Kyoto Financial : Integrated Report 2025 (April 2024-March 2025)

Integrated Report

2025

Disclosure Magazine

Published October 2025

Publisher: Corporate Planning Division, Kyoto Financial Group, Inc.

700, Yakushimae-cho, Karasuma-dori, Matsubara-Agaru, Shimogyo-ku, Kyoto, 600-8416 Japan Phone: +81-75-361-2292

https://www.kyoto-fg.co.jp/en/

Introduction

Management Principle

Structure of the Principle

Management Principle, Management Policies, and Action Guidelines of the Kyoto Financial Group

Trust of the community, customers, and employees We provide high-quality, innovative and comprehensive services consistently

Trust of society and the market We strive to enhance corporate value through responsible corporate activities

Kyoto Financial Group (Kyoto FG) has inherited the principles and policies of the Bank of Kyoto, and to ensure they are put into practice, we have newly established action guidelines for the Group on the occasion of the establishment. We will continue to contribute to the greater prosperity of the community and the development of local industries by leveraging the customer base, trust, and credibility that the Group has built over its history to shift in a better direction. In addition, we will position sustainability management as "practice of our management principle at an even higher level" and implement to help create a sustainable society and improve our corporate value.

Sustainability Management

Creation of a sustainable society and improvement of corporate value

• Meet stakeholder expectations sustainably over the long term

• Improve corporate value sustainably over the long term

Management Policy

Action Guidelines

Face everything with sincerity We will face everything with sincerity and continue to be a trusted partner

On the Occasion of the Publication of the Integrated Report 2025

The purpose of this publication is to explain to our stakeholders how far we have come, what gaps we recognize, and how we will fill them, in addition to what we are working on, how we are working on it, and what our efforts will bring, in order to realize our management principle and become "a comprehensive solutions provider that drives community growth and creates the future together," which is our long-term vision.

In addition to financial information, this report explains non-financial information such as management policies and strategies, while also including the history and features, with reference to the International Integrated Reporting Framework, which was suggested by the IFRS, and the Ministry of Economy, Trade and Industry's (METI) Guidance for Collaborative Value Creation.

This report contains forward-looking statements regarding the Group's performance, including forecasts and plans. These statements are based on information available at the time this report was prepared and on projections and certain assumptions that will affect future business performance, and are not guarantees of the Group's future performance and involve various risks and uncertainties.

It also serves as the disclosure document (explanatory document about the business and financial condition of the Bank) in accordance with Article 21 and Article 52-29 of the Banking Act. Please refer to the documents section (in Japanese only) on the Company's website when using it as a disclosure document.

Please also visit our website

https://www.kyoto-fg.co.jp/en/

High aspirations

We will meet your expectations on the strength of each individual's high aspirations and ability to make quick decisions

Integrated Report 2025 2

Take on the challenge to reform We will see social change as an opportunity for reform that connects to the future, and enjoy the challenge

CONTENTS

1 Introduction

3 Table of Contents

5 Message from Our Leadership

CHAPTER 1

About the Kyoto Financial Group

- Past, present, and future

CHAPTER 3

Foundation for Growth Strategies

- How to support the growth strategy

CHAPTER 5

Foundation That Supports Value Creation

- Foundation that supports the company's significance

13 Financial and Capital Strategies

19 Financial and Non-financial Highlights 23 History and Growth Model - The Group's Strengths

25 Value Creation Stories

27 Current Status of External Environment

29 Value Creation Sources

31 Materiality

33 Total Group Strength

39 Outside Directors Roundtable

65 Human Resource Strategy

77 DX/IT Strategy

95 Corporate Governance

103 List of Directors

105 Ensuring Compliance and Risk Management

113 Data Collection

CHAPTER 2

Growth Strategies to Enhance Corporate Value

- How to increase economic value

CHAPTER 4

Practicing Sustainability Management

- How to increase social value

45 Strategic Targets for Further Growth

46 Strengthening the Deposit and Loan Business

51 Expansion of Integrated Solution Functions

59 Discovering and Fostering the Next Generation of Growth Companies

83 Sustainability Management

85

Climate Change Initiatives (Disclosure Based on the TCFD Recommendations)

91 Respect for Human Rights

About the Logo

Profile

Group Companies As of July 1, 2025

Dry landscape gardens (karesansui) are a familiar sight in Kyoto. The design was inspired by the ripple patterns represented in the sand pattern of a karesansui. The three ripples forming the logo represent "our customers," "the local community," and "our shareholders." Further, the center of the ripples represents the Group's executives and employees who are each a single drop of water, who together create a positive impact for our stakeholders.

Even if the influence of each individual is small, we promise to become a group that creates new value for the world as a chain reaction that spreads across and connects us with those around us.

Name

Kyoto Financial Group, Inc.

Location

700, Yakushimae-cho, Karasuma-dori, Matsubara-Agaru, Shimogyo-ku, Kyoto, Japan

Establishment

October 2023

Stock Exchange Listing

Tokyo Stock Exchange Prime Market (Securities code: 5844)

The Bank of Kyoto, Ltd. (Banking)

Karasuma Shoji Co., Ltd.*1 (E-commerce mall management) Kyoto Credit Service Co., Ltd. (Credit card services)

Kyogin Card Service Co., Ltd. (Credit card services) Kyogin Lease Co., Ltd. (Leasing)

Kyoto Soken Consulting Co., Ltd. (Consulting, economic surveys, and research services) Kyogin Securities Co., Ltd. (Financial product trading)

Kyoto Capital Partners Co., Ltd. (Investments) Kyoto Turnaround Servicer Co., Ltd. (Servicer) Sekisui Leasing Co., Ltd. (Leasing)

Kyoto M&A Advisory Co., Ltd. (M&A support business) Kyoto Guaranty Service Co., Ltd.*2 (Credit guarantees)

Sky Ocean Asset Management Co., Ltd.*3 (Investment management)

*1 Renamed to Cotoyori Co., Ltd. in October 2025.

*2 Consolidated subsidiary of the Bank of Kyoto *3 Equity-method affiliate of the Bank of Kyoto

Message from Our Leadership

Kyoto Financial Group will improve its corporate value as a regional financial institution by leveraging its advantages as a bank holding company and strengthening its problem-solving capabilities to lead the region to growth.

Representative Director and President

My Starting Point - Nishijin, Kyoto, now and then

The Nishijin area, where I was born and raised, is the birthplace of Nishijin-ori silk fabric and is a center of the textile industry.

The name Nishijin comes from the fact that the western army set up camp there during the Onin War, which began in 1467. When I was born, the textile industry was still thriving in Nishijin, with the sound of looms echoing throughout what was called an "industrial area without chimneys," a bustling area where many people gathered.

As time has passed, Nishijin has lost its former glory along with the decline of the textile industry, and faces various challenges, such as the aging of the local population. When local businesses lose vitality, the local economy eventually stagnates, and the lives of residents are negatively impacted. One of Kyoto's economic indicators that I am

particularly interested in is the number of closed and dissolved businesses, which may be four to five times the number of bankruptcies. The reality of so many businesses closing and dissolving each year breaks my heart, as it reminds me of the Nishijin textile industry.

The mission of a regional financial institution is to help solve various local issues and lead the region toward growth. The starting point and core of this mission is support for local businesses. Companies generally have a lifecycle, and there are issues and needs faced at each of the stages of start-up, growth, stability, and maturity. At Kyoto FG, we are committed to the Maximization of Lifetime Value that we provide to our customers by resolving their issues at each stage of their lifecycle through our long-lasting relationships with our customers.

Message from Our Leadership

Aiming for ROE of 8% or More - Setting of New Strategic Targets (announced in November 2024)

Achievements of Regional Future Co-Creation Project

We have set ROE of 8% or more, which is the same level as our assumed cost of equity, as an indicator we are aiming for in our New Strategic Targets, and have set ROE of 5% and ¥60 billion profit attributable to owners of the parent as interim targets in the 2nd Medium-Term Management Plan (planned from April 2026 to March 2029). The three pillars of this are identifying and fostering the next generation of growth companies with a focus on venture investments, strengthening the deposit and loan business in a world with positive interest rates, and accelerating the solving of regional issues through expansion of

integrated solution functions. At the same time, we announced a Plan for the Reduction of Strategic Equity Holdings (market value of ¥100 billion or more) and decided to accelerate the reduction compared to the previous plan.

Our ROE has slowly been increasing toward 2 to 3%, but we will significantly increase that growth rate. The specifics of how we will reach the new strategic targets (5% and ¥60 billion) will be included in the 2nd Medium-Term Management Plan (expected in March 2026), after analysis and verification based on the current situation and other factors.

Kyoto Financial Group's Potential and Competitive Advantage

- Expanding branch network in the Kansai mega-region × Diverse solution functions

ROE (net asset basis) / Profit attributable to owners of the parent

1st Medium-Term Management Plan

(October 2023 - March 2026)

2nd Medium-Term Management Plan

(April 2026 - March 2029)

Further reinforced cooperation among group companies, upon the transition to a holding company in October 2023,

[New Strategic Targets]

5.0%

¥60.0 billion

To 8.0% or more

Regional banks conduct business deeply rooted in a particular region, so they are susceptible to the economic conditions and industrial structures of the underlying market. Banks with a high market share in a particular region tend to also have a risk of credit concentration in specific industries.

the Bank of Kyoto's specialized headquarters team as an independent Group company, and by supplementing missing functions through M&A. The Group's ability to provide diverse solution functions is already the source of our competitive advantage, and we intend to further enhance our competitive advantage and make it our

Banking

Guaranty services

Securities

Turnaround

Debt recovery

Kyoto Bank of Kyoto Guaranty

Service

Kyogin Securities

E-commerce mall

Kyoto Turnaround Servicer

Karasuma Shoji

Sekisui Leasing

Kyoto Credit Service

Leasing

Kyogin Lease

Kyoto Capital Partners

Kyogin Cards

Card Service

Kyoto Soken Kyoto M&A Consulting Advisory

Capital Consulting

Think tank

M&A

and exceeded the targets of the 1st Medium-Term Management Plan

Significantly increased growth rate

Through the Bank of Kyoto's strategy for expanding geographic coverage, our core market is centered upon Kyoto, along with Osaka,

unshakable core competence by leveraging synergies in the future.

2.9%

3.2%

(Previous targets) [ROE (net asset basis)]

3.0%

Shiga, Nara, and Hyogo prefectures, with locations also established in

2.6%

¥27.2 billion

Results

¥31.5 billion

¥36.5 billion

¥30.0 billion

Plan

[Profit attributable to owners of the parent]

Aichi and Tokyo. The aim of the strategy is to diversify the risk of credit concentration in specific industries, while adding large markets with room for growth to our foundations.

The Kansai region is one of Japan's mega-regions, accounting for about 15% of Japan's total gross domestic product and population. With three core cities (Kyoto, Osaka, and Kobe) with populations

exceeding 1 million, it is one of the largest economic markets in

Combining Group Functions to Address Growth of the Local Economy

Japan. While innovation has historically flourished in the region in research and production centers for cutting-edge industries and

The local community is facing a variety of challenges, including a declining and aging population, and our role is to help solve these issues and lead the community to growth. Peter Drucker taught that we cannot predict the future, but if we observe the "future that has already happened," the future that it will bring becomes visible. The future is unknowable, but some factors, such as demographic and industrial structures, and other markets, can predict the future to some extent. Therefore, it is important to consider what the "future that has already happened," and to define matters to be addressed in the medium to long term.

Incorporating this perspective, we have once again identified our materiality upon the establishment of the Kyoto FG.

We promote sustainability management in order to meet the expectations of our stakeholders by enhancing both economic and social value, thereby increasing our corporate value. In order to implement this sustainability management at an even higher level, we have identified six materiality items: environmental preservation; falling birthrate and aging population; diversity,

equity, and inclusion; well-being; growth of the local economy; and a secure future for the community.

All of these are important and cannot be ranked, but my top priority is the growth of the local economy. Through the establishment of Kyoto FG, I have become even more strongly motivated to provide greater support to local companies facing serious business challenges by mobilizing the various functions of the group companies to provide consulting services and by demonstrating our financial intermediary function through proactive risk-taking. As a symbol of this, we started the Regional Future Co-Creation Project in April 2024. This project targets businesses that have history, tradition, technology, etc., or that are representative of local industry, and is being undertaken by bringing together the Group's functions. Although this is a project that we sought to engage in from a long-term perspective, after one year, I have already seen a response beyond my expectations. I hope to further grow this project by getting as many employees as possible involved in it moving forward.

universities, it is also rich in historical and cultural heritage, including World Heritage sites, where the natural environment and the metropolitan area coexist. I expect that the Expo 2025 Osaka, Kansai, Japan will attract further global attention, and the region will continue to develop as a driving force in Japan.

Our potential is based on the geographical advantage we have in this rich market. The Bank of Kyoto has built an extensive branch network in Kyoto and the Kansai region and has spent many years cultivating relationships with customers, and continues to welcome new customers.

The source of our competitive advantage is our specialized know-how and advanced functions that enable us to accurately understand and solve our customers' increasingly diverse and complex issues. Over the years, we have strengthened our ability to respond to increasingly diverse issues, not only in the traditional financial sector, but also in non-financial sectors. In order to further strengthen and demonstrate our capabilities, we are expanding our business domains as a group and strengthening and evolving the Group's structure by spinning off

In July 2025, Kyoto M&A Advisory was newly established as an independent Group company with a specialized headquarters team that is responsible for the Bank of Kyoto's M&A support business. The Bank of Kyoto was one of the first regional banks to launch M&A operations in the 2000s and has accumulated a high level of know-