Shinkin International

Shinkin International August 2009 Introduction and Analysis

Contents • Shinkin Banks 3 • Japan’s Private Financial Institutions 4 • Size and Performance of the Shinkin Banks 5 • Shinkin Central Bank 7 • Shinkin International Ltd 12 • MTN Arranging Record 13 • Analysis of Deal History 14 • Analysis of Deals Executed in 2008 18 • Issuers Placed 19 • Current Investment Trends 23 • Milestones for Shinkin International 24 • Summary 25 • Contacts 26 Shinkin International

Shinkin Banks • Shinkin banks (“credit banks”) are cooperative financial institutions whose members are individuals and small/medium sized companies. • Shinkin banks (governed by Shinkin Bank Law) operate in a similar way to commercial banks but in principle restrict lending to members. • As at March 2008 there were 281 shinkin banks with a total of 7,686 branches throughout Japan. • Membership stands at around 9.28 million and deposits total ¥114 trillion (approx. US$ 1,135 billion) as at March 2008 - over 15% of the total deposit market in Japan. Shinkin International

Japan’s Private Financial Institutions Shinkin International

Size of the Shinkin Banks Deposit Growth by Bank Sector （From March 31,1955 to March 31,2007） Deposit Balances by Sector (US$bn equivalent as at March 2008) 459 times 2,496 City Banks 192 times 1,952 Regional Banks 136 times 145 times 1,135 Shinkin Banks Agricultural Cooperatives 819 Sources: Bank of Japan, Japanese Bankers Association Number of Domestic Branches 　（as of March 31,2008） Second-tier Regional Banks 554 163 Credit Cooperatives 151 Labour Credit Associations Sources: Japanese Bankers Association, Norinchukin Bank, National Central Society of Credit Cooperatives, National Association of Labour Banks and SCB Note: For regional banks, second-tier regional banks and city banks as of September 30, 2007 Sources: Japanese Bankers Association, National Central Society of Credit Cooperatives, National Association of Labour Banks and SCB Shinkin International

Performance of the Shinkin Banks Capital Adequacy Ratio of Shinkin Banks Growth in Number of Shareholders （Millions） Source: SCB Source: SCB Capital Adequacy Ratio by Bank Sector 　（As of March 31,2008） Non-performing Loan Ratio of Shinkin Banks(%) Note: City Banks –Consolidated BIS Capital Adequacy Ratio Others – Non-consolidated Capital Adequacy Ratio (domestic standard) Sources: Bank disclosure document/ Regional Banks Association of Japan/ The Second Association of Regional Banks Note: US$ figures have been derived from JPY using FX rate prevailing as at March 31 in each year Source: SCB Shinkin International

Shinkin Central Bank • Shinkin Central Bank (“SCB”) was established in 1950 to act as a central bank for all the shinkin banks in Japan but also acts as a financial institution in its own right. • The bank balances funding supply and demand among the shinkin banks and provide settlement and operational support. • SCB is one of Japan’s largest institutional investors. As at March 2008, the bank had assets of ¥28tn (USD 276bn). • SCB’s consolidated BIS Capital Adequacy Ratio stands at 15.95% and the non-performing loans ratio is 0.27% (as at March 2008). • SCB is the 94th largest bank in the world in terms of Tier 1 Capital strength (The Banker July 2008). Shinkin International

SCB Total Assets ¥28trn (US$276bn) Offices Domestic 13 Overseas 4 Employees 1,066 Members 281 Shinkin banks Shinkin Bank Shinkin Bank Shinkin Bank Shinkin Bank Shinkin Bank Shinkin Bank Number281 Assets¥120trn Branches7,686 Employees　112,362 Members9,255,468 Shinkin bank customers Shinkin bank customers Shinkin Central Bank – Group Structure Shinkin International

Shinkin Central Bank – Ratings • SCB has maintained strong and stable long-term ratings during the last decade and avoided the Japanese financial crisis of the late 90s/ early 00s: Moody’s Rating Comparison Aa2 Aa3 A1 A2 A3 Baa1 Baa2 Source: Bloomberg Shinkin International

Shinkin Central Bank –Funding and Assets Asset Management (\ Billion) 25,115 100.0% Fund Raising 18,633 74.2% Deposits Negotiable Deposits 81 0.3% 4,460 Debentures 17.8% 1,941 7.7% Borrowed Money Securities Held As at 31/3/08 (\ Billion) 25,669 100.0% Asset Management 2,432 9.5% Short-Term Markets 5,853 22.8% Loans & Bills Discounted Securities 16,765 65.3% 619 2.4% Cash in Trust & Others As at 31/3/08 Shinkin International

Shinkin Central Bank – Financial Soundness Capital Adequacy Ratio 　（As of March 31,2008） Non-performing Loans Ratio 　（As of September 30,2007） Note: SCB – City Banks – Average of financial holdings Source: Bank Disclosure Documents Note: Ratio = Total risk-monitored loans/ Total loans Source: Financial Services Agency Funds per Employee 　（As of September 30,2007） (US$ Millions) Expenses Ratio 　（As of September 30,2007） Note: Total Funds = Deposits + CDs + Debentures Source: Japanese Bankers Association Note: Ratio = Total Expenses / Average Balance of Deposits + CDs + Debentures Source: Japanese Bankers Association Shinkin International

Shinkin International Ltd • Shinkin International Ltd (a wholly owned subsidiary of Shinkin Central Bank) was established in London in 1990 as an overseas base for securities business. • The main goals of the company are to arrange and place private EMTN draw-downs, to trade secondary eurobonds and to provide broad investment opportunities. • These activities are driven by the combined requirements of • Shinkin Central Bank • individual banks among the extensive shinkin network (approximately 80% of shinkin banks have bought EMTNs) • other investors in Japan and elsewhere. • We are regulated in the UK by the Financial Services Authority. Shinkin International

MTN Arranging Record * as at 30/7/09 Shinkin International

Analysis of Deal History • Shinkin International Limited has been successfully arranging MTNs for Japanese wholesale investors since 1996. • Deal flows built up to a peak in 2002 and the early part of 2003 but a drop in the number of deals being called has made it more difficult to sell structured notes since then. • Significantly higher deal numbers and volumes achieved in 3 of the past 4 years due to bullet transactions which are now mostly vanilla. Shinkin International

Analysis of Deal History • JPY has always been our most important issuance currency since many of our investors only have domestic operations in Japan. • Extended marketing coverage in 2004 resulted in more USD flow but activity now limited by investor funding constraints. • EUR deals executed in 2005 due to some exceptional bullet investments. • Proportion of callable business has declined since 2003 and last year accounted for just 14% of the total amount issued (but still 40% in terms of the number of transactions executed). Shinkin International

Analysis of Deal History – Risk Weight • Historically a majority of issues have been for 20% risk-weighted entities, but since 2006 we have executed a significantly higher proportion of trades with 50% and 100% risk-weighted Japanese entities. • Until Q4 2008 0% risk-weighted issuance mostly comprised structured callable deals -since then vanilla government guaranteed bank debt has been more important. *Basel I methodology until 2006, Basel II thereafter *Basel I methodology until 2006, Basel II thereafter Shinkin International

Analysis of Deal History – Products • In the early 2000s the majority of trades were callable Step-Up Reverse Floaters and Power Reverse Dual Currency bonds but in 2004-7 structures became notably more diverse. • In the past two years volumes have been dominated by vanilla flows. • PRDC and Nikkei-linked issues are normally for small amounts but until Q4 2008 still generated a significant proportion of fee income. • Although many Step-Up Reverse Floaters are now getting called, in the current climate there is little expectation of an early return to structured investment. Shinkin International

Analysis of Deals Executed in 2008 • A successful year in difficult circumstances with business dominated by relatively large JPY-denominated vanilla issues. • Structured issuance remained an important component of deal flow until September with Reverse Dual Currency structures most favoured. • Little demand for JPY Step-Up Reverse Floaters despite increase in call ratio towards the end of the year as interest rates fell. • Non-JPY investments prevented by higher wholesale funding costs. • More buyback requests received than normal but only 5 issues were fully or partly redeemed. Shinkin International

Issuers Placed • In total Shinkin International has arranged MTNs for 204 different issuers since 1996. • For the majority of these issuers we provide regular financing - in 58% of cases 3 or more transactions have been executed and there are 9 issuers benefitting from over 40 completed trades. • Since 1999 we have added an average of 19 new issuers every year. Shinkin International

Issuers Placed – Geographical Distribution • 50% or 100% risk-weighted short-dated vanilla issuance for Japanese entities currently accounts for the majority of our executed business but we are still seeing demand for non-Japanese credits. • Approximately 42% of all our issues have been arranged for the core European countries of Germany, France and the Netherlands plus the UK. • A total of 291 trades into Canada and Luxembourg executed with only 12 entities. *Location of parent if subsidiary Shinkin International

Issuers Placed – Vanilla bonds * Year of first transaction Shinkin International

Note: for some issuers we have arranged both vanilla and structured notes but they are only shown in the relevant list for the first transaction. Issuers Placed – Structured Notes * Year of first transaction Shinkin International

Current Investment Trends • Our wholesale investors have maintained good JPY liquidity from domestic savings accounts throughout the credit crunch but have been very selective about making EMTN investments. • Up until 9/7/09 demand concentrated on vanilla issues by government guaranteed banks, government related AAA issuers and Japanese credits (only 3% of trades were callable structures) – these included several large tickets that boosted average deal size. • But, following the sharp tightening of credit spreads for top-quality credits, investors are beginning to execute structured deals again (inverse floaters and reverse dual currency in particular). • Although there are still difficulties in executing underlying derivatives we believe this trend will continue – many bonds called in H1 2009 have not yet been replaced by investors. • Overall bond turnover at Shinkin Banks has recovered from the depressed levels experienced in 2006-7 (see graphs). JPY100 Million Source: Japan Securities Dealers Association Shinkin International

Milestones for Shinkin International • 1996: 1st MTN Issue - Nationwide Building Society • 1999: 1st Issue for an Agency - Export Finance and Insurance Corp • 1999: 1st Appointment to a Dealer Group - Mitsubishi Motors • 2001: 1st Issue for a Supra-national - International Finance Corporation • 2002: 1st Issue for a Sovereign - Republic of Austria • 2003: 1st Nikkei-Linked Issue • 2004: Total of arranged transactions passes JPY 1 trillion (USD 9.1bn) • 2005: 1000th EMTN transaction executed • 2005: A record 301 deals completed with total volume of JPY 535bn • 2007: 1st Uridashi Issue - Eksportfinans • 2009: Largest issue to date – Lloyds TSB JPY 29.3bn Shinkin International

Summary • Shinkin is a co-operative financial network of local banks located throughout Japan servicing individuals and small/ medium sized businesses. • Shinkin Central Bank acts as a central bank for all the shinkin banks and is one of Japan’s strongest banks, reflected by its Aa2/A+ rating. • With deposits totaling USD 1,135 billion equivalent, Shinkin banks are active investors and, with assets of JPY 28 trillion, SCB is also one of Japan’s largest institutional investors. • Shinkin International’s relationships with SCB and the extensive shinkin bank network provides natural distribution for EMTN product. • Shinkin International ranks 6rd as a provider of JPY vanilla EMTNs in Q1 2009 (MTNi). Shinkin International

Contacts Shinkin International Ltd. 4th Floor, River Plate House, 7-11 Finsbury Circus, London EC2M 7YA Managing Director Hiroyuki Toda +44 (0)20 7562 0501 Head of Capital Markets Takuya Sakamoto +44 (0)20 7374 4633 Associate Director, Origination David Scott +44 (0)20 7374 4633 Shinkin International

Shinkin International