Shinkin International

Shinkin International June 2008 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 2006 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 2007 there were 287 shinkin banks with a total of 7,734 branches throughout Japan. • Membership stands at around 9.26 million and deposits total ¥111 trillion (approx. US$ 943 billion) as at March 2007 - over 10% 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$ equivalent as at March 2007) 459 times 2,079 City Banks 192 times 1,638 Regional Banks 136 times 145 times 943 Shinkin Banks Agricultural Cooperatives 679 Sources: Bank of Japan, Japanese Bankers Association Number of Domestic Branches 　（as of March 31,2007） Second-tier Regional Banks 462 136 Credit Cooperatives 125 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, 2006 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 31,2007） Net Income of Shinkin Banks （US$ Billion） 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 2007, the bank had assets of ¥26tn (USD 221bn). • SCB’s consolidated BIS Capital Adequacy Ratio stands at 20.06% and the non-performing loans ratio is 0.24% (as at March 2007). • SCB is the 96th largest bank in the world in terms of Tier 1 Capital strength (The Banker July 2007). Shinkin International

SCB Total Assets ¥26trn (US$221bn) Offices Domestic 13 Overseas 4 Employees 1,065 Members 287 Shinkin banks Shinkin Bank Shinkin Bank Shinkin Bank Shinkin Bank Shinkin Bank Shinkin Bank Number287 Assets¥120trn Branches7,734 Employees　112,362 Members9,255,468 Shinkin bank customers Shinkin bank customers Shinkin Central Bank – Group Structure Shinkin International

Shinkin Central Bank – Ratings NOTES: (1) SCB’s Moody’s long-term rating was raised from A1 to Aa2 on 4th May, 2007 to reflect the potential for external support in the event of default. (2) No Japanese bank has a higher Moody’s underlying financial strength rating than SCB. (3) S&P does not rate any Japanese bank higher than A+ and SCB is the only bank on positive outlook. • SCB has maintained strong and stable long-term ratings during the last decade and has outperformed most other Japanese financial institutions: Moody’s Rating Comparison Aa2 Aa3 A1 A2 A3 Baa1 Baa2 Source: Bloomberg Shinkin International

Shinkin Central Bank –Funding and Assets Asset Management (\ Billion) 24,746 100.0% Fund Raising 18,022 72.8% Deposits Negotiable Deposits 159 0.6% 4,267 Debentures 17.2% 2,298 9.2% Borrowed Money Securities Held As at 31/3/07 (\ Billion) 25,236 100.0% Asset Management 2,729 10.8% Short-Term Markets 5,586 22.1% Loans & Bills Discounted Securities 16,410 65.0% 511 2.0% Cash in Trust & Others As at 31/3/07 Shinkin International

Shinkin Central Bank – Financial Soundness Capital Adequacy Ratio 　（As of March 31,2007） Non-performing Loans Ratio 　（As of September 30,2006） Note: SCB - Non-consolidated Others - Consolidated Source: Bank Disclosure Documents Note: Ratio = Total Risk-monitored Loans/ Total Loans Source: Financial Services Agency Funds per Employee 　（As of September 30,2006） (US$ Millions) Expenses Ratio 　（As of September 30,2006） 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 of 02/06/08 On target to beat last year Volumes are 50% up on last year 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 callable structured notes since then. • Significantly higher deal numbers and volumes achieved in 2005 and 2007 due to bullet transactions which last year were 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 since 2004 has resulted in more USD flow. • EUR deals executed in 2005 due to some exceptional bullet investments which have not been repeated. • Proportion of callable business has steadily declined since 2003 and last year accounted for just 15% of the total amount issued (but still 44% in terms of 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. • Some of our investors still require 0% risk-weighted names for structured callable investment but limited opportunities in 2007 with several issuers unavailable. *Basel I methodology until 2006, Basel II thereafter *Basel I methodology until 2006, Basel II thereafter Shinkin International

Analysis of Deal History – Products • Before 2004 Step-Up Reverse Floaters and Power Reverse Dual Currency trades dominated but in recent years the range of structures has become more diverse. • In 2007 volumes were dominated by vanilla flows. • Nikkei-linked and PRDC issues are normally for small amounts but generate significant fee income. • Step-Up Reverse Floaters have been the standard way for our investors to take value from the JPY forward curve whereas in USD capped FRNs are preferred. Shinkin International

Analysis of Deals Executed in 2007 • A successful year with business dominated by relatively large JPY denominated vanilla issues. • Favoured issuers were non-Japanese commercial banks (2-5y) and non-banking sector Japanese assets (0-2y). • Nikkei-linked auto-callable digitals were popular but the deal size was generally small. • It is proving increasingly difficult to combine investors for structured transactions. • Demand for JPY Step-Up Reverse Floaters notably muted. • Non-JPY investments handicapped by higher wholesale funding costs. Shinkin International

Issuers Placed • In total Shinkin International has arranged MTNs for 196 different issuers since 1996. • For approximately 46% of these entities we have executed just 1 or 2 trades but there are many issuers for whom we provide regular financing. • Since 1999 we have added an average of almost 20 new issuers every year. Shinkin International

Issuers Placed – Geographical Distribution • Approximately 45% of all issues have been arranged for the core European countries of Germany, France and the Netherlands plus the UK. • Japanese issuers are typically 50% or 100% risk-weighted and most transactions are short-dated vanilla. • Total of 275 trades into Canada and Luxembourg executed with only 11 entities. *Location of parent if subsidiary Shinkin International

Issuers Placed – Vanilla bonds Total 81 * Year of first transaction Shinkin International

Issuers Placed – Structured Notes 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. Total 81 * Year of first transaction Shinkin International

Current Investment Trends • Our wholesale investors generally have plenty of JPY liquidity from domestic savings accounts but EMTN investment flows are relatively weak at the moment and overall Shinkin bank bond activity has only picked up slightly from the depressed levels of 2006 (see graphs). • Higher proportion of deals now being called (21% Q1 2008 compared to 12% H2 2007) but market volatility is making investors wary of picking re-entry levels. • Nonetheless we anticipate slightly more emphasis on structured business this year than in 2007 notwithstanding the current attractive target levels posted by issuers for vanilla term funding. • Recent declines in the Nikkei index make new ELNs attractive but many existing trades now below the 0.1% coupon barrier. • Implementation of Basel II has benefited Japanese corporate credits that have improved their risk weighting from 100% to 50%. 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 • 2008: Largest issue to date - Sumitomo Corp Capital Europe JPY 13bn 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 943 billion equivalent, Shinkin banks are active investors and, with assets of JPY 26 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 was a top 10 provider of JPY structured EMTNs in 2007 (mtn-i). 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 Koichi Kawashima +44 (0)20 7374 4633 Associate Director, Origination David Scott +44 (0)20 7374 4633 Shinkin International

Shinkin International