Investor Presentaiton

Japanese Local Government Bonds Japanese local government bonds have a risk weight of zero as a result of powerful national fiscal backing, a tax system designed to prevent failure and other measures as described below. 1. Local Issue Tax System ■ When determining budgets for each fiscal year, the national government sets forth an estimate of revenues and expenditures for all local governments, and guarantees revenue shortfalls. ■ As part of this system, the national government provides backing for the redemption of the principal and interest of local government bonds, thereby strengthening the repayment capacity of local government bonds by local governments. 2. Bond issuance approval system as an early correction measure Local governments must discuss with the national government before issuing bonds, and receive confirmation that the new bond issuance is reasonable and will not negatively affect the local governments' future ability to repay principal and interest of local government bonds. From January 1, 2008, tax exemption measures apply with respect to the interest on transfer local government bonds for non-residents and non-domestic entities which satisfy the prescribed conditions outlined below. Prior to this date, a 15% source deduction was deducted from interest earned on Japanese local government bonds by non-residents etc. Cases settled through the Japan Securities Depository Center, Inc. ☐ In cases of non-residents, non-residents who hold the bonds through a qualified foreign intermediary or qualified account management institution etc. Cases where appropriate tax exemption form is submitted Effective June 2010, the following has been implemented to simplify the tax exemption procedures related to interest earned on transfer local government bonds by non-residents and expand those qualified for tax exemption status. Furthermore, it is now possible to settle with Euroclear. Simplification of procedures by the elimination of separate individual bookkeeping under certain prescribed conditions, and a change from having to perform tax exemption procedures for each issuer (several) to just each transfer institution. Expansion of the range of qualified foreign securities investment trusts, and tax exemption status for redemption profit and loss Simplification of tax exemption procedures Non-residents/Non-domestic entities Qualified foreign intermediary (including Clearstream, Euroclear) Specified transfer institution (subcustodian) Director of tax office with jurisdiction over the specified transfer institution 23

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