Shinkin International January 2013 Introduction and Analysis.

Shinkin International

January 2013Introduction and Analysis

Contents

Shinkin International2

Japan’s Private Financial Institutions 3 Shinkin – Group Structure 4 Shinkin Banks 5 Shinkin Central Bank 9 Shinkin International 14

Transaction Execution Record 15 Deal History 16 Issuers Placed 20 Analysis of Deals Executed in 2012 24 Current Investment Trends 26 Milestones 27

Summary 28 Contacts 29


Japan’s Private Financial InstitutionsPrivate

Financial Institutions

Shinkin Central Bank

City, Regional and Foreign

Banks

Trust Banks Shinkin Banks

Labour Credit Associations

Credit Co-operatives

Insurance Companies

etc.

The Rokinren Bank

The Shinkumi Federation

Bank

Commercial Banks

Specialized Financial

Institutions

Other Financial

Institutions

Other Co-operative Institutions

Shinkin Internation

al Ltd.

Shinkin – Group Structure


Shinkin Bank A

Shinkin Bank B

Shinkin Bank C

Shinkin Bank D

Shinkin Bank (..)

Total Assets: ¥31tln (US$378 bln) Offices: Domestic 13, Overseas 4 Employees: 1,142 Members: 271 Shinkin Banks Listed on: Tokyo Stock Exchange

Shinkin Banks’ Customers Shinkin Banks’ Customers

Deposits in ¥

Deposits in ¥

Deposits in ¥

Deposits in ¥

ShinkinInternational

ShinkinSecurities

Deposits in ¥

Deposits in ¥

Investments in ¥ / € / $

Assets in ¥ / € / $

Individual Shinkin Banks-----------------------------------Number: 271Deposits: ¥123tln Branches: 7,535Members: 9.31mln

SHINKIN CENTRAL BANK

Lending to SME Sector &

individuals

Assets in ¥

Investments in ¥

Primary Issuers

Secondary Market

Funding

Assets

Lending to SME Sector &

individuals

Shinkin Banks


Shinkin banks (“credit banks”) are cooperative financial institutions whose members are local residents and small/medium sized companies.

Shinkin banks are close and convenient for their customers and enjoy a strong relationship of mutual trust with the communities they serve.

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 2012 there were 271 shinkin banks with a total of 7,535 branches throughout Japan.

Membership stands at around 9.31 million and deposits total ¥122 trillion (approx. USD 1,490 billion) as at March 2012 - about 15% of the total deposit market in Japan.


The shinkin bank sector, an important partner for local economies, forms a massive network of 271 shinkin banks with 7,535 branches nationwide from Hokkaido in the north to Okinawa in the south.

Shinkin Bank Distribution

Kyushu (28 banks)

Chugoku (22 banks)

Shikoku (10 banks)Tokai (39 banks)

Hokuriku (17 banks)

Hokkaido (23 banks)

Tohoku (27 banks)

Kanto (49 banks)

Tokyo (23 banks)

Kinki (32 banks)

Okinawa (1 bank)

Size of the Shinkin Banks


(US$ bln equivalent as at March 31, 2012)

Deposit Balances by Sector

Sources:Japanese Bankers Association, Norinchukin Bank, National Central Society of Credit Cooperatives, National Association of Labour Banks and SCB

Source: SCB

Growth in Number of Shareholders（ Millions from March 31, 1955 to March 31, 2012 ）

Number of Domestic Branches　（ as of September 30, 2011)

Note: For Shinkin Banks as of March 31, 2012Sources: Japanese Bankers Association, National Central Society of Credit Cooperatives, National Association of Labour Banks and SCB

34%

28%

15%

11%

7%

2% 2%

City Banks ($3,326)

Regional Banks ($2,683)

Shinkin Banks ($1,490)

Agricultural Co-operatives ($1,072)

Second Tier Regional Banks ($725)

Credit Co-operatives ($216)

Labour Credit Associations ($212)

Labor Credit Asso.

Credit Cooperatives

City Banks

Second Tier Regional Banks

Regional Banks

Shinkin Banks 7,535

7,481

3,136

2,400

1,751

642

1955.3 1965.3 1975.3 1985.3 1995.3 2005.3 2012.30

2

4

6

8

10

1.312.58

4.25

6.20

8.119.13 9.31


Non - Consolidated Capital Adequacy Ratio by Bank Sector

　（ As of March 31, 2012 ）

Deposits Outstanding（ ¥ Trillions from March 31,2008 to March 31,

2012 ）

Performance of the Shinkin Banks

Source: SCB

Source: SCB

* Preliminary FigureNote: Regional Banks: Domestic standard Others: BIS standard Sources: Bank disclosure document/ Regional Banks Association of Japan/ The Second Association of Regional Banks

11.50%

12.00%

12.50%

13.00%

11.74%

11.80%12.34%

12.67%

12.85%

Shinkin Banks*

City Banks Regional Banks

Second Tier Regional

Banks

0.00%

5.00%

10.00%

15.00%

20.00%

12.85%

18.25%

11.63% 10.41%

Capital Adequacy Ratio　（ from March 31, 2008 to March 31,

2012 ）

6.00%

6.50%

7.00%

7.50%

8.00%

6.97%

6.25% 6.27%6.44% 6.80%

Non-performing Loan Ratio　（ from March 31, 2008 to March 31,

2012 ）

2008 2009 2010 2011 2012 2008 2009 2010 2011 2012

Source: SCB

2008 2009 2010 2011 2012105

110

115

120

125

113.7115.5

117.4119.7

122.6

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 provides settlement and operational support which may be difficult or inefficient for the shinkin banks to undertake themselves.

SCB is one of Japan’s largest institutional investors. As at March 2012, the bank had assets of ¥31 trillion (USD 378 billion).

SCB’s consolidated BIS Capital Adequacy Ratio stands at 32.43% and the non-performing loans ratio is 0.39% (as at March 2012).

SCB is the 104th largest bank in the world in terms of Tier 1 Capital strength (The Banker July 2012 – unconsolidated with the Shinkin banks).

Shinkin Central Bank – Group Structure

10

The SCB group consists of SCB and eight subsidiaries working together to supply comprehensive financial services, including trusts, securities, investment consulting, investment trusts, personal loan guarantees, venture capital, M&A advisory, and computer system development.

Shinkin Securities


Trust business Fund trust Special money

trust Securities

investment trust Negotiable

securities trust Money

debentures trust Designated gift

trust Public interest

trust Land trust

Banking

Dealing

Brokerage

Underwriting

Underwriting new bonds and agency business in the euro market

Dealing and brokering for existing euro bonds

Foreign securities investment and consulting

¥10bn in capital (100% ownership)

¥20bn in capital (100% ownership); ¥10bn capital reserve

30mn pounds in capital (100% ownership)

London local securities entity

Trust businessBanking

Shinkin Banks Information

System Center

Data processing consignment

Software development

Computer consulting and training

ShinkinCentral

Business

(handles SCB administrative work)

Computing

Promissory note exchange

Branch, dormitory, and other property management

¥70mn in capital (100% ownership)

¥4.5bn in capital (50.7% stake; 49.2% owned by shinkin banks); ¥1.5bn capital reserve

Venture capital business

M&A brokering

Corporate business consulting


ShinkinCapital

ShinkinTrust Bank

Shinkin Asset Management


Investment trust consignments

Investment consulting for negotiable securities and other products and investment discretionary contract administration

Debt guarantee business (guarantees for unsecured personal loans provided by shinkin banks)

Shinkin Guarantee

¥1.0bn in capital (99.1% stake with Shinkin Trust at 0.8%); ¥0.8bn capital reserve

SCB GroupSCB Group

Data processingconsignment

Investment consultingInvestment trust

Personal loanguarantee

Venture capitalM&A advisorySecurities

Consigned

clerical works

Dec 96 Dec 97 Dec 98 Dec 99 Dec 00 Dec 01 Dec 02 Dec 03 Dec 04 Dec 05 Dec 06 Dec 07 Dec 08 Dec 09 Dec 10 Dec 11 Dec 12

SCB

City Banks Average

Trust Banks Average

Shinkin Central Bank – Ratings


SCB has maintained strong and stable long-term ratings during the last two decades and avoided the Japanese financial crisis of the late 90s/ early 00s

Agency Short-Term Rating Long-Term RatingFinancial Strength

Rating

JCR - AA -

R&I - A+ -

S&P A-1 A+ -

Moody’s P-1 A1 C-

Source: Bloomberg

Moody’s Rating Comparison Aa2

A1

A2

A3

Baa1

Aa3

Baa2

Shinkin Central Bank – Business Overview


Breakdown of Asset Management and Securities Held （ As of March 31, 2012 ）

Fund Raising ¥ (Billions) 100%

Deposits 21,608 76.1%

Debentures 3,965 14.0%

Borrowed Money 2,824 9.9%

Breakdown of Funding　（ As of March 31, 2012 ）

70%

10%

18%

2%

Securities

Short-Term Market Operation

Loans and Bills Discounted

Others

67%

1%

7%

2%

22%1%

Medium & LT Gov't Bonds

Municipal Bonds

Corporate Bonds

Stocks & Investment Trust Funds

Foreign Securities

Others

Shinkin Central Bank – Financial Soundness


Note: Ratio of expenses = Total Expenses / Average Balance of Deposits + CDs + Debentures. Source: Japanese Bankers Association

Funds per Employee　（ As of September 30, 2011 ） (USD Millions)

Capital Adequacy Ratio　（ As of September 30, 2011 ）

Non-performing Loans Ratio　（ As of September 30, 2011 ）

Expenses Ratio　（ As of September 30, 2011 ）

Note: Total Funds = Deposits + CDs + DebenturesSource: Japanese Bankers Association

Notes: City Banks: Average of 6 Banks Regional Banks: Average of 63 banksSource: Bank Disclosure Documents

Note: NPL ratio = Total risk-monitoring loans/ Total loans Source: Financial Services Agency

SCB City Banks Regional Banks0.00%

20.00%

40.00%32.57%

17.15%12.78%

SCB City Banks Regional Banks

-1.00%

0.00%

1.00%

2.00%

3.00%

0.09%

0.85%1.07%

SCB City Banks Regional Banks0.00%

2.00%

4.00%

0.39%

1.99%

3.11%

SCB City Banks Regional Banks0

100

200

300305

4120



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.


Transaction Execution Record

^ Before 2010 excludes secondary

2008 2009 2010 2011 2012

Number of Transactions 206 164 137 140 242

Vanilla New Issues 103 103 59 38 70

Structured New Issues 69 27 29 20 9

Increases 24 18 6 7 11

Secondary 10 16 43 75 152

Volume (¥ bln)^ 333 325 229 145 509

Vanilla 287 310 169 59 408

Structured 46 15 17 9 3

Secondary N/A N/A 43 77 98

Number of Primary Issuers 55 42 38 33 25

Average Primary Issue Size (¥ bln) 1.9 2.5 2.1 1.2 5.2

Summary of Deal History


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.

Since 2010 we have expanded our secondary bond business significantly to satisfy greater investor appetite for EUR and USD public bonds which deliver substantially higher yields than those achievable from private placements.

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120

50

100

150

200

250

300

350

25

90 93

172198 178

129

301

128

256

172130

8858 79

11

22

14

8

10

16 43 75

152

Primary IssuesSecondary Trades (data not available prior to 2004)

Total Issuance (number of deals)（ 1998-2012 ）

Total Issuance (JPY bln equiv)　（ 1998-2012 ）

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120

100

200

300

400

500

600

46.4107.8 84.8

164.3227.8 226

155.8

535.3

176.8

520.9

333 324.3

186.2

67.5

410.8

42.8

77.4

97.7

Primary Issues

Secondary Trades (data not available prior to 2010)

Primary Deal History


2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120%

20%

40%

60%

80%

100%

GBP EUR USD JPY

Deal History by Currency (volume)　（ 2002- 2012 ）

Deal History by Termination Type (volume) 　（ 2002-2012)

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120%

20%

40%

60%

80%

100%

Bullet European Bermudan

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 structured (generally callable) business has declined substantially in recent years and in 2012 accounted for less than 1% of the total amount issued (but 11% of the total number of private placement transactions executed).

Primary Deal History – Risk Weight


19%

29%38%

14%

0% 20%

50% 100%

Total Deals by Risk Weight (number) (1996-2012 ）

14%

32%

37%

17%

0% 20%

50% 100%

Total Deals by Risk Weight (JPY bln equiv) (1996-2012 ）

Deals History by Risk Weight (number of trades) （ 2004-2012 ）

Deal History by Risk Weight (JPY bln equiv) （ 2004-2012 ）

2004 2005 2006 2007 2008 2009 2010 2011 20120%

20%

40%

60%

80%

100%

100% 50% 20% 0%2004 2005 2006 2007 2008 2009 2010 2011 2012

0%

20%

40%

60%

80%

100%

100% 50% 20% 0%

In recent years we have executed a significant proportion of trades with 50% risk-weighted credits, often Japanese corporates and trading houses.

2012 volume distorted by some large transations with 20% risk-weighted banks.

Note 2011 data uses end of year ratings, meaning some downgraded 50% risk-weighted issues were 20% risk-weighted at the time of issue.

Notes: 1) Risk weight categorization is determined using Shinkin International’s internal assessment 2) Basel II risk weights applied from 2007 onwards

Reasons for this transition include the higher spreads payable on medium term vanilla credit, substantially increased hedging costs and the threat of MTM accounting for structured notes.

Only the callable Step-up Reverse Floater remains a consistent contributor to revenues.

Primary Deal History – Products


2004 2005 2006 2007 2008 2009 2010 2011 20120%

20%

40%

60%

80%

100%Credit-linked

Equity-linked

RAN

Dual/RD/PRD

CMS

Cum Inverse

SURF

Flipper

Callable Fixed/SU

Capped FRN

Vanilla

Deal History by Structure (volume)　（ 2004-2012 ）

Deal History by Structure (fees)　（ 2004-2012 ）

Up until 2007 our business was dominated by an increasingly broad range of interest rate, currency and, for a while, equity-linked structured products.

In the past six years the volume of structured issuance has been substantially less.

2004 2005 2006 2007 2008 2009 2010 2011 20120%

20%

40%

60%

80%

100%Credit-linked

Equity-linked

RAN

Dual/RD/PRD

CMS

Cum Inverse

SURF

Flipper

Callable Fixed/SU

Capped FRN

Vanilla

Issuers – Primary and Secondary


In total Shinkin International Ltd. has arranged MTNs for 224 different issuers since 1996. For the majority of these issuers we provide regular financing - in 60% of cases three or

more transactions have been executed and there are ten issuers benefitting from over 40 completed trades each.

Since the credit crunch adverse cross currency basis costs for primary JPY issuance have resulted in a refocus on the sourcing of secondary bonds in other currencies instead.

Issuers Placed/ Sourced (number) （ 1996-2012 ） *

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Previously Placed Issuers 0 1 3 5 16 24 30 40 34 52 45 58 47 37 32 29 21

New Issuers 1 8 8 23 15 24 24 14 22 24 13 20 8 5 6 4 4

Secondary Bonds NaN NaN NaN NaN NaN NaN NaN NaN NaN 15 13 6 9 5 17 30 78

10

30

50

70

90

110

*Secondary data not available prior to 2005

Primary Issuers Placed – Geographical Distribution

Shinkin International21*Location of parent if subsidiary

Vanilla EMTN issuance for Japanese entities (generally overseas subsidiaries) now accounts for the highest proportion of our executed business but overall we have arranged 2111 issues for 224 issuers located in 23 different countries.

Approximately 38% of all our issues have been arranged for the core European countries of Germany, France and the Netherlands, plus the UK.

A total of 303 trades into Canada and Luxembourg executed with just 12 entities.

29%

11%

10%10%

8%

7%

7%

4%

3%3%

2%1%

5%

Japan

France

Germany

Netherlands

UK

Canada

Luxembourg

Australia

Sweden

Norway

Austria

Spain

Other

Total Deals by Issuer Domicile* (number) （ 1996-2012 ）

Total Volume by Issuer Domicile* (JPY bln equiv) （ 1996-2012 ）

35%

11%11%

8%

7%

5%

4%

3%

3%3%

2%2%

6%

Japan

France

Germany

Netherlands

UK

Canada

Luxembourg

Australia

Sweden

Norway

Austria

Spain

Other

Issuers Placed – Vanilla funding


* Year of first transaction. Note for some issuers we have subsequently also arranged structured notes.

NON-JAPANESE ISSUERS JAPANESE ISSUERS

ALLIED IRISH BANKS 2007* INTESA SANPAOLO 2007 BANK OF TOKYO-MITSUBISHI UFJ 2012 MARUBENI INTL FINANCE 1999 SUMITOMO REALTY 2003

AMERICAN HONDA 2002 KBC IFIMA 2008 BOT LEASE CO LTD 2004 MITSUBISHI ELECTRIC 2002 SUNTORY EUROPE 2007

BANK AUSTRIA CREDITANSTALT 2007 KOREA DEVELOPMENT BANK2011 CHUBU ELECTRIC 2003 MITSUBISHI UFJ LEASE 2006 TEIJIN HOLDINGS NETH 2005

BANK OF IRELAND 2008 LBANK RHEINLAND PFALZ 2005 CENTURY LEASING SYSTEMS 2005 MITSUI & CO (UK) 2001 TOKYU CORPORATION 1999

BANK OF NOVA SCOTIA 2008 LVMH JAPAN KK 2006 CENTURY TOKYO LEASING CORP 2011 MITSUI &CO (USA) 2003 TOSHIBA INT FIN (NETH) 2000

BANQUE PSA FINANCE 2003 MERCEDES-BENZ JAPAN CO. 2011 DAINIPPON INK AND CHEMICAL 2002 MITSUI FUDOSAN 1997 TOSHIBA CAP CORP (ASIA) 2002

BBVA 2009 NATIONAL AUSTRALIA BANK 2007 DEVELOPMENT BANK OF JAPAN 2009 MITSUI OSK FINANCE 2002 TOKYO LEASING 2007

BBVA SENIOR FINANCE 2006 NORDDEUTSCHE LBANK 2005 EUROMOL BV 1999 MITSUI OSK LINES 2008

BMW AUSTRALIA FINANCE 2010 NORDEA BANK 2007 FUJI PHOTO 2000 MMC INTERNATIONAL 1999

BMW JAPAN FINANCE CORP 2007 OERESUNDSFORBINDELSEN 2005 FUJITSU EMEA 2005 MONEX BEANS HOLDINGS 2007

BMW (UK) CAPITAL 2007 RCI BANQUE 2007 HITACHI CAP AMERICA CORP 2004 NIPPON YUSEN KABUSHIKI 2002

BMW US CAPITAL 2009 REICHHOLD 1998 HITACHI CAPITAL (UK) 2007 NISSAN 1998

BNZ INTERNATIONAL FUNDING 2012 RENAULT CREDIT 2001 HITACHI FINANCE 2001 NISSHO IWAI 1997

BPCE 2010 SANTANDER INTL DEBT 2006 HITACHI INTERNATIONAL 2003 NKK CAPITAL 2000

CIBC 2007 SCOTTISH & NEWCASTLE 2001 INDUSTRIAL BANK OF KOREA 2002 NKK CORPORATION 2000

COCA COLA AMATIL 2001 SEVERN TRENT PLC 2001 ITOCHU FINANCE (EUROPE) 2006 NOMURA BANK INTERNATIONAL 2010

DAIMLER CHRYSLER AG 2002 SOCIETE GENERALE 2009 KAJIMA CAPITAL OF AMERICA 2003 ORIX AUSTRALIA 2006

EDF ENERGY PLC 2004 STANDARD CHARTERED BANK 2010 KOBE STEEL (AMERICA) 1999 ORIX USA CORP 2002

EFG HELLAS PLC 2004 SKANDINAVISKA ENSKILDA BANKEN 2011 KOBE STEEL (NETHERLANDS) 2003 PLASMA LIMITED 2009

FINANCE FOR DANISH INDUSTRY 2007 SWEDBANK 2007 KOMATSU EUROPEAN CC 2006 SHIMUZU INTERNATIONAL 2000

FORTIS BANK 2007 TORONTO DOMINION 2000 KOMATSU FINANCE AMERICA 2002 SUMI MITSUI FIN & LEASING 1999

GMAC AUSTRALIA 2003 UNICREDITO ITALIANO 2008 KOMATSU (NETHERLANDS) 2002 SUMISHO LEASE 2002

GMAC INTERNATIONAL FINANCE 2003 VATTENFALL 2000 KONICA CORP 1999 SUMITOMO CHEMICAL (UK) 2007

HSBC BANK 2010 VIVENDI ENVIRONMENT SA 2001 KONICA MINOLTA FIN USA 2004 SUMITOMO CORP AMERICA 2005

HSH NORDBANK 2005 VOLVO TREASURY 2005 MARUBENI EUROPE 2006 SUMITOMO CORP CAP ASIA 2006

BERDROLA FINANZAS 2005 VW FINANCIAL SERVICES 2004 MARUBENI FINANCE HOLLAND 2007 SUMITOMO MITSUI BANKING 2012

Issuers Placed – Structured funding


* Year of first transaction. Note for some issuers we have subsequently also arranged vanilla bonds.

ABBEY NATIONAL PLC 1998* CDC IXIS CAPITAL MARKETS 1999 FARM CREDIT CANADA 2002 NEDERLANDSE WATERSCHAPSBANK 2002

ABN AMRO N.V. 1999 CHRISTIANIA 1997 FIRST CHICAGO TOKIO MDP 1999 NEW SOUTH WALES TREASURY CORP 2002

AFRICAN DEVELOPMENT BANK 2002 CNCEP 2001 FMO 2000 NIBC BANK 1999

ANZ BANKING GROUP LIMITED 2003 COMMONWEALTH BANK OF AUSTRALIA 2005 FORTIS BANQUE LUXEMBOURG 1999 NORTH RHINE – WESTPHALIA 2003

ARGENTARIA 1997 COMMERZBANK 1999 HAMBURGISCHE LANDESBANK 2001 NORDIC INVESTMENT BANK 2005

ARTESIA 2001 COMP DE FINANCEMENT FONCIER 2002 HYPO ALPE-ADRIA BANK 2001 OBEROESTERREICHISCHE LB 2002

ASIAN DEVELOPMENT BANK 2005 CREDIOP 2001 HYPO TIROL 2003 OESTERREICHISCHE KONTROLLBANK 2005

AUSTRIA (REPUBLIC OF) 2002 CREDIT AGRICOLE INDOSUEZ 2004 ING BANK NV 2004 PFANDBRIEFSTELLE 2004

BACOB 1997 CREDIT AGRICOLE SA 2006 INTER-AMERICAN DEVELOPMENT BANK 2008 RABOBANK 1999

BANK FUER ARBEIT UND WIRTSCHAFT 2001 CREDIT SUISSE INTERNATIONAL 2007 INTL BK FOR RECONSTRUCTION AND DEV 2010 RENTENBANK 2001

BANK NEDERLANDSE GEMENTEN 2002 DANSKE BANK 2005 INTL FINANCE CORPORATION 2001 ROYAL BANK OF CANADA 2005

BANK OF SCOTLAND 2004 DNB NOR BANK 1997 INSTITUTO CREDITO OFICIAL 2002 ROYAL BANK OF SCOTLAND 2000

BANK OF YOKOHAMA 2000 DEPFA BANK PLC 2005 KFW 2000 SE BANKEN 1997

BARCLAYS BANK PLC 2004 DEPFA DEUTSCHE PFANDBRIEF 2003 KOMMUNALBANKEN 2001 SGA SOCIETE GENERALE 2004

BAYERISCHE LANDESBANK 1998 DEPFA ACS BANK 2004 KOMMUNALKREDIT 2002 SUMITOMO CORP CAPITAL EUROPE 2004

BAYERISCHE VEREINSBANK 1997 DEXIA BIL 2001 KOMMUNEKREDIT 2001 SUMITOMO CORP CAPITAL NETHERLANDS 2000

BCEE 1998 DEXIA CREDIT LOCALE 2001 KOMMUNINVEST 2000 SWEDBANK MORTGAGE 2004

BCL INTERNATIONAL 2001 DEXIA FUNDING NETHERLANDS 2002 LANDESBANK BADEN-WURTTEMBERG 1999 SVENSKA HANDELSBANKEN 1999

BGB FINANCE (IRELAND) PLC 1998 DEXIA MUNICIPAL AGENCY 2005 L-BANK 2004 SWEDISH EXPORT CREDIT 2000

BNP PARIBAS 2004 DEUTSCHE BANK 2004 LLOYDS TSB BANK PLC 2001 TOYOTA MOTOR CREDIT CORPORATION 2008

BUSINESS DEVELOPMENT BK OF CANADA 2001 DRESDNER BANK 1998 MERRILL LYNCH & CO 2006 VENANTIUS 2000

DEVELOPMENT BANK OF JAPAN 2009 DZ BANK 2006 MITSUBISHI CORP FINANCE 2004 VORALBERGER LANDES-HYPO 2001

CAISSE CENTRALE DESJARDINS 1999 EKSPORTFINANS 1999 MITSUI & CO FIN SERVICES (EUROPE) 2005 WESTLAND UTRECHT HYPO 1999

CALYON 2004 EUROHYPO 2005 MUNICIPALITY FINANCE 2002 WESTPAC BANKING CORP 2004

CALYON FINANCE (GUERNSEY) LIMITED 2005 EXPORT DEV BANK OF CANADA 1999 NATIONWIDE 1996 WILLOW CAYMAN I LTD 2011

CANADIAN WHEAT BOARD 2001 EXPORT FIN & INSURANCE CORP 1999 NATIXIS 2007

11%

8%

81%

JPY USD EUR

Analysis of Deals Executed in 2012


26%

6%10%

6%33%

9%

4%7%

European Bank US BankAustralian Bank Other FinancialEuropean Corporate US Corporate

2012 Secondary Bonds by Type (number)

99%

1%

Bullet Bermudan

2012 Primary Issues by Volume (JPY bln equiv)

Currency Call Type

Overall a successful year with more private placements completed and a substantial increase in the number of secondary trades; in volume terms 2012 was close to being a record.

Primary issuance was dominated by a series of large short-term vanilla EUR transactions that took advantage of the relatively attractive cross currency basis to JPY - in terms of deal numbers though JPY-denominated trades still accounted for 55% of transactions executed with Japanese credits much preferred.

After a slow Q1 we saw increasing appetite for non-Japanese secondary paper with a reasonable equal split between financial and corporate credits: again EUR was the favoured currency, accounting for 65% of the deal-flow.

Current Investment Trends


Structured note call history per 6 month period (number of calls)

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 tied up in JGBs and other Japanese-related credits.

Investors remain cautious toward non-Japanese credit but the absence to bad news stories in recent months has encouraged a steady flow of new investment and a slow diversification of risk (new limits have been established for some more of the better known European corporate names but banking sector investment is still much restricted).

The consequence of JPY and USD curve steepening and rising JGB and UST yields in 2013 ought to be a further shift towards credit investment.

Larger investors are able to buy EUR and USD denominated debt (in addition to JPY), managing cross currency risk on either an individual trade or portfolio basis depending on market circumstances; shorter-dated EUR investments continue to be preferred, driven by the relatively favourable basis swap to JPY.

With the exception of digital knock-out Nikkei-linked notes, there is still a steady trickle of old callable structured note early terminations and some limited demand to replace these investments exists, although achieving Y1 coupon targets on acceptable credits is challenging.

0

100

200

300

400

H1 05 H2 05 H1 06 H2 06 H1 07 H1 08 H2 08 H1 09 H2 09 H1 10 H2 10 H1 11 H2 11 H1 12 H2 12

Called Not called

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

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 1,490 billion equivalent, shinkin banks are active investors and, with assets of USD 378 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).


Contacts

Shinkin International Ltd.4th Floor, River Plate House, 7-11 Finsbury Circus, London EC2M 7YA

Managing DirectorKengo Kaji +44 (0)20 7562 0501

Head of Capital MarketsSatoshi Igarashi+44 (0)20 7374 4633

Head of OriginationDavid Scott +44 (0)20 7374 4633

Shinkin International January 2013 Introduction and Analysis.

Documents

Transcript of Shinkin International January 2013 Introduction and Analysis.