Shinkin International

Shinkin International January 2010 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 2009 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 2009 there were 279 shinkin banks with a total of 7,671 branches throughout Japan. • Membership stands at around 9.31 million and deposits total ¥115 trillion (approx. US$ 1,171 billion) as at March 2009 - 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 2009) 459 times 2,597 City Banks 192 times 2,038 Regional Banks 136 times 145 times 1,175 Shinkin Banks Agricultural Cooperatives 848 Sources: Bank of Japan, Japanese Bankers Association Number of Domestic Branches 　（as of September 30,2008） Second-tier Regional Banks 571 166 Credit Cooperatives 160 Labour Credit Associations Sources: Japanese Bankers Association, Norinchukin Bank, National Central Society of Credit Cooperatives, National Association of Labour Banks and SCB Note: For Shinkin Banks as of March 31, 2009 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） Notes: Capital adequacy requirements with flexibility measures not applied before 2008. 2009 are preliminary figures Source: SCB Source: SCB Non - Consolidated Capital Adequacy Ratio by Bank Sector 　（As of March 31,2009） Non-performing Loan Ratio of Shinkin Banks(%) 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 2009, the bank had assets of ¥28tn (USD 288bn). • SCB’s consolidated BIS Capital Adequacy Ratio stands at 22.91% and the non-performing loans ratio is 0.56% (as at March 2009). • SCB is the 99th largest bank in the world in terms of Tier 1 Capital strength (The Banker July 2009). Shinkin International

SCB Total Assets ¥28trn (US$288bn) Offices Domestic 14 Overseas 4 Employees 1,078 Members 279 Shinkin banks Shinkin Bank Shinkin Bank Shinkin Bank Shinkin Bank Shinkin Bank Shinkin Bank Number279 Assets¥115trn Branches7,671 Members9.31m 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 –Business Overview as at March 31, 2009 Asset Management (\ Billion) 26,239 100.0% Fund Raising 18,819 71.7% Deposits Negotiable Deposits 0.1% 1 4,728 Debentures 18.0% 10.2% 2,691 Borrowed Money Securities Held (\ Billion) 26,734 100.0% Asset Management 4,818 18.0% Short-Term Markets 5,437 20.4% Loans & Bills Discounted Securities 16,202 60.6% 277 1.0% Cash in Trust & Others Shinkin International

Shinkin Central Bank – Financial Soundness Capital Adequacy Ratio 　（As of September 30, 2008） Non-performing Loans Ratio 　（As of September 30, 2008） Note: SCB: BIS Standard City Banks: Average of 6 Banks Source: Bank Disclosure Documents Note: NPL ratio = Total risk-monitoring loans/ Total loans Source: Financial Services Agency Funds per Employee 　（As of September 30, 2008） (US$ Millions) Expenses Ratio 　（As of September 30, 2008） Note: Total Funds = Deposits + CDs + Debentures Source: Japanese Bankers Association Note: Ratio of expenses = 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 (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

MTN and CD Arranging Record Shinkin International

Analysis of Deal History • Shinkin International Limited has been successfully arranging MTNs for Japanese wholesale investors since 1996. • Until 2004 the majority of deals were bermudan callable structures but a drop in the number of deals being called has made it more difficult to sell such notes since then. • Significantly higher deal numbers and volumes achieved in 4of the past 5 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 and this was rekindled in 2009 as a result of a favourable cross-currency basis swap. • Demand for EUR issues has been more sporadic but in 2009 we saw good demand. • Proportion of callable business has declined progressively and last year accounted for just 4% of the total amount issued (but still 20% 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. • A rise in 0% risk-weighted issuance in 2009 was driven by vanilla government guaranteed bank debt during H1 and by a limited pick-up in structured callables in H2 . *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 2004-6 structures became notably more diverse. • In the past three years volumes have been dominated by vanilla flows. • Market turmoil associated with the credit crunch led to extraordinarily high spreads being paid by high quality credits during H1 2009 and overall last year (for the first time) the majority of our revenue was obtained from arranging vanilla bonds. Shinkin International

Analysis of Deals Executed in 2009 • A satisfactory year in difficult circumstances with business dominated by relatively large vanilla issues in JPY, USD and EUR. • Structured issuance was very patchy throughout the year with only brief periods of consistent deal flow – mostly bonds either Step-Up Reverse Floaters orReverse Dual Currency. • JPY investments still preferred but increasingly unfavourable basis swaps and tightening spreads resulted in investors taking foreign currency exposure. • We assisted some investors wishing to sell distressed debt at levels above their book valuations. Shinkin International

Issuers Placed • In total Shinkin International has arranged MTNs for 216 different issuers since 1996. • For the majority of these issuers we provide regular financing - in 56% 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 18 new issuers every year - but since the credit crunch investors have been much more conservative about taking new names. Shinkin International

Issuers Placed – Geographical Distribution • 50% or 100% risk-weighted (and mostly short-dated) vanilla issuance for Japanese entities currently accounts for the highest proportionof our executed business but we are still seeing good demand for quality non-Japanese credits. • Approximately 40% 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 just 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 recent crisisbut have been very selective about making EMTN investments. • During 2009 demand centered on vanilla issues by government guaranteed banks, government related AAA issuers, Japanese credits and, more recently, senior unsecured bank debt. • Following the sharp tightening of credit spreads for top-quality credits, investors begun to execute structured deals again but many bonds called in H1 2009 have not yet been replaced by investors. • Recent publicity about accounting changes that will force investors to take MTM changes to P&L from 2015 is currently depressing structured note activity and we anticipate that 2010 will again be dominated by vanilla issuance. • Despite the credit crunch overall bond turnover at Shinkin Banks remains higher than 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 Bank 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 Aa3/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 4th as a 3rd party provider of JPY vanilla EMTNs in 2009 (MTNi YTD as at 12/11/09). 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