The transactions pursuant to the joint share transfer described in this document involve securities of a Japanese company. The joint
share transfer is subject to disclosure requirements of Japan that are differentfrom those of the United States. Financial information
included in this document, if any, was excerpted from financial statements prepared in accordance with foreign accounting standards
that may not be comparable to the financial statements of United States companies.
It may be difficult for you to enforce your rights and any claim you may have arising under the U.S. federal securities laws, since theissuer is located in Japan and some or all of its officers and directors reside outside of the United States. You may not be able to sue aJapanese company or its officers or directors in a Japanese court for violations of the U.S. securities laws. It may be difficult to compel
a Japanese company and its affiliates to subject themselves to a U.S. court’s judgment. You should be awarethat the issuer may
purchase securities otherwise than under the joint share transfer, such as in the open market or through privately negotiated purchases.
This document has been translated from the Japanese-language original for reference purposes only. In the event of any conflict or
discrepancy between this document and the Japanese-language original, the Japanese-language original shall prevail in all respects.

Extraordinary General Meeting
Reference Documents for Extraordinary General
Meeting—Supplementary Volume
Proposal No. 1

Approval of Share Transfer Plan with The
Michinoku Bank, Ltd.
1.

Content of Financial Statements, etc. for
the Most Recent Business Year (ended
March 2021) for The Michinoku Bank .............. 1(“4. Matters Concerning The Michinoku Bank”
on p. 56 of the Convocation Notice)

The Aomori Bank, Ltd.
Securities code: 8342

-1-

Content of Financial Statements, etc. for the Most Recent Business Year(ended March 2021) for The Michinoku Bank
Business Report for the 49th Term (April 1, 2020 through March 31, 2021)
1.
(1)

Matters Related to the Bank’s Current Situation
Progress and results of business, etc.

Description of principal business
The Michinoku Bank, Ltd. (the “Bank”) is engaged in deposit business, lending business, securities tradingbusiness, securities investment business, domestic exchange business, foreign exchange business, andcorporate bond entrustment and registration business, as well as ancillary business such as agency business,guarantees of obligations (acceptances and guarantees) and over-the-counter sales of government and otherpublic bonds, investment trusts, and insurance products.
Financial and economic environment
In fiscal year 2020, the Japanese economy saw economic activity fall sharply due the spread of the COVID19 pandemic, resulting in negative growth comparable to that immediately after the Lehman Brothers
collapse. While the economy was on a gradual recovery track following the lifting of the state of emergency
in May 2020, the risk of further spread of COVID-19 continues to make households and businesses cautious.
The regional economy in Aomori Prefecture and the Hakodate area, where the Bank’s principal operations
are based, continues to be in a difficult situation due to the effects of the prolonged pandemic. Somemovement towards recovery has been seen in production and consumer spending thanks to various support
measures, but demand for the tourism and restaurant industries has not bounced back, and the economy has
not recovered to pre-pandemic levels due to weakness in the job climate and backing off from capital
investment. While vaccinations have begun and signs of an end to the pandemic have begun to appear, theoutlook remains uncertain, and there is a need to increase the level of economic activity while taking
measures to prevent the spread of infection.
Progress and results of business, etc.
Fiscal year 2020 marks the final year of the Bank’s 5th Medium-Term Business Plan “Exciting Innovation”
from April 2018. In pursuit of becoming the “best partner to bring out the wealth of the region” that it isaiming to be, the Bank has been working on various measures towards protecting the prosperous life of its
home while calling forth its wealth.
○ Innovation 1: Pursuit of consulting quality
・ Building an integrated support system from business establishment to revitalization
In order to carry out business activities that bring it closer to the local community, respond promptly tocustomer needs and issues, and contribute to the growth and development of the region, the Bank assigned
executive officers to each of the Aomori, Hirosaki, Hachinohe and Hakodate areas as district headquarters
managers, and set up district headquarters from April 2020 with specialist staff to make higher quality
proposals to its customers.
To expand corporate solution services, the Business Establishment Support Office became the Business
Establishment and Succession Support Office in April 2020, and in July 2020 the International BusinessSupport Office became the Business Growth Support Office in a functional reorganization to establish asystem that puts “integrated support and consulting according to the corporate life cycle from businessestablishment to revitalization” into practice.
・ Implementation of consulting to achieve life plans
Life planning consultants with specialized knowledge and skills such as asset management and inheritancehave been assigned to each of the Aomori, Hirosaki, Hachinohe and Hakodate districts to practice highquality consulting sales according to the life stage of individual customers.
The Bank has also strengthened points of contact with customers through sales locations that are open on
weekends and holidays such as the Michinoku Everyday Plaza Aomori (in Aomori City) and the Michinoku
Everyday Plaza Tamukai (in Hachinohe).
From October 2020, the Bank started dedicated telephone handling of debt consolidation loans. The Bank-2-

will continue working to provide even better products and services to meet the diverse needs of its
customers.
・ Providing solutions that bring out the potential of the region
The Bank is strengthening cooperation with various companies in order to further improve customer service
and management productivity for the development of the local economy.
A partnership with Aomori Bank, Ltd. for mutual no-fee ATM access began in July 2020. In collaboration
with SBI Money Plaza Co., Ltd., the joint location Michinoku Bank SBI Money Plaza Hakodate was opened
in Hakodate in May 2020, and various financial instruments and services provided by SBI Securities Co.,
Ltd. have been made available along with consulting and advice on asset management.
From August 2020, the Bank started to provide foreign currency-related services in partnership with SBI
Sumishin Net Bank, Ltd. and SBI Remit Co., Ltd., and is working to improve customer convenience, suchas 24-hour online support.
Collaboration with RCG Corporation will further promote the expansion of sales channels for regional
products and business matching.
○ Innovation 2: Pursuit of employee happiness and vitality
・ Realizing a vibrant corporate culture and work environment
Based on developments such as recent deregulation, the Bank has engaged in the activities of the Value
Creation Project, a project aimed at future business generation. The Aomori Producers Support Project was
launched in March 2021 through repeated discussions and consideration centered on young and mid-career
staff selected through open recruitment within the Bank, with the goal of supporting local agricultural
producers.
・ Further promotion of diversity
The Bank has established its Basic Policy for Promoting Diversity, and is continuously reviewing various
systems and improving the workplace environment for the active participation of diverse human resources,
including women, young people, seniors and people with disabilities. This fiscal year, the Bank began fullscale operation of flextime and telework systems and has built a structure that enables flexible working
styles to promote work-life balance, such as improving labor productivity, securing time for selfdevelopment, and balancing childcare and long-term care with work.
In addition, a “double job system” has been introduced at the headquarters on a trial basis that allows eachstaff member to demonstrate their skills even outside their own assigned section in an effort to support the
self-directed growth of staff members.
The percentage of female managers at the end of March was 27.2%, an increase of 0.3 points from theprevious year.
・ Expansion of the “career challenge system”
In order to develop human resources with expertise, the Bank actively dispatches staff to outsideorganizations as trainees. In addition, the Bank is actively working on human resource development, suchas allowing short-term trainees from sales locations to experience the work of the headquarters section of
their choice for one to two weeks.
○ Innovation 3: Pursuit of higher productivity through constant promotion of reform・ Promotion of digitalization
In June 2020, the Michi-Tech Project started as a digital strategy initiative to expand new points of contact
with customers. The Bank has expanded services that do not require physically visiting the Bank andreleased a portal app called the Michigin App. In addition to enabling various procedures such as looking
up savings account balance and deposit and withdrawal details, changing address, and switching to a
passbook-less account, the Michigin App also allows use of a service to manage household finances called
Money Forward. The Bank will continue to promote digitalization to improve customer convenience.
・ Branch consolidation
In order to maintain customer convenience while consolidating management resources to improve
management efficiency, the Bank has made efforts to integrate business locations using a “branch-in-branch”
style (a form in which two or more branches are located together under the same roof). As a result, the-3-number of brick-and-mortar locations has been streamlined from 84 as of the end of March 2020 to 75 asof the end of March 2021. The Bank will continue to promote reorganization in a flexible manner, including
the expansion of locations operating on holidays.
These measures have resulted in business performance for the current fiscal year as follows.
○ Deposits, etc.
The closing balance of deposits increased ¥125.2 billion year on year to ¥2,110 billion due to an increasein personal deposits and corporate deposits. The closing balance of total deposits including negotiablecertificates of deposit increased by ¥126.5 billion year on year to ¥2,146.4 billion.
Total balance of assets under custody for public bonds, investment trusts and insurance products increasedby ¥9.1 billion year on year to ¥274.3 billion due to an increase in investment trusts.
○ Loans and bills discounted
The closing balance of loans at the end of the period increased ¥41.2 billion year on year to ¥1,721.2 billion
due to an increase in loans such as home mortgages and local government loans.
○ Securities
The closing balance of securities increased ¥18.8 billion year on year to ¥185.5 billion as a result ofmanaging assets with appropriate risk control in mind, taking into consideration market trends and theinvestment environment.
○ Status of Income
Ordinary income increased by ¥4,262 million year on year to ¥31,735 million due in part to an increase ininvestment income resulting from an increase in interest and dividends on securities. Ordinary expenses
decreased ¥1,013 million year to ¥29,733 million as a result of a decrease in general and administrative
expenses and decrease in other expenses due to a decrease in provision of allowance for loan losses. As aresult, ordinary profit increased by ¥5,275 million year on year to ¥2,001 million. Current net income
increased by ¥6,361 million year on year to ¥1,929 million.
Consolidated ordinary profit was ¥2,217 million, and current net income attributable to owners of the parent
was ¥1,942 million.
Matters to be dealt withThe Bank believes the urgent issue to deal with is providing thorough support for businesses as well as forthe household finances of individual customers, all of whom are in a difficult situation due to the prolonged
impact of COVID-19 pandemic, and to fully carry out its mission of serving as a financial intermediary.
Due to structural problems such as the declining birthrate, aging population, and shrinking economic scalecaused by population decline, problems such as a shrinking workforce, lack of successors, and a decreasein suppliers and customers in commercial transactions have become apparent in the regional economy. Asa financial institution, we must present solutions to the various issues faced by local people and companies.
In addition, in the financial industry, it is necessary to take measures such as strengthening management in
the face of declining profits due to the prolonged climate of low interest rates, intensifying competition due
to the rise of FinTech companies, and various diversifying risks.
In the face of such challenges, with the start of 6th Medium-Term Business Plan “Co-creating the Futureof the Regional Community” (April 2021 to March 2024), the Bank has set its sights on becoming “a valuecreating company with close ties to the regional community, taking on challenges for the regional
community, and continuing to grow with the regional community.” The Bank aims to create the value
needed for the future of the region, reliably deliver that value to its customers, and have it lead to thesustainable growth of the region.
By steadily implementing this 6th Medium-Term Business Plan, the Bank will strengthen its financial
foundation and continue to work on further strengthening its compliance and internal control systems.
All officers and employees will continue to make efforts in the future, and the Bank sincerely asks for yourcontinued support and patronage.

-4-

(2)

Status of assets and income
FY 2017

Deposits(units: millions of yen)
FY 2019
FY 2020

FY 2018

1,953,130

1,971,717

1,984,736

2,110,005

824,088789,202746,093

700,600

1,129,042

1,182,515

1,238,643

1,409,405

Loans and bills discounted

1,526,974

1,537,721

1,679,936

1,721,230

For individuals

491,620

528,846

601,997618,265

For small and medium-sizedenterprises
Other

560,030

574,718

540,838

538,377

475,323434,156

537,100

564,587353,683

230,824

166,709

185,510238,394

110,869

-

-

-

-

24,457

12,351

Other

115,289

119,955

142,251

173,158

Total assets

2,118,788

2,112,634

2,166,390

2,357,586

Domestic exchange transaction
volumeForeign exchange transaction
volumeOrdinary profit(loss)Net profit(loss)Net profit (loss) per share

8,528,990

8,615,949

8,772,694

8,772,302

million USD

million USD

million USD

million USD

74
3,962

104
1,234

90
(3,273)

84
2,001

2,619

634

(4,432)

1,929

yen
137.25

yen
23.74

yen
(264.00)

yen
96.98

Term deposits
Other

Securities
National government bonds
Local government bonds

Notes:

1.
2.
3.

4.

All amounts shown are rounded down to the nearest whole units.
Earnings per share are calculated by dividing net profit (loss) by the average number of issued
shares during the period (after deducting the number of treasury shares).
Bank shares owned by the Board Benefit Trust (BBT) are treated as treasury shares, and areincluded in the treasury stock to be deducted in the calculation of the average number of shares
during the period in the calculation of earnings per share.
A ten to one common share reverse stock split was carried out on October 1, 2017. Net profit
per share is calculated on the assumption that the reverse stock split was carried out at the
beginning of FY 2017.

-5-

(Reference) Assets, income, and losses of the corporate group(units: millions of yen)
FY 2019
FY 2020

FY 2017

FY 2018

Ordinary income

44,856

42,11137,646

41,877

Ordinary profit
Net profit attributable to owners ofparentNet assets amount

4,063

1,523

(3,209)

2,217

2,500

670

(4,596)

1,942

92,812

89,17181,60688,717

2,123,795

2,115,746

2,169,533

2,360,494

Total assets
Notes:(3)

All amounts shown are rounded down to the nearest whole units.

Status of employees
End of this fiscal year

Number of employees

1,355

Average age

41 years 3 months

Average number of years of continuous service

16 years 5 months

Average monthly salary
Notes:

1.
2.
3.

(4)

¥355,000

The average age, average number of years of continuous service, and average monthly salary shown
are rounded down to the nearest whole units.
The number of employees does not include temporary workers or part-time workers.
Average monthly salary is the average monthly salary for March 2021, excluding bonuses.

Status of places of businessa. Number of places of businessEnd of this fiscal year

Notes:

Aomori Prefecture79(of which, 2 sub-branches)

Hokkaido

8(0)

Iwate Prefecture

2

(

0)

Akita Prefecture

3

(

0)

Miyagi Prefecture

1

(

0)

Tokyo

1

(

0)

Total

94

(of which, 2 sub-branches)

1.
2.
3.
4.

5.

In addition to the above, 160 external ATMs of the Bank have been installed, excluding alliances withother financial institutions.
There were no branches closed during the current fiscal year.
Six external ATMs were newly installed and 23 were removed during the current fiscal year.
Of the number of places of business at the end of the current fiscal year, 19 are “branch-in-branch”
locations (a form in which two or more branches are located together under the same roof), and thetotal number of locations is 75.
The Shanghai Representative Office was closed on November 30, 2020.

b. New places of business established this fiscal year
Name of places of business

Address

Not applicable.
Notes:In addition to the above, six external ATMs were newly installed during the current fiscal year.

-6-

c. List of banking agencies
Not applicable.
d. Status of banking agencies, etc. operated by banks
Trade name or name of the financial institution of affiliation
SBI Sumishin Net Bank, Ltd.

(5)

Status of capital expenditurea. Total capital expenditure
Total capital expenditureNotes:¥2,171 million

All amounts shown are rounded down to the nearest whole units.

b. New material assets, etc.

Notes:(6)

Description

AmountSoftware¥1,998 million

All amounts shown are rounded down to the nearest whole units.

Status of material parent and subsidiary companies, etc.

a. Status of parent companies
Not applicable.

-7-b. Status of subsidiaries, etc.

Description of principal
business

Name of company

Address

Michinoku Lease,Ltd.

4-10, 1-Chome,
Hashimoto,
Aomori, Aomori
Prefecture

Leasing businessMichinoku Credit
Guarantee, Ltd.

3-12, 1-Chome,
Okuno, Aomori

Credit guarantee business
related to housing loans,etc.

Michinoku Card,
Ltd.

3-12, 1-Chome,
Okuno, Aomori

Credit card businessMichinoku
Servicer Co., Ltd.

2F AomoriYanagimachi
Building, 2-20, 1Chome, Honcho,
Aomori

Credit management andcollection operations

Notes:

1.
2.
3.

(as of the end of the fiscal year)
Percentage ofvoting rights ofStated capital subsidiary held Otherby the Bank

million yen

%

90

80.00

million yen%

100

100.00

million yen%

30

100.00

million yen%

500

100.00Status of business transfers
Not applicable.

(8)

-

-

-

All amounts shown are rounded down to the nearest whole units.
Percentage of voting rights of subsidiary held by the Bank is rounded down to two decimal places.
As of the end of the current fiscal year, consolidated subsidiaries are the four material subsidiaries
listed above, and there are no equity-method affiliates.

◎Status of material business alliances
1. Automated system for cash withdrawals, etc. (ACS) allowing reciprocal use of ATMs through analliance between 62 regional banks
2. Automated system for cash withdrawals (MICS) allowing reciprocal use of ATMs through an alliance
between 62 regional banks and city banks, trust banks, member banks of the Second Association ofRegional Banks, credit unions, credit cooperatives, agricultural cooperatives and marine banks(including Norinchukin Bank and federations of agricultural cooperatives), and workers' credit unionbanks
3. Service for communicating remittances, transfers, transaction history, and other data between
partner companies by data transmission through Chigin Network Service Co., Ltd. (CNS), a joint
venture by 62 regional banks
4. Automated system for cash withdrawals and cash deposits, etc. allowing ATMs in convenience
stores and other in-store locations to be used through an alliance with Lawson Bank, Inc. and Seven
Bank, Ltd.
5. Automated system for cash withdrawals, cash deposits, etc. allowing reciprocal use of ATMs
through an alliance with Japan Post Bank Co., Ltd.
6. Automated system for cash withdrawals, etc. allowing reciprocal use of ATMs through an alliancewith AEON Bank, Ltd.
7. Automated system for cash withdrawals, etc. allowing reciprocal use of ATMs with some fees not
charged through an alliance with The Aomori Bank, Ltd.

(7)-

Other material matters related to the corporate group’s current status
Not applicable.

-8-

2.
(1)

Matters Related to Corporate Officers (Directors)
Status of corporate officers(as of the end of the fiscal year)

Name

Position and responsibilities at theBank

Kunihiro
TakadaChairman

TakayukiFujisawa

President(Representative Director)

Tsutomu
Inaniwa

Significant concurrent positions
outside the Bank

Note 1Business
Promotion
Director
Headquarters
Senior Executive (Sales
Planning
Officer
Division,
Local(Representative Revitalization Division)
Director)
Treasury and Securities
Division

YumikoKamadaDirector(Outside Director)

Representative Director, K.K. ONE
GLOCALPart-time Director, Lumine Co. Ltd.
Outside Director, Taiyo Holdings
Co., Ltd.

Kazunari
Higuchi

Director(Outside Director)

OutsideDirector,
Corporation

Kazuhiko
Odanaka
Seiichi
TsurumiToshihiro
Nishiya
Tetsutaro
Wakatsuki
Notes

1.
2.
3.
4.

5.

6.

Other

KurehaDirector
Full-time Audit & Supervisory
Committee Member
Director
Full-time Audit & Supervisory
Committee Member(Outside Director)
Director
Representative
Director,
Y.K.
Audit & Supervisory Committee Member Nishiya Computer Accounting(Outside Director)
OfficeDirector
Representative Partner, Murata &Audit & Supervisory Committee Member
Wakatsuki Law Offices(Outside Director)

Note
2, 4

Note
3, 4
Note
5, 6
Notes
4, 5, 6
Note
4, 5
Note
4, 5

As of April 1, 2020, President Takayuki Fujisawa is no longer in charge of the Diversity Promotion
Office.
Director Yumiko Kamada was appointed as an outside director of Taiyo Holdings Co., Ltd. on June20, 2020.
Director Kazunari Higuchi was appointed as an outside director of Kureha Corporation on June 24,
2020.
The five people comprising Directors Yumiko Kamada and Kazunari Higuchi and Director and Audit& Supervisory Committee Members Seiichi Tsurumi, Toshihiro Nishiya and Tetsutaro Wakatsuki are
Outside Directors as stipulated in Article 2, item (xv) of the Companies Act. Notice has been submitted
to the Tokyo Stock Exchange, Inc. that all five have been appointed as independent officers pursuant
to the requirements of the Tokyo Stock Exchange.
The four people comprising Director and Audit & Supervisory Committee Members Kazuhiko
Odanaka, Seiichi Tsurumi, Toshihiro Nishiya and Tetsutaro Wakatsuki have a wealth of experience incorporate management and financial and legal practice, and possess considerable knowledge of financeand accounting.
To enhance information gathering, improve the effectiveness of audits, and strengthen auditing andsupervision functions through sufficient cooperation with internal audit departments, etc., Kazuhiko
Odanaka and Seiichi Tsurumi have been selected as Full-time Director and Audit & Supervisory
Committee Members.

-9-

7.

The Bank has introduced an executive officer system. The names, positions and responsibilitiesof the executive officers who do not serve concurrently as Directors are as follows.
(as of the end of the fiscal year)

Name
Shinji Suto

Eiichi Okuzaki

Kenichi Asari
Katsuhiko
FukushiPosition

Responsibilities

Senior Executive Responsible for Management Planning Division, Personnel and
Officer
General Affairs Division, and Systems Management Division
Responsible for Credit Division*, Business Management
Division, and Risk Management Division
Managing*The authority of the officer responsible based on the loan
Executive Officer
authority rules will be delegated to the General Manager of theCredit Division.
Managing
Aomori District Manager
Executive Officer
Managing
Hirosaki District Manager
Executive Officer

Takanori Kudo

Managing
Hachinohe District Manager
Executive Officer

Koichi Komura

Executive Officer General Manager of Management Planning Division

Takuya Furusato

General Manager of Credit Division
Executive Officer *By the above delegation, will be delegated with the authorityof the officer responsible based on the loan authority rules.

Hideyuki Okawa

Executive Officer Head of Business Promotion Headquarters

Hiroyuki Hayano

Executive Officer General Manager of Operations Administration Division

Kou Takahashi

Executive Officer General Manager of Auditing Division

Tsuneyoshi
SuzukiManabu Harata

Executive Officer General Manager of Hachinohe Sales Division
Executive Officer

Hakodate District Manager and General Manager of Hakodate
Sales Division- 10 -

8.

The positions and responsibilities of officers and executive officers have changed as of April 1,
2021. The officers and executive officers whose positions and responsibilities have changed are
as follows.

(i) Directors

Name
Tsutomu Inaniwa(as at April 1, 2021)

Position

Responsibilities

Director
Responsible for Treasury and Securities Division, Credit
Senior Executive Officer
Division, and Systems Management Division(Representative Director)(ii) Executive officers

Name
Shinji Suto

(as at April 1, 2021)

Position

Responsibilities

Senior Executive Officer

Responsible for Management Planning Division, Personnel
and General Affairs Division, and Risk Management Division
Head of Business Promotion Headquarters and Hirosaki
District Manager; responsible for Business Promotion
Headquarters (Sales Planning Division, Local Revitalization
Division)
General Manager of Operations Administration Division;
responsible for Operations Administration Division andBusiness Management Division

Katsuhiko Fukushi

Managing Executive
Officer

Hiroyuki Hayano

Managing Executive
Officer

Hideyuki Okawa

Executive Officer

General Manager of Credit Division

Manabu Harata

Executive Officer

Hokkaido District Manager and General Manager of
Hakodate Sales Division

Takuya Furusato

Executive Officer

General Manager of Head Office Sales Division

Takuya Yamamoto

Executive Officer

General Manager of Sales Planning Division

Note:Managing Executive Officer Eiichi Okuzaki has retired as of March 31, 2021.

- 11 -

(2)Matters related to remuneration to officers

a.

Total amount of remuneration, etc. for the current fiscal year
(units: millions of yen)

Director type

Director(excluding Audit &Supervisory Committee
Members)
Director(Audit & Supervisory
Committee Member)
Total
Note:

Performance
Number of
RemuneratioBase-linked
Performance- Non-monetary
recipientsn, etc.
remuneration Remuneratio
linkedremuneration,n, etc.
remuneration
etc.
7

92

69

22

-

22

5

52

52

-

-

-

12

144

121

22

-

22

All amounts shown are rounded down to the nearest whole units.
The above table includes two Directors (one Director (excluding Audit & Supervisory Committee
Members) and one Director (Audit & Supervisory Committee Member)) who retired at the conclusionof the 48th Ordinary General Meeting of Shareholders held on June 24, 2020. Note that after retiring
at the conclusion of the 48th Ordinary General Meeting of Shareholders, Director Tetsutaro Wakatsuki
was appointed Director (Audit & Supervisory Committee Member), and so is listed as a Director(excluding Audit & Supervisory Committee Members) during his term of office as a Director(excluding Audit & Supervisory Committee Members), and as a Director (Audit & Supervisory
Committee Member) after taking office as a Director (Audit & Supervisory Committee Member).
3.
Amount of non-monetary remuneration, etc. is the amount of provision for officers’ stock benefits
recorded in the current fiscal year as “Board Benefit Trust” (BBT) performance-linked stock
remuneration.
4.
There is no remuneration as an employee in addition to the above remuneration.
b. Matters related to performance-linked remuneration, etc.
(i) “Performance-linked remuneration, etc.” is to raise awareness of improving the Bank’s core business andoverall performance, which is the result of the business execution by the eligible Directors. The amountis calculated by treating the amount of “base remuneration” as 100% and applying a certain rate ofincrease or decrease based on the degree of contribution to performance by each Director, with theresulting portion exceeding 100% as “performance-linked remuneration.” The rate of increase or decreaseis based on a performance matrix that combines the actual amounts of “core business profit” and “netprofit,” which are defined separately.
(ii) “Performance-linked stock remuneration” is a performance-linked stock compensation scheme thatutilizes trusts and aims to provide incentives linked to stock value in order to clarify theinterconnectedness with medium- to long-term corporate value improvement. For the issuance ofshares, the amount calculated by multiplying the total amount of “base remuneration” and“performance-linked remuneration” by a certain percentage according to job title, etc. is converted into
points and granted for each fiscal year.
(iii) Note that the amount of base remuneration and performance-linked remuneration to be paid to each
Director is determined by the Board of Directors based on the business results of the previous fiscal
year, and the amount is divided into 12 and paid monthly for one year starting from July of thefollowing fiscal year. Points are awarded for “performance-linked stock remuneration” every year in
July, and the Bank’s shares and money in amounts equivalent to the Bank’s shares converted to market
value are delivered and paid upon retirement to Directors who meet the beneficiary requirements
stipulated in the Officer Share Benefit Regulations.
(iv) The performance indicators used to calculate the performance-linked remuneration, etc. related to the
remuneration for the current fiscal year are the performance indicators for the fiscal year ending March
2020. Specifically, “core business profit” was negative ¥100 million against the target of ¥300 million
yen, and “net income” was negative ¥4.4 billion against the target of ¥1.8 billion.
c.

1.
2.

Content of non-monetary remuneration, etc.
The contents of non-monetary remuneration, etc. are shares of the Bank, and the delivery method and soforth are as stated in b. Matters related to performance-linked remuneration, etc. and e. Policy on determining
the content of officer remuneration, etc.

- 12 -

d.

Matters related to shareholder meeting resolutions regarding Director remuneration, etc.
The remuneration limit for Directors, as resolved at the 44th Ordinary General Meeting of Shareholders
held on June 23, 2016, is ¥145 million annually for Directors (excluding Audit & Supervisory
Committee Members) (of which ¥20 million is for Outside Directors), and ¥60 million annually for
Directors (Audit & Supervisory Committee Members). (As of the conclusion of that Ordinary General
Meeting of Shareholders, there are five Directors (excluding Audit & Supervisory Committee
Members) (including two Outside Directors) and four Directors (Audit & Supervisory Committee
Members).)(ii) In addition to the amounts under the remuneration scheme above, it was resolved at the 44th Ordinary
General Meeting of Shareholders held on June 23, 2016 that the performance-linked stock remuneration
scheme “Board Benefit Trust” (BBT) would be adopted for Directors (excluding Audit & Supervisory
Committee Members) who are not Outside Directors, and for the initial period of five fiscal years fromthe fiscal year ending March 2016 to the fiscal year ending March 2020, ¥448 million has been
contributed to the trust as a share acquisition fund for such eligible Directors. In addition, even after
such initial period has elapsed, until the end of this system, additional contributions of up to ¥250
million for the eligible Directors will be made to the trust for each subsequent five-year period
following the initial period. (As of the conclusion of that Ordinary General Meeting of Shareholders,
there are three eligible Directors.)(i)e.

Policy on determining the content of officer remuneration, etc.
At the Board of Directors meeting held on February 25, 2021, the Bank passed a resolution on a policy on
determining the content of individual remuneration, etc. for Directors. At the time of the resolution of theBoard of Directors, the Nomination and Remuneration Review Committee was consulted in advance on thecontent of the resolution and a report was received. In addition, a report was received and confirmed at theBoard of Directors stating that the content of individual remuneration, etc. for Directors for the current fiscal
year is consistent with the determination policy resolved at the Board of Directors meeting held on February
25, 2021.
The details of the policy for determining the details of remuneration, etc. for individual Directors is as follows.
(i)

(ii)

f.

(3)

Basic policy
The basic policy is that the remuneration of the Bank’s Directors (excluding Audit & Supervisory
Committee Members; the same hereinafter) functions as an incentive to secure human resources suited to
be Directors who can put the corporate philosophy into practice, and to improve medium- to long-termbusiness performance and corporate value.
Specifically, the system consists of “base remuneration” and “performance-linked remuneration,” which
are monetary compensation, along with “performance-linked stock remuneration.” After discussion by
the Nomination and Remuneration Review Committee, of which independent outside directors make up
a majority, these remunerations are determined by the Board of Directors within the total amount resolved
at the General Meeting of Shareholders and based on the Officer Remuneration, etc. Regulations andOfficer Stock Benefit Regulations established in advance by the Board of Directors.
Note that the amount of “base remuneration” is set according to the position and responsibilities bycomprehensively considering the Bank’s performance and employee salary level.
Remuneration system for each Director
Executive Director remuneration is comprised of “base remuneration” and “performance-linked
remuneration” along with “performance-linked stock remuneration,” and non-executive Director
remuneration (excluding Outside Directors) is comprised of “base remuneration” and “performancelinked stock remuneration.” The proportions for these are set according to the position and responsibilities
by comprehensively considering the performance of the Bank.
In addition, the remuneration of Outside Directors consists only of “basic remuneration” to ensure
independence in view of their duties.

Officer retirement benefits paid in the current fiscal year
Retirement benefits paid to Directors who retired at the conclusion of the 48th Ordinary General Meeting of
Shareholders held on June 24, 2020 are as follows.
Non-Audit & Supervisory Committee Member One person ¥13 million(of which, ¥13 million by reversal of the allowance for officer retirement benefits for officer stated in thebusiness report of the previous fiscal year)

Limited liability agreements
The Bank has established provisions in its Articles of Incorporation regarding limited liability agreementswith Directors who are Audit & Supervisory Committee Members and other Directors (for Directors otherthan those who are Audit & Supervisory Committee Members, limited to Outside Directors).

- 13 -Name
Yumiko Kamada
Kazunari Higuchi
Kazuhiko Odanaka
Seiichi Tsurumi
Toshihiro Nishiya
Tetsutaro Wakatsuki

Summary of terms of limited liability agreement
Regarding the liability under Article 423, paragraph (1) of the Companies Act,if the Director has acted in good faith and without gross negligence, theliability for damages shall be limited to the total amount specified in each itemof Article 425, paragraph (1) of the Companies Act. increase.

(4)

Indemnification agreementa.

Indemnification agreements with incumbent company officers
Not applicable.

b.

Matters concerning the performance, etc. of indemnification agreements
Not applicable.

(5)

Matters regarding directors and officers liability insurance contracts

Scope of insured parties

Directors and executive
officers of the Bank

Outline of the contents of directors and officers liability insurance contracts
The Bank has entered into directors and officers liability insurance contracts
as set forth in Article 430-3, paragraph (1) of the Companies Act with directors
and executive officers of the Bank as insured parties, which covers damages
resulting from compensation and litigation expenses incurred with respect tothe execution of duties by the insured directors and officers. However, there
are some waiver events. For example, there is no coverage of damages
resulting from actions that the insured committed knowing they wereviolations of laws and regulations. Note that the insurance premiums are fully
borne by the Bank, including for special provisions, and the insured are notrequired to bear the insurance premiums.

- 14 -

3.
(1)

Matters Related to Outside Officers
Concurrent positions and other status of outside officers
Name

Yumiko Kamada

Kazunari Higuchi

Concurrent positions and other status
Representative Director, K.K. ONE
GLOCALNo special relationship between thePart-time Director, Lumine Co. Ltd.
Bank and these three companies.
Outside Director, Taiyo Holdings Co., Ltd.
No special relationship between theOutside Director, Kureha Corporation
Bank and this company.

Seiichi Tsurumi
Toshihiro Nishiya
Tetsutaro Wakatsuki

Representative Director, Y.K. Nishiya
Computer Accounting Office
Representative Partner, Murata & Wakatsuki
Law Offices

There are transactions such as deposits
between the Bank and this company.
No special relationship between the
Bank and this law office.

Note: The relationship between the concurrent positions of Outside Officers and the Bank is described in the“Concurrent positions and other status” column.

(2)

Status of principal activities of outside officers
Name

Tenure as
officer

Attendance at meetings of theBoard of Directors

Yumiko Kamada(Outside Director)

5 years 9
monthsAttended all 16 meetings of theBoard of Directors this term

Kazunari Higuchi(Outside Director)

9 months

Attended all 13 meetings of theBoard of Directors held since
taking office in June 2020.

- 15 -

Comments and other activities atmeetings of the Board of Directors
Based on experience of businesscreation cultivated as a company
manager and by being involved in thedevelopment of new businesses ofcompanies in other industries, and theability to collect information in the fieldof diversity, she has made appropriate
comments necessary for agenda items
and deliberations at the Board of
Directors meetings held in the current
fiscal year from the perspective ofensuring the appropriateness of businessexecution by Directors, focusing onorganizational management and new
business development.
Based on experience in financial
practices and company management at
major banks and major credit cardcompanies, he has made appropriate
comments necessary for agenda items
and deliberations at the Board of
Directors meetings held in the current
fiscal year from the perspective ofensuring the appropriateness of businessexecution by Directors, focusing on
financial practices and organizational
management. In addition, as the chair of
the Nomination and Remuneration
Review Committee, he plays animportant role in the review process.

Name

Seiichi Tsurumi(Outside Director)(Audit&Supervisory
Committee
Member)Toshihiro Nishiya(Outside Director)(Audit&Supervisory
Committee
Member)Tetsutaro
Wakatsuki(Outside Director)(Audit&Supervisory
Committee
Member)
Note:

1.
2.

Tenure as
officer

Attendance at meetings of theBoard of Directors

2 years 9
monthsAttended all 16 meetings of theBoard of Directors and all 15
meetings of the Audit &Supervisory Committee held thisterm.

4 years 9
months9 months

Attended all 16 meetings of theBoard of Directors and all 15
meetings of the Audit &Supervisory Committee held thisterm.

Attended all 16 meetings of theBoard of Directors held this term
and all 11 meetings of the Audit& Supervisory Committee held
since taking office in June 2020.

Comments and other activities atmeetings of the Board of Directors
With experience in the Bank of Japan
main branch main office and as branchmanager and director, and based on
extensive knowledge of domestic andoverseas economic and financial
situations, he has made appropriate
comments necessary for agenda items
and deliberations at the Board of
Directors meetings held in the current
fiscal year from the perspective ofensuring the appropriateness of businessexecution by Directors, focusing on
financial practices and governance.

Based on a wealth of experience andbreadth of knowledge as a certified
public accountant, he has madeappropriate comments necessary for
agenda items and deliberations at theBoard of Directors meetings held in thecurrent fiscal year from the perspectiveof ensuring the appropriateness ofbusiness execution by Directors,
focusing on accounting and company
management practices. In addition, as amember of the Nomination andRemuneration Review Committee, heplays an important role in the review
process.
Based on a wealth of legal knowledge
and experience as a lawyer, he has madeappropriate comments necessary for
agenda items and deliberations at theBoard of Directors meetings held in thecurrent fiscal year from the perspectiveof ensuring the appropriateness ofbusiness execution by Directors,
focusing on legality and compliance.

The above comments and other activities at the Board of Directors include a summary of the duties
performed regarding the roles expected to be played as an Outside Director.
Tetsutaro Wakatsuki has been appointed as Director (Audit & Supervisory Committee Member)
after retiring as a Director (excluding Audit & Supervisory Committee Members) at the conclusionof the 48th Ordinary General Meeting of Shareholders. The above term of office is the term ofoffice as a Director (Audit & Supervisory Committee Member), and is 1 year 9 months when
including the term of office as Director (excluding Audit & Supervisory Committee Members).

(3)

Matters related to remuneration of outside officers, etc.

a.

Total amount of remuneration for the current fiscal year
(units: millions of yen)

Number ofrecipients
Total amount of remuneration,etc.

Remuneration,etc. from the Bank

6

44

- 16 -

Remuneration, etc. from the Bank’s
parent company-

Note:

b.

(4)

1.
2.
3.

All amounts shown are rounded down to the nearest whole units.
There is not share-based remuneration, etc. other than remuneration.
The above number of recipients includes one Outside Director who retired at the conclusion of the
48th Ordinary General Meeting of Shareholders held on June 24, 2020.

Officer retirement benefits paid in the current fiscal year
Not applicable.

Opinion of outside officers
Not applicable.

- 17 -

4.
(1)

Matters Related to the Bank’s Shares
Number of shares
Total number of authorized shares
Total number of issued shares

Note:

(2)

Common stock
Common stock

60,000 thousand shares
18,135 thousand sharesClass A Preferred Stock 30,000 thousand sharesClass A Preferred Stock 4,000 thousand shares

The number of shares is rounded down to the nearest 1,000 shares.

Number of shareholders at the end of this fiscal year

(3)

Major shareholdersa.

Common stock

Common stock
Class A Preferred Stock

27,6541

Equity in the Bank

Name of shareholder

Number of shares, etc. held

Shareholding ratio

thousand shares%

Custody Bank of Japan, Ltd. (trust account 4)

1,234

6.86

Custody Bank of Japan, Ltd. (Trust Account)

861

4.78

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

821

4.56

The Michinoku Bank Employee Shareholding Association

412

2.29

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

347

1.93

Mizuho Bank, Ltd.

308

1.71

SMBC Nikko Securities Inc.

276

1.53

DFA INVESTMENT TRUST COMPANY-JAPANESE SMALL COMPANYSERIES

268

1.49

Sompo Japan Insurance Inc.

230

1.28

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

211

1.17

Notes: 1.
2.
3.

Number of shares, etc. held is rounded down to the nearest 1,000 shares.
Shareholding ratio is calculated by deducting the number of treasury shares (141 thousand shares) from the total number of issued shares, and is rounded down to
the second decimal place.
The 347 thousand shares of the Bank held by Custody Bank of Japan, Ltd. (Trust E Account) are shares of the Bank owned as trust property of the board benefit
trust (BBT) and are treated as treasury stock in the financial statements and consolidated financial statements, but are not included in treasury stock deductedfrom the total number of issued shares when calculating the holding ratio.

- 18 -

b.

Class A Preferred Stock
Name of shareholder

The Resolution and Collection Corporation

Equity in the Bank
Number of shares,
Shareholding ratio
etc. held
thousand shares％
4,000- 19 -

100.00(4)Shares held by officers
Number of persons to whom shares
have been delivered

Directors(excluding Directors who are Audit & Supervisory
Committee Members and Outside Directors)

Common stock

27,300 shares

Outside Directors(excluding Directors who are Audit & Supervisory
Committee Members)--

Directors who are Audit & Supervisory Committee
Members--

Notes:

5.

1

Number of shares (share classand number by class)

1. Details of the Bank’s stock-based remuneration are described in 2. Matters Related to Officers (Directors) (2) Matters related to remuneration to officers.
2. The above includes shares delivered to retired company officers.

Matters Related to the Bank’s Stock Acquisition Rights(1) Bank stock acquisition rights held by officers of the Bank on the last day of the fiscal year
Not applicable.

(2) Stock acquisition rights issued to employees during the fiscal year
Not applicable.

(3) Other matters related to stock acquisition rights
Not applicable.

- 20 -

6.

Matters Related to the Financial Auditor(1) Status of the Financial Auditor
Name

Remuneration, etc. in thecurrent fiscal year

Ernst & Young ShinNihon LLC
Designated Limited Liability Partner Masatoshi Omura
Designated Limited Liability Partner Kazuhiko Kubosawa
Notes: 1.
2.

3.
4.

5.

¥69 million

Other

Notes 2, 3

All amounts shown are rounded down to the nearest whole units.
The Audit & Supervisory Committee has examined the audit policy, audit system, audit timing and validity of remuneration estimation by the Financial Auditor forthe current fiscal year and determined them to be appropriate, and has provided consent under Article 399, paragraph (1) of the Companies Act regarding thecompensation of financial auditors.
There is no non-audit remuneration amount other than the services set forth in Article 2, paragraph (1) of the Certified Public Accountants Act.
There is no classification under the audit agreement between the Bank and the Financial Auditor of the amount of audit remuneration for audits in accordance with
the Companies Act and audits in accordance with the Financial Instruments and Exchange Act, and no such classification is possible in practice. Therefore, theamount of remuneration, etc. above is the total of those amounts.
The money payable by the Bank’s subsidiary companies, subsidiary corporations, etc. and the total amount of other economic benefits is ¥76 million.

(2) Limited liability agreements
The Bank does not have a limited liability agreement with the Financial Auditor.

(3) Indemnification agreementa.

Indemnification agreement with the Financial Auditor during tenure
Not applicable.

b.

Matters concerning the performance, etc. of indemnification agreements
Not applicable.

(4) Other matters related to the Financial Auditor
Policy for decision to dismiss or not reappoint Financial Auditor
The Audit & Supervisory Committee of the Bank decides on the details of agenda items to be submitted to the General Meeting of Shareholders regarding
the appointment and dismissal of the Financial Auditor and not reappointing the Financial Auditor.
The Audit & Supervisory Committee formulates the standards to appropriately evaluate the Financial Auditor, evaluates the expertise and independence of
the Financial Auditor, and makes determinations and decisions on dismissal or not reappointing, taking into consideration eligibility to be the Financial- 21 -

Auditor of the Bank.
Furthermore, if the Financial Auditor is found to have fallen under any item under Article 340, paragraph (1) of the Companies Act, the Audit & Supervisory
Committee will dismiss the Financial Auditor with the consent of all Audit & Supervisory Committee Members.

7.

Basic Policy for Circumstances Related to Persons Controlling the Determination of the Financial and Business Policy
Not applicable.

- 22 -

8.

System to Ensure Suitability of Business and Operating Status of that System(1) Outline of system to ensure suitability of business
The Board of Directors of the Bank has passed a resolution for the following Basic Policy for
Establishment of an Internal Control System.

a.

System to ensure that the execution of duties by all officers and employees of the
Bank complies with laws and regulations and the Articles of Incorporation.

(i)

The Board of Directors of the Bank recognizes compliance as one of the most importantmanagement issues, and shall establish corporate ethics centered on the social responsibility
and public mission as a bank, which all officers and employees of the Bank comply with.
(ii) The Board of Directors of the Bank shall establish rules such as the Michinoku Bank Charterof Conduct, Michinoku Bank Commandments, Compliance Regulations, and Compliance
Manual to maintain and improve the compliance mindset of all officers and employees of the
Bank and ensure proper business execution.
(iii) In order to ensure the appropriateness of compliance, the Board of Directors of the Bank shallformulate a Compliance Program every fiscal year, and manage its promotion and progress.
In addition, a Compliance Committee chaired by the president of the Bank shall beestablished to plan, promote and manage measures to enhance compliance.
(iv) The Business Management Division of the Bank shall be in charge of all operations related tocompliance at the Bank, and through the persons responsible for compliance and compliancemanagers of each branch office, establish a compliance system and educate all officers andemployees, and report to the Board of Directors of the Bank on the status of such measures.
(v) The Whistleblowing System shall be used for improving the work environment for putting
compliance into practice and prevention and early detection of fraud and violations.
(vi) Antisocial forces that threaten the order and safety of citizens’ lives shall be resolutely
confronted.

b.

System for storing and managing information regarding the execution of duties
by the Directors of the Bank(i)

Information and documents related to the execution of duties by the Directors of the Bank shallbe appropriately stored and managed based on the Document Management Regulations andInformation Management Regulations.
(ii) Minutes of meetings of the Board of Directors, Audit & Supervisory Committee, Executive
Committee and other various committees of the Bank shall be prepared based on the Board of
Directors Regulations, Audit & Supervisory Committee Regulations, Executive Committee
Regulations and other various committee regulations, and shall be appropriately stored andmanaged.

c.

Regulations and other systems related to the management of the risk of loss at
the Bank(i)

In order accurately identify and properly control various management risks, the Board of the
Directors of the Bank shall establish Risk Management Regulations, make them thoroughly
known to and achieve traction with all officers and employees of the Bank, and improve risk
management within the Bank.
(ii) In order to strengthen the risk management system, the Board of the Directors of the Bank
shall formulate an Integrated Risk Management Program based on the Integrated Risk
Management Policy formulated each year, and manage its promotion and progress. In
addition, the Income and Asset Liability Management Committee chaired by the president
and Risk Management Committee chaired by the officer responsible for risk management
shall be established to plan, promote, and manage measures to strengthen the risk
management system.
(iii) The Risk Management Division of the Bank shall manage various risks under the jurisdictionof each department in charge at the Bank, monitor them at all times, and report the results to
the Board of Directors.

d.

System for ensuring that the duties of Directors of the Bank are executed- 23 -

efficiently(i)

The Board of Directors of the Bank shall, in addition to formulating a Medium-Term Business
Plan for three fiscal years in principle as a medium- to long-term business plan, formulate a
Business Plan for each single fiscal year, and make it thoroughly known to all officers andemployees of the Bank.
(ii) The Directors of the Bank shall report to the Board of Directors on the status of execution of
their duties based on the Board of Directors Regulations.
(iii) The Bank shall establish Regulations for Division of Duties and Regulations for BusinessApproval, clarify the duties of the persons in charge of each department and their authority,and strive to ensure the efficiency of the execution of duties by Directors.

e.

System for ensuring the reliability of financial reporting and the suitability ofbusiness in the Group (meaning the corporate group consisting of the Bank andits subsidiaries; the same hereinafter)(i)

The Group shall establish appropriate internal controls at the companywide and businessprocess levels to ensure the reliability of financial statements and information that may have amaterial impact on financial statements.
(ii) In order to strengthen the business management of subsidiaries, the Management Planning
Division of the Bank shall supervise the subsidiaries and coordinate with them by holding
monthly meetings with the departments in charge of the business of the Bank located in eachsubsidiary. Subsidiary Management Regulations shall be established to require prior approvalor reporting to the Bank of material management matters.
(iii) In order to subsidiaries’ risk of loss, etc., Subsidiary Management Regulations shall beestablished to confirm that subsidiaries are implementing appropriate compliance management
and risk management and to maintain and strengthen such management.
(iv) A Subsidiary Management Meeting shall be held every six months by the management of the
Bank and its subsidiaries to discuss management policies, etc. of the Group. Subsidiaries shall
execute their business based on the results of such discussions, clarify the duties and authorityof their board of directors and of each director and each department, and strive to ensure theefficiency of the execution of duties by their directors.
(v) Subsidiaries shall also be required to have rules such as Compliance Regulations and aCompliance Manual, and appropriate measures shall be taken to maintain and improve theircompliance mindset and ensure proper business execution. In addition, the Auditing Divisionof the Bank shall regularly conduct internal audits of subsidiaries.

f.

Matters concerning the audit system of the Bank(i)

The Bank shall have an Auditing Division whose duties are to conduct internal audits. The
Auditing Division shall report directly to the Audit & Supervisory Committee, and the Audit& Supervisory Committee and Auditing Division shall bear responsibility together as one forthe auditing function of the Bank.
(ii) In order to assist the duties of the Audit & Supervisory Committee, the Bank shall assign
dedicated support employees to the Auditing Division, and the General Manager of the
Auditing Division (including cases where officers also serve concurrently) will also serve as asupport employee. In assigning dedicated support employees and appointing the General
Manager of the Auditing Division, suitable personnel will be assigned and appointed withcareful consideration made to careers, etc.
(iii) Matters concerning the personnel affairs of the dedicated support employees and the General
Manager of the Auditing Division shall be determined after exchanging opinions with the Audit& Supervisory Committee and obtaining the consent of the Audit & Supervisory Committee.
(iv) The authority to direct and order the dedicated support employees in execution of their duties
shall belong the Audit & Supervisory Committee. The dedicated support employees shall nottake direction or orders from Directors (excluding those who are Audit & Supervisory
Committee Members).
(v) The results of audits by the Auditing Division shall first be reported by the Auditing Division
to the Audit & Supervisory Committee and then to the president, after which the Audit &Supervisory Committee shall report to the Board of Directors. In addition to the Audit &- 24 -

Supervisory Committee and the Board of Directors, the president may also give directions andorders to the Auditing Division as necessary. If these directions and orders are inconsistent,
those from the Audit & Supervisory Committee shall be prioritized, followed by those fromthe Board of Directors and then from those from the president.

g.

System for all officers and employees of the Group to report to the Audit &Supervisory Committee of the Bank and other systems for reporting to the Audit& Supervisory Committee of the Bank

The Bank’s Directors (excluding Audit & Supervisory Committee Members) shall report to the
Audit & Supervisory Committee on the status of establishment and maintenance of the Group’s
internal control systems. In addition, the Bank shall ensure that the Audit & Supervisory
Committee Members have the opportunity to attend important meetings such as the Bank’s
Executive Committee meetings, and that the Audit & Supervisory Committee Members may
check the execution status at any time by viewing various minutes.
(ii) The officers and employees of the Bank shall report to the Audit & Supervisory Committee of
the Bank on major business decisions based on the Business Approval Procedures.
(iii) Based on the Whistleblowing System Regulations, the officers and employees of the Bank shallreport any violation of law or suspected violation of law to the whistleblower point of contact(including the Audit & Supervisory Committee Members). The details thereof shall be reported
to the Compliance Committee, where the Audit & Supervisory Committee Members can attend
and express their opinions.
(iv) The Bank shall stipulate in the Whistleblowing System Regulations that the person making thereport will not suffer any disadvantage due to making a legitimate report, and shall make thatthoroughly known to the Group.
(i)h.

Matters concerning policies related to costs, etc. incurred in the execution ofduties by the Audit & Supervisory Committee members of the Bank (limited tothe execution of duties of the Audit and Supervisory Committee; the same applies
hereinafter in this paragraph)

The Bank will secure a pre-allocated budget for expenses deemed necessary by the Audit &Supervisory Committee Members for the execution of their duties, based on the Audit & Supervisory
Committee Audit & Supervisory Standards established by the Audit and Supervisory Committee. In
addition, if there is a claim for expenses that were urgently or extraordinarily spent in the executionof duties by the Audit & Supervisory Committee, the Bank shall bear such expenses.

i.

Other systems to ensure that audits by the Audit & Supervisory Committee of
the Bank are performed effectively

The Directors of the Bank (excluding Audit & Supervisory Committee Members) shall meet
regularly with the Audit & Supervisory Committee to exchange opinions on material audit issues
and strive to ensure the effectiveness of audits.
Furthermore, the Bank and its consolidated subsidiaries have established the following Basic Policy
for Responding to Antisocial Forces to resolutely respond to and block relationships with antisocial
forces that threaten social order and safety, with the aim of maintaining public trust and ensuring theappropriateness and soundness of operations:・ The Bank and its consolidated subsidiaries shall endeavor to prevent transactions with and block
all relationships with antisocial forces.
・ In order to ensure the effectiveness of blocking relationships with antisocial forces, the Bankand its consolidated subsidiaries shall collaborate with external specialized institutions such as
the police, lawyers, and the Center for the Removal of Criminal Organizations.
・ Responses to unreasonable demands from antisocial forces will be made as a whole organization,and decisive measures such as engaging in both civil and criminal legal response will be taken.

- 25 -

(2) Outline of operation status of system to ensure suitability of businessa.

Compliance with laws, regulations, etc.

Compliance with laws, regulations, etc. is regarded as the most important management issue, andthe Bank is working to ensure that all employees are thoroughly aware through department andbranch manager meetings, Compliance Seminars by Officers, and various other training programs.
In order to strengthen and improve compliance with laws, regulations, etc. and improve its
effectiveness, a compliance program is formulated every year and progress reported to theCompliance Committee every quarter, as well as to the Executive Committee and the Board of
Directors.
In terms of management, matters related to the entire organization are discussed at monthly
Compliance Committee meeting, such as the progress of compliance programs, revisions toregulations and manuals related to compliance, and responses to antisocial forces. For individual
matters as well, systematic responses are also made such as examining and verifying
appropriateness and taking measures to prevent recurrence.

b.

Status of execution of duties by Directors

Regarding the management decision-making function, in addition to the regular Board of Directors
meeting once a month, extraordinary meetings of the Board of Directors are held as necessary to
make decisions on important management matters. Also, the Bank has taken the form of a company
with an audit and supervisory committee, with a system in which Outside Directors make up amajority with five of the nine directors, and is strengthening and thoroughly implementing proposals
and checks from a wide range of perspectives. All five Outside Directors have been reported to theTokyo Stock Exchange as independent officers. Furthermore, regarding the management method of
the Board of Directors, efforts are being made to create time for deliberation, prioritize the allocationof time to important agenda items, and thoroughly provide information to Outside Directors inadvance.
As an organization that discusses and decides matters delegated by the Board of Directors, meetingsof the Executive Committee consisting of the representative directors and executive officers withroles at headquarters are held once a week at on a regular basis and as needed to make quick decisions.
For departments where mutual conflicts of interest may occur, a system of executive officers incharge has been established within the headquarters organization so that the check function can beeffectively exerted and operations and risk can function appropriately and effectively as a whole.
In addition, outside members make up a majority of the Nomination and Remuneration Review
Committee, which fully discusses the remuneration of officers and the selection and dismissal of
officers (Directors who are not Audit & Supervisory Committee members, and executive officers).

c.

Risk management structure

Under the Risk Management Regulations, an integrated risk management basic policy and amanagement basic policy for each risk category have been established and disseminated throughout
the organization. In addition, an Integrated Risk Management Policy and an Integrated Risk
Management Program that serves as its implementation plan are formulated for each fiscal year,with continuous efforts made toward improving risk management.
In terms of day-to-day management, the department that supervises and manages each risk reports
the monitoring status of each to the Executive Committee and the Board of Directors every quarteror semi-annually, and the Risk Management Division, which is the department that supervises andmanages risk overall, reports on the progress of the Integrated Risk Management Program to the
Executive Committee and the Board of Directors on a quarterly basis.

d.

Group management structure

A monthly regular meeting is held for each consolidated subsidiary to receive reports on the businessperformance of each company and discuss management issues and response policies. In addition,
subsidiary management meetings are held semi-annually to discuss the business performance andmanagement policies of each subsidiary company.
The Auditing Division conducts internal audits on all operations of the headquarters and sales offices
and the operations of consolidated subsidiaries, and reports the audit results first to the Audit &- 26 -

Supervisory Committee and then to the president, after which the Audit & Supervisory Committee
reports to the Board of Directors. In order to ensure the objectivity and fairness of the internal audit,
it will be independent from all audited departments so that it will not be affected or interfered withby the audited departments, and a double reporting line to the Audit & Supervisory Committee andthe president will be secured. In addition to thereby ensuring independence so that there will be acheck upon audited departments, appropriate staff have been assigned. Advice is also received fromthe Financial Auditor in order to endeavor for thoroughness.

e.

Status of execution of duties by the Audit & Supervisory Committee

The Audit & Supervisory Committee, consisting of four Directors (of which three are Outside
Directors), monitors and supervises the execution of duties by Directors and executive officers.
Furthermore, the Full-time Audit & Supervisory Committee Members exercise their authority for
appropriate audits by attending meetings of the Executive Committee and various other committees
and expressing their opinions as necessary. In addition, circular approval request documents forofficers in charge and higher up are passed on to the Full-time Audit & Supervisory Committee
Members, and efforts are being made to establish a system enabling monitoring and verification of
the status of execution by executive officers on a daily basis.

9.

Matters Related to Specified Wholly-Owned Subsidiaries
Not applicable.

10.

Matters Related to Transactions with Parent Company, etc.
Not applicable.

11.

Matters Related to Accounting Advisor
Not applicable.

12.

Other
Policy on the Exercise of Authority Granted to the Board of Directors Pursuant to theProvisions of the Articles of Incorporation Pursuant to the Provisions of Article 459,
Paragraph (1) of the Companies Act
In order to enable the Board of Directors to flexibly decide on the acquisition of treasury stock
related to Class A Preferred Stock pertaining to public funds according to the Bank’s financial
situation, stock price trends, and so forth, and to enable agile capital policy in response to changes
in the business environment, the Articles of Incorporation state that unless otherwise provided bylaw, the acquisition of treasury stock by agreement with shareholders as stipulated in Article 459,
paragraph (1), item (i) of the Companies Act may be carried out by a resolution of the Board of
Directors. The Bank will take appropriate measures regarding such acquisition of treasury stock after
comprehensively judging the financial situation, stock price trends, and so forth.

- 27 -

Financial Statements
Balance Sheet at the End of the 49th Term (as of March 31, 2021)
Item

AmountItem

AssetsCash and due from banks(units: millions of yen)AmountLiabilities
392,789

Deposits

2,110,005

Cash28,554Current account deposits

Due from banks

364,234

Ordinary deposits

1,264,584

Money held in trusts

20,243

Savings deposits

59,173

Securities

185,510Call deposits

3,350

Local government bonds

12,351

Term deposits

700,600

Corporate bonds

31,679Other deposits

24,345

Shares17,827

Negotiable certificates of deposit

Other securities

123,651

Call money

Loans and bills discounted

1,721,230

57,95036,442575

Borrowed money

107,300

Bills discounted

1,146

Borrowings

107,300

Loans on notes

34,585

Other liabilities

4,970

Loans on deeds

1,549,570

Overdrafts

42

Income taxes payable

229

535

Accrued expenses

589

535

Unearned revenue

859

19,513

Securities borrowed

1,362

Prepaid expenses

106

Lease obligations

52

Accrued income

1,241

Asset retirement obligations

183

Other assets

18,164

Other liabilities

1,650

12,796

Provision for bonuses

788

Buildings

5,310

Provision for retirement benefits

443

Land

6,411

Provision for board benefit trust

370

7

Provision for reimbursement ofdeposits

317

1,067

Provision for contingent loss

211

2,827

Deferred tax liabilities for land
revaluation

398

2,596

Acceptances and guarantees

10.067230

Total liabilities

2,271,891

Prepaid pension expenses

1,355

Net assets

Deferred tax assets

2,900Stated capital

36,986

Customers’ liabilities for acceptancesand guarantees

10.067

Capital surplus

31,589Allowance for loan losses(12,160)

Foreign exchanges
Foreign deposits paid
Other assets

Tangible fixed assets

Construction in progress
Other tangible fixed assets
Intangible fixed assets
Software
Other intangible fixed assets

135,927

Domestic exchange settlement
account, credit- 28 -

Legal capital surplus

21,986

Allowance for investment loss

(23)

Other capital surplus
Retained earnings

1,875

Other retained earnings

14,998Retained earnings brought forward

14,998

Total shareholders’ equity
Net unrealized gains on available-forsale securities
Deferred gains or losses on hedging
instruments
Land revaluation surplus
Total valuation and translation
adjustments

2,357,586- 29 -

16,873

Legal retained earnings

Treasury shares

Total assets

9,603(1,151)
84,298
1,182
5
208
1,396

Total net assets

85,695

Total liabilities and net assets

2,357,586

Statement of Income for the 49th Term (April 1, 2020 through March 31, 2021) (units: millions of yen)
Item

AmountOrdinary income

31,735Interest income

25,218Interest on loans and discounts

18,487

Interest and dividends on securities

6,579Interest on call loans

0Interest on deposits paid

148

Other interest income

2

Fees and commissions

5,466

Fund transfer fees received

1,569

Other fees and commissions

3,896

Other operating income

67

Foreign exchange trading income

5

Securities trading income

0Gain on sale of national government bonds

54

Other operating income

6

Other ordinary income

983

Gain on loan losses recovered

257

Gain on sale of equity

32

Gain on investments in money held in trust

285

Other ordinary income

407

Ordinary expenses

29,733

Interest expenses

148Interest on deposits received

140

Interest on negotiable certificates of deposit

5

Interest on call money

0

Other interest expenses

1

Fees and commissions

3,421

Fund transfer fees paid

295

Other fees and commissions

3,125

Other operating expenses

4,422

Loss on sale of national government bonds

276

Loss on redemption of national government bonds

3,941

Amortization of national government bonds

200- 30 -

Item

AmountOther operating expenses

5

General and administrative expenses

19,991Other expenses

1,749

Provision for reserve for possible loan losses

1,073

Amortization of loans and discounts

109

Loss on sale of equity

94

Amortization of equity

83

Other ordinary expenses

388

Ordinary profit

2,001

Extraordinary profit

32

Gain on disposal of fixed assets

32

Extraordinary losses

298

Loss on disposal of fixed assets

191

Impairment loss

106

Current net income before income taxes

1,735

Income taxes - current

117

Income taxes - deferred(311)

Income taxes - total(193)

Net profit

1,929- 31 -

Statement of Changes in Net Assets for the 49th Term (April 1, 2020 through March 31, 2021)(units: millions of yen)

Shareholders’ equity
Capital surplus

Retained earnings
Other retained
earnings

StatedcapitalOpening balance

Legalcapitalsurplus36,986

Other
capitalsurplus21,986

Total
capitalsurplus

9,603

Legal
retainedearnings

31,5891,759

Retainedearnings brought
forward

Total
Treasuryshareholders’sharesequityTotal
retainedearnings

13,74815,508(1,225)82,858

(578)

(578)

(578)

(115)

-

-

1,929

1,929

1,929

Changes of items during period
Distribution of surplus
Retained earnings reserve

115

Net profit
Purchase of treasury shares

(0)

(0)

Disposal of treasury shares

74

74

Reversal of land revaluation
surplus

13

13

13

Changes of items other thanshareholders’ equity during
period (net)Total changes of items during
periodClosing balance

-

-

-

-

115

1,250

1,365

74

1,439

36,98621,986

9,603

31,5891,875

14,99816,873(1,151)

84,298- 32 -

Valuation and translation adjustments
Net unrealized gains
on available-for-salesecurities
Opening balance

Net deferred losses on
hedging instruments(4,582)Land revaluation
surplus155

222

Total valuation andtranslation adjustments(4,204)

Total net
assets78,654

Changes of items during period
Distribution of surplus(578)

Retained earnings reserve-

Net profit

1,929

Purchase of treasury shares(0)

Disposal of treasury shares

74

Reversal of land revaluation surplus
Changes of items other thanshareholders’ equity during period (net)

(13)

(13)

-

5,614

5,614

5,765

(150)

Total changes of items during period

5,765

(150)

(13)

5,601

7,040

Closing balance

1,182

5

208

1,396

85,695- 33 -

Consolidated Financial Statements
Consolidated Balance Sheet at the End of the 49th Term (as of March 31, 2021) (Unit: millions of yen)
Item

AmountItem

AssetsAmountLiabilities

Cash and due from banks

392,795

Deposits

Monetary claims bought

2,493

Negotiable
depositMoney held in trusts

20,243

Call money and bills sold

Securities

179,109

Borrowed money

109,630

1,702,734

Other liabilities

10,601Loans and bills discounted
Foreign exchanges

535

2,105,968
certificatesof

32,442
575

Provision for bonuses

821
369

Lease receivables and investment
assets17,344

Reservebenefits

Other assets

28,062

Provision for board benefit
trust

370

Tangible fixed assets

13,179Provision for reimbursementof deposits

317

Buildings

5,320

Provision for contingent loss

211

Land

6,411

Provision for loss on interest
repayment

0

7

Deferred tax liabilities forland revaluation

398

1,439

Acceptances and guarantees

10,0672,916

Total liabilities

2,271,776

2,682

Net assets

Construction in progress
Other tangible fixed assets
Intangible fixed assets
Softwarefor

retirement

Other intangible fixed assets

233

Stated capital

36,986

Assets for retirement benefits

1,403

Capital surplus

31,589Deferred tax assets

3,277

Retained earnings

19,204

10,067

Treasury shares(1,151)

Customers’
liabilities
acceptances and guarantees
Allowance for loan losses
Allowance for investment loss

for

(13,645)

Total shareholders’ equity

86,629(23)

Net unrealized gains onavailable-for-sale securities

1,183

Net deferred losses
hedging instrumentsonLand revaluation surplus

208

Remeasurements of defined
benefit plans

88

Total accumulated othercomprehensive income

1,486

Non-controlling interests

Total assets

2,360,494- 34 -

5

601

Total net assets

88,717

Total liabilities and net assets

2,360,494

Consolidated Statement of Income for the 49th Term (April 1, 2020 through March 31, 2021)(Unit: millions of yen)
Item

AmountOrdinary income

41,877

Interest income

24,875Interest on loans and discounts

18,491

Interest and dividends on securities

6,231

Interest on call loans and bills bought

0Interest on deposits paid

148

Other interest income

2

Fees and commissions

6,112

Other operating income

65

Other ordinary income

10,824Gain on loan losses recovered

257

Other ordinary income

10,567

Ordinary expenses

39,659Interest expenses

154

Interest on deposits received

140

Interest on negotiable certificates of deposit

5

Interest on call money and bills sold0

Interest on borrowings

7

Other interest expenses

0

Fees and commissions

3,413

Other operating expenses

4,422

General and administrative expenses

20,830

Other expenses

10,838Provision for reserve for possible loan losses

1,061

Other ordinary expenses

9,777

Ordinary profit

2,217

Extraordinary profit

32

Gain on disposal of fixed assets

32

Extraordinary losses

298

Loss on disposal of fixed assets

191

Impairment loss

106

Current net income before income tax adjustment

1951

Income taxes - current

280

Income taxes - deferred(312)- 35 -

Item

AmountIncome taxes - total(32)

Net profit

1,984

Current net income attributable to non-controlling interests
Net profit attributable to owners of parent

42
1,942

- 36 -

Consolidated Statement of Changes in Net Assets for the 49th Term (April 1, 2020 through March 31, 2021)(Unit: millions of yen)

Shareholders’ equity

Opening balanceStated capital

Capital surplus

Retained earnings

Treasury shares

Total shareholders’ equity

36,986

31,58917,827(1,225)85,177

Changes of items during period
Distribution of surplus

(578)

(578)

Net profit attributable to owners of parent

1,942

1,942

Purchase of treasury shares

(0)

(0)

Disposal of treasury shares

74

74

Reversal of land revaluation surplus

13

13

Changes of items other than shareholders’ equity during period (net)Total changes of items during period
Closing balance

-

-

1,377

74

1,451

36,986

31,58919,204(1,151)

86,629- 37 -

Accumulated other comprehensive income

Opening balance

Net unrealized gains
on available-for-salesecurities

Net deferred losses
on hedging
instruments(4,581)155

Land
revaluation
surplus222

Remeasurements ofdefined benefit plans

Total accumulated othercomprehensive income

60(4,143)

Noncontrollinginterests
571

Total net
assets81,606

Changes of items during period
Distribution of surplus(578)

Net profit attributable toowners of parent

1,942

Purchase of treasury shares(0)

Disposal of treasury shares

74

Reversal of land revaluation
surplus(13)

Changes of items other thanshareholders’ equity during
period (net)

5,765

(150)

Total changes of items during
period

5,765

(150)

Closing balance

1,183

5

(13)

-

28

5,643

30

5,673

(13)

28

5,629

30

7,111

208

88

1,486

601

88,717- 38 -

Certified copy of audit report by Financial Auditor
Audit Report by Independent Auditor
May 13, 2021
The Michinoku Bank, Ltd.
To the Board of Directors
Ernst & Young ShinNihon LLC
Tokyo Office
Designated Limited Liability Partner Engagement Partner Certified Public Accountant
Masatoshi Omura[seal]
Designated Limited Liability Partner Engagement Partner Certified Public Accountant
Kazuhiko Kubosawa[seal]
Audit Opinion
We have audited the financial statements of The Michinoku Bank, Ltd. for the 49th Term (April 1, 2020
through March 31, 2021), which comprise the balance sheet, the statements of income, statement of changes
in equity and non-consolidated notes, and annexed detailed statements to the financial statements (the“Financial Statements”), pursuant to the provisions of Article 436, paragraph (2), item (i) of the Companies
Act of Japan.
In our opinion, the Financial Statements present fairly, in all material respects, the assets, income, andlosses of the company for the relevant period in accordance with accounting principles generally acceptedin Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our
responsibilities under those standards are described in the Auditor’s Responsibilities for the Audit ofFinancial Statements section below. We are independent of the company in accordance with the professional
ethics requirements in Japan, and we have fulfilled our other ethical responsibilities as an auditor. We havedetermined that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Responsibilities of Management and the Audit & Supervisory Committee for the Financial Statements
Management is responsible for the preparation and fair presentation of the Financial Statements inaccordance with accounting principles generally accepted in Japan, and for implementing and operatinginternal control as management determines is necessary to enable the preparation of Financial Statementsthat are free from material misstatement, whether due to fraud or error.
In preparing the Financial Statements, management is responsible for assessing the company’s ability tocontinue as a going concern and disclosing, as required by accounting principles generally accepted in Japan,
matters related to a going concern.
The Audit & Supervisory Committee is responsible for overseeing the performance of duties by directors
in connection with the implementation and operation of the financial reporting process.
Auditor’s Responsibilities for the Audit of Financial Statements
Our responsibility as auditor is to obtain reasonable assurance through the audit about whether the
Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and toissue an independent auditor’s report that includes our opinion on the Financial Statements. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the decisions of users taken on the basis of the Financial Statements.
As part of an audit in accordance with auditing standards generally accepted in Japan, we exercise
professional judgment and maintain professional skepticism throughout the audit.
・ ・Identify and assess the risks of material misstatement, whether due to fraud or error, and design andperform audit procedures responsive to those risks. The selection and application of the audit proceduresare decided by the auditor. We then obtain audit evidence that is sufficient and appropriate to provide a basis
for our opinion.
・ Consider internal control relevant to the audit in order to design audit procedures that are appropriate in
the circumstances for our risk assessments, while the purpose of the audit of the Financial Statements is not
to express an opinion on the effectiveness of the company’s internal control.

- 39 -

・ Evaluate the appropriateness of accounting policies used by management and their application, and thereasonableness of accounting estimates and related disclosures made by management.
・ Come to a conclusion on the appropriateness of management’s use of the going concern basis ofaccounting to prepare the Financial Statements and, based on the audit evidence obtained, whether a material
uncertainty exists related to events or conditions that may cast significant doubt on the company’s ability tocontinue as a going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures in the Financial Statements or, if such disclosures
are inadequate, to modify our opinion. Our conclusions are based on audit evidence obtained up to the dateof our auditor’s report. However, future events or conditions may cause the company to cease to continue
as a going concern.
・ Evaluate the overall presentation, structure and content of the Financial Statements, including thedisclosures, and whether the Financial Statements represent the underlying transactions and events in amanner that achieves fair presentation in accordance with accounting principles generally accepted in Japan.
We report to the Audit & Supervisory Committee regarding, among other matters, the planned scope andtiming of the audit and significant audit findings, including any significant deficiencies in internal control
that we identify during our audit.
We also provide the Audit & Supervisory Committee with a statement that we have complied with theprofessional ethics requirements regarding independence in Japan, and communicate with them all
relationships and other matters that may reasonably be thought to bear on our independence, and whereapplicable, related safeguards to remove or reduce obstructions.
Disclosure of Interests
We and our engagement partners do not have any interest in the company that is required to be disclosed
pursuant to the provisions of the Certified Public Accountants Act of Japan.
End of document- 40 -

Certified copy of audit report of consolidated financial statements by Financial Auditor
Audit Report by Independent Auditor
May 13, 2021
The Michinoku Bank, Ltd.
To the Board of Directors
Ernst & Young ShinNihon LLC
Tokyo Office
Designated Limited Liability Partner
Engagement Partner
Accountant Masatoshi Omura [seal]
Designated Limited Liability Partner
Engagement Partner
Accountant Kazuhiko Kubosawa [seal]

Certified PublicCertified Public

Audit Opinion
We have audited the consolidated financial statements of The Michinoku Bank, Ltd. for the consolidated
financial year from April 1, 2020 through March 31, 2021, which comprise the consolidated balance sheet,consolidated statements of income, consolidated statement of changes in equity, and consolidated notes,
pursuant to the provisions of Article 444, paragraph (4) of the Companies Act of Japan.
In our opinion, the consolidated financial statements present fairly, in all material respects, the assets,
income, and losses of the corporate group comprising The Michinoku Bank, Ltd. and its consolidated
subsidiaries for the relevant period in accordance with accounting principles generally accepted in Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our
responsibilities under those standards are described in the Auditor’s Responsibilities for the Audit ofConsolidated Financial Statements section below. We are independent of the company and its consolidated
subsidiaries in accordance with the professional ethics requirements in Japan, and we have fulfilled our otherethical responsibilities as an auditor. We have determined that the audit evidence we have obtained issufficient and appropriate to provide a basis for our opinion.
Responsibilities of Management and the Audit & Supervisory Committee for the Consolidated Financial
Statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with accounting principles generally accepted in Japan, and for implementing andoperating internal control as management determines is necessary to enable the preparation of consolidated
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing thecompany’s ability to continue as a going concern and disclosing, as required by accounting principles
generally accepted in Japan, matters related to a going concern.
The Audit & Supervisory Committee is responsible for overseeing the performance of duties by directors
in connection with the implementation and operation of the financial reporting process.
Auditor’s Responsibilities for the Audit of Consolidated Financial Statements
Our responsibility as auditor is to obtain reasonable assurance through the audit about whether the
consolidated financial statements as a whole are free from material misstatement, whether due to fraud or
error, and to issue an independent auditor’s report that includes our opinion on the consolidated financial
statements. Misstatements can arise from fraud or error and are considered material if, individually or in theaggregate, they could reasonably be expected to influence the decisions of users taken on the basis of theconsolidated financial statements.
As part of an audit in accordance with auditing standards generally accepted in Japan, we exercise
professional judgment and maintain professional skepticism throughout the audit.
・Identify and assess the risks of material misstatement, whether due to fraud or error, and design andperform audit procedures responsive to those risks. The selection and application of the audit proceduresare decided by the auditor. We then obtain audit evidence that is sufficient and appropriate to provide a basis
for our opinion.
・Consider internal control relevant to the audit in order to design audit procedures that are appropriate in- 41 -

the circumstances for our risk assessments, while the purpose of the audit of the consolidated financial
statements is not to express an opinion on the effectiveness of the company’s internal control.
・Evaluate the appropriateness of accounting policies used by management and their application, and thereasonableness of accounting estimates and related disclosures made by management.
・ Come to a conclusion on the appropriateness of management’s use of the going concern basis ofaccounting to prepare the consolidated financial statements and, based on the audit evidence obtained,
whether a material uncertainty exists related to events or conditions that may cast significant doubt on thecompany’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to the related disclosures in the consolidated financial
statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on audit
evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause thecompany to cease to continue as a going concern.
・Evaluate the overall presentation, structure and content of the consolidated financial statements, including
the disclosures, and whether the consolidated financial statements represent the underlying transactions andevents in a manner that achieves fair presentation in accordance with accounting principles generally
accepted in Japan.
・Obtain sufficient, appropriate audit evidence regarding the financial information of the company and its
consolidated subsidiaries to express an opinion on the consolidated financial statements. We are responsible
for the direction, supervision, and performance of the audit of the consolidated financial statements. We
remain solely responsible for our audit opinion.
We report to the Audit & Supervisory Committee regarding, among other matters, the planned scope andtiming of the audit and significant audit findings, including any significant deficiencies in internal control
that we identify during our audit.
We also provide the Audit & Supervisory Committee with a statement that we have complied with theprofessional ethics requirements regarding independence in Japan, and communicate with them all
relationships and other matters that may reasonably be thought to bear on our independence, and whereapplicable, related safeguards to remove or reduce obstructions.
Disclosure of Interests
We and our designated engagement partners do not have any interest in the company or its consolidated
subsidiaries that is required to be disclosed pursuant to the provisions of the Certified Public Accountants
Act of Japan.
End of document- 42 -

Certified copy of audit report by the Audit & Supervisory Committee
Audit Report
The following is a report on the methods and results of the Audit & Supervisory Committee’s audit of theperformance of duties by Directors in the 49th Term (April 1, 2020 through March 31, 2021).
1. Method and details of audit
The Audit & Supervisory Committee received periodic reports from Directors, employees, etc.
regarding the content of the Board of Directors resolution related to Article 399-13, paragraph (1), item(i)(b) and (c) of the Companies Act and the structure and operation of the system established pursuant tothat resolution (the internal control system), requested explanations as necessary, expressed opinions, andconducted its audit by the following method.
(i) Attended material meetings, received reports from Directors and employees, etc. regarding matterswith respect to their performance of duties, requested explanations as necessary, viewed the material
approval documents, and investigated the status of the business and assets of the headquarters andmajor sales offices based on the Audit & Supervisory Committee standards established by the Audit& Supervisory Committee and pursuant to the audit policy and division of duties, in collaboration with
the Bank’s Auditing Division and other internal control departments. With respect to subsidiaries,
came to a mutual understanding and exchanged information with directors and company auditors ofsubsidiaries and received reports on business from subsidiaries as necessary.
(ii) Supervised and monitored whether the financial auditor remains independent and is conducting its
audit fairly, received reports from the financial auditor regarding its performance of duties andrequested explanations as necessary. Received a notice from the financial auditor to the effect that“systems for ensuring that the performance of the duties of financial auditors is being carried out
correctly” (matters specified in each item of Article 131 of the Rules of Corporate Accounting) areestablished in accordance with the “standards for audit quality control” (Business Accounting Councilof October 28, 2005), and requested explanations as necessary.
Based on the above method, the Audit and Supervisory Committee examined (1) the business report andannexed detailed statement, (2) the financial statements (i.e., the balance sheet, statement of income,statement of changes in equity, and non-consolidated notes) and annexed detailed statement, and (3) the
consolidated financial statements (i.e., the consolidated balance sheet, consolidated statement of income,consolidated statement of changes in equity, and consolidated notes) for this fiscal year.
2. Results of audit(1) Results of audit of the business report, etc.
(i) In our opinion, the business report and the annexed detailed statement comply with laws andordinances and the articles of incorporation and accurately reflect the situation of thecompany.
(ii) In our opinion, there has been no material misconduct or breach of laws and regulations or
the articles of incorporation by a Director in the course of performing duties.
(iii) In our opinion, the content of the resolutions of the Board of Directors related to theinternal control system is appropriate, and there are no matters requiring comment withrespect to the statements in the business report and the Directors’ performance of duties
related to the internal control system.
(2) Results of auditing the financial statements and annexed detailed statement
In our opinion, the method and results of the audit conducted by Ernst & Young ShinNihon LLC
are appropriate.
(3) Results of audit of consolidated financial statements
In our opinion, the method and results of the audit conducted by Ernst & Young ShinNihon LLC
are appropriate.
May 13, 2021
The Michinoku Bank, Ltd. Audit & Supervisory
Committee
Full-time Audit & Supervisory Committee
Chairperson Seiichi Tsurumi [seal]
Full-time Audit & Supervisory Committee- 43 -

Member Kazuhiko Odanaka [seal]
Audit & Supervisory Committee Member
Toshihiro Nishiya [seal]
Audit & Supervisory Committee Member
Tetsutaro Wakatsuki [seal]
Note: Audit & Supervisory Committee Members Seiichi Tsurumi, Toshihiro Nishiya, and Tetsutaro
Wakatsuki are Outside Directors defined in Article 2, item (xv) and Article 331, paragraph (6) of theCompanies Act.
End of document- 44 -