Shinkin International

Shinkin International July 2012 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 2011 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 2011 there were 271 shinkin banks with a total of 7,584 branches throughout Japan. • Membership stands at around 9.31 million and deposits total ¥129 trillion (approx. USD 1,549 billion) as at March 2011 - about 15% of the total deposit market in Japan. • The great earthquake and tsunami of March 2011 caused damage to some of the branches belonging to just 7 of the 271 shinkin banks: the vast majority of the shinkin network was unaffected by the tragedy. Shinkin International

Japan’s Private Financial Institutions Private Financial Institutions Other Financial Institutions Specialized Financial Institutions Commercial Banks Shinkin Banks Other Co-operative Institutions Insurance Companies etc. City, Regional and Foreign Banks Trust Banks Labour Credit Associations Credit Co-operatives Shinkin Central Bank The Rokinren Bank The Shinkumi Federation Bank Shinkin International Ltd. Shinkin International

Size of the Shinkin Banks Deposit Balances by Sector Deposit Growth by Bank Sector （From March 31,1955 to March 31, 2007） (US$ blnequivalent as at March 31, 2011) Sources: Bank of Japan, Japanese Bankers Association Number of Domestic Branches 　（as of March 31, 2011) 7,584 Sources: Japanese Bankers Association, Norinchukin Bank, National Central Society of Credit Cooperatives, National Association of Labour Banks and SCB 7,500 3,134 2,364 1,761 658 Note: For Shinkin Banks as of March 31, 2010 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 　（As of March 31, 2011） Non-performing Loan Ratio 　（As of March 31, 2011） 2007 2008 2009 2010 2011 2008 2009 2010 2011 2007 Notes: Capital adequacy requirements with flexibility measures not applied before 2008. 2010 are preliminary figures. Source: SCB Non - Consolidated Capital Adequacy Ratio by Bank Sector 　（As of March 31, 2011） Growth in Number of Shareholders （Millions, as of March 31, 2011） * Preliminary Figure Note: City Banks: BIS standard Others: Domestic standard Sources: Bank disclosure document/ Regional Banks Association of Japan/ The Second Association of Regional Banks 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 2011, the bank had assets of ¥31 tln (USD 372 bln.) • SCB’s consolidated BIS Capital Adequacy Ratio stands at 31.76% and the non-performing loans ratio is 0.36% (as at March 2011.) • SCB is the 79th largest bank in the world in terms of Tier 1 Capital strength (The Banker July 2011). Shinkin International

Shinkin – Group Structure Shinkin International Primary Issuers Investments in ¥ / € / $ Funding SHINKIN CENTRAL BANK Assets in ¥ / € / $ Total Assets: ¥31tln (US$372 bln) Offices: Domestic 14, Overseas 4 Employees: 1,125 Members: 271 Shinkin Banks Listed on: Tokyo Stock Exchange Shinkin Securities SecondaryMarket Assets Deposits in ¥ Deposits in ¥ Deposits in ¥ Deposits in ¥ Assets in ¥ Investments in ¥ Shinkin Bank A Shinkin Bank B Shinkin Bank C Shinkin Bank D Shinkin Bank (..) Deposits in ¥ Deposits in ¥ Individual Shinkin Banks ----------------------------------- Number: 271 Assets: ¥129ln Branches: 7,584 Members: 9,318,366 Lending to SME Sector & individuals Lending to SME Sector & individuals Shinkin Banks’ Customers Shinkin Banks’ Customers 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 – Business Overview Breakdown of Asset Management and Securities Held （As of March 31, 2011） Breakdown of Funding 　（As of March 31, 2011） Shinkin International

Shinkin Central Bank – Financial Soundness Capital Adequacy Ratio 　（As of September 30, 2010） Non-performing Loans Ratio 　（As of September 30, 2010） Note: NPL ratio = Total risk-monitoring loans/ Total loans Source: Financial Services Agency Note: SCB: BIS Standard City Banks: Average of 6 Banks Source: Bank Disclosure Documents Funds per Employee 　（As of September 30, 2010） (USD Millions) Expenses Ratio 　（As of September 30, 2010） Note: Ratio of expenses = Total Expenses / Average Balance of Deposits + CDs + Debentures. Source: Japanese Bankers Association Note: Total Funds = 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 (sourced both through direct marketing and in co-operation with other arrangers) • We are regulated in the UK by the Financial Services Authority. Shinkin International

Transaction Execution Record ^ Before 2010 excludes secondary *As at 17 July 2012 Shinkin International

Analysis of Deal History Total Issuance (number of deals) （As of December 31, 2011） • Shinkin International Ltd. has been successfully arranging MTNs for Japanese wholesale investors since 1996. • Until 2006 our business was dominated by structured trades - often bermudan callable - but in recent years higher spreads on vanilla credit has resulted in a fundamental shift in investor preferences. • In 2010 and 2011 we expanded our secondary bond business significantly to satisfy greater investor appetite for EUR and USD bonds and deliver the substantially higher yields achievable on most public bonds relative to private placements. Total Issuance (JPY bln equiv) 　（As of December 31, 2011） Shinkin International

Analysis of Deal History Deal History by Currency (volume) 　（As of December 31, 2011） • JPY should theoretically be our most important issuance currency since many of our investors only have domestic operations in Japan. • However since 2009 the adverse cross currency basis swap and competition from the Samurai market have restricted JPY vanilla private placement investments. • The proportion of callable business has declined substantially in recent years and in 2011 accounted for just 11% of the total amount issued (but still 29% in terms of the number of private placement transactions executed). Deal History by Termination Type (volume) （As of December 31, 2011) 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 credits, often Japanese. • Note 2011 data uses end of year ratings, meaning some downgraded 50% risk-weighted issues were 20% risk-weighted at the time of issue. Total Deals by Basel II Risk Weight* (number) （As of December 31, 2011） Total Deals by Basel II Risk Weight* (JPY bln equiv.) （As of December 31, 2011） Deals History by Risk Weight *(number of trades) （As of December 31, 2011） Total Deals by Basel II Risk Weight* (JPY bln equiv) （As of December 31, 2011） Shinkin International Note: *Basel II risk weight categorization is determined using Shinkin International’s internal assessment

Analysis of Deal History – Products Deal History by Structure (volume) 　（As of December 31, 2011） • In the early 2000s the majority of trades were callable Step-up Reverse Floaters and Power Reverse Dual Currency bonds but in 2004-06 structures became notably more diverse. • In the past five years the volume of structured issuance has declined substantially. Deal History by Structure (fees) 　（As of December 31, 2011） • Since the credit crunch higher medium term funding spreads have enabled us to arrange some larger private placement tickets and the majority of our revenue is now obtained from the arrangement of vanilla bonds (callable Step-up Reverse Floaters remain an important contributor though). Shinkin International

Analysis of Deals Executed in 2011 • JPY issues regained top spot for private placement issuance (not the case in 2010) but due to strong secondary market flows in EUR (up until August) and USD (thereafter) overall business in JPY again accounted for less than 50% of total volumes. • New issue volumes were relatively poor, reflecting both the unavailability of preferred Japanese issuers and a negative attitude towards European credit that escalated towards year-end. • Despite concerns about future accounting rule changes some investors still bought JPY Bermudan callable structured trades issued by quality credits, particularly Step-up Reverse Floaters. 2011 Issues by Structure (# of deals) 　（As of December 31, 2011） 2011 Issues 　（As of December 31, 2011） (JPY bln Equiv. Volume) Issues by Currency Issues by Call Type Shinkin International

Issuers Placed • In total Shinkin International Ltd. has arranged MTNs for about 220 different issuers since 1996. • For the majority of these issuers we provide regular financing - in 56% of cases three or more transactions have been executed and there are nine issuers benefitting from over 40 completed trades. • Although we are still adding new issuers each year, since the credit crunch investors have become more conservative about establishing limits for unfamiliar names. Issuers Placed (number) （As of December 31, 2011） Shinkin International

Issuers Placed – Geographical Distribution • Vanilla EMTN issuance for Japanese entities (generally overseas subsidiaries) accounts for the highest proportion of our executed business but overall we have arranged 2035 issues for 219 issuers located in 22 different OECD countries. • Approximately 39% of all our issues have been arranged for the core European countries of Germany, France and the Netherlands, plus the UK. • A total of 300 trades into Canada and Luxembourg executed with just 12 entities. Total Deals by Issuer Domicile* (number) （1996-2011） Total Volume by Issuer Domicile* (JPY bln. Equiv.) （1996-2011） *Location of parent if subsidiary Shinkin International

Issuers Placed – Vanilla funding * Year of first transaction. Shinkin International

Issuers Placed – Structured funding * Year of first transaction. Shinkin International

Current Investment Trends • Our wholesale investors continue to generate good JPY liquidity from domestic savings accounts, with plenty of surplus funds available for investment; most of this remains with Japanese credit. • Since late 2008the attitude of our investors towards non-Japanese credit has ebbed and flowed like a tide, driven on the one hand by negative news stories and on the other by the historically high credit spreads achievable on investments; since the beginning of 2012 we have seen renewed appetite but investors have been slow to react as spreads decline and shorter-dated maturities remain strongly preferred. • Consequently there is a build up of delayed investment with an increasing urgency to yield enhance portfolios dominated by JGB and UST government securities. • Larger investors are able to buyEUR and USD denominated debt (in addition to JPY), managing cross currency risk on either an individual trade or portfolio basis depending on market circumstances; in 2012 EUR investments have become acceptable again driven by the relatively favourable basis swap to JPY. • There have been a couple of spikes in the frequency of old callable structured notes early redemptions in 2012 and some limited demand to replace these investments exists, although achieving Y1 coupon targets on acceptable credits remains challenging. Call history per 6M period (number of structured note calls) Shinkin International

Milestones for Shinkin International • 1999: 1st appointment to a Dealer Group - Mitsubishi Motors • 2001: 1st issue for a Supranational - 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 9.7 bln) • 2005: 1000th EMTN transaction executed • 2005: A record 301 deals completed with total volume of JPY 535 bln • 2007: 1st Uridashi issue – Eksportfinans • 2007: Total of arranged transactions passes JPY 2 trillion (USD 17.9 bln) • 2009: Largest issue to date - Lloyds TSB Bank JPY 29.3 bln • 2009: 1st repackaged issue using Shinkin International’s SPV - Plasma Ltd. • 2010: 1st GBP-denominated Issue - Lloyds TSB Bank • 2010: Total of arranged transactions passes JPY 3 trillion (USD 36.7 bln) • 2011: 2000th EMTN transaction executed • 2011: 1st hybrid currency and credit-linked issue 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 A1/A+ rating. • With deposits totaling USD 1,549 billion equivalent, shinkin banks are active investors and, with assets of USD 372 billion, 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 ranked fourth as a 3rd-party provider of JPY vanilla EMTNs in 2010 (MTNi – syndicated and self-issued excluded). Shinkin International

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

Shinkin International