Aozora Bank : (Note) Corrections have been made to the “Integrated Report -Annual Report- 2023.”

Integrated Report

2023-Annual Report-

April 1, 2022 - March 31, 2023

Our History of

Taking on Challenges

Aozora History

From 1957

Stage 1 Taking on Challenges: Aozora Bank's Origins

Established as Nippon Fudosan Bank in 1957, with ambitions to tackle underserved markets -  Contributed to industrial development during Japan's high economic growth period by providing

loans to small and medium-sized enterprises and commercial real estate loans

Expanded the network of regional financial institutions

- Important partner stakeholders developed through the issuance of bank debentures

Focus on overseas markets and new financial technologies

-  Proactive business development overseas and pioneering initiatives in derivatives and securitized products

From 2001

Stage 2 Taking on Challenges: Establishing New Business Models

Relaunched as Aozora Bank in 2001 following the asset price bubble collapse, nationalization, and subsequent re-privatization in 2000

Efforts to address new financial fields, both domestically and overseas - Initiatives in structured finance

- Strove to enhance risk management while redeveloping overseas business

Accelerated diversification of human resources

-  Proactively recruiting and promoting overseas talent and mid-career professionals leading to integration of diverse human resources

From 2015

Stage 3 Taking on Challenges: Evolving into a Specialized Financial Group That Grows with Its Customers through a Unique Business Model

Expanded new business areas following the full repayment of public funds

-  Established GMO Aozora Net Bank, Ltd. as an Internet bank and commenced financial services for SMEs and small businesses

-  Expanded financial services by establishing Aozora Corporate Investment Co., Ltd. and other subsidiaries

- Launched the BANK™ app to support new customer needs for Internet banking

Established the foundation for a unique strategic investments business model

-  Applied corporate valuation analysis and financing technologies developed through structured finance

- A business model ranging from debt to equity that evolves alongside customers' challenges

Accelerated business development in fast-growing Asia

- Invested in Orient Commercial Joint Stock Bank, a commercial bank based in Vietnam

Annual Report 2023

1

A Highly Specialized

Financial Group

That Endures through the Times

Taking on Challenges: Establishing New Business Models

New Initiatives to Provide Buyout Finance, Business Recovery Finance and Real Estate Finance

We relaunched as Aozora Bank on January 4, 2001, following nationalization and subsequent re-privatization in 2000.

At the time, we remained firm in our belief that developing new fields was our reason for existence and our means of contributing to society. In addition to the employees with experience in the process of bringing onboard new financial technologies domestically and internationally, new colleagues joined Aozora Bank. This diverse mix of people worked together to develop Aozora's business.

The Aozora elephant mascot

Taking on Challenges: Aozora Bank's Origins

Aozora Bank was founded on April 1, 1957, as Nippon Fudosan Bank. At the time, there were already so many banks, creating highly competitive and overcrowded markets in some regions. Despite these conditions, there remained a considerable number of customers who were being underserved.

Since inception, the main purpose of our business was to provide long-term financing to support the development of SMEs and to offer commercial real estate loans, both of which were underserved markets at the time. The Bank was expected to expand the availability of

We also relaunched our business in global markets, while emphasizing risk management through diversified investment. Buyout finance, which had already evolved substantially in the U.S. where the M&A market was well-developed, was one of the business areas where there were still only a few transactions in Japan at the time.

We also strove to shift towards a credit system focused on cash flow lending, in addition to traditional lending based on collateral values, in fields such as business recovery finance for companies seeking to rebuild their business, and real estate non-recourse finance, which analyzes the revenue generated by the real estate alone. We are proud that we continue to play a pivotal role as a major player in these types of structured finance markets.

character ("Ao-zoora") makes its debut

financing to customers, which was critical to Japan's post-war economic expansion.

Kiyoji Hoshino, then-president of Nippon Fudosan Bank, delivered the following remarks at a ceremony held when the Bank business was formed.

"Nippon Fudosan Bank will develop new fields that the public believes to be the most difficult. As the only real estate bank in Japan, we aim to demonstrate our authority and unique capabilities to contribute to Japan's industrial and business communities."

As a long-term credit bank, we have developed our network with regional financial institutions since the inception of our business by issuing bank debentures. To this day, regional financial institutions remain important stakeholders for Aozora, with whom we conduct a broad range of businesses.

Aozora has developed a new customer base while expanding business in new areas. We have actively entered overseas markets and have been a leader in incorporating new financial technologies from abroad, such as derivatives and securitized products, which have now become commonplace. These efforts have allowed us to help our customers solve the issues that they face.

Our approach of taking on challenges in new areas, and our efforts to develop enterprises, are still being continued nearly 70 years after our founding.

In 1977, we changed our name from Nippon Fudosan Bank, Limited to Nippon Credit Bank, Ltd. The importance of the long-term credit bank system, which played the role of providing long-term financing, began to be questioned as Japan's high economic growth period ended, and companies' demand for capital investment financing was no longer as strong as before. In the 1990s, as Japan was facing the collapse of its bubble economy, the Bank failed to take the proper steps to control risk and reform its operation in response to a changing environment. As a result, non-performing loan issues seriously weakened its financial strength.

On December 13, 1998, the Bank failed and was put under special public management (nationalization), and regrettably, caused considerable difficulty for numerous stakeholders, including shareholders.

Relocation to the former Head Office (Kudankita, Chiyoda-ku)

Reception desk (in 1966)

Former Nippon Credit Bank, Ltd. Head Office

Taking on Challenges: Evolving into a Specialized Financial Group That Grows with Its Customers through a Unique Business Model

On June 29, 2015, Aozora made a full repayment of public funds received in conjunction with nationalization. Subsequently, Aozora has been pursuing the expansion of new business areas in accordance with the needs of society.

GMO Aozora Net Bank, Ltd. (GANB), an Internet bank, offers even more highly convenient services to SMEs and small business customers.

Aozora Bank has also enhanced its Internet banking services and introduced the new BANK™ app. The transactions with new retail customers

have grown through the BANK™ app, and weTown Hall Meeting strive to make asset management even more convenient for our customers through this

app.

We focused on providing investment and financing ranging from debt to equity by applying the corporate valuation analysis and financing technologies we have developed through structured finance. In 2021, we launched Aozora's Strategic Investments Business, a business model that supports customers who are addressing new challenges. Under this business model, the Aozora Group, in an integrated manner, provides financial services that follow the corporate growth cycle. The key areas of Aozora's Strategic Investments Business have been included in "Aozora's Sustainability Targets" and we are implementing a wide range of measures to realize a sustainable society.

We aim to develop this business model into an ecosystem that contributes to society- one that puts a premium on our relationships and networks with our customers and business partners and grows together with them.

The Aozora Group will continue to take on challenges in order to remain a specialized financial group that benefits all of our stakeholders.

2

Annual Report 2023

Annual Report 2023

3

Management Philosophy

Aozora Mission

Contribute to the development of society

through the creation of new value-added financial services

Aozora Vision

CONTENTS

	Aozora Group Value Creation		Support Structure for Value Creation
1	Our History of Taking on Challenges	88	Corporate Governance
6	CEO Message	102	Risk Governance
10	New Mid-term Plan "Aozora 2025"	104	Compliance
16	Value Creation Process	106	Cybersecurity
18	Key Sustainability Issues (ESG Materiality)	107	Operations (Administration)
20	Aozora's Sustainability Targets	108	Non-financial Information Index

22 CFO Message

1. Financial and Non-financial Highlights

1. Messages from Outside Directors

1. Stakeholder Communication

Adapt to a rapidly changing world while remaining a trusted,

valued and specialized financial service provider

Aozora's Key Priorities

1. Provide specialized and value-added financial services
2. Move quickly, while responding patiently and politely
3. Prioritize teamwork and provide a more comfortable working environment
4. Respect one's colleagues and support professional growth of all team members
5. Learn from the past while adapting to and focusing on the future
6. Take smart risks in new areas based upon our skills and experience
7. Actively contribute to the sustainable growth of society

Cover Design Concept

The cover design uses the corporate color blue as its base color and represents the five "ecosystems" that form the core of the new Mid-term Plan "Aozora 2025."

Value Creation Strategy

1. Aozora Network
2. Business Promotion Structure
3. Why Equity Investments Now?

36 Value Creation from the Environmental Finance Team's Perspective

38 Business Groups

60 Sustainability Promotion

64 Response to Climate Change

70 Initiatives to Contribute to Society

1. Promotion of Digital Transformation (DX)
2. GMO Aozora Net Bank Initiatives
3. Human Resources Strategy

Editorial Policy

The purpose of this document is to provide our stakeholders with an overview of the Aozora Group and information regarding its value-creation initiatives. This document provides financial and non-financial information, taking into consideration the International Integrated Reporting Framework published by the International Integrated Reporting Council as well as the Ministry of Economy, Trade, and Industry's "Guidance for Collaborative Value Creation."

This document (Main Section and Financial and Corporate Data Section) is an Annual Report (document explaining the Bank's business operations and financial condition) created in compliance with Article 21 of the Banking Act.

This document has been prepared in an effort to help our customers, shareholders, and all other stakeholders understand the driving force of the Aozora Group's value creation.

Forward-looking Statements

This document contains forward-looking statements regarding the Bank's financial condition and results of operations. These forward-looking statements, which include the Bank's views and assumptions with respect to future events, involve certain risks and uncertainties. Actual results may differ from forecasts due to changes in economic conditions and other factors.

4

Annual Report 2023

Annual Report 2023

5

Aozora Group Value Creation

Value Creation Strategy

Support Structure for Value Creation

Aozora Group Value Creation

CEO Message

Kei Tanikawa

Representative Director and President

Chief Executive Officer (CEO)

To Our Stakeholders

First and foremost, I'd like to extend my deep appreciation to all of Aozora's stakeholders, including our shareholders, customers, and all of our staff members, for their extensive and continuing support of the Aozora Group.

I hope that you find this year's integrated report to be helpful in gaining a better understanding of the driving force behind Aozora Group's Value Creation, our goals, and the thoughts and aspirations of our people working at the Aozora Group.

In April 2023, we launched our new Mid-term Plan "Aozora 2025" (FY2023-25). The keywords of this plan are Fostering, Change and Recovery.

The next three years are expected to be a period of historic change in our environment. I'm convinced that now is the time for Aozora to fulfill our management philosophy of "Contribute to the development of society through the creation of new value-added financial services," by focusing on our strengths in the "Fostering" of customers' businesses and assets, providing support for "Change" in customers' businesses, and assisting the "Recovery" of customers' businesses.

"Aozora 2022" in Review

The foundation of our prior Mid-term Plan "Aozora 2022" was a management philosophy consisting of Aozora's mission, vision and key priorities, which we created in 2020 to more clearly define our position and core purpose. During the three-year period of "Aozora 2022," we built on this foundation and worked to create new added value through cross-divisionalco-working across the Aozora Group. Customer business related to our Strategic Investments Business, where we assume risks to foster newly created businesses and assist with the restructuring and recovery of businesses seeking to change, has grown steadily. Progress on our newly established Aozora's Sustainability Targets has also steadily exceeded the plan.

Due to these efforts, our results exceeded our initial plan in FY2020 and FY2021. However, in FY2022, the final year of the previous Mid-term Plan, we recorded disappointing results that fell short of the initial plan. This was largely due to the restructuring of our securities portfolio, which was affected by rising interest rates in the U.S., and a review of our retail business which is undergoing structural transformation. As CEO, I take quite seriously the fact that our efforts fell short, and we were unable to live up to the trust of our stakeholders. Consequently, we made the decision not to pay performance-based remuneration to Aozora's three representative directors, including myself, because we were unable to achieve both the earnings forecasts and key performance indicators (KPIs) that we had set.

In FY2023, the first year of our new Mid-term Plan "Aozora 2025," we intend to recover from our performance in FY2022 and target net revenue of 86.0 billion yen and profit attributable to owners of parent of 24.0 billion yen by establishing a solid business foundation for Aozora's Strategic Investments Business and growing our customer business. We also aim to deliver steady dividend payments to our shareholders by meeting our earnings targets.

I invite you to review the CFO Message in this report for a more detailed discussion of our FY2022 financial results and FY2023 plan.

As we had expected, we have seen significant changes over the past three years, including digitalization, expansion in virtual domains, and changes in how people communicate. We overcame an organization with many silos and rigid personnel assignments through determined efforts to encourage teamwork across divisions. Through these efforts, we have made strides toward creating a sustainable organization that will foster the growth of the entire Group.

We foresee even more significant changes in the environment over the next three years. The environmental changes and risks we anticipate in FY2023 are summarized in this year's annual report. We are committed to assuming our unique role in making this period of historic change a

period of growth that will lead to the next stage for our stakeholders and the Aozora Group.

Value Creation in "Aozora 2025"

Under the new Mid-term Plan "Aozora 2025," we will implement five priority initiatives: Aozora's Strategic Investments Business, Aozora's Platform Business, Investments in Human Capital, Promoting Digital Transformation (DX), and Promoting Aozora Sustainability.

By implementing these initiatives, we intend to achieve a higher level of capital efficiency, asset efficiency, and productivity, while enhancing our financial strength, which will lead to our sustainable growth and stable dividends.

In FY2025, the final year of the Mid-term Plan, we are targeting net revenue of 112.0 billion yen and profit attributable to owners of parent of 37.0 billion yen. We have established new key performance indicators (KPIs), which are ROE of 8%, a capital adequacy ratio of 9% or higher, business-related profit per employee of 20.0 million yen and business-related profit RORA of 1.3%. We are further targeting ROE of 10% over the medium to long term.

For our FY2025 dividend forecast, we expect a full-year dividend of 158 yen per share based on a dividend payout ratio of 50%, on the assumption that we achieve our targeted earnings levels. This also means that we aim to increase dividends from FY2022's dividend of 154 yen per share.

1. Aozora's Strategic Investments Business

The keywords of "Aozora 2025" are Fostering, Change and Recovery. These simple words are intended to convey a clear message to our stakeholders about Aozora's Strategic Investments Business, which involves engagement activities aligned with each customer's stage of growth.

In the three phases of Fostering, Change and Recovery, we will create the following five ecosystems: support for startups, buyout finance, environmental finance, commercial real estate, and support for business recovery. Our goal for these ecosystems is to drive the collective growth of customers, the Aozora Group and our partner companies.

Through in-depth conversations with our customers, we will strive to understand the nature of their businesses and assets, identify and exchange issues, and combine all of the Aozora Group's functions and partner companies' business capabilities, in order to support customers as they address new challenges.

2. Aozora's Platform Business

Aozora's Platform Business provides a broad range of services across business groups to customers including retail customers and owners of small and medium-sized businesses, as well as regional financial institutions. For our retail customers, we will provide a broad range of services in

6

Annual Report 2023

Annual Report 2023

7