Corporate Governance Policy

Purpose

Article 1　Mebuki Financial Group, Inc. (hereafter referred to as “the Company” and “the Group” consisting of the Company together with its consolidated subsidiaries) defines basic corporate governance policy, framework and management policy, to promote a sustainable growth and increase corporate value of the Group over the medium to long term.

Basic Approach to corporate governance

Article 2　The Company will secure the development of responsible management system and sound operation of the Group’s businesses, to gain the creditworthiness from all stakeholders, including shareholders, customers, employees and local communities, and will increase corporate value creating a corporate governance structure with basic approach as follows.

• （1）
  The Company will secure the shareholders’ rights and equality.
• （2）
  The Company will create appropriate collaboration with stakeholders including shareholders, in consideration with their interests.
• （3）
  The Company will secure appropriate information disclosure and transparency.
• （4）
  The Company will secure the transparent, fair, prompt and decisive decision-making function through the Board of Directors, while ensuring the solid audit and supervisory function by the independent outside directors.
• （5）
  The Company will work toward constructive dialogue with shareholders directed at a sustainable growth and increasing corporate value over the medium to long term.

Corporate governance system

Article 3　In terms of institutional design, the Company takes the form of a company with an audit and supervisory committee, and thereby seeks to realize prompt and decisive decision-making and business execution by entrusting many of the decision-making authorities relevant to business execution to directors as constituent members of the Board of Directors in which the knowledge and expertise of the Group are concentrated, while ensuring a transparent and fair decision-making function and a solid audit and supervisory function through the appointment of multiple outside directors.

General Meeting of Shareholders

Article 4　To ensure that shareholders have adequate time for deliberation on proposals at the General Meeting of Shareholders and can appropriately exercise voting rights, the Company will dispatch notices for the Ordinary General Meeting of Shareholders as soon as possible, while also disclosing the notice on the Company’s website.

    2　The Company will prepare an environment (date and place, etc.) to ensure that all shareholders can appropriately exercise voting rights such as using of electric voting platform.

Ensuring shareholders’ equality

Article 5　The Company will treat all shareholders fairly in proportion to holdings and conduct timely and appropriate information disclosure to ensure that information gaps do not arise among shareholders.

Capital Policy

Article 6　As far as there are no special circumstances, the Company will decide about a dividend policy and will disclose it.

    2　In the event that would have a significant effect on shareholder interests or capital structure, the Company will examine its necessity and rationality and secure an appropriate procedure. In addition, the Company shall provide full explanation to shareholders about it.

Basic Policy on Cross-shareholdings and Exercising of voting rights

Article 7　The Company and its core subsidiary banks may hold shares except for pure investment purpose, aimed for sustainable growth and medium to long term enhancement of corporate value of the Group and customers or building stable business relationship with those customers (hereinafter “cross-shareholdings”). Even in such cases, the Company and its subsidiary banks will examine the medium to long term economic rationale and future outlook of listed cross-shareholdings taking into consideration the associated risks and returns, and propriety of shareholding based on its rationale and purposes, in the Board of Directors meeting annually. In addition, the Company shall disclose it.

    2　The Company and its subsidiary banks shall exercise all voting lights of cross-shareholdings in principle, under the way of thinking defined as follows.

• （1）
  From the viewpoint of sustainable growth and medium to long term enhancement of corporate value of the Group and customers, and maintaining and enhancing its share value, the Company and its subsidiary banks shall approve or disapprove for each proposal.
• （2）
  In particular, we will consider and judge the proposals carefully while collecting adequate information through dialogue with issuing companies as necessary, when the proposals may impact the shareholder value or affect the purposes of shareholding by the Company or its subsidiary banks seriously, and be required special caution. Furthermore, the proposals required special caution are as follows.

• ①
  Proposals for appropriation of retained earnings (when such proposals may lack in the balance with financial soundness and internal reserves)
• ②
  Proposals to elect directors and the audit and supervisory committee members (when a corporate scandal and antisocial act have occurred)
• ③
  Proposals for reorganization
• ④
  Proposals to adopt or continue anti-takeover measures

    3　When the shareholders of the Company (hereinafter “cross-shareholders”) intend to sell their shares, the Company and its subsidiary banks will not prevent it.

    4　When the Company and its subsidiary banks engage in transactions with cross-shareholders, we will examine the economic rationality sufficiently, and such transactions do not harm the corporate value of the Company.

Related party transactions

Article 8　When directors engage in transactions in the same line of business of the Company or transactions involving conflict of interest, the relevant transactions shall be approved by the Board of Directors.

    2　When the Company shall conduct transactions under unordinary terms and conditions with its subsidiaries or principal shareholders (who hold 10% or more of shareholder voting rights of the Company directly or indirectly), the relevant transactions shall be approved by the Board of Directors.

    3　When the Board of Directors shall approve transactions in the same line of business of the Company and having conflict of interest, the Board of Directors shall secure an appropriate management that the relevant directors could not participate in the vote.

Code of conduct

Article 9　The Company defines “Group Philosophy” (※1) as the concept that forms the basis of all activities conducted by the Group, and “Declaration of Ethics” (※2) based on strict self-discipline and continuous efforts for trust from society.

    2　The Company defines “The Basic Rules on Group Compliance” to promote all officers and employees of the Group to secure the compliance with laws and ethical behavior, based on “Corporate Ethics” (※3) setting basic policy in business activities and “Code of Conduct” in which each of officers and employees of the Group shall be engaged.

Relations with stakeholders

Article 10 For the Group’s sustainable growth and increase of corporate value over the medium to long term, the company ensures the appropriate collaborations with all of stakeholders such as customers, employees and local communities, etc.

     2　The company establishes the internal reporting program and operates appropriately by setting internal or external contacts to report without any unfair treatment, if officers and employees detect any violation or doubts of Laws.

Information disclosure

Article 11 With an aim to evaluate the soundness and transparency in management, and the trustworthiness from all stakeholders, including shareholders, customers and local communities, the Company will ensure timely, appropriate and easily understandable information disclosure, including its financial information and non-financial information regarding business strategy, risk management, and governance, etc.

     2　In line with the Companies Act, Banking Act, Financial Instruments Exchange Act, other laws and regulations, and regulations of Tokyo Stock Exchanges, the Company will conduct proactive, fair and honest information disclosure.

External accounting auditors

Article 12 The Company recognizes the responsibility that external accounting auditors owe towards shareholders and investors, and take appropriate actions to secure the proper performance of audit as follows.

• （1）
  The Company shall prepare an appropriate environment for auditors securing adequate time for audits and scheduling meetings with management, Audit and Supervisory Committee members and other divisions required for audits.
• （2）
  The Company shall establish a system ensuring accounting auditors to cooperate with Audit and Supervisory Committee and internal audits sections.

Roles and responsibilities of the Board of Directors

Article 13 Given its fiduciary responsibility and accountability to shareholders, the roles and responsibilities of the Board of Directors shall be defined as follows to ensure a sustainable growth of the Group and increasing corporate value over the medium to long term.

• （1）
  The Board of Directors shall define the vision of the Group.
• （2）
  The Board of Directors shall establish a risk management system that could support appropriate risk-taking including an environmental improvement.
• （3）
  The Board of Directors shall supervise effective management from an independent and objective standpoint.

     2　The Board of Directors shall make decisions about matters stipulated in laws and regulations and the Articles of Incorporation, and important business matters in rules of the Board of Directors (※4).

     3　The Board of Directors shall define the rules on authority where clarify the responsibilities for business execution to its executive directors, except for the matters set forth in the preceding paragraph.

     4　The Board of Directors shall establish the Management Meeting, the ALM/Risk Management Committee, the Compliance Committee, and the SDGs Committee as the bodies to discuss and decide important matters regarding business execution.

Composition of the Board of Directors

Article 14 The Board of Directors shall have a balanced composition that shall provide a wealth of knowledge and expertise in wide range of fields. Under the Articles of Incorporation, its numbers shall be appropriate to fulfil its functions effectively and efficiently.

Operation of the Board of Directors

Article 15 The Board of Directors shall secure the following matters for active deliberation and smooth operation in the Board of Directors.

• （1）
  The Board of Directors shall set a yearly schedule in advance.
• （2）
  The Board of Directors shall take measures for the materials and explanations of agenda previously that shall be made to the outside directors in particular.
• （3）
  The Board of Directors shall ensure the sufficient time for its meeting.
• （4）
  The Board of Directors shall allow a person other than a director to attend a meeting and request his/her report or opinion as necessary.

Election of Directors

Article 16 Each candidate to be appointed as a director shall meet the following requirements based on“the standards for election of directors”.

• （1）
  The candidate has high knowledge and expertise about the Company’s business activities.
• （2）
  The candidate has superior ability of managerial decision-making and execution.
• （3）
  The candidate has superior leadership, decisiveness, foresight and creativity.
• （4）
  The candidate has high integrity and deep insight to be suitable for a director.
• （5）
  The candidate has no health problems in performing the duties as a director.

     2　Each candidate to be appointed as an outside director shall meet the requirements set forth in Article2.15 of the Companies Act and the following requirements based on “The Standards for Election of Directors”.

• （1）
  The candidate has extensive experience in overall management or be in positions as professionals in laws, accounting, finance, and others to be suitable as a supervisor that has high knowledge and experience similarly.
• （2）
  The candidate has high integrity and deep insight as an outside director.
• （3）
  The candidate ensures the sufficient time for performing his/her duties as a director.
• （4）
  The candidate has no health or job-related problems in performing the duties as an outside director.

     3　Two or more outside directors shall meet the requirements set forth in the independence standards (※5) for outside directors based on “The Standards for Election of Directors”.

     4　The Board of Directors shall respect the opinion of the Corporate Governance Committee at the election of candidates of directors, and shall get the consent of the Audit and Supervisory Committee regarding the election of candidates who shall be the committee members.

Dismissal of Directors

Article 17　If a director meet any of following matters set forth in “the standards for the submission of proposal to dismiss director” and the Board of Directors finds it to be necessary, the Board of Directors shall make decisions to submit a proposal to dismiss the director, based on the report by the Corporate Governance Committee.

• （1）
  When a director has violated or may violate laws and regulations or articles of incorporation in the course of his/her duties.
• （2）
  When a director has caused or may cause the serious damage to the Company resulting from the intentional or grossly negligent conduct.
• （3）
  When a director has promoted own or third parties interests breaching the duty of good faith.
• （4）
  When a director has injured the honor or confidence of the Company.
• （5）
  When a director has not satisfied the requirements set forth in the “the standards for election of directors”.
• （6）
  In any case equivalent to the preceding items.

Roles and responsibilities of the Directors

Article 18　Directors shall actively express their views and engage in thoroughgoing discussions, while collecting information required to execute duties.

     2　Directors shall exhibit their expected abilities, devote adequate time to the Company, and execute duties befitting a director.

     3　Outside directors shall execute decision-making in the Board of Directors and supervise other directors, based on different knowledge and idea other than as an internal director.

     4　Outside directors shall supervise any transaction having conflict of interest and act to appropriately reflect the views of external stakeholders, such as minority shareholders in the Board of Directors meeting.

     5　Outside directors may request to any officer or employee of the Company his/her explanation or report and materials whenever necessary or where appropriate.

     6　Corporate Planning Department shall act as a contact point with inside and outside directors, to provide necessary information of the Group or other information for outside directors to execute their duties. And also, Corporate Planning Department shall act equally for Outside Directors consisting the Audit and Supervisory Committee, while securing cooperation appropriately with employees who support the Audit and Supervisory Committee.

     7　Outside Directors shall exchange information and share their views from independent and objective standpoint in the Outside Directors Sessions to be held as necessary.

Self-evaluation of the Board of Directors

Article 19　On an annual basis, the Board of Directors shall perform an analysis and self-evaluation of the effectiveness of the Board of Directors in cooperation with the Corporate Governance Committee, confirming their opinion regarding the composition and operation, etc. of the Board of Directors. And the Board of Directors shall disclose the summary of the results thereof, while facilitating operational improvement of the Board of Directors.

Composition of the Audit and Supervisory Committee

Article 20　The Audit and Supervisory Committee shall comprise no less than three (3) members and the majority of those members shall be outside directors. The Company shall secure the following management system for the appropriate execution of the duties by the Audit and Supervisory Committee.

• （1）
  At least one (1) person of the Audit and Supervisory Committee Member shall have appropriate knowledge in financial accounting.
• （2）
  The Chairman of the Audit and Supervisory Committee shall be elected by the resolution of the committee.
• （3）
  Full-time member(s) of the Audit and Supervisory Committee shall be elected by the resolution of the committee.
• （4）
  The Company shall establish an Audit and Supervisory Committee Office and assign one (1) or more full-time employee in order to assist the committee.

Roles and responsibilities of the Audit and Supervisory Committee

Article 21　The Audit and Supervisory Committee shall act a role in the supervisory function of the Company and shall audit the execution of duties by the directors as an independent organization entrusted with shareholders. By this, the Audit and Supervisory Committee has responsibility for the establishment of corporate governance system ensuring a sound and sustainable growth of the Group and responding to social credibility.

Roles and responsibilities of the Audit and Supervisory Committee Members

Article 22　The Audit and Supervisory Committee Members shall exercise its effective supervisory function as a member of the Board of Directors, and a member of the Audit and Supervisory Committee that has authority to declare opinions regarding nominating and remuneration, and to approve transactions having conflict of interest.

     2　The Audit and Supervisory Committee Members shall utilize the information and knowledge acquired through their business execution proactively in deliberations at the Board of Directors meetings and secure the effective supervisory function and fair decision-making of our businesses.

     3　The Audit and Supervisory Committee Members shall secure an independent standpoint and shall act based on their own beliefs, maintaining fair and unbiased manner.

     4　Full-time member(s) of the Audit and Supervisory Committee shall secure an environmental improvement and collecting internal information proactively based on the characteristics of full-time member(s). And also, they shall monitor and verify the construction and operation status of an internal control system on a daily basis, and shall share it with other committee members in the course of such duties.

Corporate Governance Committee

Article 23　The Company shall establish the Corporate Governance Committee as an advisory body to the Board of Directors to enhance the effectiveness of corporate governance for sustainable growth and medium to long term enhancement of corporate value of the Group.

     2　The Corporate Governance Committee shall deliberate matters as follows, and reports back to the Board of Directors.

• （1）
  Matters concerning the selection, reappointment and dismissal of president and director candidates
• （2）
  Succession plan for the President and cultivation of exective candidates
• （3）
  Compensation for directors
• （4）
  Collection and analysis of voices of shareholders
• （5）
  Other matters in response to request from the Board of Directors about improvement of corporate governance

     3　The Corporate Governance Committee shall be composed by all of outside directors of the Company, the representative director and outside directors nominated by wholly-owned banks, and the majority of committee members shall be outside directors.

     4　The Chairman of the Corporate Governance Committee shall be elected from among the independent outside directors of the Company. The Chairman shall stimulate the committee members into proactive and constructive expression of opinions and shall manage the committee effectively and efficiently, while communicating with management, organizing an executive session comprised exclusively of outside directors of the Company and its subsidiary banks to exchange information and share views with each other, and cooperating with the Audit and Supervisory Committee as necessary.

Compensation for Directors

Article 24　The Company shall determine director compensation (excluding the Audit Committee members) linked with business performance and shareholder’s interest appropriately, in consideration to its transparency, fairness and objectivity and on a basis of an incentive for potential business performance.

     2　Regarding individual compensation (excluding the Audit Committee members), the Board of Directors shall decide it within the annual limits determined in the General Meeting of the Stockholders, securing its objectivity and transparency after the deliberation of the Corporate Governance Committee.

     3　Regarding compensation of the Audit Committee members, the Company shall not consider the item of an incentive, to ensure the validity of their duties as auditor and supervisory.

     4　The Company shall decide individual compensation of the Audit Committee members, within the annual limits determined in the General Meeting of the Stockholders, by the deliberation of all of the Audit Committee members.

Directors Training

Article 25　In order to fulfill their roles, directors shall proactively collect and strive for research information regarding financial condition, management issues and compliance and others of the Group on a continuing basis.

     2　The Company shall provide newly appointed directors with opportunities to acquire and improve knowledge that should be necessary to fulfill their expected roles and duties through both internal and external training at the time of newly appointment and thereafter continuously as required.

Dialogue with shareholders and investors

Article 26　From the viewpoint of a sustainable growth and increase corporate value over the medium to long term of the Group, the Company shall promote constructive dialogue with shareholders and investors to the extent permitted by the Company or by reasonable method.

     2　Representative director shall take the initiative in promoting constructive dialogue with shareholders and investors, and enhance the opportunities of dialogue through the IR meetings and other IR activities. And also, the director in charge of Corporate Planning Department shall support it as an IR managing director.

     3　Under the direction of the IR managing director, Corporate Planning Department that handles IR activities shall disclose information appropriately through cooperation with each department of the Group and shall support constructive dialogue with shareholders and investors.

     4　Shareholders view through IR activities shall be verified in the meeting of the Corporate Governance Committee, and reported regularly to the Board of Directors and management for the appropriate feedback to the Group.

     5　The Company shall control and improve information asset management and rules of preventing insider trading appropriately, without disclosing any material insider information in the dialogue with shareholders and investors.

Amendments

Article 27　These guidelines may be amended by a resolution of the Board of Directors. Notwithstanding the foregoing, amendments that reflect insignificant matters such as a change of department name can be approved by the President.