SHIGA BANK REPORT 2019 INTEGRATED REPORT/ANNUAL REPORT 2019 Year ended March 31, 2019 https://www.shigagin.com The Bank’s motto Be tough on ourselves, kind to others and serve society. CSR Charter (Management Principles) (Instituted in April 2007) The Shiga Bank has its own motto of “Be tough on ourselves, kind to others and serve society,” which forms the starting point for corporate social responsibility (CSR). As a member of society, the Bank will work for mutual prosperity with society. The Bank’s motto carries on the “Sampo yoshi” philosophy, a management philosophy embraced by Merchants in the Omi region of central Japan, which means to bring happiness to three sides: being good for the seller, the buyer, and society. Mutual prosperity with the regional As a bank that advances hand-in-hand with society, in order to win customer confidence and meet customer expectations, we maintain a sound and enterprising bank and work for the development of regional communities. Mutual prosperity with all employees Respecting the human rights and individuality of each and every executive and regular employee, we will build a satisfying workplace, and turn our bank into “Clean Bank Shigagin.” Harmonious coexistence with the environment The social mission of our company, which is headquartered next to Lake Biwa, is environmental management. We are committed to protection of the global environment and the building of a sustainable society. CONTENTS 02 LOOKING BACK ON OUR GROWTH PATHWAY 04 ABOUT SHIGA BANK Value Creation Story 4 Strengths of Shiga Bank 6 Financial / Non-financial Highlights 8 12 TOP MESSAGE President Shojiro Takahashi CSR Charter (Management Principles) (Instituted in April 2007) We create a society where everyone can define their future and live happily 22 CHALLENGES FOR VALUE CREATION Risks and Opportunities 22 The 7th Medium-Term Business Plan 24 ESG Regional Financing 30 External Evaluation 36 38 STRATEGY BY SEGMENT FOR FUTURE INNOVATION Challenge to Regional Revitalization 38 Strategies for Corporate Customers 40 Strategies for Individual Customers 42 ICT Strategy 44 Mutual prosperity with the regional 52 POWERS SUPPORTING VALUE CREATION Corporate Governance 52 Message from the Outside Director 56 Stakeholder Communication 58 Promoting Employee Activities and Environment Creation 60 Risk Management 64 Compliance 69 72 FINANCIAL SECTION Editorial Policy Shiga Bank has compiled the integrated report SHIGA BANK ANNUAL REPORT 2019. This report links Cautionary Statement with Respect to financial information to non-financial information, such as the Management Principles, environmental, Forward-Looking Statements social and governance (ESG) information by reference to the “International Integrated Reporting Framework” proposed by International Integrated Reporting Council (IIRC) and “The Guidance for This material contains statements regarding future Collaborative Value Creation” by the Ministry of Economy, Trade and Industry. It serves as an integrated earnings forecasts and targets, etc. relating to the review of measures for creation of sustainable value for the Bank and in regional communities. This report serves also as disclosure materials (briefing documents of Bank. These statements are based on information status of operations and assets) pursuant to Article 21 of the Banking available at the time of compilation of these materials Act. The reader is recommended, when using this document for and forecasts or certain conditions (assumptions) that disclosure purposes, to refer also to the material section of this could affect business performance. They are not document and “Financial Data, Basel III, Column 3 of SHIGA BANK ANNUAL REPORT 2019” (viewable on our website (https://www.shigagin. guarantees of future performance of the Bank, and com). (Japanese only) involve various risks and uncertainties. The management team of the Bank confirms that this combined report has been duly disclosed in accordance with the Disclosure Policy of the Bank. SHIGA BANK INTEGRATED REPORT/ANNUAL REPORT 2019 1 August 2010 Established the “Policies for biodiversity preservation” LOOKING BACK ON OUR GROWTH PATHWAY February 2012 Opened Bangkok Representative Office April 2013 Established the “Regional Promotion Office” June 2014 Established the “ICT Strategy Office” December 2015 Commenced the “Ratings Simulation Service 2033 (Ratings SS)” April 2016 Started the 6th Medium-Term Business Plan The philosophy of the Shiga Bank Measures to modernize the Bank’s management Environmental management November 2017 Announced Shigagin SDGs Declaration 100th April 2019 Started the 7th Medium-Term CSR Charter, the Bank’s motto which carries on For the development of the regional Aiming to reconcile environmental and Business Plan anniversary the “Sampo yoshi” philosophy communities economic needs May 2019 Joined “TSUBASA Alliance” The Shiga Bank was born in 1933 through the merger of the We believe that the ultimate role of the management of a The Bank sees CSR as the role of the Bank as a corporate 133rd National Bank (Hyakusanjusan Bank), which prided Bank is to “take on risk.” For us, this means the risk assumed citizen in fostering sustainable growth of society. The Bank itself on “sound management,” and the Hachiman Bank, on behalf of the development of the regional communities. has been developing CSR activities based on the three key which emphasized a culture of “enterprise.” Since then we To contribute to the development of regional communities, concepts of “environment,” “welfare,” and “culture.” By have forged ahead with fulfilling our mission of helping the Bank is pioneering measures to modernize its implementing “environmental management” which 2010 business partners and local communities to flourish. The management through adoption of an “In-house corporate contributes to the creation of a sustainable society through “finance,” the life blood of the economy, the Bank has taken “Sampo yoshi” management philosophy, embraced by credit ratings system,” “Pricing system,” and Basel II’s March 2000 Acquired ISO 14001 Certification measures to reconcile the twin imperatives of safeguarding merchants in the Omi region of central Japan, was upheld Foundation Internal Ratings Base-Approach (FIRB). the “environment” and providing “finance.” July 2000 Commenced Shigagin New Business Forum “Saturday School through our motto of “being tough on ourselves, kind to for Entrepreneurship” others and serving society.” The Bank has made this motto October 2001 Became the first commercial bank in Japan ot sign the and the “CSR Charter (Management Principles)” the starting United Nations Environment Programme (“UNEP”) Statement by Financial Institutions point for our activities. April 2003 Established “Shigagin Nonohana Prize,” an incentive system 2000 through industrial-academic cooperation May 1951 Commenced foreign exchange business December 2003 Opened Shanghai Representative Office October 1987 April 2004 Established “CSR Committee” and “CSR Office” Listed stocks on the Tokyo Stock Exchange (the First Section) December 2005 Established Shiga Bank Principles for Lake Biwa (PLB) and commenced “PLB rating” January 1966 Announced the Bank’s motto March 2007 Basel II’s Foundation Internal Ratings Based-Approach (FIRB) was approved by the Financial Services Agency 1990 April 2007 Established the “CSR Charter” and the “Code of Conduct” October 1977 August 2007 Commenced “Shigagin Ratings Communication Service Listed stocks on the Osaka Securities May 1991 New York Representative Office was promoted to New (Ratings CS)” Exchange (the Second Section) and the York Branch (closed down in 1998) July 2008 Became the first financial institution to be certified as October 1933 Established the Shiga Bank, Ltd. Kyoto Stock Exchange (moved to the September 1993 Hong Kong Representative Office was promoted to “Eco-First Enterprise” First Section of the Osaka Securities Hong Kong Branch October 1938 Opened Kyoto Branch July 2008 Held the first “Eco Business Matching Fair” Exchange in March 1979) April 1998 Launch of “∞ (Mugen) Net” on trial basis November 2009 Commenced “Biodiversity rating (PLB rating BD)” December 1998 Commenced “In-house corporate credit ratings system” February 1999 Launch of “Pricing system” operations on trial basis From April 2019 to March 2024 March 1941 Opened Osaka Branch 1980 October 1999 Established the “Environment Committee” and the July 1946 Opened Tokyo Branch “Environmental Policy” The 7th Medium-Term Business Plan December 1999 Launch of “DBM (Database Marketing)” operations Vision 1970 Sustainability Design Company —Realizing mutual prosperity based on the “Sampo yoshi” philosophy— 1960 From April 2016 to March 2019 Main theme The 6th Medium-Term Business Plan Define the future and realize a dream —For the future of customers, regional communities 1950 Long-term vision and all employees— The Regional Bank that innovates the future Numerical targets 1940 Main theme Investment and financing to promote Sustainable Development From April 2013 to March 2016 Change & Challenge (cumulative amount of new investment and financing) ¥500 billion The 5th Medium-Term Business Plan Support for value improvement of regional customers History 1930 Achieved value (the number of requests for consultation per year) 1,000 cases Basic vision Total deposit assets (end of year balance) Support for asset formation of regional customers A bank journeying into the future together with its (total deposits + investment trust + public bond + (the balance of