Seven Bank : Corporate Governance Report

This document is a translation of the Japanese language original for convenience purposes only, and in the event of any discrepancy, the Japanese language original shall prevail.

Corporate Governance Report

Last Update: June 23, 2021

Seven Bank, Ltd.

Yasuaki Funatake

President and Representative Director

Contact: 03-3211-3041

Securities Code: 8410

The following summarizes matters related to the corporate governance of Seven Bank, Ltd. (the "Bank").

1. Basic Views on Corporate Governance, Capital Structure, Corporate Profile and Other

Basic Information

1. Basic Views

As a bank that owns and operates an ATM network that manages deposits from a large number of customers and has a nature similar to that of public infrastructure, the Bank recognizes that ensuring disciplined corporate management is vital in responding to the social trust and seeks to ensure effective corporate governance. This is achieved by maintaining and improving its corporate governance and compliance systems to ensure transparent, fair and swift managerial decision making; clarify the roles and responsibilities of Executives and employees; strengthen management oversight functions; and ensure equitable operations.

The Bank adopts the organizational form of a Company with Audit & Supervisory Board Members. At the Board of Directors, the Bank ensures effective corporate governance through decision making by Directors with Executive Authority over operations who are well versed in the Bank's operations and Outside Directors who have considerable experience and insight in their areas of expertise as well as the audits by the Audit & Supervisory Board Members.

To clarify the specific issues to be addressed by the Bank to realize the above policy and fulfill the accountability of the Bank's corporate governance to its shareholders, the Bank has established the "Corporate Governance Guidelines," which are disclosed on its website.

https://www.sevenbank.co.jp/english/csr/esg/governance.html https://www.sevenbank.co.jp/english/ir/pdf/2020/20200622_CGG.pdf

[Reasons for Non-Compliance with the Principles of the Corporate Governance Code]

The Bank hereby explains the reasons for non-compliance with the principles of the Corporate Governance Code.

[Basic Principle 5-2: Policies on Management Decisions, Investment Strategies, and Financial Management, etc.]

In order to realize the sustainable growth of the Bank, we are actively pursuing investments in new growth fields in addition to our ATM platform business, which is the Bank's mainstay business. However, there are many uncertain elements in the future, and we will continue to establish appropriate criteria for judgment that comprehensively take into account medium- to long-term financial conditions and the management environment, and consider how to reflect these in management.

- 1 -

[Disclosure Based on the Principles of the Corporate Governance Code]

[Principle 1-4: Strategic Shareholdings]

1. We make it a basic policy not to hold the shares of other companies as strategic shareholdings unless those holdings are considered meaningful. We consider strategic shareholdings meaningful if they are judged to contribute to the preservation and enhancement of corporate value of the issuing business partner and the Bank based on the results of studies on their profitability and other factors both current and projected. We make it a policy to dispose of or reduce strategic shareholdings that, as a result of these investigations and studies, are judged to have become less meaningful or no longer meaningful, as promptly as possible.
2. We regularly conduct thorough investigations into the appropriateness of the objectives of the holdings, whether or not the benefits and risks of the holdings are commensurate with the capital cost, and other matters concerning each stock of strategic shareholdings at meetings of the Board of Directors, and study the appropriateness of the holdings and disclose the details of the studies. We make it a policy to dispose of or reduce strategic shareholdings that, as a result of these investigations and studies, are judged to have become less meaningful or no longer meaningful, as promptly as possible.
3. The Bank exercises its voting rights relating to strategic shareholdings upon comprehensive consideration of whether an issuer makes appropriate decisions to improve its corporate value over the medium to long term through appropriate corporate governance systems, as well as possible effects on enhancing our own corporate value. In particular, when considering proposals that are judged to have a serious impact on the execution of the Bank's operations, whether to vote for or against the proposals at General Meetings of Shareholders is considered through dialogue with the issuers and studies conducted by the department in charge.
4. In the event that a company holding the Bank's shares as strategic shareholdings indicates its intention to sell those shares, the Bank takes appropriate measures without doing anything that would prevent the sale, such as suggesting a reduction in transactions.
5. The Bank does not conduct any transactions with strategic shareholders that would harm the common interests of the company and shareholders, such as continuing transactions without sufficiently studying

the economic rationality of such transactions.

(Excerpt from Article 8 of our Corporate Governance Guidelines)

[Results of Studies]

The results of studies on strategic shareholdings by the Board of Directors for fiscal 2019 are as follows.

With regard to the shares of SOHGO SECURITY SERVICES CO., LTD., we confirmed the status of measures implemented relating to operations with the Bank and whether the benefits and risks of the holdings are commensurate with the capital cost, and judged that, as an important business partner in the ATM platform business, the holdings are considered meaningful in order to improve our corporate value over the medium to long term by building good relationships and promoting smooth business. Although it is difficult to describe the qualitative holding effect, the Board of Directors verified the rationality of the holdings by confirming matters such as the status of business with the Bank and major indicators with regard to business transactions.

[Principle 1-7: Related Party Transactions]

1. To protect the interests of shareholders, we are taking measures to prevent any related party of the Bank, such as an officer, from conducting transactions that would harm the interests of shareholders by taking advantage of its position.
2. Any significant or extraordinary transaction with the Bank's Directors, Audit & Supervisory Board Members and/or major shareholders requires the approval of the Board of Directors.

- 2 -

(Excerpt from Article 7 of our Corporate Governance Guidelines)

[Principle 2-6: Asset Owner]

Management of the Bank's corporate pension funds is carried out by Seven & i Holdings Corporate Pension Fund (hereinafter, "Corporate Pension Fund").

1. Structure of the Corporate Pension Fund

The Board of Delegates, which is the decision-making body for the Corporate Pension Fund, comprises an equal number of selected delegates (company) and elected delegates (employees). The Board confirms the status of asset management twice a year and passes resolutions on management policies for the managed portfolios as required, while the Board of Governors, which is the executive body, executes operations in accordance with the management policies.

Furthermore, as an advisory organization to the Chairman of the Board of Governors, the Pension Management and Finance Committee comprises members affiliated with the finance and accounting departments, etc. of Seven & i Holdings and conducts monitoring activities every two months based on specialized knowledge.

In addition, the Secretariat is staffed with personnel with knowledge in finance and human resources, enabling it to execute highly specialized management, including the monitoring of management institutions.

2. Management of the Corporate Pension Fund

The Corporate Pension Fund confirms that all domestic equity management institutions have accepted the Stewardship Code.

The Fund also monitors the equity management institutions' engagement with investee companies and the implementation status of the exercise of voting rights, and in doing so, verifies matters such as specific examples of stewardship activities. Furthermore, the Fund shares information on the status of these activities and the results of fund management with employees through Seven & i Holdings' Group magazines and other means.

Any conflicts of interest are appropriately managed through the selection of individual investee companies and the conclusion of contracts entrusting the exercise of voting rights to management institutions.

[Principle 3-1: Full Disclosure]

<1> The Bank's ideals (Management Ethos), management strategies and management plans

The Bank's Management Ethos, management strategies and management plans are disclosed on its website and through such tools as documents for the presentation of financial results and Integrated Reports.

<2> Basic views on and policies for corporate governance Please refer to "I.1 Basic Views" in this report.

<3> Policies and procedures for the Board of Directors to determine compensation etc. for the top management and Directors

<>

1. As an advisory organization to the Board of Directors, the Bank has established the Nomination & Compensation Committee chaired by an Independent Outside Director. The committee is delegated by the Board of Directors to recommend candidates for Director to be put on the agenda at a General Meeting of Shareholders, to recommend candidates for Executive Officer with Title and candidates for Executive Officer to be put on the agenda at a Board of Directors meeting and to supervise a plan on successors to the position of Director, etc.
2. The Nomination & Compensation Committee deliberates the following matters regarding the Bank's Directors and Executive Officers.
3. 1. Compensation and bonuses
   2. Other important matters concerning compensation
   3. Matters concerning the recommendation of candidates for Director, candidates for Executive Officer with Title and candidates for Executive Officer
   4. Matters concerning the recommendation of candidates for Representative Director and candidates for Executive Director
   5. Other important personnel matters regarding Directors

(Excerpt from Article 23 of our Corporate Governance Guidelines)

[Policies and procedures for determining compensation, etc., for Directors and Audit & Supervisory Board Members]

- 3 -

1. Compensation for Directors is determined by the Board of Directors, following proposals to the Board of Directors by the Nomination & Compensation Committee, based on the Basic Policy on Officers' Compensation, within the annual limits for the compensation approved by the General Meeting of Shareholders.
2. The system of determining compensation for Audit & Supervisory Board Members shall be separate from that for Directors. Compensation for Audit & Supervisory Board Members is determined through discussion at the Audit & Supervisory Board within the annual limits for the compensation approved by the General Meeting of Shareholders.

<4> Policies and procedures for the Board of Directors to appoint or remove top management and nominate candidates for Director and candidates for Audit & Supervisory Board Member

<>

1. Top management must have a significant track record, high capabilities and insights in the Bank's group, as well as a full understanding of the social mission and responsibilities of the banking business, and must be capable of pursuing corporate management and business operations in a highly disciplined manner, thereby contributing to the further development of the Bank's group so that the Bank will continue to be an enterprise that will grow in the future.
2. Any of the following shall disqualify top management.
3. • Having any form of relations with antisocial forces, or
   • Violations of law and/or internal regulations in the course of conducting duties and/or legal violations in association with personal matters.
4. In the event that top management reaches a certain age as specified in internal rules; in the event of fraud; in the event of the occurrence of a serious obstacle to the execution of business; in the event that the selection criteria set forth in 1. and 2. above are not met, or in the event that there is a significant lack of qualifications as top management, including cases where it is judged that the level of business execution as top management does not meet the requirements of the Bank, the top management will be released from their position.

<>

1. A candidate for Director must have a significant track record, high capabilities and insights in his or her area of expertise, as well as a full understanding of the social mission and responsibilities of the banking business, and must be capable of pursuing corporate management and business operations in a highly disciplined manner, thereby contributing to the further development of the Bank's group.
2. Any of the following shall disqualify a candidacy for Director.
3. • Having any form of relations with antisocial forces, or
   • Violations of law and/or internal regulations in the course of conducting duties and/or legal violations in association with personal matters.

(Excerpt from Article 18 of our Corporate Governance Guidelines)

<>

1. A candidate for Audit & Supervisory Board Member must have a significant track record and high capabilities in his or her area of expertise, financial, accounting and legal knowledge and insights necessary for the execution of business, as well as a full understanding of the social mission and responsibilities of the banking business, and must be capable of auditing the status of Directors' execution of duties from a fair and objective standpoint, thereby contributing to the enhancement of the soundness and transparency of corporate management.
2. Any of the following shall disqualify a candidacy for Audit & Supervisory Board Member.
3. • Having any form of relations with antisocial forces, or
   • Violations of law and/or internal regulations in the course of conducting duties and/or legal violations in association with personal matters.

(Excerpt from Article 20 of our Corporate Governance Guidelines)

<5> Description of the reasons for the Board of Directors to appoint or remove top management and nominate candidates for Director and candidates for Audit & Supervisory Board Member in accordance with the policies and procedures described in <4> above.

- 4 -

Appointments and removals by the Bank of top management are disclosed on the Bank's website and on the Timely Disclosure network (hereinafter, the "TD net").

The reasons for the Board of Directors to nominate candidates for Director and candidates for Audit & Supervisory Board Member are described in the Reference Materials for General Meeting of Shareholders and disclosed on the Bank's website. The career history of each candidate for Director and candidate for Audit & Supervisory Board Member is disclosed in the Notification of General Shareholder Meeting.

[Supplementary Principle 4-1 (1): Scope of Authority Delegated to the Management Team]

The Bank has a Board of Directors as a decision-making and supervising body for management and an Executive Committee as a structure that executes business operations based on the decisions and delegations made by the Board of Directors.

Under the Board of Directors is established the Executive Committee as a deliberative body concerned with operational implementation within the scope delegated by the Board of Directors. The Executive Committee meets to deliberate on the formulation or amendment of business plans; the acquisition and disposal of assets; credit provision-related issues; the payment of debts and expenses; credit management issues; rewards and sanctions for employees; issues related to employees' working conditions and benefits; the establishment, change and abolition of elements of the organization; and the formation, revision and elimination of rules and policies, in addition to conferring on issues to be deliberated by the Board of Directors prior to its meetings. The Executive Committee comprises Executive Officers and others as nominated by the Board of Directors.

(Excerpt from Article 14, Paragraph 4 of our Corporate Governance Guidelines)

[Principle 4-9: Independence Standards and Qualification for Independent Outside Directors] The Bank's Independence Standards for Outside Officers are as follows.

1. Is not a person with executive authority over operations of the Bank's parent company or fellow subsidiary (or has been in such position in the past, hereinafter, the same applies to each item);
2. Is not a person for which the Bank is a major business partner or a person with executive authority over such entity's operations, or a major business partner of the Bank or a person with executive authority over operations of such entity's operations;
3. Is not a consultant, an accounting professional, a legal professional or a person belonging to an organization that receives a significant amount of monetary compensation from the Bank, other than officers' compensation;
4. Is not a major shareholder of the Bank or a person with executive authority over operations of such shareholder; or
5. Is not a close relative to a person that falls under any of the above or a relative by blood or marriage within the second degree to a person with executive authority over operations of the Bank.

[Supplementary Principle 4-11 (1): Diversity and Size of the Board of Directors and Policies and Procedures for the Appointment of Directors]

The Bank makes it a policy to ensure diverse backgrounds in the areas of the expertise and experience of the Directors on the Board of Directors and to maintain an appropriate number that enables the most effective and efficient delivery of its functions (not exceeding 9 as stipulated by the Articles of Incorporation).

(Excerpt from Article 14, Paragraph 3 of our Corporate Governance Guidelines)

[Supplementary Principle 4-11 (2): Status of Concurrent Positions of Directors and Audit & Supervisory Board Members]

The status of concurrent positions of Directors and Audit & Supervisory Board Members is described and disclosed in the securities report for the fiscal year under review.

[Supplementary Principle 4-11 (3): Analysis and Evaluation of Effectiveness of the Board of Directors]

・The Bank has been conducting an evaluation of the effectiveness of the Board of Directors annually since fiscal 2015.

・Concerning the effectiveness of the Board of Directors for fiscal 2020, the Bank conducted a questionnaire for Directors and Audit & Supervisory Board Members and based on a summary of the results, discussion and evaluation occurred at the Board of Directors meetings.

The results of the evaluation are described below.

- 5 -