issuers.

Outstanding cross-held shares
19.1
17.1

98.2

11.5

91.9

Book value (billion yen)

Consolidated capital adequacy ratio (%)(Market value basis)

Consolidated capital adequacy ratio (%)(Book value basis)

16.6

11.2

10.8

89.4

15.5

9.7

End of Mar.
2017

61.7

End of Mar.
2018

13.9

13.5

9.1

9.1

Further reduction
will be consideredin the next
Medium-term Plan.

86.9
76.5

74.0
62.4

• Negotiate improvement oftransaction profitability• Negotiate reduction of thenumber of shares heldMarket value (billion yen)

14.5
12.1

[Shares not satisfying theshareholding criteria]

60.5

End of Mar.
2019

71.0

55.1

54.3

50.2

48.3

End of Mar.
2020

End of Mar.
2021

End of Mar.
2022

End of Sep.
2022
*Including deemed holding shares

20Section III
Management StrategyーLong-term Management Plan andMedium-term Management PlanーLong-term Management Plan “Vision 2027:
Plan for Creating the Future Together”
In March 2017, we formulated our 10-year Long-term Management Plan “Vision 2027: Plan for Creating
the Future Together” based on our long-term vision to “Create with Our Community, Customers andEmployees a Rich Future That We Can All Share,” with the aim of establishing a sustainable businessmodel by overcoming the declines in population and profitability.

[Framework for achieving the long-term vision]

Initiatives for creating arich future──

Improve the quality of the services weprovideIncrease opportunities to provide services

MissionMission we must
accomplish in society(Our raison d’être)VisionOur intended form

Value
Values shared by all officers
and employees

Initiatives for creating thefoundation of management
──Group Corporate Principle

Enhance our capabilities to provide services
Reform the mindsets of individuals and theorganizational culture

The long-term vision has been
positioned as the Group corporate
principle (since April 2022).

Create with our community, customers andemployees a rich future that we can all share

Management Vision
A comprehensive financial services group that is “chosen”
and “trusted” by customers in the region

Chugin Values
To customers : We aim for a win-win relationship with customers.
As an individual : We realize our dreams through work.
As a company : We provide job satisfaction and opportunity for growth.

22Medium-term Management Plan
“Plan for Creating the Future Together: Stage II”
Based on the achievements of the structural reforms (strategic investments and streamlining operations and enhancing sales capabilities
through BPR measures) under the previous Medium-term Management Plan, we will establish “our proprietary business model,”which can quickly respond to changes in the external environment and enables the Group and local communities to grow together.
To that end, we will strengthen our organizational power and human resources development under the new Medium-termManagement Plan.
FY2017

3 years

FY20203 years

FY20234 years

FY2026Long-term Management Plan “Vision 2027: Plan for Creating the Future Together”
Previous Medium-term Management
Plan “Plan for Creating the Future
Together: Stage I”

HOP: Enhance tangible aspects
ThoroughstructuralreformSecure personnel
and time forsales activities

Sales offices

Domestic exchange & counterreception

New Medium-term Management Plan “Planfor Creating the Future Together: Stage II”

STEP: Enhance intangible aspects(organization and human resources)

Sales activity reforms

Enhancement ofinitiatives forregional
revitalization and
the SDGs

Headquarters

Reduction of HQ
operations
Workstyle reforms

2

Deepening ofcustomer-oriented
sales activities

Five
Pillars

Loans
Concentration of loan administration
to HQ and streamlining

JUMP: Culmination of efforts

1

Teller operation reforms

Sales“Plan for Creating the Future
Together: Stage III”

5

3

Vitalization of theorganization

4
Enhancement of
the digitalization
strategy

Establish a businessmodel that enables
the Group and local
communities togrow together.
The Chugin
Financial Group will
become the regional
platform.

Establishment ofa sustainablegrowth model

23

Five Pillars of the Medium-term Management Plan
“Plan for Creating the Future Together: Stage II”
Enhancement of initiatives for regional revitalization and the SDGs

1

 Confront the various issues surrounding the local areas, and aim to solve the issues, create new businesses, and work
toward the SDGs.
 Solve social and environmental issues by providing our know-how to customers, forming various partnerships, andworking toward the SDGs.

Deepening of customer-oriented sales activities2

 As the Chugin Financial Group, provide new value to customers and solve their various issues.
 Strengthen integrated sales by sales offices and the HQ, enhance services including non-financial services, enter new
business areas including personnel placement, local trading companies and business consulting services, andstrengthen synergies within the Group.

Vitalization of the organization3

 Position employees as the Group’s important stakeholder, raise their job satisfaction, and offer support in selffulfillment and development.
 Establish an organizational system where employees can work with greater job satisfaction than before by reforming
the personnel system, reviewing the performance commendation system, and further delegating authority to blocks
and sales offices.

Enhancement of the digitalization strategy

4 The rapid progress of digitalization of finance provides a significant business opportunity for the Group.
 Aim to increase customer contact points and create new customer experience using digital technologies throughincreasing/improving smartphone apps for retail customers and opening a portal website for corporate customers.
Further streamline banking operations through digitalization.

Establishment of a sustainable growth model5

 To respond to the harsh market environment, such as sustained negative interest rates, strive to stabilize revenue inthe core business, including new business areas, and fundamentally review the cost structure to achieve sustainableprofit growth.

24Key Performance Indicators (KPIs) of the Medium-term Management
Plan “Plan for Creating the Future Together: Stage II”• We have set the value we can provide stakeholders as the KPIs of the Medium-term Management Plan: “Plan for Creating the Future
Together: Stage II.”
• We will endeavor to increase the regional (East Setouchi Economic Zone)*1 population and GDP in the long run by achieving the KPIs.

Stakeholder

1H FY2022 results/
full-year plan

Final year of theMedium-term Plan
(FY2022)

Final year of the Longterm Plan (FY2026)

Continuous improvement

Continuous
improvement－

176 (in 2.5 years)

200 companies in
3 years－

Continuous
improvement－

FY2020 Corporate
questionnaire:
74% satisfaction
FY2021 Retail questionnaire:
65% satisfaction

Continuous
improvement

Continuous improvement

Labor share of core business net profit
before payment of personnel cost*6

46% (FY2022 Plan)

54% or more－

Profit attributable to owners of parent

18.6 billion yen(FY2022 Plan)

15.0 billion yen

30.0 billion yen

Consolidated total capital adequacy ratio(Basel III)12.76%(1H FY2022 Result)

Maintained stably at
12%Maintained stably at 12%

Consolidated ROE

3.34% (FY2022 Plan)－At least 5%(single-year basis)

KPI
Number of projects addressing local
issues and contributing to the SDGs

Local community(1) Sum of the number of startups for which
we provided support*2 and the number ofcompanies for which we provided support
in business succession*3(2) Activities contributing to theimprovement of financial literacy*4

Customers

Employees

Shareholders, etc.
(All stakeholders)Customer satisfaction*5(Retail and corporate)

596 (in 2.5 years)
More than 11,000 persons
attended the events.

*1. East Setouchi Economic Zone: Okayama Prefecture, Kagawa Prefecture, eastern Hiroshima Prefecture (Bingo region), western Hyogo Prefecture (Harima region)*2. Number of startups for which we provided support: Number of startups established as a result of our event for startup support, etc.
*3. Number of companies for which we provided support in business succession: Number of companies to which we provided business succession consulting services*4. Activities contributing to the improvement of financial literacy: Number of events and study sessions that contributed to the improvement of financial literacy, business skills, etc.
*5. Customer satisfaction: Sum of “Satisfied” and “Somewhat satisfied” replies in customer questionnaires (Corporate and retail customer questionnaires are conducted every other year.)*6. Labor share in core business net profit before payment of personnel cost: Personnel expenses divided by the sum of core business net profit and personnel expenses

25

Five Pillars of the Medium-term Management Plan
“Plan for Creating the Future Together: Stage II”*For details of the “Five pillars” initiatives,[Summary: Progress and achievements of the five pillars] please see the attached Reference Materials.
Major initiatives to date1Enhancement of initiatives for regional
revitalization and the SDGs
Establishment of a dedicated section and theSustainability Committee
Promotion of regional revitalization involving local
communities and customers

2

Deepening of customer-oriented sales activities



Introduction of regional headquarters structure andautonomous goal setting
Deepening of consulting sales activities andacceleration of new businesses3Vitalization of the organization



The first “overall revision” of the personnel system
in 17 years



Promotion of diversity

4

Enhancement of the digitalization strategy

Acceleration of digitalization of sales, clerical andheadquarter businesses

Launch of “Chugin app” and “Chugin Business Portal”

5

Establishment of a sustainable growth modelExpense control, reorganization of sales offices,personnel reallocation, etc.

Achievements to date
[Number of startups forwhich we provided support*]

15(Total of startups fromFY2020 to 1H FY2022)*Startups as a result of our event forstartup support, etc.

[Support for initiatives of
local governments]
Front-running area of
decarbonization(Nishiawakura Village)

Digital Suburban HealthSpecial Zone
(Kibichuo Town)[Corporate-related revenues*][Retail-related revenues*]

7.2 billion yen

3.5 billion yen(1H FY2022)(Increased by 3.8 billion yen
compared to 1H FY2019)(1H FY2022)(Increased by 0.6 billion
yen compared to 1H FY2019)*Corporate-solution-related revenues*Assets in custody-related revenues[New businesses]

3 newly establishedcompanies(Personnel placement, investmentspecific and consulting companies)[New personnel system]
Expansion of fields for those
who can play an active role
Fostering of an autonomousand challenging culture(Establishment of internal startups
and expert positions, abolition of
restrictions on career path, etc.)[Chugin app]

[OHR]

110,000 customers

55.0% (1H FY2022)(Total of customers from July
2021 to September 2022)(Decreased by 17.5 pts
compared to 1H FY2019)26

Section III
Management StrategyーOur intended formーAbundant Business Foundation of the Chugin GroupThe population is based on “Population Estimates” as of October 2021
published by the Ministry of Internal Affairs and Communications.

Abundant forest resource• In northern Okayama Prefecture, forest resource
produces abundant water resources. The supply
capability of industrial water is at the highest
level in the Chugoku-Shikoku-Kyushu region.

One of the largest industrial zones in
Japan• In southern Okayama Prefecture, Mizushima
Industrial Zone, one of the largest industrial
zones in Japan, is located amid a concentrationof a wide range of manufacturers of petroleum,chemicals, steel, automobiles, etc.

Tottori Prefecture
550,000 people One branch

Mimasaka region
Okayama Prefecture
1,880,000 people
Bank Head Office andbranches: 110

Bizen region
Hiroshima Prefecture
Bitchu region
2,780,000 people
Bingo region
26 branches

Kagawa Prefecture
Wide area of East Setouchi Economic
Zone• The area covering Okayama Prefecture,
Kagawa Prefecture, and the Bingo region* hashigh potential as a single wide economic zone.
*Okayama Prefecture: Kasaoka City, Ibara City
Hiroshima Prefecture: Mihara City, Onomichi
City, Fukuyama City, Fuchu City, Sera
Town, Jinseki Kogen Town

Ehime Prefecture
1,320,000 people
One branch

940,000 people
16 branches

Temperate climate with few
natural disasters• Okayama Prefecture is blessed with atemperate climate with many days ofprecipitation of less than 1 mm, and iscalled “Hare-no-kuni” (Land of Sunshine).

Hyogo Prefecture
5,430,000 people
Six branches
Crossing point of traffic• Okayama Prefecture is a crossing point of traffic,
with expressways extending from east to west
and from south to north connecting Honshu andShikoku.
• The total floor space of warehouses is the largest
in the Chugoku-Shikoku area. In recent years,
new logistics centers have been established one
after another, and many manufacturers andlogistics companies nationwide have expanded
their business into Okayama.

Okayama Prefecture as a front
runner of SDGs

• The entire region works on the initiatives
for the SDGs in cooperation withadministrative organizations, universities
and other educational institutions, local
companies, and financial institutions.
“SDGs Future City”
Okayama City, Maniwa City, Kurashiki
City, Nisiawakura Village“Decarbonization Leading Areas”
Maniwa City, Nishiawakura Village“Digital Suburban Health Special Zone”
Kibichuo Town

28

Missions to Be Fulfilled

Create with Our community, Customers andEmployees a Rich Future That We Can All Share.
Previous Medium-term Plan: “Plan for
Creating the Future Together: Stage I”
Enhancement of tangible aspects(thorough BPR)
Medium-term Plan: “Plan for Creating the
Future Together: Stage II”• Enhancement of intangible aspects(organization and human resources)• Make “Regional revitalization and theSDGs” the first pillar

Local issues

Establish the basic systems“Regional headquarters structure /introduction of autonomous goal
setting, new personnel systems, andGroup management principles”

Enhancement oflocal collaboration

Local potential

Transfer to “a holding company”(to establish a sustainable businessmodel)All of the above missions form a series of flow toward theachievement of “Missions to Be Fulfilled by the Chugin Group.”

29

Foundation for Fulfilling Missions: Vitalization of the Organization• Various initiatives that contribute to vitalization of the organization have been implemented to respond tochanges in the internal and external environment.
• “Chugin Open Lab,” autonomous goal setting by sales offices, and other systems were realized bycultivating a bottom-up organizational culture.

April 2020
Revision of the performancecommendation system• The commendation system waschanged from quantitativeevaluation to qualitative evaluation.

October 2017
Introduction of a “Flat Meeting”• “Meeting for casual but serious discussion”:
Communication among employees is deepened,and various ideas and improvement measures
are proposed by the participants.

June 2015
Establishment of the “NEXT
10 Promotion Department”• CS, ES, diversity, and “Chugin Heart” arecentrally controlled and promoted while
always taking the next decade into
consideration.

Changes in theinternal environment
Changes in theexternal environment

October 2022
Transfer to a holding company system
April 2022
Establishment of the management
principle and Chugin Value• Positioning the long-term vision
as the management principle,
the principle structure waschanged from “Chugin Heart” to“Chugin Value,” etc.

June 2021 / October 2021
Introduction of Regional Headquarters
Structure / Autonomously Set Goals• Transfer of authority and functional
enhancement are promoted by establishingregional headquarters in each region.
• Independent and self-disciplined sales
activities are strengthened by autonomously
April 2021
Revision of the personnel system set goals by the sales officesof the Chugin Group and launch of Chugin Open Lab• The overall personnel system was revised for the first time in about 17 years, with the aim ofcreating “a group of human resources desired internally and externally.”
Expansion of fields in which one can demonstrate capability,
Career path
Disciplineand development of a corporate culture of self-discipline andchallenge
Work style
Challenge• “Chugin Open Lab,” an internal venture program, provides
opportunities to realize ideas for solving challenges.

April 2014
Establishment of “Chugin Heart”• “The standards and sense of value of behavior and judgment” for the directors andemployees of The Chugoku Bank Group were clarified.

30

Toward the Future of Affluent Communities (1)Maniwa City (Decarbonization Leading Area and SDGs
Future City)
Chugin’s Forest (since 2008)• We named part of a forest in Maniwa City
that suffered damage from a typhoon“Chugin’s Forest,” and have begun
activities to improve it since 2008.
• In 2018, we signed a memorandum of
understanding, under which we haveconducted tree thinning and improvement
cutting. As to thinned wood, the fundgained on sales is applied to improvement
work and biomass power generation, etc.
Comprehensive Agreement(November 2022)• Coordination and cooperation
concerning initiatives for asustainable regional economy arefurther strengthened througheffective use of intellectual andhuman resources of Maniwa Cityand the Chugin Financial Group.
Creation of new business using
unused farmland– Culture and commercialization andsale of moss – Maniwa City KOBASHI HOLDINGS CO., LTD.
 Japan Moss Factory Co., Ltd.
 Agricultural Association Yoriebara
 SETONOWA Co., Ltd.

Nishiawakura Village(Decarbonization-leading Area and SDGs Future City)
Decarbonization Leading Area
“Business to create decarbonization-leading areas to allow the whole
village to ‘enjoy living’ by 2050”

Joint proposals by four parties including Nishiawakura Village
and the Chugin Group.
Project management
and coordination

Chugin FG

Nishiawakura Village• Positive participation as
the main business entity• Promote local
decarbonization activities.

Installation and subsidy
for decarbonization

Public/private facilities
Power supply
Improvement ofphotovoltaic power
generation facilities, etc.

Local power producer
and supplier[Diagram of the system(an excerpt)]

Enjoy living in Nishiawakura Village
Healthy life

Convenient life

Data are gathered frombirth to death to promotehealth management andappropriate medical,
welfare, educational
services based on theanalyses.

SDGs Future City Plan

Living at ease

Provide moving
means with no one
left behind by
developing MaaS in
connection with adata platform.

Data of health,
medical care,nursing care, andeducation

Living in rich nature
Reconstruct the naturerich “Hundred-year
forest,” and maximize theforest value to optimize
decarbonization andconservation of
biodiversity.

Secure stable powerand energy even indisasters byintroducing andpromoting EVs andstorage batteries.

Operation
information,energyconsumption

Operation area,and volume ofmaterials supply

Amount ofelectric power

Improve the quality of rural areas by promoting initiatives for carbon
neutrality.
Local PPA
operator

Zero Energy
House (ZEH) andinsulation
Promote upgrading
to higher efficiency
equipment

Roof-mounted solar
panel + storage battery

Energyconsumption/
volume of supply

Create a regional economic
foundation by locally
Small-sized
Roof-mounted solar
consuming locallywind power
produced energy generated panel + storage battery generation
by VPP.
Energyconsumption/
volume of supply

Data PF

Eliminate CO2 emissions from power
consumption by introducing theabovementioned facilities.

(1) Work- and life-friendly residentialarea, Beppu residential area, Nakadoi
residential area

Priority Countermeasure Operation
Promote decarbonization in parallelwith the leading area by utilizing theabovementioned operations.

Other areas(Domains other than the above mentioned
residential areas and civilian use)

Use ofundergroundheat (for airconditioning)Zero Energy
Building(ZEB)/ZEH,
and insulation

Installation of power
generation facility byintroducing PPASale ofelectric
power

Renewable energy
generation facility in thevillage

Sale ofelectric
power
Supply ofrenewableenergySolar power generation
Small-sizeby participation of
hydraulic power
villagers
generation

Eliminate CO2 emissions from power
consumption by introducing theabovementioned facilities.

(2) Public facilities group, tourist
facilities group, woodprocessing/biomass facilities groupHeat
supplyOne Hundredyear Forest
CO2 absorption
and fixation

Woody biomass

Promote recyclingbased society by
utilizing dry bark.

Flow of information
Flow of energy(Source: Proposal Plan of Nishiawakura Village)31

Toward the Future of Affluent Communities (2)Horizontal development of regional communities is pursued
by the Chugin Group as a main partner
Improvement of financial literacy ofregional communities

Accelerate regional DX and SX

 Provided office tours and visiting lectures for students aspart of financial education.
 Held life plan seminars and defined contribution pension
plan seminars for adults.

 The Chugin Group will
design the regional
community by taking
the lead in solving
regional issues.

Ecosystem of startup
Momosta (Momotaro Startup Café)• A base located in front of
Okayama Station to support
entrepreneurs and thosetrying to start upa business.
Science Castle• Research presentation
opportunities for juniorhigh school and highschool students.
The gateway for future
researchers

Okayama Innovation Project• “School” for learning how to start abusiness, and “Contest” fordiscovering and awarding
talented persons

Support forstartups
Support for
innovation

Okayama Tech Planter
Tech Grand Prix
• Creates industries andincubates ventures bydeveloping scientifictechnologies

C Cube Consulting

Support companies by involving
the regional community
 “Setouchi Supporter” to support
regional companies
Establishment of an investment trust by
a Group company (an asset
management company) to include
companies based in three prefectures(Okayama, Kagawa and Hiroshima) in
the Setouchi area.
 Community-based crowdfunding
Support for fund procurement ofcommunity-based projects from a small
amountHare Fure Okayama

Transition to aholding company

Chugin Group
Conventional
financial functions(loans, deposits
and exchange)

Support forstarting up abusiness

Support for
growthBusiness
succession
Management
improvement

DigitalSolution ofregional issues

32Reasons and Objectives for the Transition to a Holding Company
The Chugin Group’s
comprehensive financial
services provision system

Objectives
Establish sustainable business models
that will mutually develop among
regional society and customers

The
Chugoku Bank
Chugin Credit
Guarantee
Chugin Operation
CenterCBS

Goals
 Expanding business channels
 Appropriate allocation ofmanagement resources Advancing group governance
Build a flexible organizational structure that willwithstand changes in the business environment.

Our intended form
Evolve into “a comprehensive service
provider centering on finance”

Become an organization capableof continuing to create new value
to regional society.

ChuginSecurities

Chugin Card

Fund
settlement

SETONOWA

Cashless

Management
and businesssupportNewly
establishedAssetmanagement

ChuginAsset
Management

PeopleFundprocurement

Consulting

C CubeConsulting

ChuginLease

Personnel
placement

Newlyestablished
ChuginHuman
Innovations

Newly
established
ChuginCapitalPartners

Expansion of business channels
to respond to regional needs

33

Initiatives of the Newly Established Subsidiaries－Chugin Capital Partners, Limitedー

Chugin Capital Partners, Limited

A community-based,
investment-specific subsidiary

Established: April 1, 2022
PE fund*2
Local
company

Venturecapital*1(*1) An investment company that invests in companies expectedto achieve high growth such as startups and venture capitals(*2) PE stands for private equity fund. A company that invests inunlisted companies with challenges such as businesssuccession, and provides support for management andgrowth (to improve corporate value)

Cooperation

Startup(*3) A company that operates businesses considered tocontribute to vitalization of the region

ChuginChuginGroup
companies

CapitalPartners

Startup

Regional vitalization
business operator*3

Business succession
company

Local company / local entrepreneur

Renewable-energy-related business
operator

Company in need of businesssuccession

Regional problem-solution-type company

Town-development-related business
operator

Company attempting to realize new
growthBuild a regional ecosystem withstartups

Contribution to regional vitalization
and regional decarbonization

Survival and development ofcompanies without a successor

Sustainable development of the regional economy
34

Initiatives of the Newly Established Subsidiaries－Chugin Capital Partners, LimitedーFund・ Business succession and growth ・・ “Chugin Fund for Creating the Future Together”
・ Infrastructure ・・ “Chugin Hare-no-kuni Infrastructure Fund*”・ Venture capital・・ “Chugin Infinity Fund” ・Other ・・ “Chugin Bridge Fund”*The commitment period expired in March 2020.

Menu
Business
succession

Support for growth Become a recipient of capital in the absence of a successor to
support smooth succession of stock.
 Support for planning growth strategies and fund procurementwith the aim of accelerating growth Support for succession (management) by accompanying an

MBO(Management Buyout)

internal candidate for successor

Joint investment

 Joint support for management in cooperation with majordomestic business partners (e.g., private companies, external
PE funds)

M&A strategy

 Support for business growth (creation of synergy effects andexpansion of market share) through M&A from financing andoperational aspects(roll-up strategy)

Support for further growth through a hands-on approach

35

Initiatives of the Newly Established Subsidiaries－Chugin Human Innovations Co., Ltd.ー
A company that provides
one-stop solutions
concerning “people”

Chugin Human Innovations Co., Ltd.
Established: May 30, 2022



Utilization of management resources andcreditworthiness of the Chugin Group

Personnel
consulting
Training

Differentiate the company from other companies by making
the best use of the Group’s management resources (people,
products, money, information and networks) plus
creditworthiness.

Application of group synergy and contribution toregional vitalization
Contribution to the development of the regional economy bycooperating with the two newly established companies(Chugin Capital Partners and C Cube Consulting) in addition
to the Group’s existing businesses, and collaborating with
regional companies in the same industry.

Become the platform of the region that connects“people’s” hearts by providing one-stop solutions tovarious consultations and requests concerning“people.”‘19/8

The Chugoku Bank launched the“staff agency business.”‘22/5

Chugin Human Innovations
was established.

Staff agency

Support forseconded
employees

Fee-charging
employment
placement

Dual employment /side-businessplacement‘22/10Received a license for the fee-charging,
employment-placement business.
Launched the business after the transferof business from The Chugoku Bank.

36

Initiatives of the Newly Established Subsidiaries－Chugin Human Innovations Co., Ltd.ー
Provide a menu of diversified solutions concerning “people” as the key management issue of acorporation based on the “personnel placement business.”

Business program of“Personnel placement business”

Mediation of secondment• “Both-side-type”
service to interview
both job-seekers andrecruiting companies

Example: Re-skilling, training/seminar services
Academic re-education
programs<Menu of reskilling>

Education programs
for adults
Chugin Okayama Economic
Research InstituteFG

Practical re-education

Internal
personnel(The Chugoku
Bank)

Training / seminar

The expansion of services including support for dual
employment / side-business placement andpersonnel consulting is under consideration.

Introduced ahead of other banks the “both-side-type” personnel
placement system under which matching is made by interviewing
both recruiting companies and job-seekers.
The retention rate after joining the recruiting company is 98.3%.* (as of July 2022)*Results in The Chugoku Bank

Local universities

Cooperation

External personnel(Database)(Cooperation withexternal personnel)

Chugin Human Innovations

Management
issuesNeed for workers

The Chugoku Bank

Recruiting company (Client)

Personnel placement

Future development(including those under consideration)

37

Initiatives of the Newly Established Subsidiaries－C Cube Consulting Co., Ltd.ー

C Cube Consulting Co., Ltd.

Contribution to the solution of customers’ andregional issues and sustainable growthDiversifying and sophisticating
regional issues

Representative: Ryu Nishihara(Former Director at PwC Consulting LLC;
Born in Okayama Prefecture)DX

Established: September 1, 2022

SX

CLOUD

Origin of the company name:

Chugin Financial Group × Community × Co-Creation

Characteristics
A startup with enthusiasm for regional
revitalization
Solution to wide-area social issues (BtoX)
Design regional communities with thecomprehensive capability of the Chugin Group
Utilization of the creditworthiness and regional
relations of The Chugoku Bank

Establishment of regional DX/SX
promotion models• New, unprecedented startup as a regional financial institution,a consulting company with a progressive spirit• Take the lead in solving difficult issues of the region
as the center of the regional ecosystem.
• Create the future of the regional communities with thepredominantly wide solutions generated from the synergyof the consulting capability and the comprehensive power of
the Chugin Group, not limited to loans.
• Handle regional issues from the standpoint that is closest
to regional opinions (issues), using the firm relations
with the relevant region as a leading bank of the East
38
Setouchi Economic Zone.

Initiatives of the Newly Established Subsidiaries－C Cube Consulting Co., Ltd.ー
To solve social issues of
the region

Business Domain• Support for the formulation of DX/IT
strategies• Support for the upgrading of internal
systems• Support for the introduction of cloudservices• Support for the development of
personnel specializing in DX, etc.

• Support for the formulationof DX road map• Support for the promotionof Society 5.0, etc.

Local
companies
IndustryDX

SX

DX for new
businesses
DX for existing
businesses

Formulation of
SX strategy
Support for SX
execution

Variousregional
issuesBusiness
associations

DX for tasks ofmunicipal
government
DX for resident
servicesLocalgovernment

Vocational
schoolRegional financial
institution

Government

Regional decarbonization
Biodiversity
Consideration of human rights• Support for compliance with
TCFD recommendation• Support for the planning andimplementation of• Support for the formulation of
decarbonization
management strategy and• Support for response toplans
biodiversity• Support for cost reduction• Support for the formulation ofcomprehensive plans, etc.

Regional society,city, town, village,
company, association

Society5.0
Local
government

City bankAcademia

Financial
institutions

National
government(local branch)

Design and operation

C CubeConsulting

Comprehensive capabilitiesof the Chugin Group

General consulting

PrivatecompanyLargecompanies

University

Region• Support for formulation of theintroduction of
decarbonization goals• Support for formulation of theimplementation plan ofdecarbonization, etc.

 Management resources of the Chugin Group
Total support from upstream (formulation ofstrategy) to downstream (financing and acquisitionof human resources)
 Utilization of creditworthiness and relations in
the region Group of professionals with a passion forregional revitalization
Established as a small group of elite professionals
specializing mainly in consulting business, invitedfrom outside the Group39

Initiatives of Alliance/Partnership
Regional coordination strategy－ Accelerate coordination in a wide range over the borders of industries toward
regional development
2019/102021/22022/2

Okayama Co-creation Partnership

2022/3
Okayama Consortium for
Regional Decarbonization
Creation• Coordination with local financial institutions
Support for startups, business meetings,
personnel exchange, etc.

Okayama Future
Co-creation Alliance• Coordination with Okayama University
Contribute to regional development by
sharing mutual information and knowhow and achieving the SDGs

Coordination with local governments(regional revitalization, etc.)• Industry-university-government-financial
institution collaboration in Okayama
Prefecture.
A unique regional revitalization anddecarbonized society will be realized byeffectively using the regional
characteristics and resources.
(Secretariat)
Chugoku-Shikoku Regional Environment
Office of the Ministry of the Environment,
The Chugoku Bank, Ltd., and Okayama
University

Coordination agreement
concerning regional revitalization• Coordination with PwC Consulting LLC, a[Okayama Prefecture]
Okayama Prefecture, Okayama City, Kurashiki
City, Mimasaka City, Tamano City
NEW
(Sep. 2022) Wake Town
(Nov. 2022) Maniwa City, Takahashi City
[Hiroshima Prefecture] Fukuyama City
[Kagawa Prefecture] Mitoyo City

Major coordination
leading general consulting firm
• Achieve, disseminate and promote • Provide full-fledged, community-based
the SDGs
consulting services centering on DX and SX
support.
• Build partnerships in the region= Establish new regional revitalization models.
• Promote industry-academia
cooperation• Provide support for venture capital• Digital transformation• Human resources development, etc.

40

Initiatives of Alliance/Partnership
TSUBASA Alliance:－ We pursue scale advantage and synergies through this broad, large-scale alliance.
 The alliance’s total assets of 96 trillion
yen are the largest following those ofJapanese mega banks (as of Mar. 2022).
 26 million retail customers and 2.2
million corporate customers
correspond to those of theJapanese mega banks.

TSUBASA Alliance Co., Ltd.
 Responds to member banks’ common key challenges andconsolidates operations
 Advanced services and functions developed by member
banks will be applied horizontally.

AML Center
Head office location

Business Strategy Division Prevent money launderingand terrorist financing

Branch location

T&I Innovation Center
Co., Ltd.
 API Platform, FinTech

 DX
 ESG/SDGs
 New businesses

Coordination

 Human resources development
 Consolidation and effective useof information

The effect of the alliance will
significantly increase when eachbank mutually utilizes its strengths.
The effect of the alliance is
expected to accelerate further

 Enhancing the top line
Coordinated finance

Effective use of group companies

Inheritance-related business

Personnel exchange

Total of over 6.0 billion
yen in five years■Effect of top line
■Effect of cost reduction

M&A business platform

Further increaseis expected in
the future.

 Cost reduction, streamlining of operations
Sharing the missioncritical system

Sharing operation departments

Sharing sub-systems

Sophisticating AML operations

TSUBASA FinTech foundation

TSUBASA SmileFY2017FY2018FY2019FY2020

FY2021…

41

Next Medium-term Management Plan －Positioning－• The next Medium-term Management Plan represents the period in which we must work to achieve the KPIs
of the Long-term Management Plan (10-year strategy) by demonstrating the results of the reforms
implemented in Stages I and II. It is also the period for considering the direction we should pursue on a longterm basis, taking into consideration the next 10 years.
Positioning

Stage

I
Stage

II
Stage

III

Structural reform
Enhancement oftangible aspects
Behavioral change
Enhancement ofintangible aspects

Achievement

Investment in BPR

From clerical work
to sales activities
Autonomous sales system
Personnel evaluation system
Acceleration of new businessdevelopment
Transfer to a holding company system<Positioning of the next Medium-term Plan> Achievement of the KPIs of 10-year strategy by demonstrating theresults based on the reforms implemented in Stages I and II
 Responses to challenges in the aspects of strategy and measures andfactors to be newly added, which emerged in Stages I and II
 Consideration of the direction we need to pursue on a long-term basis
toward the next 10 years

42

Next Medium-term Management Plan －Concept－• Build sustainable business models while addressing new challenges.
Group Corporate Principle
Create with our community, customers and employees a richfuture that we can all share.

Evolution to a comprehensive services
business focused on finance
Strength

The ChugokuBankEnhance and use
ChuginCard

The holding
company pursues:
Expanding businesschannels

SETONOWA

Weakness

Overcome andcomplement

Chugin Credit Guarantee
Chugin Operation Center
CBS

ChuginFG

Appropriate allocation ofmanagement resources
Advancing group
governance

Key initiatives in thenext Medium-term PlanC CubeConsulting

PeopleChugin Human
Innovations

ChuginSecurities<Sustainability management>

Chugin AssetManagement

ChuginLease

ChuginCapitalPartners• Co-creation of
innovation• Increase in investments
in human capital• Maximization of groupsynergy• Enhancement ofinitiatives for DX, etc.

Changes in the internal and external environment
Opportunities

Threats

43

Our Future (Statement)
We are in times of change. Turn to an offensive, not a defensive, position.
Let your dreams come true without getting into a rut.
Chugin will evolve to a comprehensive financial group to co-create a richfuture together with its customers.

Optimum solutions will be created for diversified and sophisticated issues
while we listen sincerely to customers’ opinions, on the back of ourdeepening financial services.
We may experience failure in taking on the challenge of expanding ourbusiness domains.
We may also be caught in trouble and suffer when we face a question
without a right answer.
Still, we refuse to escape.
Our challenges build our future. Challenges of each of us build our future.
This is our belief.
Each one of us will proactively take on the challenge of each issue.
What we see over the horizon is an area where happiness circulates and thefuture of dreams come true.

Today, we walk in excitement toward our challenges.
44

Our challenges build our future.
We are in times of change. Turn to an offensive, not a defensive, position.
Let your dreams come true without getting into a rut.
Chugin will evolve into a comprehensive financial group to co-create a rich future together with its
customers.
Optimum solutions will be created for diversified and sophisticated issues while we listen sincerely tocustomers’ opinions, on the back of our deepening financial services.
We may experience failure in taking on the challenge of expanding our business domains.
We may also be caught in trouble and suffer when we face a question without a right answer.
Still, we refuse to escape.
Our challenges build our future. Challenges each of us face build our future. This is our belief.
Each one of us will proactively take on the challenge of each issue.
What we see over the horizon is an area where happiness circulates and the future of dreams come true.
Today, we walk in excitement toward our challenges.

Chugin Financial Group, Inc.

Chugin Financial Group, Inc. Brand Movie

45

[Reference Materials]

Initiatives for the Principal
Measures (Sustainability)
1. Enhancement of Initiatives for Regional
Revitalization and the SDGs

47-52

2. Deepening of Customer-oriented Sales Activities:

53-55

3. Vitalization of the Organization
4. Enhancement of the Digitalization Strategy
5. Establishment of a Sustainable Growth Model

56
57-58
59-60

1. Enhancement of Initiatives for Regional Revitalizationand the SDGs －Initiatives for Regional Revitalization
Initiatives for Regional
Revitalization

Positioning the regional revitalization and the SDGs as the “First Pillar” of thecurrent Medium-term Management Plan, we will strengthen the initiatives toward
regional sustainable development together with the Chugin Group, as a whole.

Roles of the Chugin Group

Human resources,
information, funds

Information on
industries andcompanies

Initiatives to date
Momosta (Momotaro Startup Cafe)• A base located in front of
Okayama Station to support
entrepreneurs andthose trying tostart up a
Support forbusiness
startups
Science Castle
Support for• Research presentation
innovation
opportunities for juniorhigh school and highschool students.
The gateway tofuture researchers.

Partner companies forrealization

Establish a place
for co-creation(a platform)

Okayama Innovation Project• “School” for learning how to starta business, and “Contest” fordiscovering and awarding
talented persons

Local
governments

Chugin FG
Mutualcooperation

Universities,
research
institutions, etc.

 Through the provision of “human resources,” information,” “funds,” and “know-how,” we will proactively
revitalize regions in collaboration with local relevant groups and companies.
Okayama Prefecture as an advanced
prefecture in terms of the SDGs

SDGs future Cities• Okayama City, Maniwa City,
Kurashiki City, Nisiawakura Village
Japan SDGs Award• Okayama University• Geography and History Club, Sanyo
Gakuen Junior High School / HighSchool, etc.

 Okayama

COVID-19-related loans
Approx. 9,900

Amount of loans
providedNumber of loans
providedApprox. 340 billion yen(of which, loans ofapprox. 180 billion yen
were provided to the
Warranty Association)

Okayama Tech Planter
Tech Grand Prix
• Creates industries andincubates ventures bydeveloping science
technologies

May 2020

Mar. 2021

Mar. 2022

Sep. 2022

Issuance of social bonds (corona Bonds)• For maintenance of the local economy and employment
through financial support(Our message to customers by issuing corona Bonds)• Maintenance of soundness, generation of surplus capacity
for risk taking, improvement of capital efficiency

47

1. Enhancement of Initiatives for Regional Revitalizationand the SDGs －Addressing Climate Change
Addressing Climate
ChangeChallenges in mind

Through thorough discussions in Board Meetings, we are determined
to improve support for and disclosure of the shift to decarbonization
Source: “FY2018 Annual Report on Prefectural Accounts” Cabinet Officein the region.

 Risk that local companies may fall behind in decarbonization• Industrial structure of Okayama Prefecture (There are many manufacturers,
including the Mizushima Industrial Zone and Mitsubishi Motors-relatedcompanies.)• Our credit portfolio also contains many manufacturing companies, which arestrongly aware of the transition risk to decarbonization.
 Risk of occurrence of natural disasters• Although Okayama Prefecture enjoys a mild climate and experienced few natural
disasters in the past, the risk of occurrence of disasters, such as Torrential Rainin Western Japan (July 2018), has been rising.
 Risk of stranded assets such as loans andsecurities• Review of portfolio and risk management areneeded.

Composition of Okayama gross domestic
product by economic activity (%)
Manufacture
30.0

21.9
Real estate
11.2

10.1
9.2
8.9

12.5
7.5

41.8

46.9

OkayamaPrefecture

Nationwide

Wholesale and retail
Public health and social
business
Other*1. Task Force on Climate-related Financial Disclosures*2. IEA’s Sustainable Development Scenario (SDS)(2 degrees Celsius scenario)*3. IPCC’s RCP8.5 scenario (4 degrees Celsius scenario)

Initiatives
Our efforts to date: Policy for Responsible Financing and Investment Activity (Apr.
2021)• We clarified that we will carefully examine financing andinvestment activities* that pose a risk or a negative impact on
the environment or society, and make efforts to reduce or avoid
the impact of such elements. (*Weapons, coal-fired power
generation, palm oil plantation development, logging business)
 Initiatives for “SDGs through our core business”• Private placement bonds for social contribution: The proceeds
are partially applied to themes of SDGs.
• Chugin Sustainable Loans: Interest rates link to the achievementof goals set.
• Chugin SDGs Support: Support for the preparation ofcustomers’ SDGs declaration, etc.

Task Force on Climate-related Financial
Disclosures*1 (since July 2022)• Improvement of the promotion system mainly by the
Sustainability Committee• Reflected on the evaluation of risk and opportunity, and thesustainability management strategy
Transition risk (“electric power,” “automobiles and their
Strategy
components”)*2
Increase in credit cost until 2050: 18.0 billion yen in total
Physical risk (impact of flood disaster)*3
Risk
Total increase in credit cost until 2050: 6.0 billion yen at the
management
maximum• CO2 emissions: Scopes 1 and 2 will be reduced to Net Zero by
the end of 2030.
Indicators • Sustainable finance: Loans equivalent to 1.5 trillion yen will
and targets
be executed by the end of 2030.
Governance48

1. Enhancement of Initiatives for Regional Revitalizationand the SDGs －Sustainable Finance
Environmental and social finance

Goal for
FY2030 Invested amount: 1,500 billion yen(Balance: approx. 700 billion yen)
• Loans for renewable energy, sustainable loans, storage
batteries, EVs, medical care, nursing care, education, regionalrevitalization-related loans, COVID-19-related loans, etc.
• Utilization of accumulated know-how of the Headquarters Loan
Department, and enhancement of cooperation with local
governments by regional headquarters and the consulting
services subsidiary to be established (offering proposals fromupstream)
The Chugin Group companies will lead the regional initiatives
for decarbonization and sustainability.

Image of track record and future
implementation (Accumulated total)

SDGs-related training has been implemented periodically
Promoting the understanding and initiatives for employees

 Coordination with external companies(billion yen)

1.5 trillion yen
15,0001,500

 Enlightenment activity for the Group companies

Contribution to fostering the sense of regional sustainability
in cooperation with other financial institutions, companies,
and universities.

Sustainable finance1 trillion yen

10,000
1,000

531.3
5,000
500

444.6

105.6

139.6

Image is shown for FY2026
and thereafter.

(Held on September
8, 2022)A “decarbonization
seminar” was held forcompanies in the
Mizushima area ofKurashiki City.

0
FY2021

1H FY2022

FY2026FY2028FY203049

1. Enhancement of Initiatives for Regional Revitalizationand the SDGs －Promotion Structure The special dedicated section “SDGs Promotion Department (FG)” plays the leading role, operating the basic policy andthe committee.
 From the perspective of the improvement of corporate value over the medium to long term, we will accelerate responses tosustainability issues with the unified efforts of the entire Group.

SDGs

Local government• Coordination withlocal governments• Tourism-related
business, etc.

SDGs
• Planning andimplementation of
measures• Planning for sales
offices, etc.

Startups• Support business forstartups• Industry-academia
coordination, etc.

CSR
• Cooperation,
donation• Planning andimplementation of
CSR events• Formulation of the entire Chugin Group’s
principles of initiatives concerning regional
revitalization SDGs, and provision of support
for regional headquarters and sales offices[The Chugin Group’s Basic Principles of
Sustainability]= Implementation of the Chugin Group’s“mission,” “vision,” “value,” and “code of
conduct”[Sustainability Committee]<Chairperson>• Representative Director, President<Matters deliberated>• Identification and review of sustainability
issues• Measures and principles of regional
revitalization SDGs, and the status of theinitiatives• Measures and principles of environmental
issues, and the status of the initiatives• Measures and principles of social issues, andthe status of the initiatives• Measures for CSR, and the status of theinitiatives• Other matters incidental to theabovementioned items<Structure>
Supervision

Regional
Revitalization

Basic Principles of Sustainability / Sustainability Committee (since April 2022)

Board of Directors
Discussion
and reporting

Supervisionand instruction

Group Management Meeting

Sustainability Committee
Execution

Sustainability Promotion
Department

Management Planning Dept.,
Sustainability Promotion Department
Cooperation

Group companies• Concurrently with identifying and reviewing the sustainability issues,
we will deliberate the measures, principles and the status of
implementation concerning “environmental issues,” such as climatechange and biodiversity, and “social issues,” such as diversity, labor
environment, and human rights.

50

1. Enhancement of Initiatives for Regional Revitalizationand the SDGs －Local Trading Company
 We will establish a business model that enables the Group and local communities to grow together by using the knowhow, information, and networks of the Group.
 We will contribute to the development of the local economy by accelerating our support for customers’ main businesses
through a local trading company.

Local trading company
Local trading company“SETONOWA”
Chugin Financial Group

Status of consultations
Sheet metal/laser (as of October 31, 2022) Mannou sunflower
processing technology

Analysis, strategy(Local newspaper)

seed oil

Other

Industrial
technology(Local department store)

Product planning anddevelopment
Branding

Craft works, etc.

Food

Channel development
Promotion(Branding, design)(Advertising and producing)

Strengths• Complements knowledge that the Chugin Group lacks, such as in distribution,
promotion, design and marketing, through merger with companies representing theregion• Disseminates the region’s appeal by making the most of the know-how and networksof the five participating companies and the Chugin Group’s managerial resources

Tatami mats& sports51

1. Enhancement of Initiatives for Regional Revitalizationand the SDGs －SDGs and ESG through Our Core Business We provide strong support for our customers’ achievements in decarbonization and SDGs, etc. by accelerating theSDGs and ESG through our core business.
 We endeavor to improve our corporate value continuously over the long term through support for the local communityand customers.
Customers’ major SPTs (*)

SDGs and ESG through our core business
Rating and Investment
Information, Inc.

“Chugin Sustainable Loan”

Set environmental targets and reports

Check environmental targets and reports

Okayama Economic
Research Institute

The Chugoku Bank

Customer

Loan

Third-party’s opinion on
the lending program Ratio of CO2 reduction to net sales (%)
 Recovery and regeneration rate ofchlorofluorocarbon (%)
 Annual power generation of renewableenergy Power consumption reduction rate (%)*Sustainability Performance Target

May 2021

Sep. 2021

Mar. 2022

Sep. 2022

Details of support“Chugin SDGs Support”
The Chugoku Bank will support
your efforts toward the SDGs.
Illustration of Chugin SDGs Support
Sorting of efforts toward the SDGs

Total amount of
implementations:
2,770 million yen

Assisting the preparation of an
SDGs declaration document

 Simplified examination of the status of SDGs
efforts and feedback Assisting preparation of an SDGs declaration
document PR of efforts on website, etc., posting of thedeclaration as a news release on our website,
if the customer wishes
Assisting PR of efforts toward the SDGs
417
299

Total number ofapplications:
500

84

Apr. 2021

Sep. 2021

Mar. 2022

Sep. 2022

52

2. Deepening of Customer-oriented Sales Activities
ー Corporate Solutions
 Corporate solutions: Sales offices and the HQ unite to propose the optimal solutions for the customer.
Customers for relationship management

Local support activities (corporate solutions)■ Assigned a Relationship Management rep at the HQ• Carries out sophisticated solution sales that link theHigh-quality
information of the sales sites and the professionalsales offeredknowledge of the HQ to establish a deeper relationship withby saleslarge-volume clients.
offices andthe HQ in■ Established the Ship Finance Center
unison• Consolidates lending operations for ocean-going ships in the
Bingo district of Hiroshima Pref.
• Offers high-quality sales by professionals in charge of ships■ Strengthening consulting business through external
partnerships• Provides consulting services to customers with managerial
issues on business succession, M&A, business plan
formulation, etc.
CapitalOptimalsolution forthe customer

Capital contribution,
human resources

The Chugoku
BankOkayama CapitalManagement
SMEs withmanagerial
issuescontribution,
human resourcesLong Black
Partners Co., Ltd.

Both sales offices and the headquarters are continuously incharge of customers whose impact on the local economy issignificant and who are very likely to expand transactions
with The Chugoku Bank.
Proposals with higher added value
Final fiscal year of theMedium-term Plan:

Sharing of management issues, andprovision of solutions• Consulting on business succession,
consulting on personnel affairs• Business matching, finance, etc.

200
customers

62
61 customers61 customerscustomers
51 customers
20 customers

1H
2H
1H
2H
1H
FY2020 FY2020 FY2021 FY2021 FY2022

・・・

2H
FY2022

Chugin Capital Partners (April 2022)
Provides proactive support for and develops companies withbusiness succession issues, startups, regional revitalization
business operators, etc. Private
equity fund
VenturecapitalLocal
company

Coordination

Startup
The Chugoku
Bank Group
company

ChuginCapitalPartners<Example of operating fund>Chugin Infinity Fund (Investment framework: 0.5 billion yen)

■ Assisting through investment in funds• Subsidiary specialized in investment“Chugin Capital Partners”

Operates in cooperation with the Bank’s programs concerning startup andfoundation, including “Innovation Project” and “Tech Planter”
Supports the formulation of growth strategies by effectively using equity,and supports their growth53

2. Deepening of Customer-oriented Sales Activities
ー Retail Solutions and Group Synergies

We support customers’ life plans from both financial and non-financial aspects, according to thecustomer segment and the sales channel.
Group synergies: Higher synergies are pursued by seconding or assigning active bank employees to the position ofpresident of the Group companies, etc.
Retail solutions:Life plan support activities (retail solution)

Face-toface
channels
Non-faceto-facechannels

Non-financial
services Increase the number of branches that
conduct business on holidays (Life Plan
Center, sales offices) Develop an optimal branch network
 Improve customer convenience throughdigitalization• Remote consultation, completing transactions
online, partnerships with fintech companies

 “Chugin Okomarigoto Kaiketsu (Problemsolving) Support”• Inheritance, end-of-life preparations, realestate, housework, nursing care, etc.

Increase transactions with customers
Life Plan Center (Five centers as of March 2022)
Insurance

LoanManagement

 The conventional functions of the housing loan
center were strengthened, and the name waschanged to the Life Plan Center. (Sales Offices
provided customers with information on holiday
channels.) Consulting sales and cross-selling are conductedaccording to customers’ life plans, with housing
loans and various kinds of insurance as an entry
point.

Cross-selling with housing loans as an entry point
Conclusion of
housing loan contract

Renewal ofinterest rate

Redemption

Insurance, Tsumitate NISA, App, unsecured loan, Okomarigoto Kaiketsu(Problem-solving) Support
Insurance reconsideration, asset
management

Maximization of group synergies

Average balance of personal loans (billion yen)

Personnel
allocation

 Active bank employees and external personnel take office
as representatives (*At the underlined company, an
external personnel member has assumed therepresentative position.)• Chugin Lease, Chugin Securities, Chugin Capital Partners,
Local trading company “SETONOWA,” Chugin Human
Innovations, C Cube Consulting

Expandingthe businesschannels Consideration of new business areas• Three newly established companies (company specialized ininvestment, personnel placement, support for SX/DX)• New lease areas, utilization of real estate

Other personal loans
337.8

Housing loans

339.5

339.3

831.1

870.7

Steady expansionof businessfoundation

FY2020 Result

FY2021 Result

FY2022 (Final fiscal
year of the Mediumterm Plan)

804.1

FY2019 Result54

2. Deepening of Customer-oriented Sales Activities

ー Regional Headquarters Structure and Autonomous Goal Setting

 Regional Headquarters Structure: Cooperation with the region (city, town, village) will be further strengthened byestablishing seven regional headquarters according to the administrative divisions.
 Autonomous goal setting: Independent and self-disciplined sales activities will be strengthened based on theregional characteristics and markets of sales offices and regional headquarters.

Bingo,
Hiroshima

BitchuHanshin

Bizen

Shikoku

Seven regional
headquarters

Objectives of the regional headquarters structure: Understanding the challenges and needs, which become
more complicated and diversified in each region
 The “Regional Headquarters,” being closest to the field,
will lead in planning and implementation of the sales
strategies and regional revitalization SDGs measures.
• Transfer of authority (cooperation with the region,
strategy planning, personnel system, etc.)• Functional enhancement (research and analysis, liaison
with the headquarters, sales support, etc.)

Areal analysis
and strategy
planning• Regional headquarters’
activity policy• Characteristics andinformation of theregionSWOT analysis• Putting the measuresof the headquarters
into practice, etc.

Headquarters

Chuo• Challenges andneeds of the region• Situation of eachregionDemographics,
industries, numberof sales offices,market share, etc.

Regional headquarters andsales officeMimasaka

Introduction of “Autonomous goal setting” bysales offices

Customers in the region

Introduction of regional headquarters

Budgetmeeting

Objectives of autonomous goal setting: Independent and self-disciplined planning of strategy
and activities based on the regional characteristics andmarkets
 Establishment of sales systems in which the sales
office, the headquarters and the Group companies
have a sense of unity Further pursuit of customer-oriented sales activities
and improvement of earnings power55

3. Vitalization of the Organization
Promotion of diversity

We pursue the improvement of corporate value on a medium- to long-term basis
through employees’ workstyle reforms and active roles played by diverse
human resources.

Health and Productivity Management
Initiatives for the promotion of work-life balance and workstyle reforms• Introduction of a flex-time system, a working-hour interval system, andstaggered working hours• Introduction of a system to precisely record the time of employees’
arrival and leaving, such as log-in records of personal computers• Annual paid leave must be taken by the hour, and 10-day paid leavemust be taken.
• Promotion of the “Iku-boss” (a boss sympathetic to male
employees spending time with their children), and promotionof both male and female employees taking childcare leave up
to the maximum number of days they are entitled to.
Platinum Kurumin
We support
child-rearing

Support for balancing work and family life
• Improve systems to enable employees to continue to work without
concern in the event of child-rearing and nursing care
• We obtained a “Platinum Kurumin” certificate, which is granted toenterprises that support employees in their childcare period.
• We have established the Job Return system in order to enable retired
employees to work again for The Chugoku Bank.
Diversity (employment of those with diverse values and expertise)• Since 2019, we have proactively hired personnel with special skills,
such as consultants and lawyers from diversified industries other thanfinancial institutions.
• We have introduced training programs for mid-career recruits (toimprove the satisfaction and abilities of the employed).
• In October 2021, a special course was established (a career path tobecome a specialist in a specific field).

Monthly overtime
hours worked

Health & Productivity Management
Outstanding Organization

12 hours
30 minutes
5 hours
23 minutes
FY2017FY2018FY2019FY2020

FY2021

Number and rate of female
executive personnel

Rate of taking
child-care leave
Male

83%

Reduction of overtime hours
worked by improving
productivity and workstylereform
↓Improve the working
environment to allow
diversified personnel to playtheir roles actively

Female100%*The rate indicates employees whosechild was born between April 1, 2020
and March 31, 2021, and took childcare leave by March 31, 2022.

10.5

11.2

118

126

'19/3

'20/3

12.7
142

'21/3

13.8

(%)

158

'22/3

 Personnel who were appointed as General
Managers at the Headquarters in June 2021
• A mid-career recruit (General Manager,
International Department)• A female (General Manager, Regional
Revitalization & SDGs Promotion
Department) There are already many mid-career recruits andfemale Branch Managers.

56

4. Enhancement of the Digitalization Strategy
 Digital strategy vision of The Chugoku Bank: “Pursue comprehensive services business to serve every aspect ofcustomers’ lives and businesses”
 We will powerfully promote digitalization by using people (sales), products (sales offices), and information as a regional
financial institution.
Step 1. (This Medium-term Plan)
Improve user convenience ofexisting services

Retail customers

Expand digitalization
 Digitalize sales offices(Less back office andmanager operations)(Completion of transactions
on tablets at sales offices)

Highly convenient
smartphone app• Used all the time
• Optimal proposals• Liaison with realtransactions

 Improve convenience ofthe retail app

Username:

Corporate

 Sophisticationof proposals

Next-generationtype sales office

Deepening of digital channels
Enhancement of digitalarmament

Corporate platform
業績予測

Café

Hospital Drugstore(Omni-channel)(Utilization of AI)･･･
Shoppingmall
Coordination with a crossindustrial coordination channel

 Sophistication and one-stop
service on a corporate portal

各種情報提供業務サービス
資金調達 営業支援
会計

 Mail marketing for the
purpose of providing
information

consulting service)

Travel Provision of corporate portal
services(website and app)Introduce and provide physical and digital
services beyond finance on a daily basis

SUBMIT

Development of a digital channel

 Enhanced online
meetings

 Next-generation-type sales
office (Less clerical work,

Password:

Sales office tablet“TSUBASA Smile”(Non-face-to-face loan
application)(Digitalization of loan
agreements)

Combination of physicaland digital businesses

Step 3. (2030)
Comprehensive services,
including non-financial services
Provision of services for every
aspect of life

Step 2. (Next Medium-term Plan)
New financial services

受発注
生産管理

 Sophistication of online financing
and provision of information(using AI)

A partner for business &management consulting
All external sales reps will shift tobecoming consultants who support local
companies’ important decision-making.
Network ofexperts

In-house knowledge
database

AI
Quickly provides appropriate dataaccording to the proposal fromamong a vast sea of data

Bank’s customer
base network

Industry andregioninformation

57

4. Enhancement of the Digitalization Strategy －Channel Launched the “Chugin app” for retail customers in July 2021, and the “Chugin Business Portal” in
September 2022.
 A new sales style will be realized by combining face-to-face and non-face-to-face channels.
NEW

Chugin app

Chugin Business Portal

Develop the app as the “Main channel” thatconnects us to retail customers

Timely information provided using the online contact

Face-to-face

Mikatano fund management: Fund management functionID

Non-face-to-face

Password

ログイン

・Sales offices
・Life Plan Center
Starting
point

Number of customers
who underwent a face-toface meeting

Approx. 230,000

・Chugin app

Lead them to a face-to-facemeeting to offer higher
value-added proposals

・Website, SNS,
Number of customers who
mailhave not had a face-to-face・Call center,meetingetc.
Approx. 1,770,000

Approx.
140,000

Status of use of the app (Total)
Passbook app
Chugin app

1H
FY20192H
FY2019Approx.
110,000

Released inJuly 2021

1H
FY20202H
FY2020(Mikatano Works: Management ofschedule and attendance, etc.)

1H
FY2021

2H
FY2021

1H
FY2022Contributes to improvement of customer convenience andefficiency of operations, and timely information is provided basedon data analyses from sales offices and the Headquarters andaccording to customer needs

585. Establishment of a Sustainable Growth Model－Expenses, Employees and Sales Offices
 We have succeeded in thoroughly streamlining operations due to the digitalization and BPR that we promoted under theprevious Medium-term Plan.
 We will carry out fundamental cost reductions toward a sustainable growth model while maintaining and improving
customer convenience.
Reduction
targetExpenses (billion yen)

[Reference] Expected improvement of BOJ standard OHR(% change vs. FY2019)-1% (BOJ’s improvement standard)-3%-3.2 billion yen
vs. FY2019-4%- 4.4%

55.6

54.2

54.0

52.7

51.9

- 4.9%- 9.2%

Strive to achieve the standard by
improving profitability and reducing costs
FY2017FY2018FY2019FY2020

FY2021FY2019FY2022*The reduction target includes the end of the 1.4 billion yen peryear amortization of the TSUBASA mission-critical system.

Number of employees• The number of employees will decrease
under BPR initiatives.
• The effects of improved productivity will
emerge under the current Medium-term
Plan.

2,961

Achieve the medium- tolong-term target for reducing
employees to 2,800.

Mar. 2018

Mar. 2019

2,792
2,725

*Non-consolidated number of employees(excluding seconded employees)(Previous Medium-term Plan)
BPR period
Mar. 2020

No. of offices 159
in Japan
Branch-withina-branch

2,884
2,831

Number of sales offices(Current Medium-term
Plan)
Emergence of effects
Mar. 2021

Mar. 2022

Retail banking
offices andsubbranches
Full-banking
services

FY2020

FY2021

FY2022• Achieve 145 sales offices under the
Medium-term Plan
• Consider further improvement ofefficiency
155
151
145

1

6

10

33

34

30

126

121

121

114

Mar. 2019

Mar. 2020

Mar. 2021

Mar. 2022

17
31*Excludes overseas and Internet branches

595. Establishment of a Sustainable Growth Model－Corporate Governance
Enhance governance to achieve “sound and sustainable growth” and“improvement of corporate value on a medium- to long-term basis." We selected the Prime Market where more sophisticated governance system is required.
 The Sustainability Committee was established. (announced on April 27, 2022)
Holding company system

Chugin Financial Group, Inc.
Board of Directors of the holding
company(Executive) Directors

One Outside Director

Audit and Supervisory
Committee Members

Three Outside
Committee Members

Outside Directors
Nomination andCompensation Committee(a voluntary committee)

The Chairman is an
outside director.

 Independent outside director ratio: 44.4% (four out of nine, ofwhom one female director)

 The Nomination and Compensation Committee wasestablished. (The Chugoku Bank established one on December 22, 2017.)
 The “Basic Policy on the Succession Plan of theRepresentative Director” was formulated. (The Chugoku Bank
formulated one on December 21, 2018.)

Outside Directors  Outside Directors with diversified backgrounds and professions were appointed.
Name

Holdingcompany

The Chugoku
Bank

Principal background

Specialized field

Akira Kodera

Former Representative Director and Managing Director, ITOCHU Corporation
Former President, Chairman & Representative Director, ITOCHU ENEX CO., LTD.

Corporate
management

Toshihide Saito, Audit and Supervisory
Committee Member

Former Director, Managing Executive Officer, Kao Corporation

Corporate
management

Kazuhiro Tanaka, Audit and Supervisory
Committee Member

Certified Public Accountant

Finance andaccounting

Yukiyo Kiyono, Audit and Supervisory
Committee Member

Attorney at law

Legal matters

Hiromichi Furuya, Audit and Supervisory
Committee Member

Former Vice-Governor, Okayama Prefecture

Economic policy

Yasuhiro Hitomi, Audit and Supervisory
Committee Member

Former Director in charge of Development and Design Department, Fishing Operation
Division, SHIMANO INC.

Corporate
management

60This material contains forward-looking statements. These statements do not guarantee our futurebusiness performance and include risks and uncertainties. It should be noted that future
performance may differ from the targets mentioned herein due to changes in the management
environment and other factors.