Sumitomo Mitsui Banking Corporation New York Branch US$750,000,000 8.00% SUBORDINATED NOTES DUE JUNE 15, 2012

Sumitomo Mitsui Banking Corporation, acting through its New York Branch, proposes to issue $750,000,000 aggregate principal amount of 8.00%subordinated notes due June 15, 2012. Interest on the Notes is payable semiannually in arrears on June 15 and December 15 of each year, commencing December 15, 2002. The Notes are not redeemable prior to maturity, except that the Notes are redeemable as a whole, at the principal amount thereof, in the event of certain changes in the tax laws of Japan or the United States. The Notes will be represented by one or more Global Notes registered in the name of a nominee of The Depository Trust Company, or DTC. Interests in the Global Notes will be shown on, and transfers thereof will be effected only through, records maintained by DTC and its participants. Except as provided herein, Notes in definitive form will not be issued. Initial settlement for the Notes and settlement of any secondary market trades in the Notes will be made in immediately available funds. The Notes will settle in DTC’s Same-Day Funds Settlement System and may also settle through Clearstream and the Euroclear System. All payments of principal and interest will be made in immediately available funds. See ‘‘Description of Notes’’. The Notes will be issued in denominations of $100,000 or integral multiples of $1,000 in excess thereof. The Notes will constitute unsecured obligations of the Bank and upon the occurrence of a Subordination Event (as defined herein) any amounts payable under the Notes (except for such amounts which shall have become due and payable, other than solely by way of acceleration, prior to the date on which a Subordination Event shall have occurred) shall be subordinated in right of payment to the prior payment of all Senior Indebtedness (as defined herein) of the Branch and the Bank. See ‘‘Description of Notes—Subordination’’ and ‘‘—Actions Against the Bank; Limitations’’. (Continued on following page.)

See ‘‘Risk Factors’’ beginning on page 8 to read about factors you should consider before making an investment in the Notes.

The Notes are not required to be, and have not been, registered under the Securities Act of 1933. The Notes are not insured by the Federal Deposit Insurance Corporation or any other government agency. Neither the Branch nor the Bank is subject to the periodic reporting requirements of the Securities Exchange Act of 1934. Initial Public Underwriting Proceeds to Offering Price(1) Discount(2) the Branch(1) Per Note ...... 99.909%0.650%99.259% Total ...... $749,317,500 $4,875,000 $744,442,500 (1) Plus accrued interest from June 25, 2002. (2) The Bank (including the Branch) has agreed to indemnify the Underwriters against certain civil liabilities, including liabilities under applicable securities laws. See ‘‘Underwriting’’.

The Notes are offered severally by the Underwriters, as speciﬁed herein, subject to receipt and acceptance by them and subject to their right to reject any order in whole or in part. It is expected that the Notes will be ready for delivery in book-entry form through the facilities of The Depository Trust Company in New York, New York, on or about June 25, 2002 against payment therefor in immediately available funds.

Joint Lead Managers and Joint Bookrunners Goldman, Sachs & Co. Morgan Stanley Joint Lead Manager Daiwa Securities SMBC Europe Limited

UBS Warburg Deutsche Bank Securities JPMorgan Nomura Securities Credit Suisse First Boston

Offering Circular dated June 18, 2002 The information contained herein is subject to completion or amendment. These securities may not be sold nor may offers to buy be accepted prior to the time the offering circular is delivered in ﬁnal form. Under no circumstances shall this offering circular constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualiﬁcation under the securities laws of such jurisdiction.

Payment of the principal of the Notes may be accelerated only in the case of events of default (as deﬁned herein). There is no right of acceleration of the payment of principal of the Notes upon a default in the payment of interest or in the performance of any covenant of the Branch or the Bank. See ‘‘Description of Notes—Events of Default; Limited Rights of Acceleration’’.

Application has been made to the Financial Services Authority in its capacity as competent authority under the Financial Services and Markets Act 2000 (the ‘‘UK Listing Authority’’) for the Notes to be admitted to the official list of the UK Listing Authority (the ‘‘Official List’’) and to the London Stock Exchange plc (the ‘‘London Stock Exchange’’) for such Notes to be admitted to trading on the London Stock Exchange’s market for listed securities. Admission to the Official List of the UK Listing Authority together with admission to trading on the London Stock Exchange’s market for listed securities constitute official listing on a stock exchange.

IN CONNECTION WITH THIS OFFERING, GOLDMAN, SACHS & CO. (OR ANY PERSON ACTING FOR IT) MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES AT LEVELS OTHER THAN THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE LONDON STOCK EXCHANGE, IN ANY OVER-THE-COUNTER MARKET OR OTHERWISE OUTSIDE OF JAPAN. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME AND MUST BE BROUGHT TO AN END AFTER A LIMITED PERIOD.

THE NOTES MAY NOT BE OFFERED OR SOLD IN JAPAN OR TO RESIDENTS OF JAPAN, EXCEPT AS PERMITTED BY JAPANESE LAW.

This offering circular (including the Annex) comprises listing particulars (the ‘‘Listing Particulars’’) with respect to the issue of the Notes in accordance with listing rules made under Section 74 of the Financial Services and Markets Act 2000 (the ‘‘FSMA’’) by the UK Listing Authority for the purpose of giving information with regard to the Bank and its subsidiaries (taken as a whole) and the Notes. A copy of this offering circular has been delivered to the Registrar of Companies in England and Wales for registration in accordance with Section 83 of the FSMA. The Bank accepts responsibility for the information contained in this document. To the best of the knowledge and belief of the Bank (which has taken all reasonable care to ensure that such is the case), the information contained in this document is in accordance with the facts and does not omit anything likely to affect the importance of such information.

The distribution of this offering circular and the offering and sale of the Notes thereby in certain jurisdictions may be restricted by law. Persons into whose possession this offering circular comes are required by the Bank and the Underwriters to inform themselves about and to observe any such restrictions. This offering circular does not constitute an offer of, or an invitation to purchase, any Notes in any jurisdiction in which such offer or invitation would be unlawful.

The Notes have not been and will not be registered under the Securities and Exchange Law of Japan and are subject to the Special Taxation Measures Law of Japan. The Notes may not be offered, sold or delivered in Japan or to residents of Japan, except pursuant to an exemption from, or otherwise in compliance with, the Securities and Exchange Law of Japan to certain ﬁnancial institutions and persons holding Notes through such institutions. Interest payments on the Notes generally will be subject to Japanese withholding tax unless the

2 holder establishes that the Notes are held by or for the account of a holder that is not an individual resident of Japan or a Japanese corporation for Japanese tax purposes or is a Japanese designated ﬁnancial institution described in Article 6 of the Special Taxation Measures Law of Japan.

This offering circular is being furnished by the Bank solely for the purpose of enabling a prospective investor to consider the purchase of the Notes described herein. The information contained in this offering circular has been provided by the Bank and other sources identiﬁed herein. No representation or warranty, express or implied, is made by the Underwriters named herein as to the accuracy or completeness of such information, and nothing contained in this offering circular is, or shall be relied upon as, a promise or representation by the Underwriters. Any reproduction or distribution of this offering circular, in whole or in part, and any disclosure of its contents or use of any information herein for any purpose other than considering an investment in the Notes offered hereby is prohibited. Each offeree of the Notes, by accepting delivery of this offering circular, agrees to the foregoing.

THE NOTES OFFERED HEREBY HAVE NOT BEEN RECOMMENDED BY ANY UNITED STATES FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

In this offering circular, references to ‘‘U.S. dollars,’’ ‘‘dollars,’’ ‘‘US$’’ and ‘‘$’’ refer to the currency of the United States of America and those to ‘‘yen’’ and ‘‘¥’’ refer to the currency of Japan. For convenience, certain yen amounts in this document have been translated into dollars at the rate of ¥133.25 = $1.00 as of March 31, 2002. However, such translations should not be construed as representations that the yen amounts have been, could have been or could be converted into dollars at that or any other rate. The median exchange rate quotations by the Bank for buying and selling spot dollars by telegraphic transfer against yen on June 17, 2002 was ¥124.25 = $1.00.

Unless otherwise noted, all information relating to the Bank and its predecessors included in this offering circular is presented on a non-consolidated basis.

In this offering circular, where information is presented in millions or billions of yen or thousands, millions or billions of dollars, amounts of less than one thousand, one million or one billion, as the case may be, have been omitted. Accordingly, the total of each column of ﬁgures may not be equal to the total of the individual items.

In this offering circular, references to ‘‘fiscal 1997’’, ‘‘fiscal 1998’’, ‘‘fiscal 1999’’, ‘‘fiscal 2000’’ and ‘‘fiscal 2001’’ refer to the fiscal years ended March 31, 1998, March 31, 1999, March 31, 2000, March 31, 2001 and March 31, 2002, respectively.

The Bank’s ﬁnancial statements are prepared in accordance with generally accepted accounting principles in Japan, which differs in certain respects from generally accepted accounting principles in certain other countries. The material differences between Japanese GAAP and generally accepted accounting principles in the United States are disclosed herein under ‘‘Summary of Signiﬁcant Differences Between Japanese GAAP and U.S. GAAP’’.

3 AVAILABLE INFORMATION

The Bank furnishes to the U.S. Securities and Exchange Commission certain information in accordance with Rule 12g3-2(b) under the Securities Exchange Act of 1934, as amended.

FORWARD LOOKING STATEMENTS

This offering circular contains statements that constitute forward looking statements. These statements appear in a number of places in this offering circular and include statements regarding the intent, belief or current expectations of the Bank or its officers with respect to the results of operations and financial condition of the Bank and its subsidiaries including, without limitation, future loan loss provisions and financial support to customers. In those and other portions of this document, the words ‘‘anticipate’’, ‘‘believe’’, ‘‘estimate’’, ‘‘expect’’, ‘‘intend’’, and similar expressions, as they relate to the Bank or its management, are intended to identify forward looking statements. These statements reflect the current views of the Bank with respect to future events and are subject to certain risks, uncertainties and assumptions, including the risk factors described in this offering circular. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected or intended. The Bank does not intend to update these forward-looking statements.

Forward looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those in the forward looking statements as a result of various factors. The information contained in this offering circular, including without limitation the information under ‘‘Risk Factors’’, ‘‘The Bank’’, ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ and ‘‘Business’’, identiﬁes important factors that could cause such differences, including but not limited to a change in overall economic conditions, changes in market rates of interest, further declines in the value of equity securities or real estate in Japan, further deterioration of the quality of loans to certain industry sectors in Japan and the effect of new legislation or government directives.

4 SUMMARY INFORMATION The following summary is qualified in its entirety by, and is subject to, the detailed information and financial statements contained elsewhere in this offering circular. For a discussion of certain matters that should be considered by prospective investors in the securities offered hereby, see ‘‘Risk Factors’’. Except as otherwise indicated, all references to the ‘‘Bank’’ mean Sumitomo Mitsui Banking Corporation, including the Branch and all of the other branches, agencies and other offices of the Bank. The Bank: ...... The Bank is one of the world’s leading commercial banks, with approximately ¥102,083 billion, or $766,098 million, in total assets at March 31, 2002, ranking it as one of the largest banking organizations in the world in terms of total assets. The Bank is one of seven city banks in Japan. Among ordinary banks in Japan (which include the city banks), the Bank was ranked first in terms of total assets as of March 31, 2002. The Bank provides a comprehensive range of wholesale and retail banking services, both in Japan and internationally. Through its head office and branch network in Japan and overseas, it accepts deposits from, and makes loans and extends guarantees to, corporations, individuals, governments and governmental entities. The Bank also underwrites and deals in bonds issued by or under the guarantee of the Japanese government and local government authorities, and acts in various administrative and advisory capacities for certain types of corporate and government bonds. Internationally, the Bank operates through a network of branches and representative offices, as well as through subsidiaries and affiliates, to provide a wide range of banking and financial services to its clients. On April 1, 2001, The Sakura Bank, Limited (‘‘Sakura Bank’’) and The Sumitomo Bank, Limited (‘‘Sumitomo Bank’’) merged to form the Bank. See ‘‘Business—Merger and Integration of Sakura Bank and Sumitomo Bank’’. The Branch: ...... The Bank conducts an extensive banking business through the Branch, concentrating primarily on international banking transactions and servicing the financial needs of its customers in the United States. As of March 31, 2002, total assets of the Branch were approximately $30.5 billion. The Branch is not required to be, and is not, a member of the U.S. Federal Deposit Insurance Corporation, and deposits of the Branch are not insured by the U.S. Federal Deposit Insurance Corporation or any other governmental agency.

The Offering: Securities offered: ...... $750,000,000 aggregate principal amount of 8.00%Subordinated Notes due June 15, 2012 of the Bank, acting through the Branch. No Notes will be sold in this offering to any purchaser unless such purchaser purchases at least $100,000 principal amount of Notes or integral multiples of $1,000 in excess thereof. The Notes will mature on June 15, 2012 and are not redeemable prior to the Maturity Date except as described under ‘‘Description of Notes— Redemption for Taxation Reasons’’. The Notes have not been registered with the U.S. Securities and Exchange Commission and are offered pursuant to an exemption from registration under Section 3(a)(2) of the U.S. Securities Act of 1933, as amended. The Notes are not deposits and are not insured by the U.S. Federal Deposit Insurance Corporation or any other U.S. governmental agency.

5 Interest: ...... TheNotes will bear interest at the rate per annum set forth on the first page of this offering circular from June 25, 2002. Interest on the Notes will be payable semi-annually in arrears on June 15 and December 15 of each year, commencing on December 15, 2002, and on the maturity date (or, if any such date is not a business day (as defined herein), on the next succeeding business day) until the principal thereof is paid or duly made available for payment. Interest on the Notes will be calculated on the basis of a 360-day year of twelve 30-day months. Interest on the Notes will be paid to the persons in whose names such Notes (or one or more predecessor Notes) are registered as of the close of business on June 1 or December 1, as the case may be, next preceding the applicable interest payment date (as defined herein). The principal of and interest on the Notes will be payable in U.S. dollars or in such other coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts. Redemption for taxation reasons: ...... TheNotes may be redeemed at the option of the Bank, acting through the Branch, in whole, but not in part, subject to obtaining prior consent of the Financial Services Agency (the ‘‘FSA’’), at any time, on giving not less than 30 nor more than 60 days’ notice of redemption to the Note holders (which notice shall be irrevocable) at the principal amount thereof (together with interest accrued to the date fixed for redemption and any additional amounts thereon) if (i) either the Branch or the Bank has or will become obliged to pay additional amounts as described under ‘‘Description of Notes—Taxation and Additional Amounts’’ as a result of any change in, or amendment to, the laws or regulations of the United States or Japan or any political subdivision or any authority thereof or therein having power to tax, or any change in the application or official interpretation of such laws or regulations, which change or amendment becomes effective after the date of this offering circular, and (ii) such obligation cannot be avoided by the Branch or the Bank taking reasonable measures available to it, provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Branch or the Bank, as the case may be, would be obliged to pay such additional amounts were a payment in respect of the Notes then due. Status of the Notes: ...... The Notes will constitute unsecured and subordinated obligations of the Branch and the Bank. Upon the occurrence of a Subordination Event (as described below), any amounts payable under the Notes (except for such amounts as shall have become due and payable, other than solely by way of acceleration, prior to the date on which a Subordination Event shall have occurred) will be subordinated in right of payment to the prior payment of all Senior Indebtedness (as defined herein) of the Branch and the Bank. In the event that any payment of principal or interest or any additional amount due and payable by the Branch under any Note is not made by the Branch when due and payable, the Bank will have the same unsecured and, if a Subordination Event has occurred, subordinated (to the extent described herein) direct liability to make such payment as it has with respect to any of its other unsecured and similarly subordinated debt and other obligations ranking pari passu with the Notes. Payment of the principal of the Notes may be accelerated only in the case of the bankruptcy, reorganization or civil rehabilitation of the Bank. There is no right of acceleration of the payment

6 of principal of the Notes upon a default in the payment of interest or in the performance of any covenant of the Branch or the Bank. See ‘‘Description of Notes—Events of Default; Limited Rights of Acceleration’’. Use of proceeds: ...... TheBranch and the Bank intend to use the proceeds from the sale of the Notes for general corporate purposes. Listing and trading: ..... Application has been made to list the Notes on the Official List and to admit them to trading on the London Stock Exchange’s market for listed securities. Payment and settlement: . . The Notes will initially be issued to investors only in book-entry form. One or more fully-registered global notes (‘‘Global Notes’’), representing the total aggregate principal amount of Notes, will be issued and registered in the name of Cede & Co., acting as nominee for DTC, which will act as securities depositary for the Notes. The Global Notes will initially be deposited with JPMorgan Chase Bank, acting as custodian for DTC. Persons that acquire beneficial ownership interests in the Global Notes will hold their interests through DTC in the United States, or Clearstream or Euroclear in Europe, if they are participants of those systems, or indirectly through organizations that are participants in those systems. Clearstream and Euroclear will hold omnibus positions on behalf of their participants through customers’ securities accounts in Clearstream’s and Euroclear’s names on the books of their respective depositaries, which in turn will hold those positions in customers’ securities accounts in the depositaries’ names on the books of DTC. JPMorgan Chase Bank will act as European depositary for Clearstream and for Euroclear. Unless and until certificated securities are issued, the only ‘‘holder’’ of the Notes will be Cede & Co., as nominee of DTC, or the nominee of a successor depositary. Beneficial owners will be permitted to exercise their rights only indirectly through DTC, Clearstream, Euroclear and their participants. See ‘‘Description of Notes—Book-Entry; Delivery and Form’’. Except as described in this offering circular, a beneficial owner of an interest in a Global Note will not be entitled to receive physical delivery of Notes. Accordingly, each beneficial owner of an interest in a Global Note must rely on the procedures of DTC to exercise any rights under the Notes.

7 RISK FACTORS

Prior to making an investment decision, prospective investors should carefully consider, along with other matters set forth in this offering circular, the following risk factors. These risk factors are not necessarily of equal importance, likelihood of occurrence or duration. Additionally, certain of the risk factors may be related to others, and the occurrence of events described in one risk factor could increase the likelihood of occurrence of events appearing in others. Except as otherwise indicated, the information herein is presented on a non- consolidated basis.

Risks Related to the Bank

The Bank Continues to Face Losses Relating to Problem Loans The Bank has recognized very sizeable losses relating to problem loans relative to its operating profits and capital levels in recent years. Consequently, the Bank recognized credit costs (which consist of net additions to general and specific reserves and reserves for specific overseas loan losses, direct write-offs, losses on sales of loans to the Cooperative Credit Purchasing Company, Limited (‘‘CCPC’’), losses on financial assistance for associated companies, transfers to reserves for losses on loans sold and losses on sales of problem loans) of ¥1.13 trillion, ¥0.82 trillion and ¥1.54 trillion in fiscal 1999, 2000 and 2001, respectively. During the same periods, the Bank’s net banking profit was ¥0.70 trillion, ¥0.80 trillion and ¥1.18 trillion, respectively. The Bank’s problem loans are largely comprised of loans made after the ‘‘bubble’’ era to domestic and overseas corporate customers as well as to Japanese individuals. The effects of the continuing weak economic conditions in Japan, as well as recent financial difficulties faced by the Bank’s customers, have resulted in the recognition of substantial credit costs by the Bank. The prolonged economic downturn, which has affected large and small borrowers, has increased the number of corporate bankruptcies in Japan from approximately 6,500 in 1990 and approximately 14,500 in 1996 to more than 19,000 in 2001, according to Teikoku Databank America, Inc.

Many of the Bank’s problem loans are directly or indirectly collateralized by real estate in Japan. The market price of real estate in Japan has declined substantially since 1990 and there is little liquidity in the domestic real estate market. As a consequence, Japanese financial institutions, including the Bank, have had difficulty in achieving timely and adequate recoveries on foreclosed real estate and in determining realizable values for real estate collateral. In some cases, the Bank has had to, and may have to in the future, bear significant discounts in recoveries on foreclosed assets sold through auctions or in individual or bulk sales to investors. The Bank may need to make additional reserves against loans if the collateral securing those loans further declines in value.

As of March 31, 2002, the Bank had ¥493.5 billion in bankrupt and quasi-bankrupt assets, ¥2,970.2 billion in doubtful assets and ¥2,436.3 billion in substandard loans. For a description of the various loan categories, see ‘‘Business—Loan Losses and Problem Loans—Disclosure of Problem Assets Under the Financial Reconstruction Law’’. In accordance with FSA guidelines, the Bank maintains general or specific reserves in each of these categories in proportion to the expected losses. As of March 31, 2002, the Bank’s general and specific reserves amounted to ¥872.3 billion and ¥1,084.1 billion, respectively. In the future, the Bank may recognize credit losses on existing assets in excess of reserves as a result of continuing weak economic conditions, further declines in real estate prices in Japan, an increase in corporate or personal bankruptcies in Japan, further deterioration of the financial condition of the Bank’s borrowers or changes in reserve and risk management requirements.

The Bank revised its self assessment criteria for its loan quality in the second half of ﬁscal 2001. During that time, the FSA conducted a special inspection of the Bank’s largest loans. This resulted in the recognition of higher credit losses for ﬁscal 2001 than the Bank had expected earlier in the year. If the Bank or the FSA should elect to apply stricter standards in the future, the Bank may need to recognize further credit losses.

The FSA recently began to require banks to dispose of loans of borrowers categorized as potentially bankrupt borrowers or lower within two or three years depending on when the loans were so classiﬁed and subject to speciﬁed disposition targets within these time frames. The Bank had ¥3,463.7 billion of outstanding

8 loans in these categories as of March 31, 2002. There can be no assurance that the Bank will succeed in disposing of these loans within the mandated time frames, meet the specified targets within these time frames or realize the values at which these loans are carried. Additionally, the migration of credits will cause the specified disposition targets to vary, and the requirements may also be revised making them more difficult to satisfy. The consequences of not being able to satisfy these or any future requirements for disposition of non-performing loans are uncertain at this time.

The Bank has in the past recognized credit costs that exceeded its forecasted credit costs. For example, the Bank initially forecasted credit costs of ¥220 billion, ¥405 billion and ¥400 billion for ﬁscal 1999, 2000 and 2001, respectively, and recognized actual credit costs of ¥1,131 billion, ¥819 billion and ¥1,543 billion for the same respective periods.

See ‘‘Business—Loan Losses and Problem Loans’’.

Exposure to Japanese Real Estate, Wholesale and Retail, Service, Finance and Insurance and Construction Companies May Cause Additional Losses in the Future Japanese real estate, wholesale and retail, service, finance and insurance and construction companies have been severely and adversely affected by the continuing economic weakness in Japan. The losses of companies in these industries can be partly traced to direct and indirect investments in real estate and to the decline of major public and private sector development projects initiated during the ‘‘bubble’’ era. The Bank has significant exposure to a number of companies in these industries. As of March 31, 2002, the Bank had an exposure of ¥8.55 trillion to the real estate industry (14.2%of total loans), ¥7.16 trillion to the wholesale and retail industry (11.9%of total loans), ¥6.36 trillion to the service industry (10.6%of total loans), ¥5.25 trillion to finance and insurance companies (8.7%of total loans) and ¥2.84 trillion to the construction industry (4.7%of total loans). See ‘‘Business—Loans—Domestic Lending’’ and ‘‘—Loan Losses and Problems Loans—Policies with Respect to Troubled Customers’’.

The Bank and its subsidiaries, affiliates and associated companies have agreed to restructure a substantial number of loans to companies in these sectors, including a substantial number of loans that are not (and are not required to be) considered non-performing or disclosed as problem loans. In the event that the financial condition of companies in these sectors deteriorates further, it is possible that some of the currently performing loans made by the Bank to customers in these sectors may become non-performing and it may become necessary for the Bank to provide further financial support to these customers. The Bank has announced its intention to provide financial assistance to certain financially distressed retail and construction companies in the form of debt forgiveness, debt for equity swaps and the acquisition of new shares.

Capital Requirements Could Constrain the Bank’s Operations The Bank is subject to capital adequacy guidelines adopted by the FSA, which provide for a minimum target ratio of capital to risk-adjusted assets of 8.0%on a consolidated basis for an internationally operating bank, at least half of which must be maintained in the form of Tier I capital. Failure by the Bank to maintain its ratios may result in administrative actions or sanctions against the Bank which may indirectly impact the Bank’s ability to fulﬁll its obligations under the Notes. See ‘‘Supervision and Regulation—Japan—Capital Adequacy’’. Additionally, since the Bank seeks to maintain its total capital ratio in excess of 10%, the Bank’s operations may be constrained as it pursues this goal.

The Bank’s risk-adjusted capital ratios as of March 31, 2002 were 5.5%(in the case of consolidated unaudited Tier I capital) and 10.45%(in the case of consolidated unaudited total capital). See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations—Capital Adequacy—Consolidated’’. The Bank expects that its risk-adjusted capital ratios at future balance sheet dates will principally reﬂect changes in the amount of the Bank’s risk-adjusted assets, the amount of expected cash dividends to shareholders, the amount of the Bank’s qualifying earnings or losses, credit costs, net deferred tax asset balances, the amount and

9 type of additional capital raised and certain unrealized losses in its securities portfolio. There can be no assurance that the Bank will be able to maintain its capital at or above the 4.0%level (in the case of consolidated Tier I capital) and the 8.0%level (in the case of consolidated total capital) in the future.

Further, the risk-adjusted capital guidelines (‘‘Basle Accord’’) promulgated by the Basle Committee on Banking Supervision, which form the basis for the FSA’s capital adequacy guidelines, are being revised and implementation is planned for 2006. At this time, the Bank is unable to predict how the revised guidelines will affect its calculations of capital and the impact of these revisions on other aspects of its operations.

Weaknesses in the Bank’s Capital Base Could Adversely Affect the Bank The Bank includes 100%of its net deferred tax assets in its Tier I capital calculations. Japanese regulations regarding the inclusion of deferred tax assets in Tier I capital may differ from U.S. regulations. As of March 31, 2002, deferred tax assets constituted slightly more than one quarter of the Bank’s unaudited consolidated total capital. The Bank’s capital ratio would be negatively affected if the Bank is unable to utilize its deferred tax assets or if the inclusion of deferred tax assets in capital is restricted in the future. See ‘‘Management’s Discussion and Analysis of Results of Operations and Financial Condition—Critical Accounting Policies— Deferred Tax Assets’’ and ‘‘—Capital Adequacy—Consolidated’’.

The calculation of net deferred tax assets under Japanese GAAP is based on taxable income projections for approximately five years. This calculation requires the Bank to make estimates and certain assumptions, and the results of these calculations may differ from the calculation of deferred tax assets under U.S. regulations. The Bank has not established significant valuation reserves for its deferred tax assets because it believes it will be able to utilize substantially all of them. However, a portion of these deferred tax assets may not provide future economic benefits to the Bank. The Bank’s ability to realize benefits from its deferred tax assets would be adversely affected to the extent that the Bank’s actual taxable income is lower than the projected taxable income used to determine the amount of its deferred tax asset.

The capital of the Bank is also partially comprised of capital contributions from insurance and other companies in which the Bank has made capital contributions. The Bank’s capital ratio would be negatively affected if these cross-capitalization arrangements were restricted or prohibited in the future.

Governmental Ownership of Convertible Preferred Shares and New Governmental Policies Could Adversely Affect the Bank A Japanese governmental entity currently owns preferred shares in the Bank that are either currently convertible or will become convertible into common stock of the Bank. As of March 29, 2002, the governmental entity would own approximately 26%of the Bank’s common stock assuming full conversion and based on the Bank’s stock price of ¥530 at that date. However, the governmental entity could acquire more or less than a 26% interest depending on the Bank’s share price at the time of conversion and certain minimum conversion price restrictions. Additionally, the preferred shares are mandatorily convertible in 2009 based on the prevailing market price, subject to certain minimum conversion price restrictions. If the shares are converted at the minimum conversion prices applicable upon mandatory conversion, the governmental entity would own approximately 40%of the Bank’s common stock (assuming March 31, 2002 capitalization levels). As a result of these and other considerations, the Bank intends to redeem the preferred shares prior to the mandatory conversion date. This redemption does not require the consent of the holders of the Notes.

The governmental entity holding these convertible preferred shares could also obtain approximately 14.4% of the Bank’s total stockholder voting rights prior to conversion if the Bank does not pay annual dividends on the preferred shares when due. Consequently, failure to pay dividends on the convertible preferred shares or conversion of the preferred shares into common stock could result in signiﬁcant inﬂuence over the Bank by a governmental entity. See ‘‘Business—Funding—Public Funding’’. Further, the Japanese government could

10 propose additional measures in the future, including possibly requiring additional public funds to be invested and capital reductions, which may indirectly impair the Bank’s ability to fulﬁll its obligations under the Notes.

Unavailability of Distributable Proﬁts Could Have Negative Effects on the Bank The Bank’s ability to make distributions is limited by law and other considerations. The availability of distributable proﬁts in the future may be affected by decreases in the value of the Bank’s securities portfolio and increases in its credit costs. The Bank also has limited ability to further unrestrict reserves as a result of the March 2002 transfer of excess legal reserves to retained earnings which left almost no remaining excess reserves that could be transferred to retained earnings. Failure to pay dividends could negatively impact the Bank’s reputation with investors, cause the price of the Bank’s shares to decline or increase the Bank’s funding costs. Additionally, failure to pay annual dividends in full on the convertible preferred shares owned by a Japanese governmental entity would confer voting rights upon that entity. See ‘‘—Governmental Ownership of Convertible Preferred Shares and New Governmental Policies Could Adversely Affect the Bank’’.

The implementation of mark-to-market accounting for securities on April 1, 2001 may result in a decline in distributable profits. Since the Bank realizes losses or reflects after-tax unrealized losses in its balance sheet, decreases in the value of the Bank’s securities portfolio reduce earnings or directly reduce the amount of its distributable profits even if the losses are not realized. See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview—Changes in Accounting Standards—Accounting for Securities’’. As of March 31, 2002, the Bank had ¥20.4 trillion in securities and ¥298.0 billion in after-tax unrealized losses as part of its stockholders’ equity.

Market Risks Affecting the Bank’s Equity Portfolio Could Impair the Bank’s Financial Condition and Results of Operations The reported value of the Bank’s securities portfolio depends on the fair market values of these investments. Approximately one quarter of the Bank’s securities portfolio consists of equity securities which are primarily common stocks of Japanese publicly traded companies. Shares in these companies are relatively volatile and have declined substantially in recent years. As of March 31, 2002, the Bank’s securities (including money held in trust) with a readily ascertainable market value contained ¥484.4 billion in unrealized losses, of which ¥298.0 billion appeared in its stockholders’ equity. A substantial decline in the TOPIX would substantially reduce the distributable proﬁts of the Bank and negatively affect its capital position.

The Bank may also be negatively affected by the FSA requirement that banks reduce their equity holdings to the extent that their value exceeds Tier I capital. Since a large portion of the Bank’s equity holdings is comprised of share holdings in its borrowers and cross share holdings, the disposition of signiﬁcant amounts of these share holdings could negatively impact client relationships and cause secondary market sales of shares in the Bank. While the Bank may seek the consent of an issuer to sell its shares, consent may not be obtained or could signiﬁcantly delay the timing of the sale. Also, if the Bank tries to sell relatively illiquid shares, the price of these shares may decline rapidly. Therefore, the Bank’s ability to dispose of its equity holdings at the required pace may be limited and the Bank may be unable to achieve its disposition goals by September 30, 2004 (the deadline). It is uncertain what actions the FSA would take in such a case. There can be no assurance that the failure to achieve the targeted results would not have an adverse effect on the Bank.

Interest Rate Risk Could Impair the Bank’s Financial Condition and Results of Operations The Bank has substantial investments in yen-denominated debt securities, principally fixed-rate bonds. In particular, Japanese Government Bonds (‘‘JGBs’’) represent a significant part of the Bank’s fixed income portfolio. As of March 31, 2002, the Bank had ¥11.2 trillion of yen-denominated debt securities, of which ¥9.6 trillion were JGBs. The Bank also had ¥38.2 billion of net unrealized gains on investments in yen- denominated debt securities (classified as held-to-maturity securities and as other securities) as of March 31, 2002. In addition, the Bank owned ¥2.9 trillion of foreign debt securities as of March 31, 2002 which consisted

11 mainly of U.S. Treasury securities. An increase in interest rates could substantially decrease the value of the Bank’s fixed income portfolio, and any unexpected change in interest rates could adversely affect the Bank’s bond and interest rate derivative positions. In addition, a decline in the price of JGBs would substantially decrease the value of the Bank’s securities portfolio. JGBs have recently been downgraded by the major rating agencies. If a further downgrade occurs, it may cause a decline in the price of JGBs. Moreover, in recent years the Bank earned substantial profits from its investment in fixed income securities, including JGBs and U.S. Treasury Bonds. If interest rates remain stable or increase, the Bank might not be able to maintain these earnings levels. See ‘‘Business—Securities-Related Activities—Securities Portfolio’’ and ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations—Capital Adequacy—Consolidated’’.

The Bank May Need to Provide Additional Support to Japanese Financial Institutions, Troubled Customers or Affiliated Companies Japanese financial institutions, including banks, non-bank lending and credit institutions, financial affiliates of securities companies and insurance companies are currently experiencing difficulties. In some cases, asset quality problems and other financial problems have led, or may lead, to severe liquidity and solvency problems that have resulted, or may result, in the liquidation or restructuring of certain of the affected financial institutions. From time to time, the Japanese Government has requested that one or more financial institutions, including the Bank, either provide financial and other assistance to support distressed financial institutions or directly or indirectly acquire some portion of the problem loans or other assets of such institutions and such financial institutions, including the Bank, have complied with certain of these requests. No assurance can be provided that the Bank’s regulators will not in the future make similar or broader requests to the Bank. Moreover, the Bank does business with, and in some instances is a shareholder in and/or lead lender to, other financial institutions and, as a result, in certain circumstances may find itself exposed to the credit or other risks associated with the financial difficulties encountered by these institutions. See ‘‘Business—Loan Losses and Problem Loans’’.

Additionally, the Bank provides direct and indirect support to troubled borrowers generally in cases where such support is economically justified. However, the Bank, like other banks in Japan, has provided support to troubled customers under circumstances, and based upon considerations, that may differ in kind or degree from those relevant in other countries, including the United States. These may include political and regulatory influences and a perceived responsibility for obligations of affiliated and associated companies due to the relationships between the various entities. A decision by the Bank not to provide support or to withdraw its support to large borrowers may result in substantial and immediate credit costs. The Bank has supported in the past and may support in the future Sumitomo and Mitsui group companies and other affiliated entities. See ‘‘Business—Loan Losses and Problem Loans—Policies with Respect to Troubled Customers’’.

Restructured Loans May Present Uncertainties for the Bank The Bank has recently announced the restructuring of a number of its loans to large borrowers, some of which include the use of debt for equity swaps. Valuation and classification of restructured loans or restructured equity positions can be difficult and may lead to additional credit costs if restructured loans are not properly classified or the restructuring plan fails. In the case of debt for equity swaps, equity securities received will be valued at fair value, which could present difficult valuation issues for the Bank and expose it to future losses. Additionally, securities received in such restructurings may be illiquid and make it more difficult for the Bank to achieve its intended reduction of its equity portfolio.

The Continuing Integration of Sakura Bank and Sumitomo Bank May Prove More Difﬁcult Than Anticipated The Bank has not completed the integration of all aspects of the former Sakura Bank and the former Sumitomo Bank. The continuing integration process will require management resources and pose operational and other risks. Although the Bank has partially completed its system integration, it may encounter unforeseen difﬁculties in the integration of its remaining systems and administrative functions. Moreover, the anticipated

12 beneﬁts from the merger may not be realized fully or may take longer to realize than expected. See ‘‘Business— Merger and Integration of Sakura Bank and Sumitomo Bank’’.

Exposure to Subsidiaries, Affiliates and Other Business Arrangements May Adversely Affect the Bank’s Financial Condition and Results of Operations The Bank operates parts of its business through subsidiaries and affiliates and has entered into various joint venture arrangements. For example, the Bank operates its investment banking business through Daiwa Securities SMBC, its consumer financing business through At-Loan Co., Ltd., and is in the process of forming an asset management joint venture. See ‘‘Business—Operations’’. It is uncertain whether the Bank will receive any benefit from its investments in these subsidiaries, affiliates and joint ventures, and the Bank may need to provide additional support to these entities in the future. Further, the Bank may lose the capital it contributed to those entities and may incur credit costs resulting from its credit exposure to these entities if they fail or do not perform as expected. Certain of these entities, including for example, the investment banking and consumer finance entities, also engage in activities that are more volatile and have a higher risk profile than the core banking business of the Bank.

Refinancing Risk Could Impair the Bank’s Financial Condition and Results of Operations Substantial amounts of the Bank’s debt obligations mature each year. See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations—Financial Condition—Funding’’ and ‘‘Business— Funding’’. The Bank depends on its ability to continue to attract deposits and to refinance its debt obligations at commercially acceptable rates, and continues to finance a certain portion of its operations with short term funds. As these obligations become due, the Bank may need to find alternative sources of financing under unstable market conditions. No assurance can be provided that sufficient funds will be available at acceptable terms, and failure to refinance these debts could adversely affect the Bank’s financial condition and results of operations. Additionally, certain of the Bank’s perpetual and subordinated debt obligations become callable during the next few fiscal years. The Bank may choose not to call some or all of these obligations due to the lack of refinancing opportunities or for other reasons. The Bank’s reputation in the capital markets could be undermined and its future financing activities could become more difficult if this were the case.

The Bank Will be Exposed to Increased Risks as it Expands its Range of Services and Products and Implements New Strategies As the Bank expands the range of its products and services beyond its traditional banking business to include other financial services, and as the sophistication of financial products, such as financial derivatives, and management systems grows, it will be exposed to new and increasingly complex risks. In some cases, these risks will be of a type with which the Bank has no or only limited prior experience. As a result, the Bank’s risk management systems may prove to be inadequate, and may not work in all cases or to the degree required. For example, as the Bank implements its plan to expand its consumer finance lending business, which is generally considered to be a risky line of business, losses may be incurred. Consequently, the Bank remains subject to substantial market, credit and other risks in relation to these expanding products and services and trading activities, including its derivatives business, which could result in significant losses. In addition, the Bank’s efforts to offer new services and products may not succeed if market opportunities develop more slowly than expected, or if the profitability of these opportunities is undermined by competitive pressures.

Additionally, the implementation of revised lending practices and the adjustment of interest rates charged by the Bank to better reflect risk may prove more difficult than anticipated. The implementation of these strategies may face several difficulties including the following: customers may be unable to pay interest rates that reflect their risk profile, competitors may continue to provide loans that do not reflect risk premiums and to offer loans with less onerous terms and conditions and the Bank may face cultural or other resistance to the implementation of these strategies.

13 The Bank has also begun to manage its risk on an entity-wide, rather than on an individual company, basis. This strategy remains relatively untested at this time, may expose the Bank to unforeseen risk and may not be successful.

Further Declines in the Bank’s Pension Assets or Revised Actuarial Assumptions Would Reduce Results of Operations The Bank has faced in the past, and may face in the future, losses relating to its pension plans from changes in the market value of plan assets, a decline in returns on the Bank’s pension plan assets or changes in the actuarial assumptions on which the calculation of the projected pension benefit obligation is based. For example, the Bank reduced the discount rate used to measure the projected pension benefit obligation from 3.5%to 3.0% in fiscal 2001 causing an unrecognized actuarial loss. The Bank may also experience unrecognized prior service costs in the future resulting from amendments to the plans. Changes in the interest rate environment and other factors may also adversely affect the amount of the unfunded pension obligation and the resulting annual amortization expense. Additionally, no assurance can be provided that the assumptions for the computation of future pension expenses will remain constant.

Currency Risk Could Negatively Impact the Bank’s Financial Condition and Results of Operations The Japanese yen has substantially weakened relative to the U.S. dollar over the last several years. There can be no assurance that a further substantial weakening of the yen against the U.S. dollar or an increasing volatility of the foreign exchange rates of the yen will not have an adverse effect on the Japanese economy and the Bank’s ﬁnancial condition or results of operations.

Tokyo Regional Bank Tax and Other Similar Taxes May Hurt the Bank’s Financial Condition and Results of Operations On March 30, 2000, the Tokyo Metropolitan Government legislated an ordinance to introduce regional bank taxes based on banks’ gross banking profit for five years. The Bank recognized ¥36.7 billion (subject to adjustment) in expense relating to the Tokyo regional bank tax since its inception. On March 26, 2002 the Tokyo District Court adjudicated that the regional bank tax ordinance of the Tokyo Metropolitan Government was founded on a misapplication of local tax law and is therefore invalid. However, on March 29, 2002, the Tokyo Metropolitan Government appealed to the High Court, and there is no assurance that the judgment of the District Court will not be reversed. The Osaka Prefecture has also introduced a similar bank tax which, if determined to be valid and if enforced, would adversely affect the profitability and financial health of the Bank. The introduction of other regional bank taxes similar to those introduced in Tokyo and Osaka, if determined to be valid and if enforced, would adversely affect the Bank. See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview—Regional Bank Taxes’’.

Changes in the Japanese Government’s Policy on Deposit Insurance and Other Regulatory Initiatives Could Hurt the Bank In April 2002, the Japanese government ceased to insure ﬁxed deposits over ¥10,000,000 and in April 2003 it will do the same for ordinary deposits. No assurance can be provided that these actions will not prompt the Bank’s customers to transfer their deposits to institutions with lower perceived credit and other risk, which could result in a reduction in deposits, higher funding costs and liquidity problems. The Notes are not covered by deposit insurance.

Other changes in the regulatory environment and new regulatory initiatives, such as new regulations designed to prevent money laundering or related to environmental matters, may also negatively impact the Bank’s results of operations and ﬁnancial condition. See ‘‘Supervision and Regulation’’.

14 Risks Related to the Industry

The Instability of the Japanese Financial System May Hurt the Bank’s Financial Condition and Results of Operations Sluggish economic conditions in Japan in recent years have had significantly adverse effects on Japanese financial institutions, including commercial banks. As a result of severe and protracted declines in market prices of Japanese real estate and equity securities, an increasing number of bankruptcies and continuing deflation, Japanese financial institutions have been experiencing difficulties with nonaccrual loans and asset devaluations. These difficulties have caused the failure of certain Japanese banks, insurance companies and other financial institutions. Changes in the regulatory environment, such as the introduction of limits to the deposit insurance system and the removal of regulatory barriers between different sectors of the financial industry, have also increased the competition facing financial institutions. These problems have led, and may lead in the future, to severe liquidity and solvency problems and may result in the liquidation or restructuring of certain financial institutions. The Japanese Government has undertaken various measures in the past to support these institutions or otherwise to maintain depositor confidence generally. Certain of these measures have involved the use of public funds. For example, the Japanese Government effectively nationalized The Long Term Credit Bank and The Nippon Credit Bank in 1999 to insure that the interests of their creditors were protected. It is uncertain whether the Japanese Government would undertake a similar restructuring or what measures it would undertake if faced with the probable failure of a major Japanese financial institution. In particular, in light of recent government policy changes, including a reduction in deposit insurance coverage, there can be no assurance that depositors or other creditors would be protected in such a situation. Furthermore, no assurance can be provided that the Japanese Government will not request one or more financial institutions either to provide financial and other assistance to support distressed financial institutions or to directly or indirectly acquire some portion of the problem loans or other assets of such institutions. All of these measures may adversely affect the Bank.

The Bank Competes in the Highly Competitive Financial Services Industry Recent regulatory changes have subjected the Bank to significant competition from other Japanese banks, branches of international banks and financial institutions other than banks. Many of these banks and other institutions compete for substantially the same business as the Bank. Substantial restructuring of the Japanese banking industry has recently taken place, including deregulation, which is expected to substantially further increase competition in the Japanese financial services. As a consequence, there are now four highly competitive major banking groups in Japan, including the Bank. In addition, recent regulatory changes permit various financial and other institutions to enter into business sectors formerly reserved for Japanese banks. For example, Sony Corporation, an electronics manufacturer, and Ito-Yokado Co. Ltd., a supermarket operator, have recently begun to offer specialized banking services. The Bank also faces competition from governmental lending agencies such as the Japan Finance for Small Business, National Life Finance Corporation, Japan Finance Corporation for Municipal Enterprises and the Government Housing Loan companies. Legislation is also being considered that would privatize the Postal Saving Bank which may increase competition in the financial services industry. Increased competition may have an adverse effect on the Bank’s financial condition or results of operations.

Return of the ‘‘Japan Premium’’ or New Limitations on Credit Extended to Japanese Banks Could Adversely Affect the Bank As a result of concerns regarding asset quality and the failure of several large Japanese financial institutions, a so-called ‘‘Japan premium’’ had been imposed on Japanese financial institutions in the past. The ‘‘Japan premium’’ refers to the additional risk premium that Japanese financial institutions (including the Bank) and their affiliates were required to pay to borrow short-term, interbank funds in international markets compared with their U.S. and European counterparts. There can be no assurance that a ‘‘Japan premium’’ will not be imposed again or that international lenders will not implement other limitations on the credit that they are willing to extend to Japanese banks, including the Bank.

15 Risks Related to the Offering

Subordination of the Notes Could Hinder Investors’ Ability to Receive Payment Upon the occurrence of a Subordination Event (as deﬁned herein), any amounts payable under the Notes (except for such amounts as shall have become due and payable, other than solely by way of acceleration, prior to the date on which a Subordination Event shall have occurred) will be subordinated and subject in right of payment in full to the prior payment of all Senior Indebtedness (as deﬁned herein) of the Branch and the Bank. The Bank and the Branch expect from time to time to incur additional indebtedness and other obligations that will constitute Senior Indebtedness and the Indenture does not contain any provisions restricting their ability to incur Senior Indebtedness. See ‘‘Description of Notes’’.

The Market for the Notes Offered by this Offering Circular May have Limited Liquidity No market for the Notes currently exists and no assurances can be provided that an adequate trading market will develop or will be sustained. While Goldman Sachs and Morgan Stanley currently intend to make a market for the Notes, neither is obligated to do so and each may discontinue such market-making activities at any time.

The Ratings of the Notes Could be Lowered The Bank’s long-term senior debt securities have been assigned a credit rating of BBB with a negative outlook by Standard & Poor’s Corporation and A3 with a negative outlook by Moody’s Investor Service, Inc. Based on these ratings, the Notes have received a provisional rating of BBB- from S&P and a provisional rating of Baa1 from Moody’s. A downgrade in the ratings to non-investment grade could reduce the population of potential investors in the Notes and adversely affect the price of the Notes. In addition, Moody’s has placed the Bank’s ﬁnancial strength, junior subordinated debt, and preferred securities ratings on review for possible downgrade. Currently, the Bank’s ﬁnancial strength rating is E+ and the junior subordinated debt and preferred securities are both rated Baa1. Ratings are based upon information furnished by the Bank or obtained by the rating organization from other sources and are subject to revision, suspension or withdrawal by the rating organization at any time.

16 THE BANK

General

Sumitomo Mitsui Banking Corporation (Kabushiki Kaisha Mitsui Sumitomo Ginko) is a joint stock corporation with limited liability (kabushiki kaisha) incorporated in Japan under the Commercial Code for an indeﬁnite duration. The head ofﬁce of the Bank is located at 1-2, Yurakucho 1-chome, Chiyoda-ku, Tokyo, Japan. The Bank’s shares of common stock are listed on the Tokyo Stock Exchange, the Osaka Securities Exchange, the Nagoya Stock Exchange, the Sapporo Securities Exchange and the London Stock Exchange.

The Bank is one of the world’s leading commercial banks, with approximately ¥102,083 billion, or $766,098 million, in total assets at March 31, 2002, ranking it as one of the largest banking organizations in the world in terms of total assets. The Bank provides a comprehensive range of wholesale and retail banking services, both in Japan and internationally. Through its head office and branch network in Japan and overseas, it accepts deposits from, and makes loans and extends guarantees to, corporations, individuals, governments and governmental entities. The Bank also underwrites and deals in bonds issued by or under the guarantee of the Japanese government and local government authorities, and acts in various administrative and advisory capacities for certain types of corporate and government bonds. Internationally, the Bank operates through a network of branches and representative offices, as well as through subsidiaries and affiliates, to provide a wide range of banking and financial services to its clients.

On April 1, 2001, Sakura Bank and Sumitomo Bank merged to form the Bank. See ‘‘Business—Merger and Integration of Sakura Bank and Sumitomo Bank’’.

The Sumitomo Group and the Mitsui Group

The Bank is a member of the Sumitomo Group and the Mitsui Group which have evolved for over 400 years and 300 years, respectively. The relationship of the companies in the Sumitomo Group and the Mitsui Group, like that of companies in other major Japanese corporate groups, is one of cooperation in areas of common interest within a group of publicly-owned companies, each operating independently under separate management.

The New York Branch

Since April 1977, Sumitomo Bank has been licensed by the Superintendent of Banks of the State of New York to operate a branch in New York State. Prior to that time, Sumitomo Bank operated an agency in New York under a license initially granted in 1952. Sakura Bank had been licensed by the Superintendent of Banks of the State of New York to operate a branch in New York State since September 1956. As part of the merger of Sakura Bank and Sumitomo Bank, the New York branch of Sakura Bank was closed. The Bank conducts an extensive banking business through its New York Branch, concentrating primarily on wholesale commercial banking transactions and servicing the financial needs of its customers in the United States. As of March 31, 2002, total assets of the Branch were approximately $30.5 billion. Total assets include customers’ liabilities under acceptances, guarantees and letters of credit, which represent in the aggregate approximately $3.9 billion and which, under Japanese GAAP, are treated as assets in an amount equal to the Bank’s liabilities under such acceptances, guarantees and letters of credit (in contrast to U.S. GAAP under which guarantees and letters of credit are disclosed in notes to the financial statements). See ‘‘Summary of Significant Differences Between Japanese GAAP and U.S. GAAP’’. The address of the Branch is 277 Park Avenue, New York, NY 10172. The Branch is not required to be, and is not, a member of the U.S. Federal Deposit Insurance Corporation, and deposits of the Branch are not insured by the U.S. Federal Deposit Insurance Corporation or any other governmental agency. In addition to the Branch, the Bank has branches in Los Angeles and San Francisco and a representative office in Seattle, and conducts other operations in the United States either directly or through subsidiaries. The Bank’s Chicago Branch was closed on April 1, 2002.

17 USE OF PROCEEDS

The aggregate net proceeds from the offering of the Notes, after deducting the underwriters’ discounts, are expected to be approximately $744,442,500 (before deducting expenses payable by the Branch and the Bank). The Branch and the Bank intend to use the net proceeds from the sale of the Notes for general corporate purposes.

PRINCIPAL STOCKHOLDERS

The ten largest stockholders of the Bank, as appearing on its register of ordinary stockholders and register of beneﬁcial ordinary stockholders as of March 31, 2002, were as follows:

Percentage Number of of Shares Name Shares Held Outstanding (in thousands) Sumitomo Life Insurance Company ...... 228,378 4.00% Japan Trustee Service Bank, Ltd. (Trust Account) ...... 210,918 3.69 Nippon Life Insurance Company ...... 204,364 3.57 The Mitsubishi Trust and Banking Corporation (Trust Account) ...... 184,993 3.24 The Taiyo Mutual Life Insurance Company ...... 122,109 2.13 UFJ Trust Bank Limited (Trust Account A) ...... 107,002 1.87 Matsushita Electric Industrial Company Limited ...... 103,570 1.81 Mitsui Mutual Life Insurance Company ...... 76,651 1.34 The Chase Manhattan Bank, N.A. London ...... 67,979 1.19 Sanyo Electric Company Limited ...... 64,113 1.12

As of March 31, 2002, the Directors and Statutory Auditors of the Bank together owned 403,468 ordinary shares, representing less than 0.01%of the total number of ordinary shares then outstanding.

As of March 31, 2002, the Resolution and Collection Corporation, a wholly-owned entity of the Japanese Government, held all of the 67 million First Series Type 1 Preferred Shares, 100 million Second Series Type 1 Preferred Shares and 800 million Type 5 Preferred Shares that were outstanding.

EXCHANGE RATES

The Bank maintains its accounts in yen. The following table sets forth, for the periods indicated, the median exchange rates for buying and selling spot dollars by telegraphic transfer against yen as determined by the Bank.

Period Year ended March 31, High Low End (yen per dollar) 1998 ...... ¥134.10 ¥112.00 ¥132.10 1999 ...... 146.40 109.75 120.55 2000 ...... 124.40 101.55 106.15 2001 ...... 123.90 104.30 123.90 2002 ...... 134.10 116.55 133.25 April 1, 2002 through June 17, 2002 ...... 133.20 123.50 124.25

These exchange rates are reference rates and are not necessarily the rates used to calculate ratios nor the rates used to convert yen to U.S. dollars in the ﬁnancial statements herein.

18 NON-CONSOLIDATED CAPITALIZATION

The following table, which should be read in conjunction with the non-consolidated ﬁnancial statements of the Bank included elsewhere in this offering circular, sets forth the non-consolidated capitalization of the Bank as of March 31, 2002. Except as disclosed below, there has been no material change in the non-consolidated capitalization, indebtedness, contingent liabilities or guarantees since March 31, 2002. The amounts presented below are not adjusted to reﬂect this offering.

As of March 31, 2002 (millions of (millions of yen) U.S. dollars) Liabilities(1): Deposits ...... ¥67,629,353 $507,537 Convertible bonds ...... 1,106 8 Subordinated borrowings ...... 3,050,790 22,895 Subordinated bonds(2) ...... 625,854 4,697

Reserves: Reserve for possible loan losses(3) ...... — — Reserve for employee bonuses ...... 11,342 85 Reserve for employee retirement beneﬁts ...... 116,854 877 Reserve for possible losses on loans sold ...... 80,576 605 Other reserves ...... 18 0 Other liabilities(4)(5) ...... 27,370,192 205,405 Total liabilities(6) ...... 98,886,088 742,109 Stockholders’ equity: Preferred stock: Authorized—970,000,000 shares; issued and outstanding—967,000,000 fully paid shares ...... 650,500 4,882 Common stock: Authorized—15,000,000,000 shares; issued and outstanding—5,708,989,836 fully paid shares ...... 676,246 5,075 Capital surplus ...... 1,326,758 9,957 Land revaluation excess ...... 100,346 753 Retained earnings ...... 740,874 5,560 Net unrealized losses on other securities ...... (297,950) (2,236) Treasury stock ...... (283) (2) Total stockholders’ equity ...... 3,196,492 23,989 Total liabilities and stockholders’ equity ...... ¥102,082,581 $766,098

(1) Liabilities include short and long-term liabilities. (2) During the period from April 1, 2002 to June 5, 2002, the Bank issued subordinated bonds amounting to ¥5,200 million. The Bank has announced that it will issue ¥40 billion of domestic subordinated bonds in June 2002. All of the notes are unsecured and unguaranteed. (3) Reserve for possible loan losses is shown as nil, since the balance sheet format stipulated in the Banking Law Enforcement Regulation of Japan was amended to require the deduction of all assets covered by such reserve at the end of the asset section. The amount of reserve for possible loan losses deducted at the end of the asset section is ¥1,971,849 million ($14,798 million). (4) Includes ¥5,529,996 million of acceptances and guarantees. All contingent liabilities arising in connection with customers’ foreign trade and other transactions are accounted for in ‘‘Acceptances and guarantees’’. (5) As of March 31, 2002, the Bank had no contingent liabilities or guarantees except for those disclosed in (4) above.

19 (6) The Bank has no liabilities guaranteed by unafﬁliated entities. Details about the amount of certain secured/unsecured liabilities of the Bank are as follows: Millions of yen Secured Unsecured Total Call money ...... ¥1,505,000 ¥2,378,991 ¥3,883,991 Bills sold ...... 6,868,800 — 6,868,800 Payables under repurchase agreements ...... 1,100,446 — 1,100,446 Borrowed money ...... 98,128 3,308,157 3,406,286 Acceptances and guarantees ...... 45,571 5,484,424 5,529,996 Pledged money for securities lending transactions ...... 2,504,332 657,676 3,162,009 All other liabilities of the Bank are unsecured.

20 CONSOLIDATED CAPITALIZATION

The following table, which should be read in conjunction with the unaudited consolidated ﬁnancial statements of the Bank included elsewhere in this offering circular, sets forth the consolidated capitalization of the Bank as of March 31, 2002. Except as disclosed below, there has been no material change in the consolidated capitalization and indebtedness or contingent liabilities or guarantees since March 31, 2002. The amount presented below are not adjusted to reﬂect this offering.

As of March 31, 2002 (millions of (millions of yen) U.S. dollars) Liabilities(1): Deposits ...... ¥71,648,073 $537,697 Convertible bonds ...... 1,106 8 Subordinated borrowings ...... 1,001,047 7,513 Subordinated bonds(2) ...... 1,780,041 13,359 Reserves: Reserve for possible loan losses(3) ...... — — Reserve for employee bonuses ...... 21,606 162 Reserve for employee retirement beneﬁts ...... 147,972 1,110 Reserve for possible losses on loans sold ...... 86,371 648 Other reserves ...... 336 3 Other liabilities(4)(5) ...... 29,421,977 220,802 Total liabilities(6) ...... 104,108,534 781,302 Stockholders’ equity: Preferred stock: Authorized—970,000,000 shares; issued and outstanding— 967,000,000 fully paid shares ...... ¥ 650,500 $ 4,882 Common stock: Authorized—15,000,000,000 shares; issued and outstanding— 5,697,737,528 fully paid shares ...... 676,246 5,075 Capital surplus ...... 1,326,758 9,957 Land revaluation excess ...... 121,244 910 Retained earnings ...... 475,357 3,567 Net unrealized losses on other securities ...... (304,837) (2,288) Foreign currency translation adjustments ...... (15,174) (114) Treasury stock ...... (283) (2) Parent bank stock held by subsidiaries ...... (17,191) (129) Total stockholders’ equity ...... 2,912,619 21,858 Minority interests ...... 983,847 7,384 Total liabilities and stockholders’ equity ...... ¥108,005,001 $810,544

(1) Liabilities include short-term and long-term liabilities. (2) During the period from April 1, 2002 to June 5, 2002, the Bank issued subordinated bonds amounting to ¥5,200 million. The Bank has announced that it will issue ¥40 billion of domestic subordinated bonds in June 2002. All of the notes are unsecured and unguaranteed. (3) Reserve for possible loan losses is shown as nil, since the balance sheet format stipulated in the Banking Law Enforcement Regulation of Japan was amended to require the deduction of all assets covered by such reserve at the end of the asset section. The amount of reserve for possible loan losses deducted at the end of the asset section is ¥2,159,649 million ($16,208 million). (4) Includes ¥3,625,047 million of acceptances and guarantees. All contingent liabilities arising in connection with customers’ foreign trade and other transactions are accounted for in ‘‘Acceptances and guarantees’’. (5) As of March 31, 2002, the Bank had no contingent liabilities or guarantees except for those disclosed in (4) above.

21 (6) The Bank has no liabilities guaranteed by unafﬁliated entities. Details about the amount of certain secured/unsecured liabilities of the Bank are as follows: Millions of yen Secured Unsecured Total Deposits ...... ¥ 9,621 ¥71,638,451 ¥71,648,073 Call money and bills sold ...... 8,394,800 2,380,684 10,775,484 Payables under repurchase agreements ...... 1,118,531 349,972 1,468,504 Trading liabilities ...... 39,986 2,291,513 2,331,500 Borrowed money ...... 117,463 2,772,443 2,889,907 Pledged money for securities lending transactions ...... 2,517,123 657,676 3,174,799 Other liabilities ...... 10,888 2,850,781 2,861,669 Acceptances and guarantees ...... 45,571 3,579,476 3,625,047 All other liabilities of the Bank are unsecured.

22 NOTE REGARDING UNAUDITED HISTORICAL COMBINED FINANCIAL INFORMATION

This offering circular contains unaudited historical combined financial information of Sakura Bank and Sumitomo Bank as of and for the years ended March 31, 1998, 1999, 2000 and 2001. Certain financial information for Sakura Bank and Sumitomo Bank for these periods is presented on a separate bank basis in ‘‘Annex—Supplemental Financial Data’’. The unaudited historical combined financial information is derived from an arithmetic summation of amounts shown in the historical financial statements of Sakura Bank and Sumitomo Bank and includes certain merger adjustments. The merger adjustments were made on April 1, 2001 (and are therefore reflected in the Bank’s financial statements as of and for the fiscal year ended March 31, 2002) to strengthen the Bank’s post-merger financial base. They consisted of the recognition of Sakura Bank’s previously unrealized losses on securities and land and its previously unrecognized pension obligations. The Bank also reduced stockholders’ equity without charging retained earnings and recognized a deferred tax asset in connection with the recognition of the unrealized losses and the previously unrecognized pension obligations. More specifically, the Bank reduced stockholders’ equity by ¥427.0 billion in connection with the recognition of ¥485.5 billion of unrealized losses on investments and land, the increase of reserves for pension liabilities by ¥210.2 billion and the recognition of related deferred tax assets of ¥268.7 billion.

The unaudited combined historical ﬁnancial information does not eliminate cross holdings of debt or equity securities between the banks or transactions conducted between the banks during the respective periods shown. The transactions conducted between the banks were entered into on an arm’s length basis, and the Bank does not believe that the cross holdings or other transactions, including any inter-bank deposits, were signiﬁcant.

The unaudited combined historical financial information should be read in conjunction with the historical financial statements of Sakura Bank and Sumitomo Bank, including the respective notes thereto, which are included elsewhere in this offering circular. The unaudited historical combined financial information is not necessarily indicative of the combined financial position or the combined results of operations in the future or of the combined financial position or the combined results of operations which would have been realized had the merger been consummated during these periods or as of the dates for which such information is presented.

23 SELECTED NON-CONSOLIDATED FINANCIAL AND OTHER INFORMATION

The following table sets forth certain selected non-consolidated financial data for the Bank for the periods presented. The selected non-consolidated financial data as of and for the fiscal years ended March 31, 2000, 2001 and 2002 have been extracted from, and should be read in conjunction with, the non-consolidated financial statements of the Bank or Sakura Bank and Sumitomo Bank, as the case may be, as of and for such periods included elsewhere in this offering circular. The non-consolidated financial statements of Sakura Bank as of and for the years ended March 31, 2000 and 2001 included elsewhere in this offering circular are unaudited. This information should also be read in conjunction with, and is qualified in its entirety by reference to, ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’.

Years ended and as of March 31, 1998(1) 1999(1) 2000(1) 2001(1) 2002 (billions of yen, except ratios) Income Statement Data: Interest income ...... ¥ 3,661 ¥ 3,189 ¥ 2,755 ¥ 2,276 ¥ 2,193 Interest expense ...... (2,486) (2,022) (1,544) (1,036) (717) Net interest income ...... 1,175 1,166 1,211 1,240 1,476 Net fees and commissions ...... 137 115 129 151 165 Net trading income ...... 24 47 41 95 121 Net other operating income ...... 97 113 46 16 90 General and administrative expenses ...... (844) (813) (781) (712) (697) Transfer to reserves for possible loan losses .... (1,432) (1,125) (447) 38 (1,159) Other income ...... 1,198 454 989 616 113 Other expenses ...... (1,053) (1,240) (885) (1,172) (647) Income (loss) before income taxes ...... (699) (1,282) 303 273 (537) Income taxes: Current ...... (143) (27) (11) (10) (33) Deferred ...... — 560 (186) (126) 247 Net income (loss) ...... ¥ (842) ¥ (749) ¥ 106 ¥ 138 ¥ (323) Balance Sheet Data: Total assets ...... 109,727 98,740 97,649 113,727 102,083 Loans and bills discounted ...... 71,014 66,008 63,299 61,748 59,928 Securities ...... 13,706 12,897 15,894 27,060 20,443 Deposits ...... 73,771 65,967 67,572 70,730 67,629 Stockholders’ equity ...... 2,436 4,070 4,133 4,200 3,196 Average Data: Total assets ...... 112,483 104,685 97,775 102,198 105,465 Stockholders’ equity ...... 3,307 2,297 3,822 3,928 3,953 Credit Quality Data: Credit costs(2) ...... 2,254 2,096 1,131 819 1,543 Reserve for possible loan losses(3) ...... 2,301 1,789 1,569 1,096 1,972 Bankrupt Loans ...... 661 281 230 236 196 Non-accrual loans ...... 1,137 2,519 2,504 2,208 3,184 Past due loans (3 months or more) ...... 528 141 76 103 92 Restructured loans ...... 619 779 747 186 2,344 Loans for ﬁnancial assistance ...... 119 — — — —

24 Years ended and as of March 31, 1998(1) 1999(1) 2000(1) 2001(1) 2002 (billions of yen, except ratios)

Selected Ratios: Net income (loss) as a percentage of average total assets .... (0.75)%(0.72)%0.11% 0.13%(0.31)% Net income (loss) as a percentage of average stockholders’ equity ...... (25.47) (32.63) 2.77 3.51 (8.17) Net interest margin(4) ...... 1.20 1.31 1.44 1.39 1.62 Average stockholders’ equity as a percentage of average total assets ...... 2.94 2.19 3.91 3.84 3.75 Reserve for possible loan losses as a percentage of loans and bills discounted ...... 3.24 2.71 2.48 1.77 3.29 Credit costs as a percentage of period-end loans and bills discounted ...... 3.17 3.18 1.79 1.33 2.57

(1) Figures for the fiscal years ended March 31, 1998, 1999, 2000 and 2001 are prepared for Sakura Bank and Sumitomo Bank on a combined basis. See ‘‘Note Regarding Unaudited Historical Combined Financial Information’’ and, for more information regarding certain balance sheet, income statement and other financial data, see ‘‘Annex—Supplemental Financial Information’’. (2) Credit costs equal the aggregate of net additions to general reserves, direct write-offs, net additions to specific reserves, net additions to reserves for specific overseas loan losses, losses on sale of loans to CCPC, losses on financial assistance for associated companies, transfers to reserve for losses on loans sold and losses on sales of problem loans. (3) Reserves for possible loan losses include general reserves, specific reserves and reserves for specific overseas countries. (4) Net interest margin equals net interest income as a percentage of average total interest-earning assets.

25 SELECTED CONSOLIDATED FINANCIAL AND OTHER INFORMATION

The following table sets forth selected consolidated financial data for the Bank and its consolidated subsidiaries for the periods presented. The selected consolidated financial data as of and for the fiscal years ended March 31, 2000, 2001 and 2002 have been extracted from, and should be read in conjunction with, the financial statements of the Bank or Sakura Bank and Sumitomo Bank, as the case may be, and its consolidated subsidiaries as of and for such periods included elsewhere in this offering circular. The Bank’s consolidated financial statements as of and for the year ended March 31, 2002 are unaudited. See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’. This information should be read in conjunction with, and is qualified in its entirety to, ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’.

Years ended and as of March 31, 1998(1) 1999(1) 2000(1) 2001(1) 2002 (billions of yen, except ratios) Income Statement Data: Interest income ...... ¥ 3,754 ¥ 3,335 ¥ 2,927 ¥ 2,436 ¥ 2,177 Interest expense ...... (2,476) (2,076) (1,620) (1,112) (727) Net interest income ...... 1,278 1,259 1,307 1,324 1,450 Net fees and commissions ...... 169 294 266 316 320 Net trading income (loss) ...... (2) 49 63 109 129 Net other operating income ...... 70 213 111 89 179 General and administrative expenses ...... (938) (1,041) (954) (941) (936) Transfer to reserves for possible loan losses . . . (1,457) (1,124) (469) (49) (1,204) Other income ...... 1,255 456 1,099 892 270 Other expenses ...... (945) (1,572) (1,080) (1,335) (812) Income (loss) before income taxes and minority interests ...... (569) (1,465) 343 406 (604) Income taxes ...... (162) (54) (59) (66) (102) Deferred taxes ...... 397 460 (171) (198) 289 Minority interests ...... (5) 11 11 (9) (47) Net income (loss) ...... ¥ (340) ¥ (1,048) ¥ 124 ¥ 132 ¥ (464) Balance Sheet Data(2): Total assets ...... 117,530 103,989 102,263 119,243 108,005 Loans and bills discounted ...... 72,911 68,553 65,274 65,537 63,646 Securities ...... 13,543 12,908 15,898 27,312 20,695 Deposits ...... 75,401 67,277 68,970 74,696 71,648 Stockholders’ equity ...... 3,398 3,932 4,013 4,013 2,913 Credit Quality Data: Credit costs(3) ...... —(4) —(4) 1,260 993 1,703 Reserve for possible loan losses(5) ...... 2,343 1,935 1,633 1,269 2,160 Bankrupt Loans ...... —(4) 378 264 273 227 Non-accrual loans ...... —(4) 2,955 2,937 2,578 3,600 Past due loans (3 months or more) ...... —(4) 255 119 126 103 Restructured loans ...... —(4) 520 546 280 2,554 Risk-Adjusted Capital Data: Tier I capital ...... 3,660 4,577 4,645 4,755 3,719 Total qualifying capital ...... 7,203 8,403 8,449 7,984 7,061 Total risk-adjusted assets ...... 78,433 72,483 70,198 71,817 67,548 Tier I risk-adjusted capital ratio ...... 4.66%6.31%6.61%6.62%5.50% Total risk-adjusted capital ratio ...... 9.18 11.59 12.03 11.11 10.45

26 (2) The Bank is not required to maintain records in Japan which would enable it to determine averages and related ratios on a consolidated basis and therefore such information is not included herein. Accordingly, the balance sheet data included herein has been prepared on a year-end basis only. (3) Credit costs equal the aggregate of net additions to general reserves, direct write-offs, net additions to specific reserves, net additions to reserves for specific overseas loan losses, losses on sale of loans to CCPC, losses on financial assistance for associated companies, transfers to reserve for losses on loans sold and losses on sales of problem loans. (4) This information was not required on a consolidated basis for this period. Accordingly, this information is unavailable. (5) Reserves for possible loan losses include general reserves, specific reserves and reserves for specific overseas countries.

27 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with ‘‘Note Regarding Unaudited Historical Combined Financial Information’’, ‘‘Selected Non-Consolidated Financial and Other Information’’, ‘‘Selected Consolidated Financial and Other Information’’, ‘‘Annex—Supplemental Financial Information’’ and the financial statements and notes to those financial statements included elsewhere in this offering circular. The Bank’s financial statements are prepared in accordance with Japanese GAAP, which differs in certain significant respects from U.S. GAAP. See ‘‘Summary of Significant Differences between Japanese GAAP and U.S. GAAP’’. The amounts expressed in yen that appear in the following discussion have been truncated, and some tabular amounts may not total due to this truncation. Except as otherwise indicated, the information herein is presented on a non-consolidated basis. However, as a public company in Japan, the Bank must issue and file consolidated financial statements as its basic or primary financial statements. The Bank’s consolidated financial statements as of and for the fiscal year ending March 31, 2002 have not yet been audited. However, the Bank expects its audited consolidated financial statements as of and for the fiscal year ended March 31, 2002 to be available in due course after its stockholders’ meeting which is scheduled for late June 2002. The non-consolidated financial statements of Sakura Bank as of and for the years ended March 31, 2000 and 2001 included elsewhere in this offering circular are also unaudited. Much of the financial and statistical information set forth in this offering circular, including many of the tables, is based upon the Bank’s non-consolidated financial statements. Unlike the consolidated financial statements, these non-consolidated financial statements provide, among other things, for the Bank’s investment in subsidiaries and affiliates to be carried at cost on the Bank’s balance sheets and the income or losses of these entities to be disregarded in the Bank’s statements of income (except to the extent that any such income is paid to the Bank by such subsidiaries and affiliates). See ‘‘Summary of Significant Differences between Japanese GAAP and U.S. GAAP’’.

Overview General The Japanese economy continued to face significant difficulties in fiscal 2000 and 2001. Continuing deflation and rising unemployment kept consumer spending at comparatively low levels. Major corporate failures continued in fiscal 2001, including those of MYCAL Corporation, Tokyo Life Insurance Company and Taisei Fire & Marine Insurance Co., each a multibillion dollar bankruptcy. These and other developments fueled additional debate inside the Japanese government and elsewhere about how best to stimulate the economy and resuscitate the health of the Japanese financial industry. Japan’s financial industry recently saw major banks consolidate into four major banking groups. In addition to the merger of Sakura Bank and Sumitomo Bank in April 2001, • Fuji Bank, Dai-Ichi Kangyo Bank and the Industrial Bank of Japan combined under Mizuho Holdings in September 2000 and began conducting their business under the Mizuho name after restructuring the three banks into two banks in April 2002; • The Bank of Tokyo-Mitsubishi and Mitsubishi Trust Bank combined under the Mitsubishi Tokyo Financial Group in April 2001; and • UFJ Holdings was formed in April 2001 by combining Sanwa Bank, Tokai Bank and Toyo Trust Bank, which later restructured into one bank and one trust bank in January 2002. Given the worse than expected economic environment during fiscal 2001 and an initiative by the FSA to address bad loan problems more aggressively, each of the four major banking groups incurred higher than expected credit-related expenses during such fiscal year. Since September 2001, the Bank of Japan has maintained its discount rate at 0.10%, citing the slow pace of economic recovery. In March 2001, the Bank of Japan decided to shift its focus away from adjusting the

28 uncollateralized overnight call rate to the money market by adjusting the balance of current accounts held by ﬁnancial institutions at the central bank. Since March 2001, the Bank of Japan has increased the supply of money to the ﬁnancial markets and as a result, the uncollateralized overnight call rate declined to near zero percent.

Exchange rates for yen declined during the ﬁscal year ended March 31, 2002, hitting a low of 134.10 to $1.00 on January 26, 2002 before ending the period at 133.25 to $1.00.

The Japanese securities markets suffered significant declines in fiscal 2000 and 2001. The Nikkei-225 Stock Average reached a high in fiscal 2000 of 20,833 on April 12, 2000, but declined to 11,433 on March 15, 2001 and closed the fiscal year at 12,999. In fiscal 2001, the average further declined to a low of 9,420 on February 6, 2002 before recovering to 11,024 on March 29, 2002. One factor particular to the Japanese market is the large proportion of cross share holdings. Given the weakening of traditional Japanese ties as many corporations restructure, as well as recent accounting changes requiring companies to mark their securities portfolios to market, the unwinding and potential further unwinding of these cross share holdings is believed to be negatively affecting share prices generally. In response to these developments, the Japanese government established Banks Shareholdings Purchase Corp. in January 2002 to mitigate the downward pressure on securities’ prices resulting from the unwinding of these cross share holdings. See ‘‘Supervision and Regulation’’.

Merger and Integration of Sakura Bank and Sumitomo Bank On April 1, 2001, Sakura Bank and Sumitomo Bank merged to form the Bank. Each share of Sakura Bank’s common stock outstanding on that date was exchanged for 0.6 Sumitomo Bank shares while Sakura Bank’s preference shares were exchanged for Sumitomo Bank preference shares on a one-for-one basis. Sumitomo Bank then changed its name to Sumitomo Mitsui Banking Corporation.

The merger was accounted for in accordance with the Japanese Commercial Code, one source of generally accepted accounting principles in Japan. The surviving entity in a merger accounted for under Japanese GAAP generally records the assets and liabilities of the merged entity at their respective book values and the results of operations of the two entities are combined prospectively from the consummation date of the merger. At the time of the merger, in order to strengthen the Bank’s post-merger financial base, the Bank recognized Sakura Bank’s previously unrealized losses on securities and land and its unrecognized pension obligations. The Bank also reduced stockholders’ equity without charging retained earnings and recognized a deferred tax asset in connection with the recognition of the unrealized losses and the previously unrecognized pension obligations. More specifically, the Bank reduced stockholders’ equity by ¥427.0 billion in connection with the recognition of ¥485.5 billion of unrealized losses on investments and land, the increase of reserves for pension liabilities by ¥210.2 billion and the recognition of related deferred tax assets of ¥268.7 billion. The merger adjustments were made on April 1, 2001 and are therefore reflected in the fiscal 2001 financial statements.

The integration of the related group companies has been mostly completed and full systems integration is expected to be completed during the fall of 2002. Merger-related information technology investment is expected to continue through March 31, 2003.

Reduction of Equity Securities Investment Portfolio One of the Bank’s financial goals is to significantly reduce its holdings of investment securities, particularly listed Japanese equities. See ‘‘Business—Strategy’’. As of March 31, 2002, the Bank held equity investment securities with a book value of ¥6.3 trillion. In accordance with Japanese banking regulations, the Bank is required to reduce its equity investment portfolio to an amount that does not exceed its Tier I capital by September 30, 2004. The Bank’s ability to achieve this financial goal is subject to many factors beyond its control, including stock market conditions, sensitivities of cross share holdings and changes in legislation. See ‘‘Risk Factors—Market Risks Affecting the Bank’s Equity Portfolio Could Impair the Bank’s Financial Condition and Results of Operations’’.

29 Asset Quality The continuing weak economic conditions in Japan have further affected the Bank’s asset quality. Credit costs increased by 88.3%in fiscal 2001 to ¥1.54 trillion, which included the recognition of ¥1.24 trillion in credit costs in the second half of the fiscal year. Non-performing loans increased substantially during fiscal 2001 as a result of credit deterioration as well as a stricter application of loan classification criteria during the second half of fiscal 2001. Reserve ratios were also significantly increased in fiscal 2001.

Regional Bank Taxes Since April 2000, the Tokyo Metropolitan Government has been imposing an enterprise tax of 3%based on the gross domestic banking profits of banks operating within its jurisdiction. The introduction of this enterprise tax, which is scheduled to apply for a period of five years, resulted in a significant reduction in deferred tax assets for each of Sakura Bank and Sumitomo Bank in fiscal 1999. The tax has been paid and reported as other expense and must be paid even if the bank reports no taxable income.

In June 2000, the Osaka Prefectural Government adopted a similar tax on banks operating in Osaka with deposits and negotiable certificates of deposit of ¥5.0 trillion or more. The effect of the adoption of this enterprise tax was an additional one-time decrease in the value of deferred tax assets for each of Sakura Bank and Sumitomo Bank in fiscal 2000. The Osaka tax is also scheduled to apply for a period of five years, after which banks would revert to paying local enterprise taxes based on pre-tax profits.

The Bank recognized total regional bank tax expense of ¥30.0 billion in ﬁscal 2001. It has instituted litigation challenging the validity of these taxes and to recover the amounts paid. Although the Bank was successful in the Tokyo District Court, the Tokyo Metropolitan Government has appealed this decision. The litigation may be costly and require management attention, and no assurances can be provided that the Bank will be successful.

Changes in Accounting Standards Accounting for securities. New mark to market accounting rules for investment in securities have been applicable to the Bank’s ﬁnancial statement reporting requirements beginning with the six-month period ended September 30, 2000. The Bank categorizes its securities portfolio into the following four categories: • held-to-maturity securities; • trading securities; • investments in subsidiaries and afﬁliates; and • other securities (includes securities with a readily ascertainable market value and those without such a value).

Held-to-maturity securities are carried at amortized cost. Impairments on these investments are recognized in the income statement in accordance with internal self-assessment guidelines for assets.

Trading securities are marked to market with resulting gains and losses recognized in the income statement.

Investments in subsidiaries and afﬁliates are carried at cost, using the moving-average method.

Effective April 1, 2001, other securities that have a readily ascertainable market value are carried at fair value and other securities that do not have such value are carried at cost or amortized cost. Net unrealized gains (losses) on other securities are recognized, net of applicable income taxes, as a separate component of stockholders’ equity.

30 Other securities with a readily ascertainable market value that experience unrecoverable declines in market value are considered impaired and losses on the devaluation are recognized. Unrecoverable declines are determined in relation to the classification of the issuer of the security based on the self-assessment criteria used for assets. If the issuer would be classified as potentially bankrupt or lower, any decline in market value is considered an unrecoverable decline. Declines in market value of 30%or more for issuers requiring caution and declines of 50%or more for issuers that would be considered normal borrowers are also considered unrecoverable declines. All other losses on devaluation on an after-tax basis are included in Net unrealized gains (losses) on other securities in stockholders’ equity. Prior to implementation of these standards in April 2001, although trading account securities were marked to market, other equity securities and debt securities were revalued only if the value of these securities decreased substantially, and the revaluation loss, when recorded, was recognized as other expenses and did not directly impact shareholders’ equity. Reserve for employee retirement benefits. Effective April 1, 2000, a new accounting principle for employee severance and retirement benefits was adopted in Japan. Under the new principle, reserves for employee retirement benefits are recorded based on actuarial computations. Prior service cost and unrecognized net actuarial gain or loss is amortized on a straight line basis over ten years. Unrecognized net transition obligation related to the change in accounting principle is amortized on a straight line basis over 15 years or less. The Bank amortizes its obligation over five years. Derivative financial instruments and hedge accounting. From April 1, 2000, Sakura Bank and Sumitomo Bank have changed their respective methodologies for accounting for derivative financial instruments (except for trading purpose transactions). The new standard provides that: • all derivative financial instruments are valued at fair value (except for certain interest rate swaps), in contrast with just those entered into for trading purposes as was the case under the previous standard. Unrealized gains and losses are recorded in the current year’s earnings, except that transactions for hedging purposes are accounted for using the deferral method of accounting. • the determination of whether a transaction is entered into for hedging purposes is made pursuant to guidelines issued by the Japanese Institute of Certified Public Accountants. Gains or losses from transactions not entered into for hedging purposes are now recorded in other operating income or expense rather than net interest income. The amount included in other operating income or expense for non-hedging transactions, as well as that included in interest income or expense for hedging transactions, is shown on a net basis. In previous periods, gains and losses on all such transactions were presented separately on a gross basis in other interest income and other interest expenses. Losses on redemption of bonds included in securities. From April 1, 2000, a new accounting standard required Sakura Bank and Sumitomo Bank to amortize premium or accumulate discount paid over or under the principal amount of bonds. These amortized or accumulated amounts are included in net interest income.

Critical Accounting Policies The Bank makes estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses as well as the disclosure of contingent liabilities as of the date of the financial statements. Actual results may differ from those estimates. The Bank has identified the following accounting policies as critical to an understanding of the Bank’s business since the application of these policies requires significant management assumptions and estimates that could result in the reporting of materially different amounts if such assumptions and estimates prove to be unwarranted.

Reserve for Possible Loan Losses The Bank maintains a reserve for possible loan losses for exposures in its portfolio that represents the estimate of probable losses in the loan portfolio. Determining the reserve for possible loan losses requires signiﬁcant management judgment and the use of estimates including the ongoing risk assessment of customers’

31 ability to pay and/or the fair value of underlying collateral. If actual events prove the estimates and assumptions used in determining the reserve for possible loan losses incorrect, the Bank may need to make additional provisions for loan losses. See ‘‘Business—Loan Losses and Problem Loans’’.

Impairment of Investments The Bank recognizes an impairment loss for other securities that have a readily ascertainable market value when their market value suffers an unrecoverable decline that is not considered temporary. See ‘‘—Overview— Changes in Accounting Standards—Accounting for securities’’. The Bank recognizes impairments semiannually on its debt securities classified as held to maturity, other securities that do not have a readily ascertainable market value and investments in subsidiaries and affiliates in accordance with its internal rules for the self-assessment of assets. Future impairment charges may be required if triggering events occur, such as worsening market conditions or downgrades in credit ratings and breach of covenants in the case of debt securities, suggesting the deterioration in an investment’s future economic benefit. The amount of these impairments may be a matter of significant judgment.

Deferred Tax Assets The Bank recognizes deferred tax assets and liabilities for the estimated future tax effects of temporary differences, net operating loss carryforwards and tax credits. Deferred tax assets are recognized based on the tax planning strategy authorized by the Bank’s management. In the process of determining the amount of net deferred tax assets to be recognized on the balance sheet, the Bank makes certain estimates and assumptions, including, in particular, an estimation of taxable income for the next ﬁve years. If it is later determined not probable that such projected taxable income will be realized, the Bank will provide a valuation allowance for deferred tax assets to reﬂect this, and a corresponding amount of income tax expense will be recognized in the period.

Fair Value Estimates Quoted market prices in active markets are the most reliable measure of fair value. However, quoted market prices for certain instruments, investments and activities, such as non-exchange traded contracts and equity investments in non-public securities, are usually not available. In these cases, the determination of fair value requires the Bank to make estimates and certain assumptions. The Bank estimates the fair value by relying on various methods, such as the discounted cash ﬂow method, to make these determinations. However, these methods themselves require the use of estimates and assumptions which may differ from actual results.

Hedge Accounting Over the entire life of an effective hedging instrument, changes in the fair value or cash flows of the hedged item can be expected to be almost fully offset by changes in the fair value or cash flows of the hedging instrument, so the net impact on profit over time is relatively small. However, if the hedged item is one that would normally not be recorded at fair value (for instance if it is held at cost less impairment), but the hedging instrument is of a sort that would normally be accounted for at fair value, there could be substantial differences in the profit and loss effect for the two items during specific accounting periods, although over the whole life of the instrument these differences would be expected to balance out. Applying hedge accounting means that changes in the fair values of designated hedging instruments affect reported net profit in a period only to the extent that each hedge is ineffective. If the Bank did not apply hedge accounting, the entire change in fair value of the designated hedging instrument in each individual reporting period would be reported in net income for that period regardless of the economic effectiveness of the hedge. For fiscal 2001, this would have resulted in a pre-tax gain of ¥93 billion. The Bank believes that not applying hedge accounting could lead to misinterpretations of its results and financial position since hedging transactions could have a material impact on reported net profit in a particular period, although over the total life of a hedge the net effect of the two treatments is identical.

32 Operating Results The following table presents certain information as to the Bank’s income, expenses and net income for each of the three ﬁscal years ended March 31, 2000, 2001 and 2002:

Years ended March 31, 2000(1) 2001(1) 2002 (millions of yen) Interest income ...... ¥ 2,755,397 ¥ 2,275,679 ¥ 2,192,961 Interest expenses ...... (1,544,241) (1,035,641) (716,677) Net interest income ...... 1,211,156 1,240,038 1,476,284 Fees and commissions (income) ...... 209,121 231,780 239,645 Fees and commissions (expenses) ...... (79,747) (81,087) (74,373) Net fees and commissions ...... 129,374 150,693 165,272 Trading income ...... 42,725 95,385 121,414 Trading expenses ...... (1,356) — (125) Net trading income ...... 41,369 95,385 121,289 Other operating income ...... 119,026 73,476 150,886 Other operating expenses ...... (73,322) (57,082) (60,445) Net other operating income ...... 45,704 16,394 90,440 Other income ...... 989,002 616,346 113,281 Other expenses ...... (885,406) (1,171,830) (647,482) General and administrative expenses ...... (781,208) (711,987) (696,775) Transfer to reserve for possible loan losses ...... (447,417) 38,075 (1,158,947) Income (loss) before income taxes ...... 302,569 273,111 (536,637) Income tax (expense)/beneﬁt(2) ...... (196,632) (135,273) 213,784 Net income (loss) ...... ¥ 105,935 ¥ 137,835 ¥ (322,852) Banking proﬁt (excluding transfer to general reserve for possible loan losses)(3) ...... ¥ 702,897 ¥ 803,073 ¥ 1,183,369

Net Interest Income Net interest income is determined by the amount of interest-earning assets, the difference between the rate of interest earned on interest-earning assets and the rate of interest paid on interest-bearing liabilities and the proportion of interest-earning assets ﬁnanced by non-interest bearing liabilities and equity. The Bank’s net interest income is affected by the general level of interest rates. The Bank’s interest-earning assets are generally less sensitive to interest rate changes than its interest-bearing liabilities, principally due to the difference in the average maturities of the Bank’s yen-denominated obligations and yen-denominated assets as described below. As a result, net interest income tends to increase when interest rates decline and decrease when interest rates rise. The Bank seeks to control its exposure to interest rate ﬂuctuations through market risk and asset/liability management.

33 The Bank’s net interest income in recent periods has reflected the impact of a significant decline in market rates of interest for obligations denominated in yen. The average of the new issue rates for Japanese bank certificates of deposit with maturities of from 90 to 179 days as published by the Bank of Japan was 0.064%, 0.105%and 0.097%as of March 31, 2000, 2001 and 2002, respectively. The Bank’s yen-denominated interest- bearing obligations have a shorter average maturity than its yen-denominated interest-bearing assets and therefore such obligations mature and are replaced more rapidly than such assets. Consequently, as market interest rates have declined, the Bank has incurred interest-bearing obligations at new, lower interest rates more rapidly than it has acquired new assets at lower interest rates. This has had the effect of reducing the Bank’s interest costs more rapidly than it reduced the Bank’s interest income. The Bank’s net interest income reflected this effect in fiscal 2001 and, to a lesser extent, in fiscal 2000. The difference in average maturity of the Bank’s yen-denominated obligations and yen-denominated assets may have a negative impact on net interest income if market rates of interest for obligations denominated in yen increase from current levels. In such case, the Bank’s net interest income will be adversely affected to a greater degree by the rise in short-term interest rates than long-term interest rates because the Bank’s long-term prime rate is principally based on short-term market interest rates.

The Bank’s total interest income decreased 3.6%to ¥2,192,961 million in fiscal 2001 from ¥2,275,679 million in fiscal 2000. This decrease was principally due to decreases in interest on loans and discounts and in other interest income that was only partially offset by an increase in interest and dividends on securities. Interest on loans and discounts decreased ¥250,944 million, or 16.6%, to ¥1,261,307 million in fiscal 2001 primarily as a result of decreases in loan balances in domestic and overseas offices as well as declining interest rates. Other interest income increased by 3.2%to ¥426,920 million in fiscal 2001 from ¥413,634 million in fiscal 2000. Interest and dividends on securities was ¥504,732 million in fiscal 2001 representing an increase of ¥156,556, or 45.0%, from ¥348,176 million in fiscal 2000. The increase was primarily due to increases of ¥2,198,530 million, or 12.6%and ¥1,592,485 million, or 74.1%,in average domestic and international investment balances, respectively, as well as an increase in average returns earned internationally that was only partially offset by declining average domestic returns. Interest and dividends on securities benefitted in fiscal 2001 and 2000 from relatively large dividends from SMBC Capital Markets, Inc. resulting from its sales of common stock in The Goldman Sachs Group. SMBC Capital Markets no longer owns shares in The Goldman Sachs Group and dividends are expected to normalize in the current fiscal year. See ‘‘—Consolidated Results’’.

The Bank’s total interest income decreased 17.4%to ¥2,275,679 million in fiscal 2000 from ¥2,755,397 million in fiscal 1999. This decrease was principally due to a decrease in total interest income of ¥619 billion relating to a change in accounting for interest rate swaps effective as of the beginning of fiscal 2000. Beginning in fiscal 2000, interest income on interest rate swaps is netted with interest expense whereas the two amounts were previously shown on a gross basis. This decrease was partially offset by increases in interest on loans and discounts, other interest income and interest and dividends on securities. Interest on loans and discounts increased ¥16,612 million, or 1.1%, to ¥1,512,251 million in fiscal 2000 primarily as a result of an increase in average international interest rates. Interest and dividends on securities increased ¥93,777 million, or 36.9%, to ¥348,176 million in fiscal 2000 principally due to an increase in average domestic investment balances and an increase in average international rates of return. The 58.8%decrease in other interest income to ¥413,634 million in fiscal 2000 from ¥1,005,357 million in fiscal 1999 primarily reflects an increase in the average balance of international bank deposits earning higher average rates of interest.

34 The following table sets forth information regarding the Bank’s interest income and average interest-earning assets for the past three ﬁscal years: Year ended March 31, Percentage Change 2000(1) 2001(1) 2002 2000/2001 2001/2002 (millions of yen, except percentages) Interest income ...... ¥ 2,755,397 ¥ 2,275,679 ¥ 2,192,961 (17.41)%(3.63)% Average interest-earning assets ...... 84,124,410 89,424,194 91,377,110 6.29 2.18 Loans and bills discounted ...... 65,283,195 62,824,034 60,635,599 (3.76) (3.48) Securities ...... 15,105,386 19,635,244 23,426,257 29.98 19.30 Deposits with banks ...... 2,430,365 4,989,657 4,478,651 105.30 (10.24) Other interest-earning assets ...... 1,305,464 1,975,258 2,836,601 51.30 43.60 Average rate ...... 3.27%2.54%2.39%(0.73)(0.15)

(1) Figures for the fiscal years ended March 31, 2000 and 2001 are prepared for Sakura Bank and Sumitomo Bank on a combined basis. See ‘‘Note Regarding Unaudited Historical Combined Financial Information’’ and, for more information regarding certain balance sheet, income statement and other financial data, see ‘‘Annex—Supplemental Financial Information’’. The Bank’s total interest expense decreased 30.7%to ¥716,677 million in fiscal 2001 from ¥1,035,641 million in fiscal 2000. Interest on deposits decreased ¥299,804 million, or 47.0%, to ¥337,679 million in fiscal 2001 primarily due to declines in domestic and international interest rates. The Bank’s interest rates on ordinary domestic deposits in fiscal 2001 were nearly zero percent. Interest on borrowings and rediscounts decreased ¥67,804 million, or 31.4%, to ¥147,932 million in fiscal 2001 reflecting lower balances of interbank borrowings and lower interest rates on these balances. Other interest expense increased ¥48,643 million, or 26.6%, to ¥231,064 million principally reflecting an increase in the average amount of bonds outstanding. The Bank’s total interest expenses decreased 32.9%to ¥1,035,641 million in fiscal 2000 from ¥1,544,241 million in fiscal 1999. This decrease was primarily due to a decrease in total interest expense of approximately ¥619 billion relating to a change in accounting for derivatives such as interest rate swaps. The change, effective as of the beginning of fiscal 2000, permits interest expense relating to derivative transactions that meet the criteria for hedge accounting to be netted with interest income. The following table sets forth the Bank’s interest expenses, average interest-bearing liabilities and average non-interest-bearing current deposits for the last three fiscal years: Year ended March 31, Percentage Change 2000(1) 2001(1) 2002 2000/2001 2001/2002 (millions of yen, except percentages) Interest expenses(2) ...... ¥ 1,541,387 ¥ 1,034,946 ¥ 716,448 (32.86)%(30.77)% Average interest-bearing liabilities(2) ...... 79,599,180 85,009,383 86,932,786 6.79 2.26 Deposits ...... 68,110,101 68,038,955 67,897,175 (0.10) (0.20) Other interest-bearing liabilities ...... 11,489,079 16,970,428 19,035,611 47.70 12.16 Average rate ...... 1.93%1.21%0.82%(0.72)(0.39) Average non-interest-bearing current deposits ...... ¥ 2,770,622 ¥ 2,893,838 ¥ 3,097,596 4.44%7.04%

35 operations) as compared to 1.3%in ﬁscal 2000 (allocated 1.5%to domestic operations and 0.8%to international operations.)

Net interest income in fiscal 2000 increased by 2.3%to ¥1,240,038 million from ¥1,211,156 million in fiscal 1999 as lower total interest income was more than offset by a decrease in total interest expense. Net interest income as a percentage of average interest-earning assets were 1.3%and 1.4%,respectively in fiscal 2000 and fiscal 1999 (allocated 1.5%to domestic operations and 0.8%to international operations in fiscal 2000 and allocated 1.6%to domestic operations and 0.6%to international operations in fiscal 1999).

The following table sets forth information relating to the Bank’s interest-earning assets and interest-bearing liabilities. Average balances are based on daily averages.

Year ended March 31, 2000(1) 2001(1) 2002 (millions of yen, except percentages) Domestic operations(2) Average total interest-earning assets(3) ...... ¥70,250,127 ¥73,581,868 ¥78,080,748 Interest income ...... 1,589,755 1,301,298 1,202,035 Average rate ...... 2.26%1.76%1.53% Average total interest-bearing liabilities(3) ...... ¥66,389,205 ¥70,146,084 ¥72,477,777 Interest expenses ...... 462,403 192,100 122,677 Average rate ...... 0.69%0.27%0.16% Net interest income ...... ¥ 1,127,352 ¥ 1,109,197 ¥ 1,079,358 Net interest margin(4) ...... 1.60%1.50%1.38% International operations(2) Average total interest-earning assets(3) ...... ¥14,073,832 ¥16,433,417 ¥16,683,507 Interest income ...... 1,166,141 978,265 994,778 Average rate ...... 8.28%5.95%5.96% Average total interest-bearing liabilities(3) ...... ¥13,409,523 ¥15,454,388 ¥17,842,154 Interest expenses(3) ...... 1,079,485 846,730 597,623 Average rate ...... 8.05%5.47%3.34% (5) Net interest income(3) ...... ¥ 86,656 ¥ 131,534 ¥ 397,154 Net interest margin(4) ...... 0.61%0.80%2.38% (6)

36 The following tables show changes in interest income and interest expense of the Bank allocated between changes in volume and changes in rate for the periods shown. Rate/volume variance is allocated based on the percentage relationship of changes in volume and changes in rate to the total ‘‘net change’’. Volume/rate variance is prorated according to changes in volume and rate.

Fiscal 2000(1) Versus Fiscal 1999(1) Fiscal 2001 Versus Fiscal 2000(1) Increase (Decrease) Due to Changes in Increase (Decrease) Due to Changes in Volume Rate Net Change Volume Rate Net Change (millions of yen) Interest income: Loans and bills discounted:(2) Domestic ...... ¥(31,492) ¥ 4,481 ¥ (27,011) ¥(33,749) ¥(86,803) ¥(120,552) International ...... (40,910) 81,114 40,202 (23,027) (100,713) (123,741) Total ...... 13,190 (244,296) Securities:(3) Domestic ...... 47,381 (22,459) 24,921 21,754 (29,408) (7,654) International ...... 6,670 62,183 68,853 135,949 28,261 164,210 Total ...... 93,776 156,555 Call loans:(2) Domestic ...... (10) 7 (2) 156 (113) 43 International ...... 1,102 1,533 2,635 (1,744) (4,095) (5,839) Total ...... 2,632 (5,797) Receivables under resale agreements:(4) Domestic ...... — — — 1,269 (1,526) (257) International ...... — — — 408 15 423 Total ...... — 166 Bills bought:(2) Domestic ...... 63 725 787 (372) (477) (850) International ...... 0 0 0 — — — Total ...... 787 (850) Deposits with banks:(5) Domestic ...... (1) (1) (3) 15 (19) (3) International ...... 150,425 53,951 204,377 (30,138) (98,589) (128,727) Total ...... 204,374 (128,732) Effect of a change in accounting standard(6) Domestic ...... — — (184,511) — — — International ...... — — (431,879) — — — Total ...... (618,718) — Total interest income: Domestic ...... 67,612 (171,556) (288,456) 76,258 (175,520) (99,262) International ...... 199,975 44,026 (187,875) 14,909 1,603 16,512 Total ...... ¥(479,718) ¥ (82,718)

37 Fiscal 2000 Versus Fiscal 1999(1) Fiscal 2001 Versus Fiscal 2000(1) Increase (Decrease) Due to Changes in Increase (Decrease) Due to Changes in Volume Rate Net Change Volume Rate Net Change (millions of yen) Interest expenses(2): Deposits: Domestic ...... ¥(4,341) ¥ (9,131) ¥ (13,474) ¥ 278 ¥ (36,219) ¥ (35,941) International ...... 75,672 115,330 191,004 (59,295) (183,051) (242,347) Total ...... 177,530 (278,289) Negotiable certiﬁcates of deposit: Domestic ...... 322 12,525 12,848 3,008 (22,591) (19,582) International ...... (2,619) 972 (1,647) 1,893 (3,824) (1,930) Total ...... 11,200 (21,513) Call money: Domestic ...... 1,227 4,603 5,831 (3,658) (7,725) (11,383) International ...... 3,925 653 4,580 (210) (6,326) (6,536) Total ...... 10,412 (17,921) Payables under repurchase agreements(3): Domestic ...... — — — (831) (3,663) (4,494) International ...... — — — 16,028 (1,666) 14,361 Total ...... — 9,867 Bills sold: Domestic ...... 737 1,120 1,858 2,419 (3,208) (788) International ...... 33 (6) 26 (26) (26) (53) Total ...... 1,884 (841) Commercial paper: Domestic ...... 1,149 1,783 2,933 70 (3,642) (3,572) International ...... — — — — — — Total ...... 2,933 (3,572) Borrowed money: Domestic ...... 1,271 (8,508) (7,237) (13,166) 6,179 (6,987) International ...... (12,032) 23,661 11,629 (8,602) (23,760) (32,363) Total ...... 4,391 (39,351) Bonds: Domestic ...... 13,910 (54) 13,857 12,054 (1,700) 10,354 International ...... — — — — — — Total ...... 13,857 10,354 Effect of a change in accounting standard: Domestic ...... — — (184,511) — — — International ...... — — (431,879) — — — Total ...... (618,718) — Total interest expenses: Domestic ...... 25,955 (111,745) (270,301) 6,190 (75,614) (69,423) International ...... 168,316 30,809 (232,753) 116,360 (365,468) (249,108) Total ...... ¥(506,440) ¥(318,498)

38 Market and Liquidity Risk The corporate risk management department manages the Bank’s market risk and liquidity risk together. This department is independent from the business units that conduct market transactions. The corporate risk management department generates daily risk reports and sends them electronically to senior management. The methods used to measure and model market and liquidity risks include the value at risk (VaR) method, which uses Monte Carlo simulations, and the basis point value (BVP) indicator. Additionally, the corporate risk management department performs periodic stress tests to prepare for changes in the market environment. To manage the risk in the Bank’s yen-denominated banking account, it uses gap analysis, including maturity ladders and the earnings at risk (EaR) model, as well as the VaR model. If an external factor, such as interest rates, moves in an unfavorable direction, the EaR model indicates the largest estimated change in earnings (interest rate spread) for a set period at a given probability. Since strategy and budgetary planning is based on the earnings for a period, the Bank uses the EaR model to supplement the VaR model. Using Monte Carlo simulations to generate 1,000 scenarios, the Bank tests the magnitude of the effect that new deposits and loans will have on the period’s earnings. The Bank manages liquidity risk so that it is not overly dependent on market-based funding to cover short term cash outﬂows. The Bank’s liquidity risk management is based on a framework consisting of setting limits and guidelines for funding gap, maintaining a system of highly liquid supplementary funding sources and establishing contingency plans. To attempt to prevent market crises interfering with funding, the Bank carries highly liquid assets, such as U.S. Treasury bonds, and has emergency borrowing facilities in place which also facilitates foreign currency-denominated liquidity management. See ‘‘Business—Risk Management’’.

Net Fees and Commissions The Bank’s most substantial source of fees and commissions income consists of fees from money remittance and transfers, and in recent periods this income has mainly reﬂected the development and increasing customer use of alternative banking service delivery channels, such as electronic, telephone and internet banking. The Bank’s fees and commissions income also relates to deposits and loans (such as loan commitment fees, loan agency fees and swap fees), securities transactions (such as bond trustee fees and bond recording agency fees) and guarantees and acceptances. The following table sets forth the Bank’s fees and commissions income and expenses for the last three ﬁscal years: Year ended March 31, 2000(1) 2001(1) 2002 (millions of yen) Fees and commissions (income) ...... ¥209,121 ¥231,780 ¥239,645 Deposits and loans ...... 30,851 37,272 28,805 Remittances and transfers ...... 97,174 101,639 100,509 Securities ...... 15,466 14,580 13,834 Fees and commissions (expenses) ...... (79,747) (81,087) (74,373) Remittances and transfers ...... (21,945) (22,543) (20,634) Net fees and commissions ...... 129,374 150,693 165,272

39 commissions increased by ¥1,340 million, or 1.6%, to ¥81,087 million in ﬁscal 2000. Net fees and commissions increased by ¥21,319 million, or 16.4%, to ¥150,693 million in ﬁscal 2000.

Net Trading Income The Bank reports its trading assets and liabilities, which are securities, derivatives and other capital market instruments held for short periods in anticipation of market gains, at fair value. Gains and loss on these items are included in trading profits or losses on the Bank’s statements of income. Net trading income in fiscal 2001 increased by ¥25,904 million, or 27.1%, to ¥121,289 million from ¥95,385 million in fiscal 2000 principally due to fluctuations in the value of the Japanese yen against the U.S. dollar and a further easing of monetary policy by the Bank of Japan. Net trading income in fiscal 2000 increased by ¥54,016 million, or 130.5%, to ¥95,385 million from ¥41,369 million in fiscal 1999 principally due to an increase in sales of derivative financial products.

Net Other Operating Income The Bank’s net other operating income includes net profit from bond-related operations, gains on foreign exchange operations and other items. Net profit from net gain on bond-related operations consists of gains on sales and redemptions of bonds after subtracting losses on the sale, redemption and devaluation of bonds. The Bank’s net profit from bond-related operations and gains on trading account securities fluctuate depending on a number of factors such as fluctuations in market prices of bonds and related products, the status of the Bank’s open and hedged positions in the market and the cost of managing any market exposures as well as, in the case of gains on trading account securities, the volume of, and margin in respect of, transactions. Gains on foreign exchange operations include net gains from foreign-currency transactions, gains on revaluation of foreign- currency positions at each fiscal period end, margins earned on trades for customers and gains on hedged positions in foreign-denominated transactions. Gains on foreign exchange operations fluctuate depending upon a number of factors such as the volume of, and margin earned in respect of, transactions initiated by customers and the status of the Bank’s open and hedged positions in the market and the costs of managing any market exposures. The major component of net other operating income is fees earned on securities lending and gains and losses on sales of performing loans. See ‘‘Business—Derivatives’’.

The following table sets forth the Bank’s net other operating income for the last three ﬁscal years. Year ended March 31, 2000(1) 2001(1) 2002 (millions of yen) Gains on sale of bonds ...... ¥59,220 ¥ 36,988 ¥124,773 Gains on redemption of bonds ...... 7,441 54 — Losses on sale of bonds ...... (46,829) (23,767) (50,522) Losses on redemption of bonds ...... (21,059) (2,638) (1,985) Losses on devaluation of bonds ...... (226) (1,841) (5,704) Net gains on bond-related operations ...... (1,453) 8,796 66,560 Bond issuance costs ...... (4,024) (1,928) (2,161) Gains (losses) on foreign exchange transactions ...... 50,882 (10,258) 10,439 Gains on ﬁnancial derivatives ...... — 18,389 15,110 Other (net) ...... 300 1,394 490 Net other operating income ...... ¥45,704 ¥ 16,394 ¥ 90,440

Net other operating income for fiscal 2001 was ¥90,440 million as compared to ¥16,394 million for fiscal 2000, an increase of ¥74,046 million or 451.6%. Net other operating income for fiscal 2001 consisted mainly of ¥66,560 million in net profits from bond-related operations as well as favorable foreign exchange positions. The

40 gains from the sales of bonds resulted from the continued low interest rate conditions in Japan which kept bond prices at relatively high levels. A substantial profit in fiscal 2001 was generated from transactions in JGBs and U.S. Treasury securities. These profits resulted primarily from a favorable interest rate environment in Japan and a decrease in interest rates in the United States. Similar results should not be expected in the future since less favorable market conditions are expected. In fiscal 2001, foreign exchange operations generated a gain of ¥10,439 million as compared to a loss of ¥10,258 million in fiscal 2000 due to improved results on hedged positions in foreign-denominated transactions.

Net other operating income in fiscal 2000 decreased by 64.1%to ¥16,394 million from ¥45,704 million in fiscal 1999. Gains on sales of bonds decreased by ¥22,232 million, or 37.5%, to ¥36,988 million in fiscal 2000, compared to a gain of ¥59,220 million in fiscal 1999. The decrease in gains on sales of bonds in fiscal 2000 compared to fiscal 1999 was due to a lower level of bond sales in fiscal 2000 than in fiscal 1999 notwithstanding an increase in bond prices during fiscal 2000 resulting from declining interest rates in Japan. Losses on bonds sales decreased by ¥23,062 million during fiscal 2000 as a result of decreases in the volume of bonds sales. Losses on bond redemptions decreased by ¥18,421 million during fiscal 2000 primarily due to the introduction of a new accounting method for derivative instruments which allows the Bank to treat these losses as decreases in interest on bonds if certain conditions are met. In fiscal 2000, foreign exchange operations generated losses of ¥10,258 million as compared to gains of ¥50,882 million in fiscal 1999 due to unexpected changes in foreign exchange rates that negatively affected hedged positions in foreign-denominated transactions.

General and Administrative Expenses The principal components of the Bank’s general and administrative expenses consist of salaries and related expenses, rent and lease expenses, welfare expenses, depreciation expense and taxes other than income taxes. The following table sets forth the Bank’s general and administrative expenses for the periods indicated:

Year ended March 31, 2000(1) 2001(1) 2002 (millions of yen) Salaries and related expenses ...... ¥253,178 ¥242,004 ¥223,215 Retirement beneﬁt cost ...... 46,310 31,142 31,555 Welfare expenses ...... 62,765 34,851 34,705 Depreciation expense ...... 44,435 41,988 65,577 Rent and lease expenses ...... 101,188 90,716 82,134 Building and maintenance expenses ...... 2,367 3,139 4,412 Supplies expenses ...... 10,774 10,010 9,334 Water, lighting and heating expenses ...... 8,946 8,551 7,608 Traveling expenses ...... 3,621 3,791 3,349 Communication expenses ...... 11,822 12,751 7,730 Publicity and advertising expenses ...... 6,374 6,838 5,404 Taxes, other than income taxes ...... 37,546 35,533 34,237 Other ...... 191,869 190,662 187,508 Total ...... ¥781,208 ¥711,987 ¥696,775

General and administrative expenses decreased by ¥15,212 million, or 2.1%, to ¥696,775 million in ﬁscal 2001 primarily due to the decrease in salaries and related expenses of ¥18,789 million and the decrease in communication expenses of ¥5,021 million, but was partially offset by an increase in depreciation expense of ¥23,589 million. Salaries and related expenses decreased mainly as a result of a reduction in headcount achieved by eliminating duplicative functions through the merger and a revised bonus structure.

41 General and administrative expenses decreased by ¥69,221 million, or 8.9%, to ¥711,987 million in fiscal 2000 primarily due to decreases in salaries and related expenses, retirement benefit costs, welfare expenses and rent and lease expenses of ¥11,174 million, ¥15,168 million, ¥27,914 million and ¥10,472 million, respectively. Retirement benefit costs decreased primarily as a result of the change in accounting method. See ‘‘—Overview— Changes in Accounting Standards—Reserve for employee retirement benefits’’.

Other Income and Expenses The following table sets forth below the Bank’s other income and expenses for the periods indicated: Year ended March 31, 2000(1) 2001(1) 2002 (millions of yen) Gains on sale of stock and other securities ...... ¥957,547 ¥ 496,241 ¥ 54,196 Gains on money held in trust ...... 1,953 2,141 1,810 Gains on securities contributed to employee retirement beneﬁts trust ...... — 52,902 7,715 Gains on disposition of premises and equipment ...... 2,318 2,105 4,360 Collection of written-off claims ...... 679 1,006 258 Dividends from liquidation of a subsidiary ...... — — 22,164 Write-off of loans ...... (460,731) (741,432) (283,895) Transfer to reserves for possible losses on loans sold ..... (72,765) (52,917) (37,034) Losses on sale of stock and other securities ...... (65,078) (66,761) (54,300) Losses on devaluation of stock and other securities ...... (64,019) (118,057) (130,585) Losses on money held in trust ...... (3,097) (1,223) (1,867) Losses on disposition of premises and equipment ...... (15,375) (32,639) (18,562) Amortization of unrecognized net transition obligation for employee retirement beneﬁts ...... — (56,528) (20,167) Losses on disposals of software ...... — — (2,584) Additional contribution to pension fund ...... (21,460) — — Other (net) ...... (156,372) (40,319) (75,709) Net other income (expenses) ...... ¥103,595 ¥(555,484) ¥(534,201)

Net other expenses were ¥534,201 million in fiscal 2001 due primarily to write-off of loans, losses on devaluation of stock and other securities and comparatively small gains from the sale of stock and other securities. This was a decrease of ¥21,283 million from the comparable figure in fiscal 2000. In fiscal 2000, write-offs of loans of ¥741,432 million were partially offset by gains on sale of stock and other securities in the amount of ¥496,241 million. Net other expenses increased by a total of ¥659,079 in fiscal 2000 as compared with fiscal 1999 principally reflecting a decrease in gains on sale of stock and other securities and an increase in write-offs of loans. In fiscal 2001, the Bank had a net loss on sales and devaluations of stocks and other securities of ¥130,689 million compared to a net gain of ¥311,423 million in fiscal 2000. Gains on sales of stock and other securities decreased by 89.0%to ¥54,196 million in fiscal 2001 from fiscal 2000 primarily reflecting adverse stock market performance, particularly for Japanese equities, in the second half of fiscal 2001 as well as the Bank’s policy to reduce its cross share holdings. Approximately one quarter of the Bank’s securities portfolio is comprised of equity securities, most of which are equities of Japanese listed companies. In fiscal 2000, the Bank’s net gain(loss) on sale or devaluation of stock and other securities decreased by 62.4%from ¥828,450 million in fiscal 1999 to ¥311,423 million. Gains on sale of stock and other securities declined by 48.1%, or ¥461,306 million, from fiscal 1999 to fiscal 2000.

42 Credit Costs Credit costs in fiscal 2001 were ¥1,543,078 million and were primarily comprised of transfers to specific reserves and transfers to general reserves for possible loan losses. The significant transfers to reserves for possible loan losses resulted primarily from a deterioration in asset quality and general economic conditions, as well as the Bank’s revised self-assessment which occurred in the latter part of fiscal 2001. During that time, the FSA conducted a special inspection of the Bank’s largest loans.

During fiscal 2001, the Bank faced significant loan quality problems and addressed these problems by: • increasing reserves for possible loan losses including general reserves, specific reserves and reserves relating to specific overseas loans; • directly writing-off loans; and • recognizing losses on sale of problem loans.

See ‘‘Business—Loan Losses and Problem Loans’’.

Transfers to reserves for possible loan losses amounted to ¥1,158,947 million in fiscal 2001. In fiscal 2001, write-offs of loans decreased by 61.7%to ¥283,895 million as a result of reduced amounts of debt forgiveness. Credit costs decreased by ¥311,502 million to ¥819,103 million in fiscal 2000 from the comparable figures for fiscal 1999 principally due to a decrease in transfers to specific reserves of ¥291,279 million and transfers from general reserves of ¥188,596 million in fiscal 2000 (versus transfers to general reserves of ¥24,235 million in fiscal 1999) that were partially offset by an increase of write-offs of ¥280,701 million.

Income (Loss) Before Income Taxes and Income Taxes Income (loss) before income taxes for fiscal 2001 amounted to a loss of ¥536,637 million compared to income of ¥273,111 million in fiscal 2000 and income of ¥302,569 million in fiscal 1999. Income taxes for fiscal 2001 amounted to a net benefit of ¥213,784 million, which included a deferred tax credit of ¥246,522 million, as compared to income tax expense of ¥135,273 million and ¥196,632 million in fiscal 2000 and fiscal 1999, respectively.

Consolidated Results The Bank’s consolidated financial statements include all entities that are controlled by the parent bank regardless of the percentage of the outstanding voting shares the parent bank owns. The non-consolidated financial statements provide for the parent bank’s subsidiaries and affiliates to be carried at cost on its balance sheets and the income or losses of these entities to be disregarded on its statements of income. See ‘‘Summary of Significant Differences between Japanese GAAP and U.S. GAAP’’. Consolidated results will differ at times from non-consolidated results due to timing differences arising from the recognition of profits or losses in one period by a subsidiary and the recognition by the parent bank of dividends from such subsidiary in a different period.

43 The following table sets forth selected consolidated and non-consolidated ﬁnancial data for the past three ﬁscal years:

Fiscal 1999(1) Fisca1 2000(1) Fiscal 2001(2) Non- Non- Non- Consolidated consolidated Consolidated consolidated Consolidated consolidated (billions of yen) Net interest income ...... ¥1,307 ¥ 1,211 ¥ 1,324 ¥ 1,240 ¥ 1,450 ¥ 1,476 Net fees and commissions .... 266 129 316 151 320 165 Net trading income ...... 63 41 109 95 129 121 Net other operating income . . . 111 46 89 16 179 90 Gross proﬁt ...... 1,747 1,428 1,838 1,503 2,078 1,854 General and administrative expenses ...... (954) (781) (941) (712) (936) (697) Credit costs ...... (1,260) (1,131) (993) (819) (1,703) (1,543) Gain (loss) on stocks ...... 859 828 469 311 (18) (131) Net income (loss) ...... 124 106 132 138 (464) (323)

Consolidated net loss exceeded non-consolidated net loss by ¥141.0 billion in fiscal 2001. The difference between consolidated and non-consolidated net loss in fiscal 2001 principally reflects greater gross profit of ¥224.2 billion and gains on the sale of stocks of ¥112.9 billion that were more than offset by incremental general and administrative expenses of ¥238.8 billion and credit costs of ¥160.3 billion. Consolidated gross profit exceeded non-consolidated gross profit by ¥224.2 billion primarily due to profits from subsidiaries, particularly Sumitomo Mitsui Card Company, Limited and SMBC Leasing Company, Limited, that were partially offset by intercompany dividends of approximately ¥220 billion. Consolidated gains on sales of stocks benefitted from the ¥126.9 billion gain recorded by SMBC Capital Markets, Inc. on the sale of its remaining common stock in The Goldman Sachs Group. Since SMBC Capital Markets sold its remaining common stock in The Goldman Sachs Group in fiscal 2001, no significant intercompany dividends are expected in fiscal 2002. Dividends from Daiwa Securities SMBC for fiscal 2002 are expected to be low as a result of the continued difficult operating environment it faces. Consolidated results were also negatively affected by losses from the consolidated guarantee companies, SUMIGIN GUARANTEE and SMBC Guarantee. The incremental credit costs were mainly due to credit costs from the Bank’s consolidated guarantee subsidiaries and other subsidiaries.

The difference between consolidated and non-consolidated net income in fiscal 2000 is principally due to capital gains from SMBC Capital Markets’ sale of common stock in The Goldman Sachs Group of ¥133.3 billion and income from equity method affiliates of ¥44.4 billion, partially offset by dividends from group companies of ¥60.8 billion and losses of Sumigin General Finance. The income from equity method affiliates mainly consisted of a contribution from Daiwa Securities SMBC. The dividends from group companies mainly consisted of dividends from SMBC Capital Markets resulting from the sale of the Goldman Sachs shares.

Financial Condition

Total Assets At March 31, 2002, the Bank had total assets of ¥102,082,581 million, a decrease of ¥11,644,917 million, or 10.2%, as compared to total assets at March 31, 2001. This decrease was caused primarily by a decrease in the value of the Bank’s equity securities and reductions in risk assets such as loans and an increase in the amount of loan loss reserves as a percentage of loans and discounts. This decrease was partly offset by the depreciation of the yen against the U.S. dollar and other major foreign currencies that resulted in an increase in the yen value of foreign denominated assets. At March 31, 2002, the exchange rate of the yen against the U.S. dollar used for the translation of the Bank’s ﬁnancial information (and therefore not necessarily reﬂecting market exchange

44 rates) was ¥133.25 per dollar compared to ¥123.90 per dollar at March 31, 2001. As part of the Bank’s balance sheet management, it intends to continue to reduce its risk-adjusted assets in ﬁscal 2002.

Lending At March 31, 2002, the Bank’s loans and bills discounted totaled ¥59,928,368 million, or 58.7%of total assets, which represented a decrease of ¥1,819,512 million or 2.9%, from March 31, 2001. Total loans and bills discounted at March 31, 2002 consisted of ¥53,618,414 million of domestic loans and ¥6,309,954 million of foreign loans. Foreign loans consist of loans originated in foreign branches and loans from domestic ofﬁces which are denominated in currencies other than yen or which are made to individuals and entities who are not residents of Japan. This decrease in loans and bills discounted from March 31, 2001 to March 31, 2002 was principally attributable to sluggish demand for corporate loans. Total loans and bills discounted have increased modestly since March 31, 2002.

At March 31, 2001, the Bank’s loans and bills discounted were ¥61,747,880 million, or 54.2%, of total assets, which represented a decrease of ¥1,550,632 million, or 2.4%, from March 31, 2000. Total loans and bills discounted at March 31, 2001 consisted of ¥54,617,068 million of domestic loans and ¥7,130,812 million of foreign loans. The Bank’s domestic loans decreased ¥1,510,738 million, or 2.6%, during ﬁscal 2000. The Bank’s foreign loans decreased ¥39,894 million, or 0.5%, primarily due to reduction of loans in overseas ofﬁces caused by a rise in funding costs.

The Bank’s non-accrual loans outstanding totaled ¥3,184,459 million at March 31, 2002 representing an increase of ¥976,955 million, or 44.3%, from March 31, 2001. Loans outstanding that were past due for 3 months or longer as of March 31, 2002 (other than non-accrual loans) totaled ¥92,324 million. Restructured loans outstanding totaled ¥2,344,016 million at March 31, 2002. Restructured loans are deﬁned as loans with a reduction of interest rate, extension of due date for principal and interest, forgiveness of principal, or other renegotiated terms in favor of customers with the intent of supporting or restructuring such customers, other than loans categorized as non-accrual loans or loans that are past due for 3 months or longer.

The Bank’s non-accrual loans outstanding totaled ¥2,207,504 million at March 31, 2001 representing a decrease of ¥296,281 million, or 11.8%, from March 31, 2000. Loans outstanding that were past due for 3 months or longer as of March 31, 2001 (other than non-accrual loans) totaled ¥75,598 million. The Bank’s total ‘‘restructured loans’’ outstanding were ¥747,441 million at March 31, 2001.

Loans made by the Bank to customers outside Japan in leveraged corporate transactions (generally loans made in connection with recapitalizations, acquisition transactions or other corporate restructurings to customers whose debt-to-asset ratio exceeds 75%, or 50% under certain circumstances) and, other than with respect to loans to customers in Indonesia, to speciﬁc overseas countries (as deﬁned by FSA regulations) are not material relative to the Bank’s total assets at March 31, 2002. The Bank intends to continue to participate in such loans to the extent that credit risks are deemed prudent, a satisfactory level of return is offered and the portion of the Bank’s loan portfolio attributable to such loans does not materially increase.

Securities Portfolio The Bank holds various kinds of securities in its securities portfolio besides trading assets. These securities are categorized into four categories and accounted for either under the cost method or the mark to market method. See ‘‘—Overview—Changes in Accounting Standards—Accounting for Securities’’. The Bank’s investment securities totaled ¥20,442,996 million at March 31, 2002, a decrease of ¥6,616,982 million or 24.4%, as compared to March 31, 2001. The Bank’s investment securities totaled ¥27,059,978 million at March 31, 2001, an increase of ¥11,166,132 million or 70.2%, as compared to March 31, 2000.

Net unrealized losses included in the Bank’s other securities were ¥481,654 million at March 31, 2002. These unrealized losses relate principally to marketable equity securities of Japanese issuers. The net unrealized

45 losses in the Bank’s other securities tend to track general trends in the performance of the Japanese stock markets, subject to the particular portfolio mix of the Bank’s Japanese equity securities at any given time and to other factors affecting other types of securities in the Bank’s investment portfolio. The Nikkei Stock Average closed at 11,025 as of March 31, 2002.

Inter-Bank Deposits The Bank’s deposits in other banks at March 31, 2002 were ¥3,587,308 million, a decrease of ¥1,770,746 million or 33.0%, as compared to March 31, 2001 principally due to a decrease of overseas assets and the lack of availability of higher yields on such assets.

The Bank’s deposits in other banks at March 31, 2001 were ¥5,358,054 million, an increase of ¥2,148,411 or 66.9%, as compared to March 31, 2000 principally due to an increase in international balances and the relatively higher yields that were available on these assets.

Funding At March 31, 2002, the Bank’s total liabilities were ¥98,886,088 million, a decrease of ¥10,641,471 million or 9.7%, as compared to March 31, 2001. This decrease in total liabilities resulted primarily from a decrease of ¥3,100,420 million in deposits, a decrease of ¥3,756,765 million in payables under repurchase agreements and a decrease of ¥3,847,022 million in other liabilities. Other liabilities at March 31, 2002 mainly included pledged money for securities lending transactions of ¥3,162,009 million and liabilities related to ﬁnancial derivatives of ¥887,205 million.

The amount of year-end deposit balances for fiscal 2001 decreased by ¥3,100,420 million or 4.3%to ¥67,629,353 million as compared to the year-end deposit balances for fiscal 2000. Total deposits at March 31, 2002 consisted of ¥58,568,596 million domestic yen deposits and ¥9,060,755 million international deposits. The amount of year-end deposit balances for fiscal 2000 increased by ¥3,157,287 million to ¥70,729,772 million, or 4.6%, as compared to year-end deposit balances for fiscal 1999. Total deposits at March 31, 2001 consisted of ¥57,916,540 million domestic yen deposits and ¥12,813,231 million international deposits.

Among domestic yen deposits, the Bank maintains a stable trend as to balances of large denomination time deposits due to the historically high rollover rate of its corporate customers and individual depositors. The period- end balances of time deposits, including negotiable certificates of deposit, for domestic offices at March 31, 2002 was ¥26,250,729 million, a decrease of 22.8%as compared to March 31, 2001. The period-end balances of time deposits, including negotiable certificates of deposit, for domestic offices at March 31, 2001 was ¥34,026,890 million an increase of 0.4%as compared to March 31, 2000.

A material part of the Bank’s international deposits are interbank deposits which are either short-term deposits or deposits at notice. For information about additional premiums that the Bank has been required to pay on such deposits during recent periods, see ‘‘Risk Factors—Return of the ‘Japan Premium’ or New Limitations on Credit Extended to Japanese Banks Could Adversely Affect the Bank’’.

Total deposits have increased modestly since March 31, 2002.

46 Capital Resources The table below presents information relating to the Bank’s stockholders’ equity as of March 31 in each of the last three ﬁscal years: As of March 31, 2000(1) 2001(1) 2002 (millions of yen, except percentages) Stockholders’ equity ...... ¥4,132,926 ¥4,199,937 ¥3,196,492 Stockholders’ equity as a percentage of total assets .... 4.23%3.69%3.13%

(1) Figures as of March 31, 2000 and 2001 are prepared for Sakura Bank and Sumitomo Bank on a combined basis. See ‘‘Note Regarding Unaudited Historical Combined Financial Information’’ and, for more information regarding certain balance sheet, income statement and other ﬁnancial data, see ‘‘Annex—Supplemental Financial Information’’. In connection with the April 1, 2001 merger of Sakura Bank and Sumitomo Bank, the Bank wrote-off ¥427,048 million against stockholders’ equity in connection with the recognition of ¥485,494 million of unrealized losses on investments and land, the strengthening of pension reserves by ¥210,250 million and the recognition of related deferred tax assets of ¥268,696 million. See ‘‘Note Regarding Unaudited Historical Combined Financial Information’’. The table below presents information relating to the Bank’s net unrealized gains (losses) (before taxes) with respect to securities with a readily ascertainable market value for the periods presented: As of March 31, 2000(1) 2001(1) 2002(2) (millions of yen, except percentages) Net unrealized gains (losses) ...... ¥1,564,155 ¥(429,844) ¥(481,654) Net unrealized gains (losses) as a percentage of book value of securities ...... 11.9%(1.7)%(2.6)%

(1) Figures as of March 31, 2000 and 2001 are prepared for Sakura Bank and Sumitomo Bank on a combined basis. See ‘‘Note Regarding Unaudited Historical Combined Financial Information’’ and, for more information regarding certain balance sheet, income statement and other financial data, see ‘‘Annex—Supplemental Financial Information’’. (2) Figures as of March 31, 2002 are included on an after-tax basis in stockholders’ equity. The Bank issues a variety of fixed and floating, dated and undated, subordinated securities as well as borrows on a subordinated basis. As of March 31, 2002, the Bank had ¥625,854 million subordinated securities and ¥3,050,790 million subordinated loans outstanding. On March 31, 2002, the Bank transferred ¥357,614 million from its capital surplus and ¥241,421 million from its earned surplus reserve to retained earnings. This transfer was made pursuant to changes in Japanese law to increase the flexibility of the Bank’s capital structure. Many of the Bank’s subsidiaries and joint ventures involve the contribution of significant equity capital and, in the case of the securities and derivatives joint venture with Daiwa Securities Group Inc., the provision by the Bank of credit support to the joint venture to the extent necessary to enable the joint venture to fully participate in the derivatives markets. In addition, the securities and derivatives joint venture agreements provide that the Bank and Daiwa Securities will make such additional equity capital contributions through 2004, in proportion to their respective shareholdings, as may be necessary to avoid the imposition of any restrictions on the venture’s businesses as a result of insufficient legal or regulatory capital.

Capital Adequacy—Consolidated Japan’s capital guidelines are based on the risk-adjusted approach proposed by the Basle Committee on Banking Supervision for uniform application to all international banks in industrialized countries. The FSA’s guidelines are similar to the ﬁnal guidelines issued in 1989 by the Board of Governors of the Federal Reserve System in the United States with the differences primarily reﬂecting implementation of the Basle Committee’s approach in a manner designed to suit the respective banking environments in Japan and the United States. See ‘‘Supervision and Regulation—Japan—Capital Adequacy’’.

47 Set forth below is a schedule of risk-adjusted assets and details of qualifying capital of the Bank determined on a consolidated basis.

As of March 31, 2000(1) 2001(1) 2002 (millions of yen, except percentages) Tier I capital ...... ¥ 4,644,509 ¥ 4,754,710 ¥ 3,719,366 Tier II capital: Reserves for possible loan losses (excluding speciﬁc reserves) ...... 592,746 395,858 929,461 Subordinated term debt (with an original maturity of over 5 years) ...... 3,035,135 2,795,003 2,577,490 Land revaluation excess after 55%discount ...... 177,815 168,863 82,931 Total Tier II capital ...... 3,805,699 3,359,725 3,589,883 Tier II capital included as qualifying capital ..... 3,805,699 3,346,991 3,504,772 Deduction ...... (999) (117,384) (163,331) Total capital ...... ¥ 8,449,210 ¥ 7,984,317 ¥ 7,060,807 Risk-adjusted assets: On-balance sheet items ...... ¥65,421,485 ¥66,421,628 ¥62,532,180 Off-balance sheet items ...... 4,335,059 5,021,028 4,803,181 Market risk items ...... 441,769 373,978 212,650 Total risk-adjusted assets ...... ¥70,198,315 ¥71,816,635 ¥67,548,012 Tier I risk-adjusted capital ratio ...... 6.61%6.62%5.50% Total risk-adjusted capital ratio ...... 12.03 11.11 10.45

The Bank’s risk-adjusted capital ratios as of March 31, 2002 were 5.50%(in the case of Tier I capital) and 10.45%(in the case of total capital). The decreases in the risk-adjusted capital ratios from March 31, 2001 reﬂected mainly a decrease in the amount of the Bank’s risk-adjusted assets, the amount of dividends to shareholders in respect of the period, the amount of the Bank’s loss for the period, an increase in the reserves for possible loan losses (excluding speciﬁc reserves), increase in the unrealized losses on listed securities and the amount of additional capital raised through the issuance of subordinated debt and the extension of subordinated loans.

The Bank’s risk-adjusted capital ratios as of March 31, 2001 were 6.62%(in the case of Tier I capital) and 11.11%(in the case of total capital). The decrease in the total risk-adjusted capital ratio from March 31, 2000 reﬂected mainly a transfer from general reserves of ¥209,539 million related to an increase in loan write-offs of ¥228,927 million in ﬁscal 2000, an increase in risk adjusted assets of ¥1,618,320 million and the redemption of subordinated term debt, all of which was only partially offset by an increase in Tier I capital of ¥110,201 million.

The Bank includes 100%of its net deferred tax assets in its Tier I capital calculations. Japanese regulations regarding the inclusion of deferred tax assets in Tier I capital may differ from U.S. regulations. As of March 31, 2002, deferred tax assets constituted slightly more than one quarter of the Bank’s consolidated unaudited total capital. The Bank’s capital ratio would be negatively affected if the Bank is unable to utilize its deferred tax assets or if the inclusion of deferred tax assets in capital is restricted in the future.

The calculation of net deferred tax assets under Japanese GAAP is based on taxable income projections for approximately ﬁve years. These projections are based on the reasonable tax planning strategy as authorized by the management of the Bank, which is reviewed by the Bank’s independent auditors in the process of their audit

48 performed in accordance with generally accepted auditing standards in Japan. These calculations require the Bank to make estimates and certain assumptions. The results of these calculations may also differ from corresponding calculations made under U.S. regulations. The Bank’s ability to realize beneﬁts from its deferred tax assets would be adversely affected to the extent that the Bank’s actual taxable income is lower than the projected taxable income used to determine the amount of its deferred tax asset.

The Bank’s capital also depends in part on the fair market value of its securities portfolio since unrealized losses reduce stockholders’ equity. Approximately one quarter of the Bank’s securities portfolio consists of equity securities, which are primarily common stocks of publicly traded Japanese companies. The common stocks of publicly traded Japanese companies are generally volatile and have declined substantially in recent years. As of March 31, 2002, the Bank’s securities (including money held in trust) with a readily ascertainable market value contained ¥498.4 billion in unrealized losses, of which ¥304.8 billion appeared in its stockholders’ equity. Although it would depend on the particular securities involved, a substantial decline in the Tokyo stock market would likely reduce the Bank’s capital substantially.

If the impact of the changes in risk-adjusted assets or loan losses or other relevant factors would otherwise decrease the Bank’s capital ratios below 4.0%(in the case of Tier I capital) or 8.0%(in the case of total capital) in the future, the Bank intends to take actions to seek to maintain its risk-adjusted capital ratios above such levels. Such actions might include additional sales of equity or debt securities and the sale of loans or other assets in order to reduce the amount of risk-adjusted assets. Sales of assets such as equity securities in substantial amounts by the Bank and other ﬁnancial institutions similarly situated might have adverse effects on the market values for assets of the types sold, which would reduce the amounts realized on such sales. Current adverse conditions in the markets for securities of companies in the Japanese ﬁnancial sector may limit the Bank’s ability to improve its capital ratios through the issuance of securities on favorable terms. Consequently, there can be no assurance that the Bank will be able to maintain its Tier I and total capital ratios at or above 4%and 8%,respectively, in the future.

See ‘‘Supervision and Regulation—Japan—Capital Adequacy’’, ‘‘Risk Factors—Capital Requirements Could Constrain the Bank’s Operations’’ and ‘‘Risk Factors—Weaknesses in the Bank’s Capital Base Could Adversely Affect the Bank’’.

49 Return on Equity and Assets The following table sets forth the return on the Bank’s equity and assets for the periods indicated.

Year ended March 31, 2000(1) 2001(1) 2002 (millions of yen, except percentages) Net income (loss) ...... ¥ 105,935 ¥ 137,835 ¥ (322,852) Average total assets ...... 97,774,739 102,197,909 105,464,974 Average total assets, excluding customers’ liabilities for acceptances and guarantees ...... 92,039,580 96,399,241 99,527,131 Average stockholders’ equity ...... 3,822,438 3,928,169 3,952,886 Net income (loss) as a percentage of: Average total assets ...... 0.10%0.13%(0.30)% Average total assets, excluding customers’ liabilities for acceptances and guarantees ...... 0.11 0.14 (0.32) Average stockholders’ equity ...... 2.77 3.50 (8.16) Declared cash dividends(2) ...... ¥ 58,065 ¥ 58,104 ¥ 37,349 Dividend payout ratio ...... 54.81%42.15%(11.56)% Average stockholders’ equity as a percentage of average total assets ...... 3.90 3.84 3.74

50 BUSINESS

The Bank provides an extensive range of wholesale and retail banking services in Japan and overseas to its customers. In Japan, the Bank accepts deposits, makes loans and extends guarantees to corporations, individuals, governments and governmental entities. Internationally, the Bank operates through a network of branches, representative offices, subsidiaries and affiliates to provide syndicated lending, project finance and portfolio management services while participating in international securities markets.

Except as otherwise indicated, the information herein is presented on a non-consolidated basis.

Merger and Integration of Sakura Bank and Sumitomo Bank The Bank was formed on April 1, 2001 through the merger of Sakura Bank and Sumitomo Bank. Each share of Sakura Bank’s common stock outstanding on that date was exchanged for 0.6 Sumitomo Bank shares while Sakura Bank’s preference shares were exchanged for Sumitomo Bank preference shares on a one-for-one basis. Sumitomo Bank then changed its name to Sumitomo Mitsui Banking Corporation.

On April 1, 2001, the Bank reduced stockholders’ equity by ¥427.0 billion in connection with the recognition of ¥485.5 billion of unrealized losses on investments and land, the increase of reserves for pension liabilities by ¥210.2 billion and the recognition of related deferred tax assets of ¥268.7 billion. See ‘‘Note Regarding Unaudited Historical Combined Financial Information’’.

History Sumitomo Bank was established in 1895 and incorporated as a joint stock corporation with limited liability in 1912. Sumitomo Bank later merged with the Osaka-based Hannan and Ikeda Jitsugyo Banks in 1945. Sumitomo Bank merged with Kawachi Bank in 1965 and with the Heiwa Sogo Bank in 1986. In 1998, Sumitomo Bank formed an alliance with Daiwa Securities Co. Ltd. Through this alliance, Sumitomo Bank established a securities and derivatives joint venture with Daiwa Securities Co. Ltd., Daiwa Securities SMBC Co. Ltd. (formerly known as Daiwa Securities SB Capital Markets Co. Ltd.), and an asset management joint venture, Daiwa SB Investments Ltd. Sumitomo Bank was a member of the Sumitomo Group.

Sakura Bank was a joint stock corporation with limited liability that was formed in 1990 through the merger of The Mitsui Bank, Limited and The Taiyo Kobe Bank, Limited. The Mitsui Bank traced its origins to the Mitsui Exchange House which was founded in Edo (now Tokyo) in 1683. Prior to the April 2001 merger, Sakura Bank operated in Japan as a commercial bank under the Banking Law of Japan and provided a range of wholesale and retail banking services to customers in Japan and overseas. Sakura Bank was a member of the Mitsui Group.

Strategy The Bank’s strategic objective is to strengthen its position as a leading domestic and international financial group by: • improving its profitability in consumer banking through a more focused customer segmentation, broadening its range of profitable products and services and achieving a lower cost structure;

51 • achieving a higher return on its assets in transactions with domestic and overseas borrowers; • initiating new international banking initiatives based on a more selective regional focus; • investing strategically in information technology in order to strengthen its competitiveness in database marketing and providing network platforms to serve small and medium-sized corporate customers; and • establishing a leading position in the provision of internet-related ﬁnancial services.

The Bank will seek to improve its banking profit by: • adjusting the terms and conditions of its financial products and services, such as the interest rates on wholesale loans, to improve its risk-return profile; • instituting cost-cutting measures, such as reducing occupancy, personnel and other expenses; and • expanding its more profitable businesses, such as home mortgage lending and the distribution of investment trust products to retail investors.

As part of its cost-cutting measures, the Bank intends to reduce the number of branches by approximately 30%during the current fiscal year and the number of employees by 10%by March 31, 2004 from March 31, 2002 levels. The Bank has also been replacing many of its retail branch offices with specialized distribution facilities, incorporating advanced technologies, providing new services to retail customers, such as telephone banking and Internet banking, and reorganizing its middle market corporate lending branch offices into corporate business offices. Some of these measures may be difficult to implement and may not be successful. See ‘‘Risk Factors—The Bank Will be Exposed to Increased Risks as it Expands its Range of Services and Products and Implements New Strategies’’.

The Bank’s strategy is affected by a number of dynamic environmental considerations. Notable among these are the weak domestic economy, continuing financial deregulation in Japan, increasing competition from domestic and foreign competitors, consolidation in domestic and international financial sectors and the increasing interdependence of national economies and financial markets. The Bank’s strategy reflects its judgment about the most effective means of confronting the challenges posed and exploiting the opportunities afforded by these considerations, in light of a careful assessment of the Bank’s strengths and weaknesses.

The Bank’s ﬁnancial strategy reﬂects the adverse economic circumstances currently confronting it. The continuing weakness of the domestic economy and continuing decline in real estate prices have adversely affected the quality of the Bank’s loan portfolio, forcing the Bank to divest assets and restrict lending and investment in order to maintain capital adequacy. Declines in domestic equity prices have decreased the value of the Bank’s portfolio of equity securities. The Bank also recognizes the temporary nature of the positive impact on earnings produced by low domestic interest rates as well as its favorable position with regard to international interest rates and foreign currency rates.

The Bank seeks to establish a solid balance sheet for future growth, although its ability to do so depends on a variety of contingencies beyond the Bank’s control. See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations—Capital Adequacy—Consolidated’’. The Bank is continuing to explore ways to reduce the proportion of its assets represented by its portfolio of equity securities. Although market and client relationship considerations signiﬁcantly constrain the Bank’s ﬂexibility to dispose of equity securities, the Bank may undertake various measures to support its balance sheet such as the sale of certain securities to recognize gains. See ‘‘Risk Factors—Market Risks Affecting the Bank’s Equity Portfolio Could Impair the Bank’s Financial Condition and Results of Operations’’.

Operations The Bank conducts its primary banking business through the following business units: Consumer Banking Unit, Middle Market Banking Unit, Corporate Banking Unit, International Banking Unit, Treasury Unit and

52 Investment Banking Unit. The Consumer Banking Unit, the Middle Market Banking Unit and the Corporate Banking Unit direct the Bank’s domestic commercial banking business.

The Bank’s domestic network consists of two types of offices: branch offices serving consumer clients and corporate business offices serving small and medium size corporate clients.

The Bank had a domestic network consisting of 564 branch ofﬁces, 50 sub-branches and 5 agencies as of March 31, 2002, most of which are located in the Tokyo and the Osaka regions of Japan and managed by the Consumer Banking Unit. In addition to providing full-service banking operations at many of its branches, the Bank operates satellite ofﬁces that provide specialized services such as housing loans, which are also managed by the Consumer Banking Unit.

As of March 31, 2002 the Bank had 272 corporate business ofﬁces managed by the Middle Market Banking Unit.

The Bank’s international network is managed by the International Banking Unit and the Investment Banking Unit and consisted of 21 branches, 4 sub-branches, 17 representative ofﬁces, 39 subsidiaries and 8 afﬁliates and associated companies as of March 31, 2002, creating a presence for the Bank in more than 25 countries.

Consumer Banking Unit The Consumer Banking Unit offers various retail banking products and services including private banking, asset management and long-term asset building. Since the April 2001 merger, the Bank has been the leader among Japanese banks in terms of investment trust sales, outstanding housing loans and number of customer accounts. The Consumer Banking Unit’s central theme is ‘‘One’s Next,’’ which means that the Unit assists individuals in achieving the next level of their ﬁnancial objectives according to their stage in life. This includes, for example, assisting customers in their long-term planning for retirement or for down payments to secure housing loans, managing their assets and providing housing loans and loans for education.

The operations of the Consumer Banking Unit are largely conducted through a large and well-developed branch network. The Bank has been working to streamline and strengthen this network by consolidating overlapping branches and transforming them from transaction centers to marketing bases. The transformation process requires the review of each branch’s infrastructure based on location and market size to determine the most suitable functions and physical layout. The Bank has established call centers to provide customers with an additional access channel.

The Bank also operates an extensive network in Japan of automated teller machines which allows its customers to conduct self-service banking transactions during extended hours. At March 31, 2002, the Bank’s ATM network included 7,470 full-service ATMs and cash dispensers, including 1,154 24-hour ATMs in am/pm convenience stores through its alliance with am/pm Japan Co., Ltd. In addition, the Bank offers its customers ready access to more than 1,783 ATMs and cash dispensers through arrangements with other ATM providers. The Bank also offers payment and settlement services for individuals that can be accessed through ATMs located in convenience stores as well as through the telephone and the Internet.

The Consumer Banking Unit also offers internet banking services through One’s Direct. As of March 31, 2002 One’s Direct was one of the largest online service operated by a Japanese bank with 1.9 million registered users. Users of One’s Direct can transfer funds, make balance inquiries and time deposits, and conduct foreign currency, deposit and investment trust transactions generally over the telephone, internet or i-mode mobile phone service. The Bank established Japan Net Bank, Ltd. in September 2000 as the ﬁrst internet bank in Japan for retail customers. Through this continuously-available internet outlet, the Bank offers relatively high interest rates on deposits and low service charges to its customers.

53 The Consumer Banking Unit also offers the following products and services: • Investment trust products. The Consumer Banking Unit provides a variety of investment trust products with varying degrees and types of risk/return proﬁles which are developed and managed by experienced investment management companies within and outside Japan. The Unit generally focuses on the distribution, rather than the development, of investment trust products. The aggregate face amount of investment trust balances outstanding as of March 31, 2002 was approximately ¥1,572 billion. • Consumer ﬁnance products and services. Through Sumitomo Mitsui Card Company, Limited, a subsidiary of the Bank and a charter member of VISA International, and Sakura Card Co., Ltd., the Bank has approximately 12 million cardholders (with aggregate expenditures totaling approximately ¥3 trillion) and offers personal credit services including the issuance of various credit cards, consumer loans and guarantees. Since July 2000, the Bank has been providing small, unsecured consumer loans to individuals under the brand name @Loan through a joint venture with Sanyo Shinpan Finance Co., Ltd., Nippon Life Insurance Company and am/pm Japan Co., Ltd.

Middle Market Banking Unit The Middle Market Banking Unit focuses on building a ‘‘solution business’’ capable of rapidly addressing the diversified needs of small and medium-sized businesses. The Unit serves these customers by providing products and services involving traditional lending, cash management, settlement, leasing, factoring, management information systems consulting, collection and investment banking, some of which are offered in cooperation with the Bank’s joint venture with Daiwa Securities Group Inc. The Middle Market Banking Unit also provides the following services to small and medium-sized businesses: • Cash management services. Through SMBC Perfect, a patented reconciliation support service, the Unit provided cash management services electronically to 3,362 companies as of March 31, 2002. The Bank has also established 76 business support plazas to function as service locations exclusively for small and medium-sized businesses and sole proprietorships throughout Japan. • Restructuring advisory services. In October 2001, the Business Reengineering Department was formed within the Business Promotion Department at the head office to provide assistance to customers restructuring their business. • Business Promotion Services. The Middle Market Banking Unit, through its business promotion department, focuses on customers in growth industries such as the semiconductor, biotechnology, information technology, environmental services and health care industries. The business promotion department analyzes and evaluates a customer’s technologies, marketability and growth prospects and introduces it to appropriate capital sources, such as the new business support fund which is an unsecured financing system. The Bank’s subsidiary SMBC Capital Co., Ltd, also assists companies in the start-up stages with their capital requirements. Another subsidiary, SMBC Leasing Co., Ltd., provides small and medium-size businesses with leasing services. The business promotion department also advises on initial public offerings and on the implementation of capital strategies. • Lending. The Middle Market Banking Unit offers unsecured loans through Business Select Loan at its business support plazas. The balance of these loans totaled ¥44.0 billion as of March 31, 2002. The Bank plans to continue to increase its lending to medium and small-sized companies using a lending strategy that involves increasing the spread on its loans over time to achieve a more appropriate risk- adjusted return on its corporate loan portfolio. The Bank is currently implementing revised lending practices that include modified terms and conditions of its loans as well as the adjustment of interest rates to better reflect the risk profile of borrowers, and is strengthening its capacity to strategically take more credit risk.

The Unit also offers an internet-based product, SMBC Financial Link, to provide various products and services of the Bank and group companies in a single package. These products and services include settlement

54 services, the extension of credit, authorization services and bill collection services. Middle Market customers can also use Value Door, a product that allows clients using a personal computer to access services of the Bank’s subsidiaries and afﬁliates that meet their needs. The Bank has promoted Value Door as a ﬂagship product to stimulate greater demand for the Bank’s ‘‘solution’’ business for small and medium-sized enterprises. In May 2001, the Bank inaugurated the Value Door web-site. It had approximately 13,000 corporate users as of March 31, 2002.

Corporate Banking Unit The Corporate Banking Unit’s primary mission is to function as a reliable source of sophisticated solutions for Japan’s largest corporations. The Unit provides a full range of banking services to these clients including syndicated loans, credit line commitments and non-recourse loans. With respect to its large corporate customers, the Bank has focused its lending activities on Japanese clients while providing other fee-based services, such as cash management services, to its Japanese customers operating overseas. The Bank intends to promote the use of the capital markets for a greater proportion of these customers’ funding and corporate restructuring needs, particularly through the involvement of Daiwa Securities SMBC, the Bank’s investment banking joint venture with Daiwa Securities.

International Banking Unit The International Banking Unit assists Japanese companies to develop in overseas markets and multinational companies to succeed in Japan. This Unit maintains a strong branch network in the Asian region as well as in the Americas and Europe, and leverages the Bank’s strong relationships with major Japanese corporations. The Unit offers a variety of services and products, such as non-recourse syndicate ﬁnancing, securitization arrangements, global cash management systems and yen custody services, to its global clients.

Treasury Unit The Treasury Unit operates in the domestic and international money, foreign exchange, securities and derivatives markets to serve the needs of the Bank’s customers while maintaining market and liquidity risk at appropriate levels. To further expand the Bank’s clientele and to respond to its clientele’s increasingly diverse and complex needs, the Bank has a Treasury marketing department. The Treasury marketing department enhances the Unit’s sales capabilities by providing a single department to specialize in customer transactions involving marketable products. Since the April 2001 merger, the Treasury Unit has been operating under uniﬁed risk management procedures.

The Treasury Unit also offers the following services: • Government bond underwriting. The Bank acts in Japan as an underwriter for national government bonds, government-guaranteed bonds and local government bonds. • Commercial paper placement. The Bank acts as placement agent for commercial paper programs for qualiﬁed corporate issuers.

Investment Banking Unit The Investment Banking Unit provides a broad array of sophisticated financial products and services in connection with capital markets financings, management buyouts, real estate and lease financing, asset securitizations and asset management and other services. The Investment Banking Unit accesses customers and offers its products and services through the Middle Market Banking Unit, the Corporate Banking Unit and the International Banking Unit. The Bank owns 40%of Daiwa Securities SMBC Co., Ltd., a joint venture with Daiwa Securities Group, Inc., which focuses on the wholesale securities market. The joint venture engages in the underwriting, placement and trading of various securities and provides merger and acquisition advice as well as other investment banking services.

55 The Investment Banking Unit also offers the following products and services related to the following: • Asset management. The Bank’s asset management services are provided through Daiwa SB Investments, Ltd. and SAKURA INVESTMENT MANAGEMENT CO., LTD. The Bank has been cooperating with these companies to develop and offer investment trust products and manage customer funds. As of March 31, 2002, these companies had ¥3.0 trillion and ¥0.6 trillion, respectively, in assets under management. • Pensions. In response to the introduction of defined contribution pension plans in Japan in October 2001, the Unit offers consulting, plan management services and employee investment education related to this new pension system through Japan Pension Navigator Co., Ltd. Established in September 2000, Japan Pension Navigator is capitalized by the Bank and five other financial services companies belonging to the Mitsui and Sumitomo groups. • Trust services. The Bank serves as a trustee or co-trustee of corporate mortgage bonds and corporate general mortgage bonds. The Bank also serves as a commissioned company for bondholders and registrar, paying and fiscal agent for unsecured public bond offerings by domestic and foreign customers. In this role, the Bank advises the issuer of market conditions and undertakes certain procedural matters on behalf of the issuer.

Other Business Activities In addition to the activities of the six business units described above, the Bank also engages in the following business activities: • Payment services. The Bank handles money remittances for municipalities, public and private corporations and individuals both within Japan and abroad. Domestic remittance services are significant in Japan where checks are rarely used and money remittance is a major means of payment. During the fiscal year ended March 31, 2002, the Bank handled domestic remittances totaling approximately ¥1,379 trillion on behalf of its customers. The Bank also handles the presentation and collection for its customers of promissory notes, bills of exchange and checks. During the fiscal year ended March 31, 2002, the total domestic volume of such presentations and collections was approximately ¥27 trillion. • Foreign exchange. The Bank engages in a variety of foreign exchange transactions for its clients and for its own account, including foreign currency exchange, overseas transfers and trade finance for export and import activities. The Bank’s foreign exchange trading volume during the year ended March 31, 2002 amounted to approximately $1,287 billion.

As described above, the Bank conducts some of its operations through subsidiaries and joint ventures. The Bank may need to provide capital and funding to these companies in the future. Many of the Bank’s subsidiaries and joint ventures involve the contribution of signiﬁcant equity capital and, in the case of the securities and derivatives joint venture, the provision by the Bank of credit support to the joint venture to the extent necessary to enable the joint venture to fully participate in the derivatives markets. In addition, the securities and derivatives joint venture agreements provide that the Bank and Daiwa Securities Group Inc. will make such additional equity capital contributions through 2004 in proportion to their respective shareholdings, as may be necessary to avoid the imposition of any restrictions on its businesses as a result of insufﬁcient legal or regulatory capital.

The Bank has also entered into an alliance with the Mitsui and Sumitomo group insurance companies (Mitsui Mutual Life Insurance Company (Mitsui Life), Sumitomo Life Insurance Company (Sumitomo Life), and Mitsui Sumitomo Insurance Co., Ltd.) to bolster its insurance operations. It is intended that the alliance will include the following five specific areas of cooperation: • mutual sharing of distribution channels among the Mitsui and Sumitomo group insurance companies; • conducting joint research and development activities with Mitsui and Sumitomo group insurance companies relating to hybrid products that combine insurance and financial products;

56 • reorganizing the asset management businesses of the alliance members; • transferring the operations of Mitsui Life’s non-life insurance subsidiary to Mitsui Sumitomo Insurance Co.; and • expanding the exchange of personnel among the alliance partners.

The Bank agreed with Mitsui Mutual Life Insurance Company, Sumitomo Life Insurance Company and Mitsui Sumitomo Insurance Co., Ltd. in April 2002 to merge their respective asset management subsidiaries. Completion of the merger is expected by December 2002. As of March 31, 2002, the new company would have had approximately ¥13.1 trillion in total assets under management. A committee to steer the alliance, made up of senior managing directors, managing directors and ofﬁcers of a similar rank at the alliance partners, has been formed to assure that actions are taken as quickly and effectively as possible to fulﬁll the objectives of the alliance.

Revenues by Region The following table sets forth the percentage of consolidated total income for the Bank for the past five fiscal years based on the consolidated total income of the offices of the Bank and its subsidiaries located in the regions indicated.

Year ended March 31, 1998(1) 1999(1) 2000(1) 2001(1) 2002 Region: Japan ...... 67%70%79%74%74% Foreign ...... 33 30 21 26 26 Americas ...... 12 11 9 14 11 Europe ...... 12 12 5 6 8 Asia (excluding Japan) ...... 9 7 7 6 7 Total ...... 100%100%100%100%100%

Funding The Bank derives funding for its operations from a variety of domestic and international sources. The Bank’s domestic funding is primarily derived from retail deposits placed with the Bank by its corporate and individual customers, but also from call money (interbank), bills sold (interbank promissory notes) and negotiable certificates of deposit issued by the Bank to its domestic and international customers. The Bank’s principal international sources of funds are inter-bank deposits, funds raised in the international capital markets and loan financing. In addition, positive cash flows generated by the Bank’s operations provide a steady source of additional funding. The Bank closely monitors maturity gaps and foreign exchange exposure with a view towards managing its risk profile.

57 The following table illustrates the composition of the Bank’s funding by average balances and related interest and average interest rates as of March 31, 2000, 2001 and 2002. Average balances are based on a daily average. Year ended March 31, 2000(1) 2001(1) 2002 Average Average Average Average Average Average Balance Interest Rate Balance Interest Rate Balance Interest Rate (millions of yen, except percentages) Interest-bearing liabilities: Deposits: Domestic ...... ¥49,618,558 ¥ 93,621 0.18%¥ 47,095,702 ¥ 80,147 0.17%¥ 47,259,727 ¥ 44,206 0.09% International ...... 9,925,900 330,385 3.32 11,952,437 521,390 4.36 10,450,595 279,042 2.67 Total ...... 59,544,459 424,008 0.71 59,048,140 601,538 1.01 57,710,322 323,249 0.56 Negotiable certiﬁcates of deposit: Domestic ...... 8,342,182 12,951 0.15 8,813,953 25,801 0.29 9,972,010 6,218 0.06 International ...... 223,458 11,790 5.27 176,862 10,142 5.73 214,841 8,211 3.82 Total ...... 8,565,642 24,743 0.28 8,990,815 35,944 0.39 10,186,852 14,430 0.14 Call money: Domestic ...... 5,404,118 6,835 0.12 6,093,793 12,667 0.20 3,691,136 1,283 0.03 International ...... 208,012 9,480 4.55 291,515 14,060 4.82 287,094 7,523 2.62 Total ...... 5,612,131 16,316 0.29 6,385,308 26,729 0.41 3,978,230 8,807 0.22 Payable under repurchase agreements: Domestic ...... — — — 2,579,529 5,368 0.20 2,110,550 873 0.04 International ...... — — — 42,859 2,144 5.00 684,262 16,506 2.41 Total ...... — — — 2,622,388 7,512 0.28 2,794,813 17,379 0.62 Bills Sold: Domestic ...... 337,282 182 0.05 952,300 2,041 0.21 5,571,248 1,253 0.02 International ...... 910 27 2.96 2,276 53 2.32 — — — Total ...... 338,193 209 0.06 954,576 2,095 0.21 5,571,248 1,253 0.02 Commercial paper: Domestic ...... 534,849 1,609 0.30 794,830 4,543 0.57 807,392 970 0.12 International ...... — — — — — — — — — Total ...... 534,849 1,609 0.30 794,830 4,543 0.57 807,392 970 0.12 Borrowed money: Domestic ...... 1,629,422 47,195 2.89 1,695,179 39,957 2.35 1,191,746 32,969 2.76 International ...... 2,879,573 124,664 4.32 2,649,024 136,294 5.14 2,473,270 103,931 4.20 Total ...... 4,508,997 171,859 3.81 4,344,205 176,252 4.05 3,665,017 136,900 3.73 Bonds: Domestic ...... 383,613 7,025 1.83 1,147,858 20,883 1.81 1,858,675 31,237 1.68 International ...... — — — — — — — — — Total ...... 383,613 7,025 1.83 1,147,858 20,883 1.81 1,858,675 31,237 1.68 Total interest-bearing liabilities: Domestic ...... 66,389,205 462,403 0.69 70,146,084 192,100 0.27 72,477,777 122,677 0.16 International ...... 13,409,523 1,079,485 8.05 15,454,388 846,730 5.47 17,842,154 597,623 3.34 Offset(2) ...... (199,549) (499) — (591,090) (3,885) — (3,387,145) (3,853) — Total ...... 79,599,180 ¥1,541,387 1.93 85,009,383 ¥1,034,946 1.21 86,932,786 ¥ 716,448 0.82 Non-interest-bearing liabilities ...... 14,353,121 13,260,357 14,579,302 Stockholders’ equity ...... 3,822,438 3,928,169 3,952,886 Total funding ...... ¥97,774,739 ¥102,197,909 ¥105,464,974

Net interest income and net interest margin(3) ...... ¥1,214,008 1.44%¥1,240,731 1.39%¥1,476,512 1.61%

58 The Bank reduced the interest rates it paid on domestic negotiable certificates of deposits from 0.29%in fiscal 2000 to 0.06%in fiscal 2001 as a result of the decision by the Bank of Japan to set its rates by reference to the generally prevailing interest rates in the market.

The Bank’s requirements for call money were reduced from ¥6,094 billion in ﬁscal 2000 to ¥3,691 billion in ﬁscal 2001. This reduction was primarily due to a decrease in loan originations.

The Bank increased its average balance of domestic bills sold from ¥952 billion in ﬁscal 2000 to ¥5,571 billion in ﬁscal 2001 in order to exploit the favorable domestic interest rate environment.

Deposits A complete range of standard banking accounts, including current deposits, ordinary deposits, savings deposits, deposits at notice, time deposits and negotiable certiﬁcates of deposit are offered through the Bank’s branches in Japan and are the principal source of funding for the Bank’s domestic operations. The Bank’s domestic deposits are principally from private individuals and corporations with the balance coming from government bodies (including municipal authorities) and ﬁnancial institutions. The total amount of domestic yen deposits of ¥58,569 billion was one of the largest among Japanese city banks as of March 31, 2002. Domestic deposits in currencies other than yen are not material.

The Bank’s overseas branches accept deposits mainly in U.S. dollars but also in yen and other foreign currencies and are active participants in the Euro-currency market as well as the United States domestic money market. In addition, the London, New York, Singapore and Hong Kong branches of the Bank regularly issue U.S. dollar certiﬁcates of deposit. The London branch also issues certiﬁcates of deposit denominated in pounds sterling and in yen. At March 31, 2002, international deposits amounted to ¥9,061 billion, representing approximately 13.4%of total deposits.

The following table shows a breakdown of domestic and international deposits of the Bank as of the dates indicated:

As of March 31, 2000(1) 2001(1) 2002 (millions of yen) Domestic Deposits Current deposits(2) ...... ¥ 3,540,744 ¥ 4,142,020 ¥ 4,472,212 Ordinary deposits(3) ...... 15,342,840 15,594,040 23,769,812 Savings deposits(4) ...... 1,552,138 1,434,340 1,314,621 Deposits at notice(5) ...... 2,587,227 1,998,422 1,793,888 Time deposits(6) ...... 23,626,565 22,518,100 19,982,869 Negotiable certiﬁcates of deposit ...... 10,233,960 11,508,790 6,267,860 Other deposits ...... 1,051,903 720,822 967,330 Total domestic yen deposits ...... ¥57,935,381 ¥57,916,540 ¥58,568,596

59 As of March 31, 2000(1) 2001(1) 2002 (millions of yen) International Deposits(2) Current deposits(3) ...... ¥ 94,411 ¥ 122,937 ¥ 126,595 Ordinary deposits ...... 107,742 119,518 145,765 Deposits at notice(4) ...... 5,847,320 8,545,311 4,447,656 Time deposits ...... 998,698 794,383 949,692 Negotiable certiﬁcates of deposit ...... 146,600 179,669 309,679 Other deposits ...... 2,442,326 3,051,407 3,081,367 Total international deposits ...... ¥9,637,103 ¥12,813,231 ¥9,060,756

(1) Figures as of March 31, 2000 and 2001 are prepared for Sakura Bank and Sumitomo Bank on a combined basis. See ‘‘Note Regarding Unaudited Historical Combined Financial Information’’ and, for more information regarding certain balance sheet, income statement and other ﬁnancial data, see ‘‘Annex—Supplemental Financial Information’’. (2) The exact nature of these accounts varies from country to country. (3) Generally, checking accounts. (4) Principally interbank Euro-deposits. Year ended March 31, 2000(1) 2001(1) 2002 Average Average Average Average Average Average balance rate balance rate balance rate (millions of yen, except percentages) Liquid deposits Domestic ...... ¥22,320,967 0.05%¥22,677,798 0.07%¥24,764,664 0.02% International ...... 5,933,668 3.26 7,962,793 4.16 6,856,855 3.18 Total ...... ¥28,254,635 0.72 ¥30,640,591 1.13 ¥31,621,519 0.71 Time deposits Domestic ...... ¥26,853,371 0.30 ¥23,964,193 0.26 ¥21,980,490 0.14 International ...... 1,099,893 1.57 983,544 3.12 796,962 2.67 Total ...... ¥27,953,264 0.35 ¥24,947,737 0.38 ¥22,777,452 0.23 Negotiable certiﬁcates of deposit Domestic ...... ¥ 8,342,182 0.15 ¥ 8,813,953 0.29 ¥ 9,972,010 0.15 International ...... 223,458 5.27 176,862 5.73 214,841 3.55 Total ...... ¥ 8,565,640 0.28 ¥ 8,990,815 0.39 ¥10,186,852 0.22 Other Domestic ...... ¥ 444,216 0.00 ¥ 453,706 0.00 ¥ 514,572 0.00 International ...... 2,892,338 4.12 3,006,095 5.27 2,796,777 3.39 Total ...... ¥ 3,336,554 3.57 ¥ 3,459,801 4.58 ¥ 3,311,349 2.86 Total deposits Domestic ...... ¥57,960,740 0.18 ¥55,909,656 0.18 ¥57,231,737 0.09 International ...... 10,149,358 3.37 12,129,299 4.38 10,665,437 3.21 Total ...... ¥68,110,098 0.65 ¥68,038,955 0.93 ¥67,897,174 0.58

60 expects domestic deposit balances to continue to increase, as depositors move funds from perceived weaker Japanese financial institutions to perceived healthier financial institutions (including the Bank), particularly as a result of the termination of the Special Financial Aid excess deposit insurance program. See ‘‘Supervision and Regulation—Japan—Deposit Insurance System’’. At March 31, 2002 domestic time deposits were ¥19,983 billion, an 11.2%decline from ¥22,518 as of March 31, 2001. This decrease was primarily due to the Bank’s lower funding requirements as a result of a decrease in its lending activities in fiscal 2001.

Changes in the level of international deposits were primarily the result of changes in the level of interbank deposits. The 29.2%decline in international deposits from ¥12,813 billion as of March 31, 2001 to ¥9,061 billion as of March 31, 2002 reflects a decrease in the Bank’s funding needs due to lower loan originations. In addition, the reduction of assets reflects the Bank’s policy to improve its capital adequacy ratios. As a result of reduction in assets for international business operations, the Bank needs less international funding and consequently the aggregate amount of its international deposits has also declined. Interest rates payable on all deposits are now deregulated with the only exception being a prohibition of the payment of interest on current deposits. The Bank considers that this interest rate deregulation is leading to increasing competition for deposits from other financial institutions in Japan. See ‘‘—Competition’’.

Most domestic deposits with the Bank are ﬁxed rate time deposits in yen. Such deposits pay interest at rates established by the Bank based principally on prevailing market rates. Most international deposits with the Bank are inter-bank deposits at notice denominated in dollars or other foreign currencies. Such deposits typically pay interest at ﬁxed rates determined by reference to market rates for time deposits in London with major money- center banks.

The Bank’s need for money market funding decreased substantially as a result of its increased deposits. Additionally, the Bank’s loan originations decreased which further reduced the Bank’s demand for money market funds.

The following table sets forth the composition of the Bank’s time deposits by types and maturity as of the dates indicated.

Maturity as of March 31, 2002 Three Months Six Months to One Year to Two Years to Less than to Less than Less than Less than Less than Three Years Three Months Six Months One Year Two Years Three Years and Over Total (millions of yen) Domestic ﬁxed rate time deposits(1) . . . ¥7,924,906 ¥3,581,854 ¥5,592,722 ¥1,697,715 ¥1,127,185 ¥521,985 ¥20,446,369 Domestic ﬂoating rate time deposits(1) . . . — — — — 1,500 — 1,500 Total domestic time deposits(2) ...... 7,924,906 3,581,854 5,592,722 1,697,715 1,128,685 521,985 20,447,869 Total international time deposits ..... 407,881 22,823 6,595 3,578 6,494 37,318 484,692 Total time deposits . . ¥8,332,787 ¥3,604,678 ¥5,599,317 ¥1,701,294 ¥1,135,179 ¥559,304 ¥20,932,561

(1) For purposes of this table, time deposits outstanding do not include installment time deposits, which have no stated maturity. (2) Includes off-shore account deposits.

Euro Medium Term Note Programmes The Bank has a Euro Medium Term Note Programme which permits it and certain of its subsidiaries to have outstanding not more than ¥1 trillion aggregate nominal amount of notes at any given time. The Bank also succeeded Sakura Bank to two Euro Medium Term Note Programmes. The Bank does not issue new securities under the former Sakura Bank programmes. As of May 31, 2002, the Bank had ¥1,133 billion aggregate nominal amount of notes outstanding under these three programmes.

61 Domestic Debt Programme From time to time the Bank issues dated debt securities in the domestic market under a domestic debt programme. The maturities of these securities at the time of issuance range from 5 years to 12 years. As of May 31, 2002, the aggregate nominal amount of debt securities outstanding under this programme was ¥1,853 billion. The Bank has announced that it will issue ¥40 billion of domestic subordinated bonds in June 2002.

Public Funding As part of a government-funded bank recapitalization program designed to strengthen Japan’s ﬁnancial system, on March 31, 1999 Sumitomo Bank issued ¥501 billion and on March 31, 1999 Sakura Bank issued ¥800 billion of Preferred Shares to The Resolution and Collection Corporation (‘‘RCC’’), formerly known as The Resolution and Collection Bank, Limited, an entity established pursuant to the Law Concerning Emergency Measures for Early Strengthening of Functions of the Financial System. The Preferred Shares issued by Sumitomo Bank were issued at a price of ¥3,000 per share (¥1,500 of which was accounted for as stated capital). The Preferred Shares issued by Sakura Bank were issued at a price of ¥1,000 per share (¥500 of which was accounted for as stated capital). ¥201 billion of the Preferred Shares (First Series Type 1) are convertible into common stock of the Bank at any time from May 1, 2002 until February 26, 2009, ¥300 billion of the Preferred Shares (Second Series Type 1) are convertible into common stock of the Bank at any time from August 1, 2005 until February 26, 2009, and ¥800 billion of the Preferred Shares (the Type 5) are convertible into common stock of the Bank at any time from October 1, 2002 until September 30, 2009, in each case subject to certain adjustments to the conversion period. See note 16 of notes to non-consolidated ﬁnancial statements of the Bank.

All Preferred Shares not converted during the applicable conversion period are mandatorily convertible on the day immediately following the last day of such conversion period. The initial conversion price per share for the First Series Type 1 is ¥1,400, subject to certain adjustments, and the initial conversion price per share for the Second Series Type 1 and the Type 5 will be determined by a formula based on the average market value of the Bank’s common stock during the 30 trading day period beginning 45 trading days prior to August 1, 2005 and October 1, 2002, respectively, subject to certain adjustments and a ﬂoor conversion price. The conversion price for the First Series, Second Series and Type 5 Shares will be reset annually during their respective conversion periods pursuant to a market-based formula, subject to certain adjustments and to a ﬂoor conversion price. As of March 29, 2002, RCC would own approximately 26%of the Bank’s common stock assuming full conversion and based on the Bank’s stock price of ¥530 at that date. However, the RCC could acquire more or less than a 26%interest depending on the Bank’s share price at the time of conversion and certain minimum conversion price restrictions. Additionally, the preferred shares are manditorily convertible in 2009 based on the prevailing market price, subject to certain minimum conversion price restrictions. If the shares are converted at the minimum conversion prices applicable upon mandatory conversion, RCC would own approximately 40%of the Bank’s common stock (assuming March 31, 2002 capitalization levels). As a result of these and other considerations, the Bank intends to redeem the preferred shares prior to the mandatory conversion date. This redemption does not require the consent of the holders of the Notes.

The First Series Type 1 bears an annual noncumulative dividend equal to ¥10.50 per share (0.35%per annum of the issue price), the Second Series Type 1 bears an annual noncumulative dividend equal to ¥28.50 per share (0.95%per annum of the issue price) and the Type 5 bear an annual noncumulative dividend equal to ¥13.70 per share (1.37%per annum of the issue price). Failure to pay annual dividends in full confers voting rights on the holders of these securities, which could have adverse consequences on the Bank. These voting rights could approximate 14.4%of the total vote. See ‘‘Risk Factors—Governmental Ownership of Convertible Preferred Shares and New Governmental Policies Could Adversely Affect the Bank’’.

As a condition to the application for these public funds, Sakura Bank and Sumitomo Bank were required to submit rationalization plans to the Financial Reconstruction Commission (integrated into the Financial Services Agency as of January 2001) in March 1999. These plans are updated in semiannual reports to the Financial Services Agency, as required by Article 5.4 of the Financial Function Early Strengthening Law, which state the

62 progress achieved toward the goals of the rationalization plans. See ‘‘Supervision and Regulation—Japan— Prompt Corrective Action and Self-Assessment’’. The consequences of not reaching the targets set forth in the plans are uncertain.

Other Sources of Funding The Bank’s additional sources of funding include call loans and other interbank funding arrangements (other than inter-bank deposits), repurchase agreements using Japanese Government bonds, both senior and subordinated loans from institutional investors on a worldwide basis and other sources.

The Bank also has access to funding through loans by the Bank of Japan. Borrowings from the Bank of Japan require the Bank to pledge collateral consisting of Japanese Government bonds and certain other qualifying collateral.

63 Assets The following table shows the Bank’s average asset balances and related interest and average interest rates for the last three ﬁscal years. Average asset balances are based on a daily average.

Year ended March 31, 2000(1) 2001(1) 2002 Average Average Average Average Average Average Balance Interest Rate Balance Interest Rate Balance Interest Rate (millions of yen, except percentage) Loans and bills discounted(2): Domestic ...... ¥56,874,762 ¥1,130,800 1.98%¥ 55,306,043 ¥1,103,789 1.99%¥ 53,576,051 ¥ 983,235 1.83% International ...... 8,408,433 357,152 4.24 7,517,989 397,355 5.28 7,059,547 273,612 3.87 Total ...... 65,283,195 1,487,953 2.27 62,824,034 1,501,144 2.38 60,635,599 1,256,848 2.07 Securities: Domestic ...... 13,082,320 160,758 1.22 17,488,774 185,681 1.06 19,687,304 178,027 0.90 International ...... 2,023,066 93,639 4.62 2,146,468 162,494 7.57 3,738,953 326,705 8.73 Total ...... 15,105,386 254,399 1.68 19,635,244 348,176 1.77 23,426,257 504,732 2.15 Call loans: Domestic ...... 76,676 95 0.12 25,551 92 0.36 148,181 135 0.09 International ...... 150,134 7,500 4.99 167,690 10,135 6.04 134,124 4,296 3.20 Total ...... 226,812 7,595 3.34 193,242 10,229 5.29 282,306 4,432 1.56 Receivables under resale agreements: Domestic ...... — — — 277,192 1,130 0.40 1,172,550 873 0.07 International ...... — — — 38,209 484 1.26 69,514 908 1.30 Total ...... — — — 315,402 1,614 0.51 1,242,064 1,781 0.14 Bills bought: Domestic ...... 199,200 89 0.04 282,060 878 0.31 84,967 27 0.03 International ...... — — — — — — — — — Total ...... 199,200 89 0.04 282,060 878 0.31 84,967 27 0.03 Deposits with banks: Domestic ...... 12,179 34 0.27 11,722 30 0.25 20,383 26 0.12 International ...... 2,418,186 109,408 4.52 4,977,935 313,787 6.30 4,458,268 185,058 4.15 Total ...... 2,430,365 109,443 4.50 4,989,657 313,817 6.28 4,478,651 185,085 4.13 Total interest-earning assets: Domestic ...... 70,250,127 1,589,755 2.26 73,581,868 1,301,298 1.76 78,080,748 1,202,035 1.53 International ...... 14,073,832 1,166,141 8.28 16,433,417 978,265 5.95 16,683,507 994,778 5.96 Offset(3) ...... (199,549) (499) — (591,090) (3,885) — (3,387,145) (3,853) — Total ...... 84,124,410 2,755,397 3.27 89,424,194 2,275,679 2.54 91,377,110 2,192,961 2.39 Non-interest-earning assets: Cash and due from banks ...... 1,555,277 1,449,401 1,472,409 Other non-interest-earning assets ...... 12,095,052 11,324,314 12,615,455 Total non-interest- earning assets . . . 13,650,329 12,773,715 14,087,864 Total average assets ...... ¥97,774,739 ¥102,197,909 ¥105,464,974

64 Loans General The Bank’s principal investing activity is its lending business. The Bank makes loans and extends other types of credit principally to corporate and individual customers in Japan and principally to corporate and sovereign customers abroad. Average loans and bills discounted declined by 3.7%from fiscal 1999 to fiscal 2000 and by 3.4%from fiscal 2000 to fiscal 2001 as a result of sluggish demand for corporate loans. The following table sets forth the composition of the Bank’s loans and bills discounted by type of interest rate charged and maturity as of the dates indicated. Maturity as of March 31, 2002 More than More than More than One Year One Year to Three Years Five Years to Over Seven Unspecified or Less Three Years to Five Years Seven Years Years Term Total (millions of yen) Floating interest rate ...... ¥10,359,147 ¥ 7,076,540 ¥4,401,939 ¥1,957,333 ¥12,854,843 ¥11,624,262 ¥48,274,067 Fixed interest rate ...... 5,726,704 2,982,358 1,656,956 615,363 672,918 — 11,654,301 Total ...... ¥16,085,851 ¥10,058,898 ¥6,058,896 ¥2,572,696 ¥13,527,762 ¥11,624,262 ¥59,928,368

As of March 31, 2002, ¥36,280 billion, or 60.5%, of the Bank’s loan portfolio consisted of secured or guaranteed loans. The Bank usually takes real estate collateral on its domestic corporate loans. The Bank extends collateralized housing loans and unsecured consumer ﬁnance loans to its retail customers. The Bank’s housing loans are usually guaranteed by its guarantee subsidiaries, SMBC Guarantee Company and SUMIGIN GUARANTEE COMPANY. The following table sets forth the Bank’s loans outstanding (including bills discounted) classiﬁed by class of collateral as of the dates indicated: As of March 31, 2000(1) 2001(1) 2002 (millions of yen, except percentages) Class of collateral: Securities ...... ¥ 870,350 1.37%¥ 960,691 1.55%¥ 1,171,780 1.96% Commercial claims ...... 1,398,270 2.21 1,293,632 2.10 1,098,954 1.83 Commodities ...... 8,434 0.01 15,736 0.03 4,430 0.01 Real estate ...... 11,055,583 17.47 10,419,117 16.87 9,309,699 15.53 Other ...... 928,409 1.47 555,680 0.90 831,093 1.39 Total secured loans ...... 14,261,050 22.53 13,244,861 21.45 12,415,959 20.72 Guaranteed(2) ...... 25,919,435 40.95 24,906,661 40.34 23,864,117 39.82 Unsecured ...... 23,118,025 36.52 23,596,356 38.21 23,648,291 39.46 Total ...... ¥63,298,512 100.00%¥61,747,880 100.00%¥59,928,368 100.00%

The Bank is subject to lending limits under the Banking Law. See ‘‘Supervision and Regulation—Japan— The Financial Services Agency—Credit Limit’’.

Domestic Lending The Bank makes loans to, and discounts bills of, a broad range of industrial, commercial and individual customers in Japan. The Bank’s domestic lending business consists principally of the extension of small loans to individuals and small businesses. As of March 31, 2002, 22%of the Bank’s domestic loans and bills discounted were to individuals, 48%were to small and medium-sized enterprises which are deﬁned as companies with a capital stock of ¥300 million or less, or with less than 300 employees, subject to certain exceptions applicable to

65 speciﬁc industries and 28%were to large corporations. However, the Bank also has substantial lending relationships with larger businesses, including many of the leading companies of Japan. For example, the Bank makes loans to approximately 60%of the companies listed on the Tokyo Stock Exchange.

The following table shows the outstanding loans (including bills discounted) of the Bank’s domestic offices, before deduction of reserves for possible loan losses, as of the dates indicated. Classification of loans by industry is based on industry segment loan classifications as defined by the Bank of Japan for regulatory reporting purposes and is not necessarily based on use of loan proceeds.

As of March 31, 2000(1) 2001(1) 2002 (millions of yen, except percentages) Domestic Ofﬁces(2): Manufacturing ...... ¥7,418,427 13.02%¥7,455,390 13.42%¥7,493,045 13.75% Agriculture, Forestry, Fishing and Mining ...... 271,288 0.48 188,821 0.34 183,675 0.34 Construction ...... 3,198,134 5.61 2,929,161 5.27 2,841,574 5.21 Wholesale and retail ...... 7,872,269 13.81 7,631,138 13.74 7,161,690 13.14 Financial and insurance ...... 4,858,979 8.53 4,850,179 8.73 5,244,899 9.63 Real Estate ...... 8,715,561 15.29 9,222,242 16.60 8,549,534 15.69 Transportation, communication and other public enterprises . . . 2,848,209 5.00 2,982,196 5.37 2,838,889 5.21 Services ...... 7,507,905 13.17 6,720,406 12.10 6,364,140 11.68 Municipalities ...... 436,659 0.77 304,143 0.55 337,514 0.62 Other ...... 13,863,105 24.32 13,267,524 23.88 13,474,520 24.73 Total ...... ¥56,990,540 100.00%¥55,551,203 100.00%¥54,489,488 100.00%

As part of its business operations, the Bank regularly lends funds to individuals and small and medium-sized enterprises. The following table shows a breakdown of the Bank’s domestic loan portfolio by type of borrower as of the dates indicated:

As of March 31, 2000(1) 2001(1) 2002 (billions of yen, except percentages) Individuals ...... ¥13,190.7 23.1%¥12,535.0 22.6%¥12,493.0 22.9% Small and medium-sized enterprises ...... 28,268.3 49.6 27,936.2 50.2 26,287.3 48.3 Large corporations(2) ...... 15,531.4 27.3 15,079.9 27.2 15,709.1 28.8 Total ...... ¥56,990.5 100.0%¥55,551.2 100.0%¥54,489.4 100.0%

The Bank is expanding its lending to individuals in Japan while simultaneously attempting to manage its risk/return proﬁle. The outstanding balance at March 31, 2002 of the Bank’s loans to individuals (almost all of them in Japan) was ¥12,493 billion. Most of the Bank’s outstanding loans to individuals at March 31, 2002 consisted of housing-related loans.

The Bank’s long-term strategy includes increased lending to small and medium-sized enterprises. However, the aggregate amount of loans to small and medium-sized enterprises reﬂected in the Bank’s accounts decreased 5.9%from ¥27,936.2 billion as of March 31, 2001 to ¥26,287.3 billion as of March 31, 2002, primarily due to securitizations and bulk sales of such loans and write-offs of problem loans. As a prerequisite to its receipt of public funding in 1999, the Bank submitted its rationalization plan to the Government, in which the Bank stated

66 its intention to increase its lending to small-and medium-sized companies. Due to the weak economic conditions, the Bank has faced signiﬁcant difﬁculties in expanding such loans. The FSA is reviewing the Bank’s performance under its mid-term rationalization plan and may require the Bank to prepare an action plan to increase its lending to small and medium-sized companies.

Housing loans to individuals are generated through the Bank’s branch network. Consumer loans to individuals are provided by the Bank and its subsidiaries and affiliates, including its At-Loan-Co., Ltd. subsidiary which operates its own distribution network through the am/pm convenience stores. Loans to small and medium enterprises are generated through the Middle Market Banking Unit, which operates the Bank’s corporate business offices. Loans to large corporations are generated by our Corporate Banking Unit. In the Corporate Banking Unit, individual account managers work with the Bank’s corporate customers. Loans originated by corporate business offices can be approved by the general manager of the Bank’s Corporate Banking Department up to a limit which varies depending upon the amount and duration of the loan, the type and amount of collateral and other factors. Loans above this limit require approval from either of the Bank’s head offices in Tokyo or Osaka, and such head office approval entails review by two departments. The industry analysts of the Corporate Research Department review the market position and the industry characteristics of corporate customers, and evaluate (among other things) the strength of management, assets, financial performance, prospects and risks of such customers. In addition, the Bank uses a sophisticated tool, the Obligor Grading Model, to evaluate credit applications. The credit analysts of the Credit Department evaluate specific extensions of credit, analyzing, among other things, the adequacy of collateral or other credit support, use of proceeds, leverage and interest and cash flow coverage. Larger loans require the approval of one or more directors of the Bank. The Bank has also established a Credit Review Department to oversee the credit risk management system. See ‘‘—Risk Management—Credit Risk’’.

The large majority of the Bank’s domestic loans are secured by collateral or are supported by guarantees. Most domestic secured loans consist of loans to businesses secured by first liens on real estate collateral or housing loans to individuals guaranteed by the Bank’s affiliates, SUMIGIN GUARANTEE COMPANY LIMITED or SMBC Guarantee Co., Ltd. Such guarantees are secured by first liens on apartments or houses. Real estate collateral is generally valued based on asset values rather than cash flow. Most real estate collateral is valued by an appraisal firm affiliated with the Bank.

The Bank, like other banks in Japan, makes most domestic loans based on a short-term rate, the Tokyo Inter- Bank Offered Rate (‘‘TIBOR’’) and a long-term prime rate, which are generally intended to reﬂect the cost of funds.

Most domestic short-term loans (loans with a maturity of less than one year) by the Bank bear interest at a rate based on a short-term rate or TIBOR. The Bank establishes a short-term rate based principally on its cost of short-term yen funding. The Bank’s short-term prime rate is affected by changes in the Bank of Japan’s ofﬁcial discount rate, the rate at which the Bank of Japan extends short-term secured loans to domestic banks.

Most domestic long-term loans (loans with a maturity of one year or more) by the Bank bear interest at a rate based on the Bank’s new basis long-term prime rate, which is based on the short-term prime rate reﬂecting the fact that most of the Bank’s funding is short-term. The old basis long-term prime rate has been set at a rate equal to 90 basis points above the 5-year debenture rate of long-term credit banks. Currently, only a limited number of loans are based on the old basis long-term prime rate. Unsecured loans in the domestic interbank market are mostly overnight loans priced at call market rates. Call market rates are negotiated rates based on availability of and need for funds by Japanese banks.

Despite the relaxed monetary policy of the Bank of Japan after the ‘‘bubble’’ era, prime rates in Japan have been relatively stable since ﬁscal 1999. This is mainly because short-term interest rates, such as the six-month TIBOR, have declined to nearly zero and the prime rates, which will be adjusted according to the change in short-term interest rates, have little room for further decline.

The following table sets forth the Bank’s short-term, long-term prime rate (old basis and new basis), ﬁve- year swap rate and six-month TIBOR for the ﬁscal years indicated.

67 As of March 31, 1998(1) 1999(1) 2000(1) 2001(1) 2002 Short-term prime rate ...... 1.625%1.375%1.375%1.375%1.375% Long-term prime rate (new basis) ...... 2.125 1.875 1.875 1.875 1.875 Long-term prime rate (old basis) ...... 2.6 2.6 2.2 1.9 2.3 Five-year swap rate ...... 1.51 1.10 1.40 0.67 0.58 Six-month TIBOR ...... 0.74 0.29 0.18 0.12 0.12

(1) Figures as of March 31, 1998, 1999, 2000 and 2001 are prepared for Sakura Bank and Sumitomo Bank on a combined basis. See ‘‘Note Regarding Unaudited Historical Combined Financial Information’’ and, for more information regarding certain balance sheet, income statement and other ﬁnancial data, see ‘‘Annex—Supplemental Financial Information’’.

Overseas Lending The Bank’s international branches and representative offices originate corporate, sovereign and quasi- sovereign loans. Most of these loans are unsecured and are denominated in currencies other than Japanese yen. While most of the Bank’s international loans are to foreign credits, a significant portion of the Bank’s international loans are to overseas branches, subsidiaries and affiliates of Japanese corporations, and many of such loans to such subsidiaries and affiliates are guaranteed or otherwise supported by the Japanese parent corporations. Loans originated by a branch or representative office can be approved by the general manager up to a limit which varies depending upon the rank of the general manager and other factors. Loans above this limit require approval from regional headquarters or the Bank’s head office in Tokyo. The roles of the Corporate Research Department and the International Credit Department are credit grading and credit supervision, respectively. Larger international loans require the approval of one or more directors of the Bank. The overseas business of the Bank has been principally focused on lending to large, highly-rated corporations as well as to sovereign and quasi-sovereign credits. The following table shows the outstanding loans (including bills discounted) of the Bank’s overseas offices, before deduction of reserves for possible loan losses, as of the dates indicated, classified according to type of borrower: As of March 31, 2000(1) 2001(1) 2002 (millions of yen, except percentages) Overseas Offices(2): Public sector ...... ¥ 207,853 3.30%¥ 264,021 4.26%¥ 182,437 3.35% Financial institutions ...... 433,469 6.87 378,764 6.11 372,246 6.84 Commerce and industry ...... 5,595,092 88.70 5,488,219 88.57 4,689,758 86.23 Other ...... 71,554 1.13 65,669 1.06 194,437 3.58 Total ...... ¥6,307,972 100.00%¥6,196,676 100.00%¥5,438,880 100.00%

(1) Figures as of March 31, 2000 and 2001 are prepared for Sakura Bank and Sumitomo Bank on a combined basis. See ‘‘Note Regarding Unaudited Historical Combined Financial Information’’ and, for more information regarding certain balance sheet, income statement and other financial data, see ‘‘Annex—Supplemental Financial Information’’. (2) The above figures include Tokyo offshore accounts for international financial transactions. Because most of the Bank’s overseas loans are general-purpose credits to highly rated corporate, sovereign and quasi-sovereign credits, most of them are not secured by collateral. However, the Bank makes substantial secured loans overseas, including for project finance, equipment financing and margin lending for securities and commodities. The Bank’s overseas loans are generally extended at floating rates based on the London Interbank Offered Rate (‘‘LIBOR’’). Spreads on such loans are negotiated with customers and reflect competition with other domestic and international banks as well as alternative funding sources available to customers. Loans made by the Bank to customers outside Japan in highly leveraged corporate transactions (loans made in connection with recapitalizations, acquisition transactions or other corporate restructurings to customers whose debt to total asset ratio will exceed 75%, or 50% under certain circumstances) and, except with respect to loans to customers located in Indonesia (discussed below), are not material relative to the Bank’s total assets at

68 March 31, 2002. The Bank intends to continue to participate in such loans to the extent that credit risks are deemed prudent and a satisfactory level of return is offered, although the Bank expects that the portion of the Bank’s loan portfolio attributable to such loans will not materially increase.

Loan Losses and Problem Loans

General The Bank has experienced substantial loan losses in recent years. The Bank’s ﬁnancial results reﬂect actual loan losses as well as transfers to reserves for possible loan losses.

The Bank reviews its loans in the following ways. First, the Bank conducts semiannual self-assessments to calculate appropriate write-offs and reserves by classifying borrowers according to their ﬁnancial soundness. Second, the Bank categorizes the problem loans pursuant to, and provides disclosure under, the Financial Reconstruction Law. Third, the Bank calculates and discloses the value of risk monitored loans based on the Banking Law (which excludes non-loan assets such as foreign exchange, accrued interest and advanced payments). The Bank also discloses loans to speciﬁc overseas countries.

The Japanese economy has suffered for more than a decade from stagnant or negative growth and severely limited availability of credit. As a consequence, and compounding the effect of declining real estate prices, large numbers of businesses and individuals have become insolvent and have entered bankruptcy proceedings or have obtained partial forgiveness of their debts or other relief. Consequently, the Bank and other Japanese banks have suffered significant loan losses relating to loans to such businesses and individuals or relating to loans to financial institutions that extended credit to them. As a consequence of these trends, a number of Japanese banks, including the Bank, have for an extended period been faced with serious loan portfolio quality problems, as well as with the difficult issue of determining the realizable values of their non-performing assets and the amounts that should be reserved against them.

The Bank has in recent years recognized substantial loan losses as a result of these trends. In accordance with the Bank’s self-assessment policy, the reserve for possible loan losses reflects an estimate of the amount of losses that the Bank may incur in connection with its loan portfolio. The reserve does not necessarily reflect the entire amount of loan losses that may ultimately be realized in respect of existing loans. The Bank seeks through restructuring of loans or collection efforts to maximize the return on problem loans. The Bank’s loan recovery unit is dedicated to managing problem loans and maximizing the level of recoveries on loans which have been written-off. However, such returns are frequently limited by economic and legal impediments to restructuring and collection, including adverse domestic economic conditions in Japan that limit the operating profitability of customers, the absence of a liquid domestic market for real estate and the prevalence of second and third mortgages on real estate over which the Bank holds first liens (which can delay the disposal of such collateral and decrease the recoverable amount).

Policies with Respect to Troubled Customers In the past the Bank has provided direct and indirect support to troubled customers for a variety of reasons. For example, the Bank has provided support to customers where operating profitability or asset values indicate the likelihood of a successful restructuring. In addition, the Bank, like other banks in Japan, has provided support in the past to troubled customers under circumstances, and based upon considerations, that may differ in kind or degree from those relevant in other countries, including the United States. These include political and regulatory influences, relationships with members of Sumitomo Group and Mitsui Group, the lead bank system and perceived responsibility for obligations of affiliated and associated companies. While the importance of some of these considerations has been declining, these considerations nevertheless have significantly affected the Bank’s actions on a number of occasions in recent years. The Bank has also been subject to political and regulatory influences that affect the Bank’s willingness to support troubled customers. In some cases, the Bank has been induced by such considerations to extend credit or forgive indebtedness under circumstances where short-term economic considerations would have suggested other action.

69 The Bank may be influenced by its relationships with other members of Sumitomo Group and Mitsui Group to provide financial support. The Bank, like other Japanese banks, has provided financial support to affiliated or associated companies in the past. Third parties dealing with such companies frequently have an expectation, which may be implicitly or explicitly ratified by the Bank, that the Bank will provide financial assistance in the event that such affiliated or associated companies experience financial difficulties. The Bank has provided substantial support to SMBC Leasing, SMBC Finance (formerly known as Sumigin General Finance), SMBC Mortgage (formerly known as Sakura Mortgage) and SMBC Guarantee (formerly known as Sakura Guarantee) in recent years. Assistance to affiliated companies could consist of the forgiveness of loans by the Bank, the extension of loans by the Bank to facilitate the repayment of other indebtedness or equity investment. The Bank has announced its intention to provide financial assistance to certain financially distressed retail and construction companies in the form of debt forgiveness, debt for equity swaps and the acquisition of new shares.

The Bank has made a strategic decision to extend financial support to distressed customers only in situations where the Bank expects a positive return from such support. However, the Bank may face difficulties in implementing this strategy and there can be no assurance that the Bank’s decision to provide financial support will not be influenced by the factors mentioned above.

Credit Costs The following table shows an analysis of the Bank’s credit costs for each of the periods indicated:

Year ended March 31, 2000(1) 2001(1) 2002 (millions of yen, except percentages) Write-off of loans ...... ¥ 460,731 ¥ 741,432 ¥ 283,895 Transfer to specific reserves ...... 447,775 156,496 663,184 Transfer to reserve for losses on loans sold ...... 72,765 52,917 37,034 Losses on loans sold to CCPC ...... 44,756 31,745 8,363 Losses on sale of delinquent loans ...... 33,770 25,108 50,589 Losses on financial support for associated companies ...... 35,216 — — Transfer from loan loss reserve for specific overseas countries . . (5,753) (2) (4,546) Transfer to general reserve for possible loan losses ...... 24,235 (188,596) 504,558 Total ...... ¥ 1,113,498 ¥ 819,103 ¥ 1,543,078 Loans and bills discounted (period end) ...... 63,298,512 61,747,880 59,928,368 Ratio of total loan losses to loans and bills discounted ...... 1.76%1.33%2.57%

In fiscal 2001 the Bank wrote-off loans in the amount of ¥284 billion, a decrease of ¥458 billion from ¥741 billion in fiscal 2000. Write-offs in fiscal 2000 had increased by ¥281 billion from ¥461 billion in fiscal 1999. The large amount of write-offs in fiscal 2000 was primarily a result of debt forgiveness.

Transfers to reserves for losses on loans sold have decreased over the last three fiscal years due to the progress of write-offs conducted by CCPC. Losses on loans sold to CCPC declined to ¥8 billion in fiscal 2001 from ¥32 billion and ¥45 billion in fiscal 2000 and 1999, respectively.

The Bank makes the appropriate write-offs and reserves as a result of the self-assessments which are conducted in compliance with the financial inspection manual prepared by the Financial Services Agency and the practical guidelines published by the Japan Institute of Certified Public Accountants. Total credit costs amounted to ¥1,543,078 million in fiscal 2001, ¥819,103 million in fiscal 2000 and ¥1,113,498 million in fiscal 1999, on a nonconsolidated basis and including the amounts transferred to general reserves. The elevated credit

70 costs generally reflect three main factors: (i) the protracted economic slump in Japan that has led to an increase in the number of borrowers experiencing financial difficulties or requiring reorganization, (ii) the negative impact of deflation on collateral values, and (iii) precautionary measures undertaken by Sakura Bank and Sumitomo Bank before the merger to decrease problem assets.

Total credit costs increased in fiscal 2001 primarily as a result of the recent deterioration in asset quality and general economic conditions and a revised self-assessment and reserve policy in light of these economic and asset deteriorations. The increase in total credit costs included an increase in transfers to specific reserves of ¥506,688 million and an increase in transfers to general reserves of ¥693,154 million. The increases were partially offset by a decrease in write-offs of ¥457,537 million resulting from the tighter self-assessment and reserve policy. As of March 31, 2002, total reserves for possible loan losses were ¥1,971,849 million. On a consolidated basis, total credit costs amounted to ¥1,703,363 million, including amounts transferred to general reserves, specific reserves and write-offs. Total reserves for possible loan losses were ¥2,159,649 million (as compared to ¥1,971,849 million on a non-consolidated basis) due to reserves for possible loan losses provided by subsidiaries such as bank subsidiaries and leasing and other companies.

71 Accounting Principles and Self-Assessment Categories Relating to Reserves for Possible Loan Losses The table set forth below provides an overview of the different methods of loan and asset categorization as well as applicable amounts and percentages as of March 31, 2002.

(1) Includes amount of direct reduction totaling ¥1,405.1 billion. (2) Includes reserves for assets which are not subject to disclosure under the Financial Reconstruction Law disclosure standards. (Bankrupt/effectively bankrupt borrowers: ¥3.7 billion, potentially bankrupt borrowers: ¥11.9 billion). (3) Reserve ratios to bankrupt borrowers, effectively bankrupt borrowers, potentially bankrupt borrowers, substandard borrowers and borrowers requiring caution including substandard borrowers represent the proportion of the reserve to the respective claims of each category, excluding the portion secured by collateral or guarantees. (4) In the second half of fiscal 2001, the Bank increased its reserve ratio applicable to category III loans from 60%to 65%.The new ratio is based on the historic credit loss ratio. Additionally, the Bank provides for higher specific reserves with respect to certain loans. As a result, the average specific reserve ratio as of March 31, 2002 was 75.9%. (5) Reserve ratios to normal borrowers requiring caution excluding substandard borrowers represent the proportion of the reserve to the respective claims of each category. A figure in square brackets indicates the proportion of the reserve to the claims excluding the portion secured by collateral or guarantees. (6) The proportion of the reserve to the claims, excluding the portion secured by collateral or guarantees.

72 The Bank accounts for its problem loans, reserves and loan losses in accordance with the following policies and regulations.

Borrower Categorization Under the self-assessment process, the Bank classifies its customers into five different categories based on guidelines promulgated by the JICPA in April 1997. The five categories of customers are: ‘‘Normal Borrowers’’. This category consists of borrowers in satisfactory financial condition who meet their payment obligations, and includes all borrowers not classified as ‘‘borrowers requiring caution’’, ‘‘potentially bankrupt borrowers’’, ‘‘effectively bankrupt borrowers’’ or ‘‘bankrupt borrowers’’. ‘‘Borrowers Requiring Caution’’. This category consists of borrowers (i) with ‘‘restructured’’ loans (see —‘‘Restructured Loans’’); (ii) who are past-due on principal or interest payments for 3 months or more; (iii) whose business or financial condition is deteriorating or becoming unstable; or (iv) who are otherwise experiencing financial difficulties. (i) and (ii) combined constitute ‘‘substandard loans’’ as defined under the Financial Reconstruction Law. ‘‘Potentially Bankrupt Borrowers’’. This category consists of currently solvent borrowers that the Bank deems to have a high probability of becoming insolvent because of continuing, serious financial difficulties or because of a lack of expected progress in implementing restructuring plans. These borrowers have low prospects of future profitability and continued solvency because, among other reasons, they are nearly insolvent, their business and financial condition has significantly deteriorated, or some or all of their loans are past-due. The Bank classifies those borrowers as ‘‘potentially bankrupt’’ whom the Bank decides to cease providing financial support and to adopt a passive approach with respect to, or withdraw from, its current relationship with such borrower. ‘‘Effectively Bankrupt Borrowers’’. Even though not legally or formally insolvent, borrowers can be classified as ‘‘effectively bankrupt’’ if, among other reasons, they face extreme financial difficulties of a larger magnitude than customers classified as ‘‘potentially bankrupt’’ and there are no prospects for successful restructuring. A borrower that continues to operate its business may nevertheless be classified as ‘‘effectively bankrupt’’ because, among other reasons, there is no prospect of future profitability due to a large amount of problem assets, a large amount of debt compared to its ability to repay, or insolvency persisting for generally more than one year. A borrower may also be classified as ‘‘effectively bankrupt’’ if there are no prospects for successful restructuring because of substantial losses due to calamities, accidents, a sudden change in the economic conditions, or other similar events. In addition, the borrower is ‘‘effectively bankrupt’’ if it is practically insolvent as evidenced by its loans being past-due for six months or longer. ‘‘Bankrupt Borrowers’’. This category consists of borrowers who have entered into bankruptcy (hasan), civil rehabilitation proceedings (minji saisei), corporate reorganization proceedings (kaisha kosei), special liquidation proceedings (tokubetsu seisan) or similar proceedings, or whose discounted bills are subject to trading suspension at the bill clearing house.

Loan Categorization After categorizing the borrower to which a loan was extended, the Bank categorizes such loan by evaluating any collateral and guarantees associated with such loan. Collateral and guarantees are classified into two broad categories, ‘‘superior’’ (e.g. cash deposits and high-quality securities) and ‘‘ordinary’’ (e.g., real estate). Sub- categories of ‘‘superior’’ and ‘‘ordinary’’ collateral are specified, and each sub-category is assigned a specific percentage ranging from 50%to 100%for the purpose of determining the portion of the value of collateral that will be considered ‘‘qualified’’ collateral. The Bank then classifies its loans as follows: ‘‘Category I (Unclassified) Loans’’ includes (i) all loans to ‘‘normal’’ borrowers and (ii) the ‘‘qualified’’ portion of ‘‘superior’’ collateral and guarantees for loans to all other borrowers.

73 ‘‘Category II Loan’’ includes (i) all loans (other than Category I Loans) to ‘‘borrowers requiring caution’’, and (ii) the ‘‘qualiﬁed’’ portion of ‘‘ordinary’’ collateral and guarantees for loans to ‘‘potentially bankrupt borrowers’’, ‘‘effectively bankrupt borrowers’’ and ‘‘bankrupt borrowers’’. ‘‘Category III Loans’’ includes (i) all loans (other than Category I Loans and Category II Loans) to ‘‘potentially bankrupt borrowers’’, (ii) the non-‘‘qualiﬁed’’ portion of collateral and guarantees for loans to ‘‘effectively bankrupt borrowers’’ and ‘‘bankrupt borrowers’’ and (iii) any additional amount the Bank expects to receive in bankruptcy proceedings on loans to ‘‘effectively bankrupt customers’’ and ‘‘bankrupt borrowers’’. ‘‘Category IV Loans’’ includes all loans (other than Category I Loans and Category II and III Loans) to ‘‘effectively bankrupt borrowers’’ and ‘‘bankrupt borrowers’’.

Direct Write-offs The Bank directly writes off (and does not charge off against its reserves) the portion of loans classified as ‘‘Category IV’’, to the extent such portion has not been previously specifically reserved. The Bank writes off such portions of loans to ‘‘bankrupt borrowers’’, and such portions of loans to ‘‘effectively bankrupt borrowers’’ (to the extent not previously specifically reserved). The Bank then determines the appropriate amount of reserves to be established for loans in the remaining three categories according to the reserve policies described below.

Reserves Reserves for possible loan losses represent allowances for estimated future credit losses. Credit losses arise primarily from the loan portfolio, but may also be derived from other sources including commitments to extend credit, guarantees and standby letters of credit. In this offering circular, the term ‘‘loan losses’’ includes losses derived from these other sources. Actual loan losses, net of recoveries, are generally deducted from reserves for possible loan losses. However, under the Bank’s self-assessment process, losses on loans are shown as direct write-offs (and not charged off against reserves) when the loan or a portion thereof is or becomes unsecured, and the customer is classiﬁed as ‘‘bankrupt’’ or ‘‘effectively bankrupt’’, to the extent that speciﬁc reserves were not provided for such loans.

Reserves for possible loan losses are comprised of three parts: general reserves, speciﬁc reserves and reserves for speciﬁc overseas countries. Accounting principles relating to these are discussed below. The Bank also maintains reserves for loss on loans sold to CCPC. The Bank uses a self-assessment process to analyze the quality of its loans and thereby calculate its reserves.

74 The following table shows the changes in the Bank’s reserves for possible loan losses as of the dates indicated:

As of March 31, 2000(1) 2001(1) 2002 (millions of yen, except percentages) Reserves for possible loan losses at beginning of fiscal year ended ...... ¥1,788,520 ¥1,569,493 ¥1,095,841 Foreign currency translation adjustment ...... (11,399) 8,141 6,239 Charge-offs to specific reserves for possible loan losses ...... (655,043) (446,774) (289,180) Aggregate additions to reserves ...... 447,417 (35,018) 1,158,948 Reserves for possible loan losses at end of fiscal year ended ...... 1,569,493 1,095,841 1,971,849 General reserves ...... 556,376 367,779 872,338 Specific reserves ...... 993,116 708,073 1,084,065 Reserves for specific overseas loan losses ...... 20,001 19,989 15,445 Loans and bills discounted ...... 63,298,512 61,747,880 59,928,368 Reserves for possible loan losses as a percentage of loans and bills discounted ...... 2.47%1.77%3.29% Specific reserve as a percentage of bankrupt loans and non-accrual loans ...... 36.3 28.9 32.0

General Reserves. General reserves are provided for the following categories of loans: category II of substandard loans, loans to borrowers requiring caution other than substandard loans and category I of loans to normal borrowers. The reserve ratios for those three categories are based on the historical credit loss ratios for each group. In ﬁscal 2001, the Bank raised the reserve ratios for the category II loans to borrowers requiring caution. The reserve ratio for the unsecured portion of the category II loans to borrowers requiring caution was increased to 9.4%as of March 31, 2002 from 3.1%as of September 30, 2001. The reserve ratio for the unsecured portion of substandard loans was increased to 21.8%as of March 31, 2002 from 15%as of September 30, 2001.

Specific Reserves. The specific reserves are based on the Bank’s estimate of the probability of loan losses on the whole amount of each loan classified as ‘‘Category III,’’ which is based on historical credit loss ratios. The Bank has transferred unusually large amounts to the specific reserves in recent fiscal years. See ‘‘—Credit Costs’’. Additions to the specific reserves are generally not fully deductible for Japanese tax purposes. The Bank in recent years has provided for transfers to the specific reserves in amounts that have substantially exceeded the corresponding amounts deductible for Japanese tax purposes; this difference accounts for most of the deferred income taxes reflected in the Bank’s financial statements. In the second half of fiscal 2001, the Bank increased its reserve ratio applicable to category III loans from 60%to 65%.The new ratio is based on the historical credit loss ratio. Additionally, the Bank provides for higher specific reserves with respect to certain loans. As a result, the average specific reserve ratio as of March 31, 2002 was 75.9%. See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies—Reserves for Possible Loan Losses’’.

Reserves for Specific Overseas Countries. The Bank maintains reserves for possible losses on specific overseas loans originated in countries considered to be more risky. The amount of the reserves is based on the amount of expected losses due to the political and economic situation of these countries. See ‘‘—Loans to Specific Overseas Countries’’.

Reserves for Possible Losses on Loans Sold. The reserves for possible losses on loans sold reﬂects the Bank’s estimate of the amount of losses it will incur in the future in relation to loans previously sold by the Bank to CCPC. At the time of each sale by the Bank to CCPC of problem loans, the Bank recognizes a loss to

75 reflect the discounted sale price of such loans. However, the Bank is subject to the risk of further losses associated with loans sold to CCPC. Each sale to CCPC is financed by a loan by the Bank to CCPC. Under the contract for sale of loans, any losses incurred by CCPC on any subsequent disposition of the real estate collateral (and certain related expenses incurred by CCPC) are then reflected retroactively in the sale price at which CCPC purchased the loan and are charged to the Bank. Because the market value of real estate securing many of the loans sold by the Bank to CCPC has declined significantly since the respective times at which such loans were sold, the Bank expects that such losses will be charged to the Bank upon disposition of the relevant real estate collateral. Reserve for loss on loans sold provides for such contingent ‘‘secondary’’ losses expected to be charged to the Bank in the future. The Bank intends to provide for such reserve to reflect the material difference between current estimated market values for real estate collateral for such loans and the principal amount of loans extended by the Bank to CCPC to finance the purchase of such loans by CCPC. Transfer to reserve for loss on loans sold is not deductible for Japanese tax purposes. See Notes 2(h) and 22 of Notes to Non-Consolidated Financial Statements of the Bank.

Disclosure of Problem Assets Under the Financial Reconstruction Law Under the Financial Reconstruction Law, assets are assessed and classified into four categories (i) bankrupt and quasi bankrupt assets, (ii) doubtful assets, (iii) substandard loans and (iv) normal assets. The Bank is required to categorize its assets according to the Financial Reconstruction Law and to disclose such information semiannually. The categories are: Bankrupt and Quasi-Bankrupt Assets. This category is defined as the sum of credits to bankrupt borrowers and effectively bankrupt borrowers as categorized by the self-assessment, minus fully written-off Classification IV credits. All Classification III credits are unsecured and fully covered by reserves. The remaining Classification I and II credits are considered to be collectible since they are secured by collateral or guarantees. Doubtful Assets. This is the sum of credits extended to borrowers classified as potentially bankrupt under the self-assessment. Since the Classification I and II credits are secured by collateral or guarantees and are considered to be collectible, specific reserves are set aside only for the unsecured portions under Classification III. Substandard Loans. This is the sum of the loans extended to borrowers requiring caution under the self-assessment. Loans that are 90 days or more past due and restructured loans are placed in this category. Normal Assets. This is the sum of the credits not included in the other three categories. Normal assets thus represent the sum of credits to normal borrowers and that portion of credits identified through self- assessment as borrowers requiring caution, but not classified as substandard, and on which the risk of credit losses is deemed relatively small.

The following tables set forth the Bank’s disclosure as to the quality of its loan portfolio and other extensions of credit, in the disclosure categories required under the Financial Reconstruction Law and the corresponding amount of speciﬁc reserves for each category, as of March 31, 2000, 2001 and 2002.

As of March 31, Non-consolidated 2000(1) 2001(1) 2002 (billions of yen) Bankrupt and quasi-bankrupt assets (Hasan kousei saiken tou) ...... ¥ 585.5 ¥ 589.9 ¥ 493.5 Doubtful assets (Kiken saiken)...... 2,232.0 1,943.1 2,970.2 Substandard loans (Youkanri saiken) ...... 823.0 289.4 2,436.3 Total problem assets ...... 3,640.5 2,822.5 5,900.0 Normal assets (Seijou saiken) ...... 66,034.7 66,157.8 60,558.9 Total ...... ¥69,675.2 ¥68,980.3 ¥66,458.9

76 As of March 31, 2000(1) 2001(1) 2002 (billions of yen, except percentages) Bankrupt and quasi-bankrupt assets: Secured by collateral or guarantees ...... ¥ 556.5 ¥ 557.1 ¥ 474.8 Fully reserved ...... 28.9 32.8 18.7 Reserve for possible loan losses ...... 32.1 37.8 22.4 Reserve ratio ...... 100.0%100.0%100.0% Doubtful assets: Secured by collateral or guarantees ...... ¥ 731.6 ¥ 828.4 ¥1,572.1 Necessary amount to be reserved ...... 1,500.3 1,114.8 1,398.1 Reserve for possible loan losses ...... 908.2 665.4 1,061.7 Reserve ratio ...... 60.5%59.7%75.9%

As of March 31, Consolidated 2001(1) 2002 (billions of yen) Bankrupt and quasi-bankrupt assets (Hasan kousei saiken tou) ...... ¥ 777.3 ¥ 638.2 Doubtful assets (Kiken saiken)...... 2,166.4 3,263.4 Substandard loans (Youkanri saiken) ...... 411.2 2,666.1 Total problem assets ...... 3,355.0 6,567.7 Normal assets (Seijou saiken) ...... 68,290.6 61,896.4 Total ...... ¥71,645.6 ¥68,464.1

The following table sets forth the loan categories and corresponding guidelines for loan loss write-offs and reserves issued by the FRC in 1999. The Bank has adopted reserve policies for loan loss write-offs and reserves in accordance with these guidelines.

FRC Reserve Guideline Bankrupt and quasi-bankrupt assets (Hasan Kousei saiken tou) ...... Direct write-off of 100%of unsecured portion not covered by specific reserves. Doubtful assets (Kiken saiken) ...... Specific reserves of 70%or ratios based on the Bank’s historical credit loss experience against the unsecured portion of claims. Substandard loans (Youkanri saiken) ...... 15%ofgeneral reserves against unsecured portion of claims to any ‘‘customer requiring caution’’, if any of such customer’s loans are classified as ‘‘substandard’’. Normal assets (Seijou saiken) ...... Historical credit loss ratio.

77 Disclosure of Risk-Monitored Loans Under the Banking Law The Bank is required to disclose certain of its problem loans as ‘‘risk-monitored loans’’ under the Banking Law. The Banking Law provides for the disclosure of four categories of risk monitored loans, (i) bankrupt loans, (ii) non-accrual loans, (iii) past due loans (three months or more) and (iv) restructured loans. These loans exclude non-loan assets such as foreign exchange, accrued interest and advanced payments. The following table sets forth the Bank’s risk monitored loans for the last three ﬁscal years.

As of March 31, 2000(1) 2001(1) 2002 (billions of yen) Bankrupt loans ...... ¥ 229.6 ¥ 235.7 ¥ 195.7 Non-accrual loans ...... 2,503.8 2,207.5 3,184.5 Past due loans (3 months or more) ...... 75.6 103.2 92.3 Restructured loans ...... 747.4 186.2 2,344.0 Total risk-monitored loans ...... ¥3,556.5 ¥2,732.6 ¥5,816.5

Bankrupt Loans. Bankrupt loans are loans to borrowers that have been legally and formally declared bankrupt.

Non-accrual loans. Non-accrual loans are loans for which the Bank does not currently accrue interest income due to the nonpayment status of the loan or the condition of the borrower. Non-accrual loans also include all other loans to ‘‘bankrupt’’, ‘‘effectively bankrupt’’ and ‘‘potentially bankrupt’’ customers. Loans to customers (other than ‘‘bankrupt’’, ‘‘effectively bankrupt’’ and ‘‘potentially bankrupt’’ customers) are removed from non- accrual status if interest is received from the borrower, even if such interest is substantially less than the full amount due. See ‘‘Summary of Signiﬁcant Differences between Japanese GAAP and U.S. GAAP—Accrued Interest on Non-Performing Loans’’. The Bank’s non-accrual loans are virtually all domestic loans. The Bank is taking active measures to reduce the balance of its non-accrual loans, principally by writing off such loans and, in the case of domestic loans secured by real estate, disposing of such loans and collateral through sales.

Past due loans. Past due loans include loans for which principal or interest is three months or more past due but excludes non-accrual and restructured loans.

Restructured loans. Restructured loans are loans to customers in financial difficulty to whom banks provide financial support by changing the lending terms so as to be more favorable to the borrower, including reduction of interest rate, provision of grace periods for repayment and debt forgiveness. Restructured loans do not include extensions of credit to the CCPC or to the Housing Loan Administration Corporation (‘‘HLAC’’) or its successor, or investments in the jusen funds. See ‘‘—Jusen Restructuring’’. In some cases, the Bank provides support to customers whose loans are classified as ‘‘restructured’’. The Bank’s approach in these instances is to provide support to these customers in an attempt to achieve a greater level of recovery. The Bank monitors the customer’s performance carefully, in some cases by seconding staff from the Bank, while maintaining the customer relationship. As of March 31, 2002, restructured loans were ¥2,344 billion, an increase of ¥2,158 billion from March 31, 2001. This increase of restructured loans in fiscal 2001 was primarily due to a broadening of the Bank’s interpretation of ‘‘restructured loans’’. Restructured loans had decreased by ¥561 billion from March 31, 2000 to March 31, 2001.

78 Loans to Specific Overseas Countries As of March 31, 2002, nine countries are categorized by the Bank as countries that are considered to have an enhanced credit risk. As of March 31, 2002, the Bank had ¥152 billion of exposure to specific overseas countries, almost all of which represented exposure to Indonesia. The following table sets forth the Bank’s exposure to specific overseas countries.

As of March 31, 2000(1) 2001(1) 2002 (billions of yen) Indonesia ...... ¥176.0 ¥184.6 ¥138.5 Argentina ...... — — 8.4 Algeria ...... 4.5 4.5 4.1 Other ...... 7.2 3.8 1.3 ¥187.7 ¥192.9 ¥152.3 Number of countries ...... 14 9 9

Jusen Restructuring Japanese housing loan companies, commonly known as ‘‘jusen’’, were rendered insolvent in the early 1990s by the rapid increase in non-performing loans and a decline in the value of Japanese real estate collateral underlying their loan portfolios. In 1996, the Ministry of Finance and leading Japanese ﬁnancial institutions undertook coordinated action to resolve the problems of the jusen, including the use of public funds. The HLAC was formed to administer this restructuring. As part of this government sponsored restructuring, Sakura Bank and Sumitomo Bank invested in the special jusen funds.

The Bank’s investments in the two jusen funds, which totaled ¥208.6 billion, are non-interest bearing investments included on the Bank’s balance sheet (classified as other assets). These investments are reported at cost. There can be no assurance that the Bank’s investments in these funds will be returned or that additional contributions from the Bank or further forgiveness of loans by the Bank will not be required in the event that HLAC’s successor requires additional financial assistance in order to meet its financial obligations. In April 1999, HLAC merged with the Resolution and Collection Bank and became The Resolution and Collection Corporation.

Exposure to Enron The Bank has claims totaling $210 million against Enron Corp. and eight related entities. This includes both secured and unsecured claims. In addition to the above claims, the Bank has five project finance transactions in which Enron has a 50%or higher equity interest or with which Enron is significantly involved. The major repayment source of these transactions is the cash flow of each project. The total exposure to these project finance transactions is $59 million.

Securities-Related Activities

Securities Portfolio The book value of the Bank’s investment securities portfolio amounted to ¥20,442,996 million as of March 31, 2002. The Bank’s bond portfolio had a book value amounting to ¥14,113,540 million as of March 31, 2002. The Bank’s bond portfolio is principally held for investment purposes with a small number of securities being held for inventory purposes for sales to customers. More than half of the Bank’s bond portfolio is composed of ﬁxed-rate long-term Japanese and local government bonds and high quality corporate bonds

79 denominated in yen which the Bank intends to hold until maturity. The approximate average duration of the Bank’s JGB portfolio is 2.7 years. Bonds are also held to ensure liquidity and, when needed, they can be used as collateral for call money or other money market funding or short term borrowing from the Bank of Japan. Sales of such bonds are made from time to time in order to recognize discretionary gains. The Bank’s treasury department actively monitors the interest rate and maturity proﬁle of its bond portfolio as part of the Bank’s overall risk management. The short-term bond trading operations of the Bank’s former securities subsidiary have been transferred to the securities and derivatives joint venture.

The Bank’s equity portfolio had a book value amounting to ¥5,595,410 million as of March 31, 2002, consisting largely of publicly-traded Japanese equities. The Bank’s equity portfolio, like that of other Japanese banks, has historically included shares of certain of its customers who in turn hold shares of the Bank. The Bank is reducing its equity holdings to comply with the FSA requirement that the equity portfolio of a bank shall amount to no more than the Bank’s Tier I capital. See ‘‘Supervision and Regulations—Japan—Restriction on Bank’s Stockholding and the Bank-held Stock Acquisition Organization’’.

The Bank recognizes the risks associated with its equity portfolio due to its volatility as well as its relatively poor yield. Accordingly, the Bank has been actively looking to minimize the negative effect of holding a large equity portfolio through hedging and derivative transactions and at the same time maintain existing client relationships. While the portfolio is under review, the Bank continues to look at equity investments with the potential for meaningful returns.

As of June 17, 2002, the Nikkei average was 10,664.11 and the TOPIX average was 1,025.70. The table below sets forth the closing values of the Nikkei 225 Index and the TOPIX Index at March 31, 1998, 1999, 2000, 2001 and 2002.

As of March 31, 1998 1999 2000 2001 2002 Nikkei ...... ¥16,527.17 ¥15,836.59 ¥20,337.32 ¥12,999.70 ¥11,024.94 TOPIX ...... 1,251.70 1,267.22 1,705.94 1,277.27 1,060.19

80 The following table shows the total composition and maturity of the Bank’s investment securities portfolio as of the dates indicated:

As of March 31, 2002 More than One Year More than More than More than One Year to Three Three Years to Five Years to Seven Years to Over Ten Unspeciﬁed or Less Years Five Years Seven Years Ten Years Years Term Total (%) (millions of yen, except percentages) Japanese government bonds ...... ¥2,155,760 ¥3,613,404 ¥2,392,875 ¥465,271 ¥ 771,568 ¥200,230 — ¥ 9,599,109 46.9% Japanese local government bonds(2) . . 25,433 41,395 69,013 96,921 196,077 570 — 429,412 2.1 Japanese corporate bonds(2)(3) ...... 87,161 340,745 469,994 133,812 149,948 1,900 — 1,183,562 5.8 Japanese corporate stocks ...... — — — — — — ¥5,595,410 5,595,410 27.4 Other(4) ...... 219,992 1,784,002 161,871 71,295 70,673 510,543 817,122 3,635,501 17.8 Foreign bonds .... 218,291 1,783,941 160,315 67,652 57,289 508,912 67,236 2,863,638 14.0 Foreign stocks .... — — — — — — 734,046 734,046 3.6 Total ...... ¥2,488,347 ¥5,779,548 ¥3,093,754 ¥767,300 ¥1,188,268 ¥713,243 ¥6,412,533 ¥20,442,996 100.0%

As of March 31, 2001(1) More than More than One Year More than More than Seven One Year to Three Three Years to Five Years to Years to Over Ten Unspeciﬁed or Less Years Five Years Seven Years Ten Years Years Term Total (%) (millions of yen, except percentages) Japanese government bonds ...... ¥7,020,507 ¥4,135,860 ¥1,507,521 ¥482,210 ¥2,125,002 — — ¥15,271,104 56.4% Japanese local government bonds(2) . . 24,803 30,372 24,187 58,671 184,652 ¥ 563 — 323,252 1.2 Japanese corporate bonds(2)(3) ...... 132,201 219,562 368,357 87,960 184,339 3,000 — 995,423 3.7 Japanese corporate stocks ...... — — — — — — ¥7,167,659 7,167,659 26.5 Others(4) ...... 470,764 677,665 443,331 99,217 186,710 497,940 926,900 3,302,535 12.2 Foreign bonds .... 461,147 658,274 414,947 69,085 157,090 493,209 — 2,253,757 8.3 Foreign stocks .... — — — — — — 920,696 920,696 3.4 Total ...... ¥7,648,275 ¥5,063,459 ¥2,343,396 ¥728,058 ¥2,680,703 ¥501,503 ¥8,094,559 ¥27,059,978 100.0%

As of March 31, 2000(1) More than One Year More than More than More than One Year to Three Three Years to Five Years to Seven Years to Over Ten Unspeciﬁed or Less Years Five Years Seven Years Ten Years Years Term Total (%) (millions of yen, except percentages) Japanese government bonds ...... ¥1,187,598 ¥1,515,682 ¥ 986,540 ¥685,670 ¥ 916,130 — — ¥ 5,291,625 33.3% Japanese local government bonds(2) . . 24,973 45,987 20,311 28,781 371,074 ¥ 566 — 491,698 3.0 Japanese corporate bonds(2)(3) ...... 310,069 235,906 212,834 119,113 144,896 9,004 — 1,031,827 6.5 Japanese corporate stocks ...... — — — — — — ¥6,973,606 6,973,606 43.9 Others(4) ...... 285,242 350,292 145,111 76,616 166,387 276,408 789,209 2,089,273 13.2 Foreign bonds .... 268,405 317,754 122,810 48,799 133,814 270,650 — 1,162,239 7.3 Foreign stocks .... — — — — — — 766,323 766,323 4.8 Securities lent ...... 663 1,023 677 — — — 13,451 15,814 0.1 Total ...... ¥1,808,545 ¥2,148,890 ¥1,365,473 ¥910,180 ¥1,598,487 ¥285,978 ¥7,776,266 ¥15,893,846 100.0%

81 (1) Figures as of March 31, 2000 and 2001 are prepared for Sakura Bank and Sumitomo Bank on a combined basis. See ‘‘Note Regarding Unaudited Historical Combined Financial Information’’ and, for more information regarding certain balance sheet, income statement and other ﬁnancial data, see ‘‘Annex—Supplemental Financial Information’’. (2) Many of the corporate bonds and some of the Japanese local government bonds held by the Bank are not listed on an established market and are, therefore, recorded at cost. (3) Includes, in addition to corporate bonds, bonds guaranteed by the government of Japan and bank debenture. (4) Includes foreign securities such as non-yen denominated securities, yen denominated securities issued outside Japan and yen denominated securities of non-Japanese issuers issued in Japan.

The following tables show the book value and market value of, and the unrealized gain or loss on, the Bank’s investment securities portfolio as of the dates indicated. The categories for the presentation of the table above were changed as of April 1, 2001 as a result of the adoption of new accounting standards for ﬁnancial instruments. Unlisted securities without market value are not reﬂected in these tables.

March 31, 2000(1) Balance sheet Net unrealized Unrealized Unrealized amount Market value gains (losses) gains losses (millions of yen) Listed Securities Corporate and Government bonds . . ¥ 1,301,914 ¥ 1,270,817 ¥ (31,095) ¥ 24,844 ¥ 55,941 Corporate Stocks ...... 6,410,117 7,880,035 1,469,918 2,166,990 697,071 Other ...... 701,497 704,309 2,811 19,998 17,187 Listed Securities Total ...... 8,413,529 9,855,163 1,441,633 2,211,835 770,201 Unlisted Securities with Market Value Corporate and Government Bonds .... 4,611,659 4,614,306 2,647 16,108 13,461 Corporate Stocks ...... 66,893 184,361 117,468 130,544 13,076 Other ...... 36,669 39,076 2,405 4,664 2,257 Unlisted Securities Total ...... 4,715,221 4,837,743 122,522 151,319 28,797 Total(4) ...... ¥13,128,750 ¥14,692,906 ¥1,564,155 ¥2,363,154 ¥798,998

April 1, 2001(2) Net Unrealized Unrealized Unrealized Gains (Losses) Gains Losses (millions of yen) Bonds classiﬁed as held-to-maturity ...... ¥ (60) ¥ 1 ¥ 61 Stocks of subsidiaries and afﬁliates ...... (2,101) 6,249 8,351 Other securities ...... 200,412 505,260 304,849 Stocks ...... 93,783 387,839 294,056 Bonds ...... 104,965 107,521 2,556 Other ...... 1,664 9,899 8,236 Other money held in trust ...... (3,614) 811 4,426

March 31, 2002(3) Gains included Balance sheet in proﬁt (loss) amount during the year (millions of yen) Securities classiﬁed as trading ...... ¥873,583 ¥265

March 31, 2002(3) Net Balance sheet Market unrealized Unrealized Unrealized amount value gains (losses) Gains Losses (millions of yen) Bonds classiﬁed as held-to-maturity ...... ¥127,961 ¥129,108 ¥1,146 ¥1,165 ¥19

82 March 31, 2002(3) Net Balance sheet Market unrealized amount value gains (losses) (millions of yen) Stocks of subsidiaries and afﬁliates ...... ¥112,488 ¥112,387 ¥(101) March 31, 2002(3) Acquisition Balance sheet Net unrealized Unrealized Unrealized cost amount gains (losses) Gains Losses (millions of yen) Other securities ...... ¥18,528,611 ¥18,046,957 ¥(481,593) ¥244,299 ¥725,892 Stocks ...... 5,234,755 4,733,857 (500,897) 180,943 681,841 Bonds ...... 10,517,923 10,555,706 37,783 55,597 17,814 Other ...... 2,775,933 2,757,392 (18,540) 7,696 26,236 Change of classiﬁcation(4) ...... — — 61 61 — Other money held in trust ...... 33,968 30,142 (3,825) 135 3,960

(1) Figures as of March 31, 2000 are prepared for Sakura Bank and Sumitomo Bank on a combined basis. See ‘‘Note Regarding Unaudited Historical Combined Financial Information’’ and, for more information regarding certain balance sheet, income statement and other financial data, see ‘‘Annex—Supplemental Financial Information’’. (2) Concurrently with the merger of Sakura Bank and Sumitomo Bank, the Bank recognized unrealized losses on Sakura Bank’s equity securities portfolio. See ‘‘Note Regarding Unaudited Historical Combined Financial Information’’ and ‘‘Annex—Supplemental Financial Information’’. This table shows figures as of April 1, 2001 to include this merger-related reduction in unrealized losses. (3) Figures are shown as of March 31, 2002 to reflect the changes in accounting rules that became effective as of April 1, 2001. (4) Reflects a change in classification of investment.

The high level of unrealized losses as of March 31, 2002 is primarily attributable to the general decline in securities values, particularly in the values of Japanese equities.

Trading Portfolio Beginning in fiscal 1997, the Bank adopted mark-to-market accounting for its trading portfolio pursuant to Japan’s Banking Act. The Bank’s trading portfolio includes securities, derivatives and other trading assets and liabilities. Net trading income for fiscal 1999, 2000 and fiscal 2001 was ¥41,369 million, ¥95,385 million and ¥121,289 million, respectively, principally consisting of gains on trading-related financial derivatives transactions.

Risk Management Risks are classified into the following categories for control purposes: (1) credit risk, (2) market risk, (3) liquidity risk, (4) processing risk, (5) systems risk and (6) other risk (settlement risk, legal risk, reputational risk and others). Each department is charged with control of risks at an appropriate level within its own business line. To manage the risks included in the items (1-5) above as well as settlement risk, the Bank has designated certain departments as risk management departments to oversee specific risk control measures within each risk category. In addition, the Bank has established the Corporate Risk Management Department completely independent of the business units to manage these risks on a bank-wide basis. This department works with the Corporate Planning Department to comprehensively and systematically manage risk. The system works as follows: the risk management department supervising each risk category drafts ‘‘basic principles for risk management’’ for that category, which are then presented for approval at the Management Committee and considered by the Board’s Risk Management Committee before being finalized by the Board. According to the basic principles for risk management, the Management Committee, board members and risk management department heads perform risk management and this process is coordinated by the risk management departments concerned. The risk management departments revise the basic risk management principles for each risk category on a regular basis, and whenever necessary, to ensure timely and appropriate risk management. Furthermore, in order

83 to maintain a balance between risk and return as well as ensure soundness of the Bank from an overall perspective, the Bank uses the ‘‘risk capital-based management’’ method which allocates capital to each department according to its role in the Bank’s business strategies to keep the total exposure to credit, market, processing and systems risk within the scope of its management resources, i.e., capital. In the credit and market risk categories in particular, the maximum risk capital that can be allocated during a period is predetermined and risk capital guidelines are set within this limit to manage these risks. Liquidity risk is managed within a framework that includes plans for money gap and treasury funding. The other risk categories are managed with procedures closely attuned to the nature of the risk as described below.

Market Risk Market risk is the chance that ﬂuctuations in interest rates, foreign exchange rates or stock prices will change the value of ﬁnancial products, leading to a loss. Market risk can be divided into its various factors: foreign exchange rate, interest rate, equity price and option risk. The Bank uses both the VaR method and other indicators actually used in daily operations, such as the basis point value (BPV) indicator (to measure the change in earnings for every 0.01%change in interest rates), to manage risk in each risk category. The value at risk (VaR) method predicts the maximum potential loss for a given probability. The Bank strives to set the total VaR guidelines to conservative levels relative to capital in line with its business strategies.

The market risk of the Bank’s strategic equity holdings held by the units not in charge of market-related activities and the market risk taken by its major subsidiaries are also included in the integrated risk measurement performed by the Corporate Risk Management Department. The VaR is regularly calculated and reported to the Board of Directors and Management Committee.

The market occasionally undergoes extreme ﬂuctuations that exceed expectations. To manage market risk, therefore, it is important to run simulations (stress tests) of situations that may occur only once in many years. The Bank runs periodic stress tests to prepare for unforeseeable swings. The Bank also establishes loss cut guidelines and limits for its operations, depending on its ﬁnancial situation and business strategy, in order to manage its market risk.

The internal model used by the Bank (SMBC VaR) has been evaluated by an independent auditing firm and certified to be appropriate. To further verify the reliability of the model, the Bank performs back testing on the relationship between the VaR calculated with the model and the actual profit and loss data.

To manage the Bank’s risk in the its yen-denominated banking account, it uses gap analysis employing maturity ladders and the earnings at risk (EaR) model in addition to the VaR model. If an external factor, such as interest rates, moves in an unfavorable direction, the EaR model can indicate the largest estimated change in earnings (interest rate spread) for a set period at a given probability. Since strategy and budgetary planning is based on the earnings for a period, the Bank uses the EaR model to supplement the VaR model. Using Monte Carlo simulations to generate 1,000 scenarios, the Bank tests the magnitude of the effect that new deposits and loans will have on the period’s earnings.

In the interests of bolstering asset soundness, the Bank recognizes that maintaining strategic equity holdings at the levels appropriate to its ﬁscal strength and managing the price risk of these stocks is an important issue for the Bank’s management. Therefore, the Bank actively manages these risks by treating the entire holding of strategic equity as a portfolio and keeping the maximum potential loss amount derived from the VaR model and the earnings for the period within the risk capital allocations, and maintaining them at an appropriate level vis-a`- vis capital.

As of March 31, 2002, the market risk exposure of the Bank was approximately ¥47 billion based on the VaR method. The greater portion of the exposure arises from assets in the banking account intended for long-term holding. The exposure related to short-term trading account holdings is relatively small compared to the total. Moreover, the primary component of the exposure is interest rate risk arising from ﬂuctuations in market rates, rather than ‘‘non-linear’’ risk arising from derivative products.

84 Credit Risk

Credit risk is the chance of a loss arising from a credit event, such as deterioration in the ﬁnancial condition of a borrower, that causes an asset (including off-balance sheet transactions) to lose value or become worthless. Overseas credits also include an element of country risk, which is closely related to credit risk. This is the risk that changes in currency values or political or economic situations result in a loss.

The purpose of credit risk management is to avoid these credit events, to keep credit risk exposure within the bank’s capital, maintain the soundness of the bank’s assets and ensure returns commensurate with risk. The Bank’s current credit policy became effective after the April 2001 merger. This policy clariﬁes the universal and basic operating concepts, code of conduct and standards for credit operations. By giving the Bank’s employees extensive credit training, it aims to achieve the global standards of credit risk management contemplated by the Bank for International Settlements (BIS) in its January 2001 consultative papers and by the Japanese Financial Services Agency in its inspection manuals, and create a better credit management culture within the Bank.

The Bank assesses the credit risk posed by each borrower and loan with the Bank’s internal rating system and quantiﬁes that risk for control purposes. The internal rating system consists of two indicators: the obligor’s grading which indicates the creditworthiness of a borrower, and the facility grading which shows the probability of collecting for each facility. Facility gradings are assigned based on the borrower’s obligor’s grading in consideration of transaction terms such as guarantee, tenor and collateral. Overseas credits are further subjected to analysis with the country ranking, an indicator derived from analysis of the political and economic situations, international balance of payments and the external debt burden of each country. In order to maintain the consistency of the grading system as a whole, self-assessment is the prerequisite step to the obligor’s grading process.

Quantifying credit risk reflects the concentrating of risk toward a specific customer or industry and fluctuations in the values of real estate, securities and other types of collateral. This range of data must be analyzed to quantify the risk of an entire portfolio or an individual loan. To calculate credit risk, historical data for the obligor and facility is entered into a database, the parameters are set—such as the probability of a ratings change and the recovery rate—and then the probability distribution of losses for the entire portfolio (amount of loss for what probability) is computed to determine the maximum potential loss in the future. The quantified credit risk results are then used to formulate business plans and provide a standard against which individual credit applications are assessed.

Credit assessments involve a variety of financial analyses, including cash flow analysis, to predict an enterprise’s ability to repay the loan and its growth prospects. These quantitative measures are then combined with qualitative analyses of industry trends, research and development capabilities, the competitiveness of the company and its products or services, and its management capabilities. The loan application is also analyzed in terms of the intended uses of the funds, the repayment schedule and the state of its collateral. As part of the Bank’s measures to enhance efficiency and speed up approvals, it has digitized and standardized the loan evaluation and approval processes to run on the Bank’s information technology network as the Credit Application System. In addition to analyzing loans at the application stage, the Credit Monitoring System is implemented in order to reassess the obligor’s grading and review self-assessment so that problems can be detected at an early stage and quick and adequate action can be taken. The system includes Periodic Monitoring with receipt of the annual report, as well as Continuous Monitoring performed when the credit conditions change.

In addition to managing individual loans, the Bank applies the following basic policies to the management of the entire portfolio to maintain and improve its soundness and proﬁtability over the medium to long-term.

• Risk-Taking within the Scope of Capital. To control credit risk within the scope of its capital, the Bank calculates the required credit risk capital through regular quantiﬁcation of credit risk, and then sets credit risk capital limits and manages risk-taking activities within these limits.

85 • Controlling Concentration Risk. Since the concentration of credit in an industry or corporate group has the potential to severely impact a bank’s capital, credit control on industries with concentration risk and loan reviews of large borrowers and their groups are implemented. The Bank also sets up credit limits for each country based on its creditworthiness to manage country risk. • Balancing Risk and Return. The Bank operates on the basic principle of seeking returns commensurate with the credit risk. Loan pricing, therefore, uses its credit risk quantiﬁcation calculations and the Sumitomo Mitsui Value Added (SMVA) indicator to ensure that adequate proﬁt is generated after deducting credit cost, cost of capital and expenses. • Reduction of Problem Loans. In order to counter concerns of increasing losses from the deterioration of existing problem loans or the appearance of new problem loans, the Bank is striving to quickly reduce problem loans, by conducting loan reviews to set new responses and clarify action plans, and by strengthening its recovery and asset value maintenance strategies. • Toward Active Portfolio Management. In addition to controlling the individual loan approval process, the Bank also actively manages its loan portfolio on an aggregate basis. The newly established Portfolio Management Department spearheads the Bank’s use of credit derivatives and loan securitization in the markets to proactively manage its portfolio.

The Credit Risk Management Department within the Corporate Staff Unit is responsible for the comprehensive management of credit risk. This department determines the credit policies, establishes the internal rating system, develops credit risk quantiﬁcation methods, sets credit limits and approval limits, and manages problem loans and other aspects of the loan portfolio administration.

The Corporate Research Department within the Corporate Staff Unit performs the basic research on industries and subsectors, and investigates individual companies to monitor early signs of problems or growth potential.

Each business unit’s credit departments conduct the credit judgment for the loans handled by their business units and manage the business units’ portfolios. The credit limits the Bank uses are based on the baseline amounts established for each rating category and the Bank pays particular attention to evaluating and managing customers or loans perceived to have particularly high credit risk.

Bankrupt or virtually bankrupt companies are generally handled by the Credit Administration Department, which is working to recover non-performing loans as quickly as possible. The Credit Review Department, the Audit Department for the Americas, and the Audit Department for Europe operate independently of the business units, the Corporate Staff Unit and the Corporate Services Unit. These departments audit the soundness of assets, accuracy of gradings, self-assessments, state of credit operation etc., and report audit results directly to the Board of Directors and the Management Committee.

Liquidity Risk Liquidity risk is the chance of encountering an obstacle to raising the funds required for settlement due either to a mismatch between the use and procurement of funds or to an unexpected outﬂow of funds, or being forced to borrow at higher interest rates than usual. The Bank considers liquidity risk to be one of its major risks. The Bank manages liquidity risk so that it is not overly dependent on market-based founding to cover short- term cash outﬂows. The Bank’s liquidity risk management is based on a framework consisting of setting limits and guidelines for the funding gap, maintaining a system of highly liquid supplementary funding sources and establishing contingency plans.

In daily risk management operations, the Bank avoids a gradual increase in liquidity risk by adjusting the funding gap limits and guidelines. For an emergency situation, the Bank has contingency plans in place to reduce the funding gap limits and guidelines and take other measures. To prevent the chance of market crises interfering

86 with funding, the Bank carries highly liquid assets, such as U.S. treasury bonds, and has emergency borrowing facilities in place, which also facilitates foreign currency-denominated liquidity management.

Processing Risk Processing risk is the chance of losses arising from negligent administration by employees, from accidents or from unauthorized activities. In our administrative regulations, the basic administrative policies are summarized as ‘‘comprehending the risks and costs of administration and transaction processing, and managing them accordingly,’’ and ‘‘seeking to raise the quality of administration to deliver high-quality service to customers.’’ The Bank has tried to organize its systems to achieve these goals.

In its operating regulations, the Bank has also defined specific rules for processing risk management. The rules divide processing risk management tasks among six types of departments: the Operations Planning Department, compliance departments, operations departments, transaction execution departments (primarily the front office departments and branches), the Internal Audit Department and the Customer Relations Department. The Board of Directors also reviews administrative conditions annually and sets new management policies as required. In addition, the Bank has set up a specialized group within the Operations Planning Department to strengthen administrative procedures throughout the SMBC Group.

The Bank includes processing risk in its calculation of risk capital requirements and has allocated a certain percentage of risk capital to cover it, based on the quantiﬁcation of the risk for ﬁscal 2001.

Settlement Risk Settlement risk is the chance of a loss arising from a transaction that cannot be settled as planned. Since this risk comprises elements of several types of risk—such as credit risk, liquidity risk, processing risk and systems risk—it requires interdisciplinary management. The Operations Planning Department is charged with coordinating the management of this risk with the Credit Risk Management Department, which oversees credit risk, and the Corporate Risk Management Department, which oversees liquidity risk. The Bank is continuing to upgrade settlement risk management through such measures as participation in the Continuous Linked Settlement system, which will reduce the risk inherent in settlement of foreign exchange transactions.

Systems Risk Systems risk is the chance of a loss arising from the failure, malfunction or unauthorized use of a computer system. The Bank has instituted a number of basic policies to manage systems risk, including a security policy, usage regulations and speciﬁc management procedures. The Bank is further strengthening safety measures based on a needs assessment drawing on such references as the Financial Inspection Manual, approved by the Financial Services Agency, and the Security Guidelines published by the Financial Information Systems Center.

Since computer-related trouble at ﬁnancial institutions now has greater potential to impact the public, and systems risk has increased with the information technology revolution and the concomitant use of networks and personal computers, the Bank has taken the necessary steps to ensure the smooth, secure operation of its information systems. The Bank has duplicated each system and infrastructure and fully proofed its Tokyo and Kansai computer centers against earthquakes and other disasters. To maintain the privacy of customer information and prevent information leaks, the Bank is encrypting sensitive information, blocking unauthorized external access and implementing all known countermeasures to secure its data. The Bank has also established contingency plans and conducted training as required to ensure it is fully prepared in the event of an emergency. The Bank will continue to revise its countermeasures as new technologies and usage patterns emerge to maintain its security.

The Bank includes systems risk in its calculation of risk capital requirements and has allocated a certain percentage of risk capital to cover it, based on the risk quantiﬁcation results for ﬁscal 2001.

87 Derivatives The main risks associated with derivative transactions are market risk (change in market prices), credit risk (non-fulfillment of obligations), and liquidity risk (lack of marketability at prices in line with recent sales). The Bank uses VaR (Value at Risk) to manage its exposure to a variety of market risks (interest rate risk, foreign exchange risk, etc.) and mark to market its exposure to credit risk periodically. To mitigate liquidity risk, the Bank establishes ‘‘dealing’’ restrictions on amount, currency, instrument and term and sets limits on outstanding contracts of futures transactions. The Treasury Unit, which conducts derivative transactions, is divided into the front office and the middle/back office (administration) to strictly control the entering into and execution of transactions, exposure and profitability.

Information of Derivative Transactions to Which Mark-to-Market Accounting is Applied Mark-to-market accounting is applied mainly to dealing transactions using derivatives to obtain gains from short-term changes in interest rates, currency rates and other factors. Departments in Tokyo, New York, London, Singapore and other markets proactively deal in derivatives within proscribed limits.

The transactions set forth in the tables below are valued at market value and the resulting gains (losses) are accounted for in the statement of income. Derivative transactions to which hedge accounting method is applied are not included in the amounts below.

(1) Interest Rate Derivatives

Market value of interest rate derivatives transactions listed on an exchange is calculated mainly using the closing prices on the Tokyo International Financial Futures Exchange and others. Market value of OTC transactions is calculated mainly using discounted present value and option pricing models.

As of March 31, 2001(1) As of March 31, 2002 Net Net Contract (Over 1 Market Gains/ Contract (Over 1 Market Gains/ Amount year) Value (Losses) Amount Year) Value (Losses) (millions of yen) Transactions Listed on Exchange: Interest rate futures ...... ¥ 6,880,932 ¥ 503,515 ¥ 9,075 ¥ 9,075 ¥ 15,871,971 ¥ 884,187 ¥ 238 ¥ 238 Interest rate options ...... 2,990,847 — (337) 1,038 1,276,246 — 26 26 Over-the-Counter Transactions: Forward rate agreements ..... 2,573,372 10,000 (1,212) (1,212) 5,001,000 1,360,000 88 88 Interest rate swaps ...... 170,531,197 107,021,757 (83,115) (83,115) 215,866,197 142,440,648 67,336 67,336 Others ...... 6,081,649 4,548,311 6,017 13,676 5,693,311 3,699,620 3,786 3,786 Total ...... ¥(69,570) ¥(60,535) ¥71,475 ¥71,475

(2) Currency Derivatives

Market value of currency derivative transactions is calculated mainly using the discounted present value method. Forward foreign exchange and currency options which are of the following types are not included in the figures below: (i) those that are revalued at year end. The resulting gain (loss) is accounted for in the statement of income; and (ii) those that were allotted to financial assets/liabilities by foreign currency and whose market values are already reflected in the amount of the financial assets/liabilities on the balance sheet.

88 As of March 31, 2001(1) As of March 31, 2002 Net Net Contract (Over 1 Market Gains/ Contract (Over 1 Market Gains/ Amount year) Value (Losses) Amount Year) Value (Losses) (millions of yen) Over-the-Counter Transactions: Currency swaps ...... ¥6,138,730 ¥3,150,826 ¥3,209 ¥3,209 ¥5,388,800 ¥3,957,076 ¥(7,681) ¥(7,681) Others ...... — — — — 751,069 751,069 2,982 2,982 Total ...... ¥3,209 ¥3,209 ¥(4,698) ¥(4,698)

(1) Figures as of March 31, 2001 are prepared for Sakura Bank and Sumitomo Bank on a combined basis. See ‘‘Note Regarding Unaudited Historical Combined Financial Information’’ and, for more information regarding certain balance sheet, income statement and other ﬁnancial data, see ‘‘Annex—Supplemental Financial Information’’. The contract amount of currency swaps which are valued at the balance sheet date are as follows: Contract Amount Contract Amount As of March 31, 2001 As of March 31, 2002 (millions of yen) Over-the-Counter Transactions: Forward foreign exchange ...... ¥57,888,066 ¥41,694,524 Currency options ...... 4,863,296 6,898,055 (3) Equity Derivatives Market value of OTC transactions is calculated mainly using discounted present value and option pricing models. As of March 31, 2001(1) As of March 31, 2002 Net Net Contract (Over 1 Market Gains/ Contract (Over 1 Market Gains/ Amount year) Value (Losses) Amount Year) Value (Losses) (millions of yen) Over-the-Counter Transactions: Equity options ...... — — — — — — — — Equity price index swaps ...... — — — — — — — — Others ...... ¥875 — ¥ 0 ¥ 0 ¥ 8 — ¥ 0 ¥ 0 Total ...... ¥ 0 ¥ 0 ¥ 0 ¥ 0

(1) Figures as of March 31, 2001 are prepared for Sakura Bank and Sumitomo Bank on a combined basis. See ‘‘Note Regarding Unaudited Historical Combined Financial Information’’ and, for more information regarding certain balance sheet, income statement and other ﬁnancial data, see ‘‘Annex—Supplemental Financial Information’’. (4) Bond Derivatives Market value of bond derivative transactions listed on an exchange is calculated mainly using the closing prices on the Tokyo Stock Exchange. Market value of OTC transactions is calculated mainly using discounted present value and option pricing models. As of March 31, 2001(1) As of March 31, 2002 Net Net Contract (Over 1 Market Gains/ Contract (Over 1 Market Gains/ Amount year) Value (Losses) Amount Year) Value (Losses) (millions of yen) Transactions Listed on Exchange: Bond futures ...... ¥2,000 ¥2,000 ¥ 8 ¥ 8 ¥26,600 — ¥ 12 ¥12 Bond options ...... — — — — 5,000 — 11 11 Over-the-Counter Transactions: Bond options ...... — — — — 390 — (11) (11) Total ...... ¥ 8 ¥ 8 ¥11 ¥11

89 (5) Commodity Derivatives Market value of commodity derivative transactions is calculated based on factors such as price of the relevant commodity and contract term. As of March 31, 2001(1) As of March 31, 2002 Net Net Contract (Over 1 Market Gains/ Contract (Over 1 Market Gains/ Amount year) Value (Losses) Amount Year) Value (Losses) (millions of yen) Over-the-Counter Transactions: Commodity Swaps ...... — — — — ¥ 3,837 ¥3,593 ¥142 ¥142 Commodity options ...... ¥5,414 ¥5,414 ¥51 ¥51 10,052 8,938 37 37 Total ...... ¥51 ¥51 ¥180 ¥180

(1) Figures as of March 31, 2001 are prepared for Sakura Bank and Sumitomo Bank on a combined basis. See ‘‘Note Regarding Unaudited Historical Combined Financial Information’’ and, for more information regarding certain balance sheet, income statement and other ﬁnancial data, see ‘‘Annex—Supplemental Financial Information’’. (6) Credit Derivatives Market value of credit derivative transactions is calculated based on factors such as price of reference credit and contract term. As of March 31, 2001(1) As of March 31, 2002 Net Net Contract (Over Market Gains/ Contract (Over Market Gains/ Amount 1 year) Value (Losses) Amount 1 Year) Value (Losses) (millions of yen) Over-the-Counter Transactions: Credit Default Options ...... — — — — — — — — Other ...... ¥29,294 ¥14,500 ¥(8,289) ¥(8,289) ¥11,340 ¥10,057 ¥(6,986) ¥(6,986) Total ...... ¥(8,289) ¥(8,289) ¥(6,986) ¥(6,986)

Information on derivative transactions to which hedge accounting is applied The Bank applies hedge accounting to certain derivative transactions that are entered into to manage the Bank’s market risk that arises from its banking businesses such as deposits and loans. Generally, the Bank applies the risk-adjusted approach to derivatives transactions that the Bank entered into to manage the volatility of interest rates on various ﬁnancial assets and liabilities, such as deposits and loans. The Bank applies the short-cut method for certain interest rate swaps and other accounting methods to other derivative transactions pursuant to guidelines issued by the Japanese Institute of Certiﬁed Public Accountants. The risk-adjusted approach is applied to the following transactions: As of March 31, 2002 Net evaluation Deferred Gains/ Gains/ Assets(1) Liabilities(2) (Losses)(1)(2) (Losses)(3) (billions of yen) Interest rate swaps ...... ¥ 750.0 ¥284.3 ¥465.7 ¥ 98.8 Currency swaps ...... 438.0 414.1 23.9 17.3 Other ...... 35.7 40.6 (4.9) (23.1) Total(2) ...... ¥1,223.7 ¥739.0 ¥484.7 ¥ 93.0

(1) Derivative transactions are carried at fair value in the balance sheet (including hedging purpose derivatives appearing in (1) and (2) in the above table), except those to which the short-cut method is applied.

90 (2) Gains and losses on derivative transactions are treated as follows:

— Deferred hedge accounting defers gains and losses (as determined based on fair value accounting) on hedging purpose derivatives that do not match the gains and losses realized on the hedged items (as determined based on accrual accounting).

— Hedging purpose swap transactions that meet certain requirements regarding contract amount, receivable/payable condition, contract term and other conditions are recorded on a cost basis using the short-cut method for interest rate swaps, in accordance with the accounting standard for ﬁnancial instruments.

The following table sets forth the contract amount of interest rate swaps to which deferred hedge accounting is applied, classiﬁed by maturity:

As of March 31, 2002 1 year or less 1-5 years Over 5 years Total (Billions of yen) Receivable fixed rate/payable floating rate ...... ¥26,989.8 ¥23,894.6 ¥2,754.3 ¥53,638.7 Receivable floating rate/payable fixed rate ...... 15,786.2 9,530.3 2,801.4 28,117.9 Receivable floating rate/payable floating rate ...... 133.5 651.5 245.1 1,030.1 Total contract amount ...... ¥42,909.5 ¥34,076.4 ¥5,800.8 ¥82,786.7

Competition In recent years in Japan, both weak demand for loan financing and deregulation of interest rates has intensified competition for the Bank, primarily from the other city banks (a group of seven banks that are considered to be the largest and most influential group of banks in Japan). At the same time, large Japanese corporations increasingly raise funds through the capital markets and, as a consequence, have relied to a lesser extent on city banks, such as the Bank, as sources of finance. Internationally, the Bank faces intense competition from major commercial banks.

Additionally, the deregulation of banking activities in Japan, and more generally the Japanese ﬁnancial system, has accelerated over the past several years. This deregulation is altering two structural features of Japan’s ﬁnancial system: the separation of the banking and securities businesses and distinctions among the permissible activities of Japan’s three principal types of private banking institutions: ordinary banks (including both city banks, of which the Bank is one of seven, and regional banks), trust banks and long-term credit banks. Additionally, the Bank faces competition from certain government entities, including the Postal Saving Agency, the Japan Finance Corporation for Small Businesses and the Government Housing Loan Corporation.

Article 65 of the Securities and Exchange Law of Japan separates the banking and securities businesses. However, banks in Japan (including the Bank), like their counterparts in the United States, have been seeking authorization to combine traditional commercial and investment banking activities in order to offer customers a wider range of services. Conversely, securities ﬁrms are seeking the authority to engage in activities that have been considered banking activities and have been forbidden to them. The present policy of the Japanese government is to reduce the barriers between the banking and securities businesses in Japan and the Bank expects increased competition among ﬁnancial institutions in new areas of permissible activities. The Financial System Reform Law (Law No. 87 of 1992) and the subsequent amendment to the Banking Law now permit banks to establish or otherwise own domestic and overseas subsidiary securities companies (with the approval of the FSA) to engage in securities business.

As a result of the deregulation of the banking sector, companies without prior banking operations have formed new banks. For example, in 2001 the bank subsidiaries of Sony Corporation, an electronics manufacturer, and Ito-Yokado Co., Ltd., a supermarket operator, commenced operations to offer banking services to consumers. Sony Bank is an Internet based bank focusing on fund-management services. IY Bank uses automated teller machines installed in convenience stores operated by Seven-Eleven Japan Co., Ltd. as its main service access point.

91 Within the Japanese consumer banking sector, the continuing deregulation of interest rates on yen deposits has enabled banks to offer customers an increasingly attractive and diversified range of new products. The Bank faces competition in this sector from the other city and regional banks as well as from the Postal Saving Bank, a Japanese government entity (and the world’s largest holder of deposits), that traditionally has had significant competitive advantages over Japanese banks due in large part to its ability to offer fixed interest rates on deposits for terms of up to ten years while allowing depositors to withdraw their funds after only six months. The government may privatize the Postal Saving Bank, the effect of which on the competitive environment of the Bank is uncertain. Recently Japanese banks have started competing with one another by developing innovative proprietary computer technologies that allow them to deliver basic banking services in a more efficient manner and to create sophisticated new products in response to customer demand. In connection with a recently announced significant restructuring of its domestic network, the Bank is implementing a plan to replace many of its retail branch offices with specialized distribution facilities and to incorporate advanced technologies to offer new services to its retail customers, such as telephone banking and Internet banking. See ‘‘Business—Strategy’’.

In international markets, the Bank faces competition from other commercial banks and similar ﬁnancial institutions, particularly major international banks and the leading domestic banks in those ﬁnancial markets outside Japan in which the Bank conducts business.

Property The Bank owns or leases the land and buildings in which it conducts its business. Most of the property in which the Bank operates in Japan is owned by the Bank. In contrast, the Bank’s international operations are conducted out of leased premises. In February 2002, the Bank sold the former Tokyo Head Ofﬁce of Sumitomo Bank in a sale and leaseback transaction. The Bank’s retained earnings increased by approximately ¥44 billion as a result of this transaction.

As of March 31, 2002, the property owned by the Bank was as follows:

Land (square meters) Head ofﬁces ...... 8,247 Branch network ...... 286,128 Other facilities ...... 739,637 Total ...... 1,034,012

Legal Matters The Bank is a party to litigation concerning regional bank taxes. See ‘‘Risk Factors—Tokyo Regional Bank Tax and Other Similar Taxes May Hurt the Bank’s Financial Condition and Results of Operations’’ and ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview— Regional Bank Taxes’’.

The Bank is party to other routine litigation incidental to its business, none of which is currently expected to have a material adverse effect on the Bank’s ﬁnancial condition or results of operations.

92 MANAGEMENT AND EMPLOYEES

Management The Bank’s Board of Directors has ultimate responsibility for the administration of the Bank’s affairs. The Corporate Auditors (who are not required to be and are not certified public accountants) have the statutory duty to examine the financial statements and business reports submitted by the Board of Directors to the shareholders and also to supervise the administration by the Directors of the Bank’s affairs in accordance with the auditing policy and rules relating to the execution of Corporate Auditors’ duties as prescribed by resolutions of the Board of Auditors. All Directors and Corporate Auditors are elected by the shareholders of the Bank at general meetings. The normal term of office for Directors is two years and the normal term of office for Corporate Auditors is three years, but Directors and Corporate Auditors may serve any number of consecutive terms.

The Bank has recently adopted several revisions to its corporate governance structure. On May 24, 2002, the Bank announced that it would reduce the number of its board members from 26 as of the date of this offering circular to 16 by the end of June 2002. As a result of this reduction in the size of the Board of Directors, the responsibilities of certain of the remaining Directors will be reallocated in June 2002.

The Bank utilizes an executive officer system that separates decision making at the operational level from the Board of Directors’ oversight and control functions. The Chairman of the Board of Directors is prohibited from assuming direct responsibility for operational duties and his primary duty is to oversee and control. Three subcommittees of the Board of Directors were created to enhance the ability of the Board of Directors to oversee the operations of the Bank: the risk management committee, the compensation committee and the nominating committee. The risk management committee supervises and reports to the Board of Directors on the overall risk management policies and the risk management system, the market and liquidity risk management policies and the respective risk management system, the credit risk management policy and the respective management system and other issues with a potential material impact on operations. The compensation committee supervises and reports to the Board of Directors on the remuneration of the members of the Board and Directors and the executive officer’s remuneration and issues related to remuneration, salaries and incentive plans and other remuneration issues. The nominating committee supervises and reports to the Board of Directors on the selection of directors, managing directors and representative directors, issues related to the appointment of executive officers and the President and other major personnel issues for the Board of Directors.

The Bank is required to appoint independent certified public accountants, who are elected at a general meeting of shareholders and who have as their primary statutory duties the examination of the financial statements prepared in accordance with the Commercial Code of Japan and approved by the Board of Directors and the reporting of their opinion thereon to the Board of Auditors and to the Representative Directors for notification to the shareholders. Examination by independent certified public accountants of the financial statements of the Bank is also required for the purpose of the securities report that companies listed on Japanese stock exchanges must file annually through Kanto Local Finance Bureau to the Ministry of Finance for public inspection in accordance with the Securities and Exchange Law of Japan. The Bank’s independent certified public accountants for such purposes are Asahi & Co.

93 The names and titles of the Directors and Auditors of the Bank as of the date of this offering circular are as follows:

Name Title Akishige Okada ...... Chairman of the Board Yoshifumi Nishikawa(1) ...... President and Chief Executive Ofﬁcer Youhei Shiraga(1)(2) ...... Deputy President Akio Asuke(1)(2) ...... Deputy President Hirokazu Ishikawa(1)(2) ...... Deputy President Shunichi Okuyama(1)(2) ...... Senior Managing Director Tsutomu Sakuma(1)(2) ...... Senior Managing Director Hidemitsu Nakao(1)(2) ...... Senior Managing Director Michiyoshi Kuriyama(1) ...... Senior Managing Director Takeharu Nagata(1) ...... Senior Managing Director Hidenori Hiramatsu(1) ...... Senior Managing Director Tadashi Inoue(1) ...... Senior Managing Director Keizo Ogawa(1)(2) ...... Senior Managing Director Masayuki Oku(1) ...... Senior Managing Director Hideharu Kadowaki(1) ...... Senior Managing Director Takemasa Tsukamoto(1) ...... Senior Managing Director Teisuke Kitayama(1) ...... Managing Director Ryuzo Kodama(1)(2) ...... Managing Director Shigetada Takahashi(1) ...... Managing Director Kenjiro Noda(1) ...... Managing Director Tadashi Hirota(1)(2) ...... Managing Director Mutsuhiko Matsumoto(1) ...... Managing Director Toichiro Mizushima(1) ...... Managing Director Kakuei Miyagi(1)(2) ...... Managing Director Yoshiaki Yamauchi ...... Director Yoichiro Yamakawa ...... Director Hiroshi Kii ...... Corporate Auditor Toyosaburo Hirano ...... Corporate Auditor Tomoyuki Watanabe ...... Corporate Auditor Gaishi Hiraiwa ...... Corporate Auditor Katsuya Onishi ...... Corporate Auditor Josei Itoh ...... Corporate Auditor Yasutaka Okamura ...... Corporate Auditor

(1) Also acting as an Executive Ofﬁcer. (2) Intends to resign in June 2002.

All of the above Directors are engaged in the business of the Bank on a full-time basis, except for Mr. Yoshiaki Yamauchi (CPA, Vice President of Andersen Research Institute of Japan) and Mr. Yoichiro Yamakawa (Attorney-at-law, Koga & Partners). The business address of the Directors of the Bank is 1-2, Yurakucho 1-Chome, Chiyoda-ku, Tokyo 100-0006.

The Bank has issued to various Directors and members of senior management stock options, representing the right to purchase an aggregate of 1,149,000 shares of the Bank’s common stock, in fiscal 2001. See note 2(j) of the notes to the non-consolidated financial statements of the Bank. Subject to shareholder approval, in fiscal 2002 the Bank plans to issue additional stock options, representing the right to purchase an aggregate of no more than 1,850,000 shares of the Bank’s common stock, to a broader group of Directors, senior managers and senior officers of the Bank.

94 In July 2001, the Bank established an Advisory Board composed of individuals from the business and academic communities who are independent of the SMBC Group. The board serves as an advisory body to the Chairman of the Board and the President and Chief Executive Ofﬁcer. As such, the board provides a broad range of advice to management issues and strategies as well as insights on trends and issues in the ﬁnancial services industry for consideration when making top management decisions. As of the date of this offering circular, the following individuals were members of the Advisory Board:

Name Title Shoichiro Toyoda ...... Honorary Chairman and Member of the Board, Toyota Motor Corporation Naohiko Kumagai ...... Senior Advisor to the Board, Mitsui & Co., Ltd. Tetsuro Kawakami ...... Senior Advisor, Sumitomo Electric Industries, Ltd. Toshiomi Uragami ...... Senior Advisor, Sumitomo Life Insurance Company Yoshinori Yokoyama ...... Director, McKinsey & Company, Inc. Japan

Employees As of March 31, 2002, the Bank had 25,027 employees (excluding temporary, part-time and overseas local staff). The Bank reduced the number of its employees in excess of its original projections. The rationalization plan of the Bank, which was submitted to the Financial Reconstruction Commission in December 2000, set a target of 26,200 employees as of March 2002.

Most of the employees of the Bank are members of the Sumitomo Mitsui Banking Corporation Workers’ Union, which negotiates with the Bank concerning remuneration and working conditions. The Union is afﬁliated with the Federation of City Bank Workers’ Unions. The Bank considers its labor relations to be excellent.

The Bank considers its level of remuneration, fringe beneﬁts (including an employee share ownership program), working conditions and other allowances, which include lump-sum payments and annuities to employees upon retirement, to be generally competitive with those offered in Japan by other large enterprises.

95 SUBSIDIARIES, AFFILIATES AND ASSOCIATED COMPANIES

The Bank offers many of its banking and related services through subsidiaries and affiliates. At March 31, 2002, the Bank had 215 subsidiaries and 24 affiliates in Japan and 52 subsidiaries and 34 affiliates outside of Japan. In total, the accounts of 144 of the Bank’s subsidiaries were consolidated with those of the Bank and 38 affiliates were accounted for by the equity method. The consolidated accounts of the Bank do not include the accounts of other subsidiaries or affiliates which would not have a material impact on such consolidated accounts. The following table sets forth certain information with respect to certain of the Bank’s subsidiaries, affiliates and associated companies as of the date of this offering circular:

Domestic (as of March 31, 2002) Percentage of Parent Issued Company’s Company Name Capital Ownership(1) Established Main Business (Millions of yen) Principal Subsidiaries SMBC Business Service Co., Ltd...... 40 100 — September 24, 1976 Banking clerical work SMBC International Business Co., Ltd...... 20 100 — September 28, 1983 Banking clerical work SMBC Property Research Service Co., Ltd. . . 30 100 — July 1, 2001 Banking clerical work SMBC Green Service Co., Ltd...... 30 100 — March 15, 1990 Banking clerical work SMBC International Operations Co., Ltd. .... 40 100 — December 21, 1994 Banking clerical work SMBC Center Service Co., Ltd...... 100 100 — October 16, 1995 Banking clerical work SMBC Delivery Service Co., Ltd...... 30 100 — January 31, 1996 Banking clerical work SMBC Consumer Loan Operations Co., Ltd. . . 30 100 — November 7, 1997 Banking clerical work SMBC Loan Adviser Co., Ltd...... 10 100 — April 1, 1998 Consulting and agency services for consumer loans SMBC Learning Support Co., Ltd...... 10 100 — May27,1998 Seminar organizer SMBC Staff Service Co., Ltd...... 90 100 — October 1, 2001 Temporary manpower service SMBC Total Maintenance Co., Ltd...... 450 100 — October 7, 1994 Disposal of real estate collateral THE WAKASHIO BANK, LTD...... 20,831 100 — June 6, 1996 Commercial banking SMBC Business Servicing Co., Ltd...... 500 100 — March 11, 1999 Servicer SMBC Factors Co., Ltd...... 3,000 100 — August 16, 2000 Factoring SMBC Guarantee Co., Ltd...... 87,820 0 (100) July 14, 1976 Credit guarantee SAKURA INVESTMENT MANAGEMENT CO., LTD...... 1,280 100 — September 27, 1993 Investment advisory and investment trust management SMBC Finance Co., Ltd...... 71,705 80.68 (18.46) December 5, 1972 Mortgage securities, factoring and loans At-Loan Co., Ltd...... 17,500 52 — June 8, 2000 Loans SAKURA CARD CO., Ltd...... 7,438 68.49 (27.25) February 23, 1983 Credit card services The Japan Net Bank, Limited ...... 20,000 57 — September 19, 2000 Commercial banking The Bank of Kansai, Ltd...... 32,500 49.94 (19.3) July 1, 1922 Commercial banking THE MINATO BANK, LTD...... 24,908 48.37 (1.65) September 6, 1949 Commercial banking Sumitomo Mitsui Card Company, Limited . . . 79,115 46.88 (53.11) December 26, 1967 Credit card services Mitsui Finance Service Co., Ltd...... 1,100 43.63 (34.54) December 22, 1979 Collecting agent and factoring Sakura Finance Service Co., Ltd...... 200 39.97 (10.47) July 12, 1979 Collecting agent and factoring SMBC Capital Co., Ltd...... 2,500 39.8 (60.2) August 1, 1995 Venture capital Sakura Friend Securities Co., Ltd...... 26,139 37.46 (6.26) April 20, 1932 Securities SMBC Leasing Company, Limited ...... 57,600 37.48 (47.67) September 2, 1968 Leasing SMBC Mortgage Co., Ltd...... 18,182 47 (10.68) October 14, 1983 Mortgage securities The Japan Research Institute, Limited ...... 3,000 4.85 (49.28) February 20, 1969 Economic research, system engineering, data processing and management consulting Sakura KCS Corporation ...... 2,054 5 (47.89) March 29, 1969 System engineering and data processing Sakura Information Systems Co., Ltd...... 600 5 (35)November 29, 1972 System engineering and data processing

96 Percentage of Parent Company’s Company Name Issued Capital Ownership(1) Established Main Business (Millions of yen) SUMIGIN GUARANTEE COMPANY, LIMITED ...... 47,850 — (100) June 30, 1984 Credit guarantee SMBC Consulting Co., Ltd...... 1,100 50 (50) May 1, 1981 Management consulting SMBC Loan Servicer Co., Ltd. .... 500 — (100) July 28, 1999 Servicer SAKURA LEASING CO., LTD. . . . 208 — (100) March 23, 1998 Leasing Principal Afﬁliates Daiwa Securities SMBC Co., Ltd. . . 205,600 40 — February 5, 1999 Wholesale securities Daiwa SB Investments Ltd...... 2,000 30.39 (13.57) April 1, 1999 Investment advisory and investment trust Japan Pension Navigator Co., Ltd. . . 2,500 30 — September 21, 2000 Operation and administration of deﬁned contribution pension plans DLJdirect SFG Securities Inc...... 3,000 21.25 — March 24, 1999 Securities via Internet Meiko National Securities Co., Ltd...... 27,270 20.6 (7.60) March 2, 1948 Securities QUOQ Inc...... 1,000 5 (34.85) April 5, 1978 Purchase of monetary assets and credit guarantee Overseas (as of March 31, 2002) Percentage of Parent Company’s Company Name Issued Capital Ownership(1) Established Main Business Principal Subsidiaries Sumitomo Mitsui Finance Australia Limited ...... A$62.5 million 100 — June 29, 1984 Finance PT Bank Sumitomo Mitsui Indonesia ...... Rp1,502.4 billion 97.63 — August 22, 1989 Commercial banking Sakura Finance Asia Limited ...... US$65.5 million 100 — October 17, 1977 Finance Sakura Finance Australia Limited . . A$54 million 100 — March 27, 1986 Finance Sakura Merchant Bank (Singapore) Limited ...... S$4million 100 — April 18, 1990 Finance Bangkok SMBC Systems Ltd...... B20million 10 (36) January 11, 1991 Sales of software, and computation SMBC Management Service Co., Ltd...... B64million 10 (90) November 28, 1996 Consulting Bangkok SMBC Consulting B5 million 10 (35) April 21, 1997 Investments and Company Limited ...... consulting SBCS Co., Ltd...... B140 million 10 (90) March 2, 1989 Consulting SMSB Co., Ltd...... B64million 10 (90) August 1, 2000 Consulting SMBC Leasing (Singapore) Pte. Ltd...... S$7.5 million — (100) May 7, 1980 Leasing Sumitomo Mitsui Finance Australia (Securities) Limited ...... A$100,000 — (100) April 29, 1987 Securities SMBC Leasing (Hong Kong) Limited ...... HK$70 million — (99.99) September 26, 1989 Leasing SMBC Leasing (Thailand) Co., Ltd...... B60million — (48.99) February 28, 1996 Leasing SB Leasing (Guangzhou) Co., Ltd...... US$10 million — (100) September 26, 1996 Leasing SMBC Leasing (Malaysia) Sdn. Bhd...... MYR250,000 — (49) November 26, 1996 Leasing Manufacturers Bank ...... US$80.8 million 100 — June 26, 1962 Commercial banking Sumitomo Mitsui Banking Corporation of Canada ...... C$121.87 million 100 — April 1, 2001 Commercial banking Banco Sumitomo Mitsui Brasileiro S.A...... SR200.9 million 100 — October 6, 1958 Commercial banking SMBC Capital Markets, Inc...... US$100 90 (10) December 4, 1986 Investments and derivatives

97 Percentage of Parent Company’s Company Name Issued Capital Ownership(1) Established Main Business SMBC Leasing and Finance, Inc...... US$1,620 89.69 (10.3) November 9, 1990 Leasing SMBC Securities, Inc...... US$100 90 (10) August 8, 1990 Securities SMBC Financial Services, Inc...... US$300 100 — August 8, 1990 Investments SFVI Limited ...... US$300 100 — July 30, 1997 Investments Sakura Preferred Capital (Cayman), Limited ...... ¥10million 100 — November 12, 1998 Long- and mid-term finance Sumitomo Finance (Asia) Limited ...... US$35 million 100 — September 26, 1973 Investments Sakura Capital Funding (Cayman) Limited ...... US$100,000 100 — July 15, 1992 Long- and mid-term finance Sakura Finance (Cayman) Limited ...... US$100,000 100 — February 11, 1991 Long- and mid-term finance Sumitomo Mitsui Finance Dublin Limited ...... US$12 million 100 — September 29, 1989 Finance SMBC Capital Markets Limited ...... US$297 million +£2 100 — April 18, 1995 Derivatives SMBC Derivative Products Limited ...... US$300 million — (100) April 18, 1995 Derivatives Sakura Trust International Limited ...... £250,000 100 — May 25, 1984 Trustee business Sumitomo Finance International plc...... £200 million 100 — July 1, 1991 Investments SMBC International Finance N.V...... US$200,000 100 — June 25, 1990 Loans Sumitomo Mitsui Finanz (Deutschland) GmbH ...... DM50,000 100 — June 14, 1985 Leasing Submarine CuraçaoN.V...... US$17,000 40 — June 26, 1996 Finance Principal Affiliates P.T. Exim SB Leasing ...... Rp50.0 billion 10 (40) March 16, 1985 Leasing SMBC Metro Investment Corp...... P600 million 40 — August 9, 1995 Investments and loans P.T. Perjahl Leasing Indonesia . . Rp25,001 million 25 — August 28, 1975 Leasing China United International Leasing Co., Ltd...... US$5 million 25 — September 25, 1985 Leasing China International Finance Company Limited (Shenzhen) ...... RMB¥100 million 25 — December 8, 1986 Loans BSL Leasing Co., Ltd...... B60million 10 (30) July 16, 1987 Leasing

(1) ‘‘( )’’ in this column indicates the percentage of ownership by subsidiaries and afﬁliated companies excluding the parent company.

98 THE JAPANESE BANKING SYSTEM

The Japanese banking system is broadly divided into three groups: a central bank, public financial institutions, and private-sector banking institutions. The Bank of Japan is the Japanese central bank and it has responsibility for the regulation of currency, the control and facilitation of credit and finance and the maintenance and development of the credit system. See ‘‘Supervision and Regulation—Japan—The Bank of Japan’’. There are a number of public financial institutions, such as the Development Bank of Japan and the Japan Bank of International Cooperation, which have been organized in order to provide funding for specific matters, and to supplement the activities of the private-sector banking institutions. Their funds are provided mainly from government sources.

Private banking institutions in Japan are classified into three categories as of April 1, 2002: ordinary banks, of which there are 132, not including 73 foreign commercial banks with banking operations in Japan; trust banks, of which there are 29, including 24 Japanese subsidiaries of foreign financial institutions and subsidiaries of Japanese financial institutions; and long-term credit banks, of which there are two. Ordinary banks in turn are classified as city banks, including the Bank, and regional banks, of which there are 120, including member banks of the second association of regional banks that were originally mutual loan and savings (sogo) banks.

In general, the operations of ordinary banks correspond to commercial banking operations in the United States. Their main sources of funds are deposits from the public. City banks and regional banks are distinguished on the basis of head ofﬁce location as well as the size and scope of their operations.

The city banks are generally considered to be the largest and most inﬂuential group of banks in Japan. These banks are based in either Tokyo, Osaka or Nagoya, and operate domestically on a nationwide scale through networks of branch ofﬁces. City banks, unlike regional banks, have strong links with large corporate clients, including the major industrial companies in Japan; however, in light of deregulation and other competitive factors, many of these banks (including the Bank) have placed increasing emphasis on other markets, including small to medium-sized companies, retail banking, international operations and, more recently, investment banking and related services.

With some exceptions, the regional banks tend to be much smaller in terms of total assets than the city banks. Each of the regional banks is based in one of the Japanese prefectures and may extend its operations into neighboring prefectures. Their clients are mostly regional enterprises and local public utilities, although the regional banks also lend to large corporations.

Both long-term credit banks and trust banks have been engaged primarily in providing long-term loans to Japanese industry, principally with funds obtained from the issue of debentures in the case of the long-term credit banks and beneﬁciary certiﬁcates in the case of the trust banks. Other banks also make long-term loans.

There are 73 foreign banks operating banking businesses in Japan. They are subject to a statutory framework similar to the regulation of Japanese domestic banks. Their principal sources of funds come from their overseas head ofﬁces or other branches.

Certain other private-sector ﬁnancial institutions in Japan, including agricultural and marine cooperative ﬁnancial institutions, credit associations and credit unions, are mainly engaged in making loans to small businesses and individuals.

Another distinctive element of the Japanese banking system is the role of the postal savings system. Postal savings deposits are gathered through the network of post ofﬁces throughout Japan. The system offers a variety of types of deposits, at interest rates that are set by the Ministry of Public Management, Home Affairs, Posts and Telecommunications with some reference to the market-based interest rates of the private-sector banks. The funds are used to ﬁnance various government activities and investments in the public sector. As of December 31, 2001 the balance of deposits with the postal savings system was approximately ¥240 trillion, representing

99 approximately one-third of all household deposits in Japan. However, led by Prime Minister Koizumi, the privatization of postal services, including postal savings, is now under discussion and a bill to establish a public corporation to take over the postal services from the government was presented to the Diet on April 26, 2002.

The present banking system evolved from measures adopted as part of the reconstruction of the Japanese economy after World War II. Such reconstruction, as it applied to financial markets, was initially guided by such principles as the separation between long-term and short-term financing, the separation of trust banking from other types of banking, and the separation of banking from the securities business. However, in 1992, the Financial System Reform Act was passed and removed many of the legal barriers between various segments of the financial services industry. As a result of this legislation and the subsequent modifications to the relevant laws and regulations (including those which enabled city banks themselves to engage in the trust business, effective February 2002), ordinary banks, trust banks and long-term credit banks, directly or through subsidiaries, may now engage in securities activities, and ordinary banks and long-term credit banks may engage in certain trust banking business without restrictions. In turn, securities companies may perform a full range of banking and certain trust banking functions through subsidiaries. In addition, the prohibition on bank holding companies was lifted in March 1998, and the prohibition on issuances by an ordinary bank of corporate bonds was completely lifted in the second half of fiscal 1999.

Commencing November 2000, the barrier between the banking and insurance businesses has also been gradually lifted, and now banks and insurance companies can engage in the other business through subsidiaries. Also, since April 2001, banks themselves have been permitted to sell certain insurance products, and the FSA announced that it would expand the scope of such insurance products permitted to be sold each year through ﬁscal 2003.

In addition, the recent injection of signiﬁcant public funding into many Japanese banks has substantially increased the overall level of state ownership in the banking sector, which may produce unforeseen effects on competitive conditions, economic health and further deregulation in the industry.

100 SUPERVISION AND REGULATION

Japan Pursuant to the Banking Law, the FSA is given authority to supervise banks in Japan. The Bank of Japan also has supervisory authority over banks in Japan based primarily on its contractual agreements and transactions with the banks. Only companies licensed by the Prime Minister are deﬁned as banks under the Banking Law, and only a kabushiki kaisha (a stock corporation) with paid-up capital of ¥2 billion or more may be licensed as such.

The Financial Services Agency

Scope of Supervision. The FSA has had supervisory control over the banks in Japan since July 1, 2000. The FSA was established on July 1, 2000 through the integration of the Financial Supervisory Agency (which had supervisory control over the banks and exercised the power of control delegated from the Financial Reconstruction Committee (the ‘‘FRC’’)) and the Financial System Planning Bureau of the Ministry of Finance (which had the function of planning and drafting related bills) pursuant to the Central Government Reform Fundamental Law which was enacted in June 1998. The FRC, which had controlled the Financial Supervisory Agency, was abolished in January 2001 and the authority of the FRC was transferred to the Prime Minister, who, under the Banking Law, transferred such authority to the FSA. As a result, all the functions of supervision of financial institutions were unified in the FSA, except that in cases in which systemic risk is anticipated, the Prime Minister retains the authority to take necessary measures after consulting with the Conference for Financial Crisis Countermeasures. Under the Banking Law, the FSA’s supervisory control over banks in Japan extends to various areas, including approval of applications for licenses to operate a bank, approval of reductions in capital, approval of changes of corporate name, approval of the establishment or closure of overseas offices and approval of mergers and liquidations or discontinuations of business by existing banks. The FSA also has the authority to instruct Japanese banks to remove directors if such banks violate laws or other regulations or commit acts contrary to public policy and, in the case of Japanese banks which are in financial difficulty, to direct such banks to submit certain property to be held for the protection of depositors and to issue such other orders as it may deem necessary. Under the ‘‘prompt corrective action’’ system, the FSA may take certain corrective actions in the case of capital deterioration of financial institutions. These actions include (i) requiring a financial institution to formulate and implement reform measures, (ii) requiring it to reduce its assets or take other specific actions and (iii) issuing an order suspending all or part of its business operations.

The Ministry of Finance and the FSA have, in the past several years, introduced a number of deregulatory measures into the banking sector in Japan, as well as measures to increase the transparency of the regulatory process, including the following:

Credit Limit. The Banking Law restricts the aggregate amount of loans, guarantees and capital investments to any single customer for the purposes of avoiding excessive concentration of credit risks and promoting a fair and extensive utilization of bank credit. The limit applicable to an ordinary bank in respect of aggregate exposure by such bank to any single customer is established by a cabinet order and by the Banking Law, and is currently 40%of such bank’s total qualifying capital in respect to aggregate exposure to any single customer including certain of such customer’s affiliates or 25%of such bank’s total qualifying capital in respect to aggregate loans to any single customer not including such customer’s affiliates. The same restriction applies to a bank group on a consolidated basis. The aggregate exposure by a bank group (the bank, its subsidiaries and certain affiliates) to a single customer and a customer including certain of such customer’s affiliates is 25%and 40%,respectively, of the total qualifying capital of such group companies.

Disclosure. Under the Banking Law, banks are required to disclose their non- and under-performing loans (consolidated and non-consolidated) as ‘‘loans under risk monitoring’’. Loans under risk monitoring are classiﬁed as bankrupt loans, non-accrual loans, loans past due 3 months or more and restructured loans. Banks are required to submit annual and semi-annual reports to the FSA on their business including the amount of such loans. Also,

101 as to the corporate disclosure as a whole, banks are required to disclose their financial statements consisting of the balance sheet and income statement, and the explanatory documents regarding their business and asset conditions, each prepared under the Banking Law both on a non-consolidated and consolidated basis. The requirement of consolidated financial disclosure was made applicable commencing the fiscal year ended March 1999. In addition, independent from the Banking Law disclosure regulations, the Law Concerning Emergency Measures for Financial Function Reconstruction (Law No. 132 of 1998, as amended, the ‘‘Financial Reconstruction Law’’) requires banks to disclose their problem assets. Under the Financial Reconstruction Law, assets are classified into four categories: bankrupt and quasi-bankrupt assets, doubtful assets, substandard loans and normal assets. Generally, the bankrupt and quasi-bankrupt assets correspond to the total of the bankrupt loans and the lower tier of the non-accrual loans (the borrowers of which are effectively bankrupt) under the Banking Law disclosure. Doubtful assets generally correspond to the higher tier portion of the non-accrual loans (the borrowers of which are not, but have the potential to become, bankrupt). The substandard loans generally correspond to the total of the restructured loans and loans past due 3 months or more. Bankrupt and quasi- bankrupt assets and doubtful assets also include non-loan assets, such as securities lending, foreign exchange, accrued interest, advanced payments and customers’ liabilities for acceptances and guarantees. Reserves. Based on the Accounting Standards for Banks issued by the Japanese Bankers Association, the Bank, for statutory purposes, establishes three categories of reserves: general reserve, specific reserves and reserves for specific overseas loan losses. The general reserve is established to account for an amount at a certain rate of the aggregate amount of certain outstanding loans of the Bank at each balance-sheet date. For Japanese taxation purposes until March 31, 1998, the Bank was able to choose as a tax-deductible reserve, either the fixed rate of 0.3%of the aggregate outstanding amount of certain loans as specified by Japanese tax regulations at each balance sheet date or any rate not exceeding the average loan loss ratio of the Bank for the previous three fiscal years. As a consequence of amendments to Japanese tax law effective April 1, 1998, the fixed rate of 0.3%applicable to tax-deductible reserves has been abolished subject to limited exceptions. The Bank may, however, select the fixed rate until March 2003 subject to the gradual reduction of such rate until its elimination after March 2003. Specific reserves are established for specific loans, the repayment of which is considered materially doubtful, in the same amounts as the amount of the expected losses on such loans. Reserves for specific overseas countries are maintained to provide for possible losses on loans to certain countries which are classified as restructuring countries. Due to the introduction of the new self-assessment rule of the credit quality of the assets of financial institutions, including the Bank, as well as the ‘‘prompt corrective actions’’ system, the Bank may establish such amount of any reserves for its loan portfolio as may be considered adequate by the Bank at a balance sheet date. In January 1999, the FRC announced its guidelines concerning write-offs and reserves in respect of problem loans required of the large banks, which applied for capital injection pursuant to the Financial Function Early Strengthening Law and Financial Revitalization Law. Thereafter, the FSA issued operating guidelines, the Financial Inspection Manual, on inspection of financial institutions including credit-risk management and the standards concerning write-offs and reserves. Although the Financial Inspection Manual itself does not have the force of law, the FSA inspection of banks is based on the Manual. As a result of such inspection, the FSA may exercise its authority over the banks under the Banking Law to suspend or terminate their banking business. The FSA also issued non-binding guidelines to clarify their interpretation and enforcement policies of the Banking Law and related regulations. It also discloses the results of its investigations of banks and other financial companies. Frequency of Examination of Banks. The Banking Law authorizes the FSA to inspect banks in Japan at any time with any frequency but in practice inspections occur once a year, conducted by officials from the Inspection Department of the FSA. From January through March of 2002, the FSA conducted a special inspection of the major 13 banks (7 city banks, including the Bank, 5 trust banks and a long-term credit bank), as to how the banks should properly classify their borrowers according to the credit risks. As a result, ¥7.5 trillion out of ¥12.9 trillion of all credit receivables subject to the inspection were downgraded from the classifications given by such banks as of September 2001.

102 In addition, the Ministry of Finance conducts examinations of the Bank in relation to foreign exchange transactions under the Foreign Exchange and Foreign Trade Law. Such examinations are conducted normally once every few years.

Furthermore, the Bank of Japan conducts examinations of the Bank similar to those undertaken by the FSA. Such examinations are normally conducted once every few years. Notice is served prior to the examiner’s visit. The inspection is conducted for the purposes of checking day-to-day operations and giving pertinent advice.

Deposit Insurance System In 1971, the Deposit Insurance Law was enacted in order to protect depositors in cases where ﬁnancial institutions fail to meet their obligations. The Deposit Insurance Corporation (‘‘DIC’’) was established to implement the law. The DIC was reformed, as part of the Japanese government’s plan to liquidate the jusen in accordance with legislation enacted in June 1996, by the creation of a special fund amounting to ¥1 trillion and the increase of its paid-up capital of ¥455 million to ¥5.45 billion. Currently the DIC is supervised by the FSA.

As from April 2002, the DIC receives annual insurance premiums from insured banks equivalent to 0.094% of the deposits held with current, savings and sundry accounts and 0.080%of the other deposits. A special insurance premium of 0.036%of deposits required for the fiscal years 1996 through 2001 to cover the costs for the insurance exceeding the otherwise applicable ¥10 million cut-off amount is no longer required upon discontinuation of the full coverage of the deposits. Premiums held by the DIC may be either deposited at financial institutions or used to purchase marketable securities. The insurance money may be paid out in case of suspension of repayments of deposits, banking license revocations, dissolution or bankruptcy of a bank, to a maximum of ¥10 million of principal amount together with any interest accrued with respect to each depositor. Until March 31, 2003, however, the full amount of deposit exceeding the maximum of ¥10 million will be repaid only with respect to the current savings and sundry accounts (the ‘‘Special Financial Aid’’). Until March 2003 the DIC is authorized, subject to the approval of the FSA, to borrow up to ¥6.5 trillion from the Bank of Japan or other financial institutions for the purpose of providing the Special Financial Aid, which is guaranteed by the Japanese Government. Also, the Japanese Government has issued to the DIC Japanese Government Bonds of ¥13 trillion for the same purpose. The DIC has set up a separate ‘‘special business account’’ to provide the Special Financial Aid.

City banks (including the Bank), regional banks including member banks of the second association of regional banks, long-term credit banks, trust banks, credit associations, credit cooperatives and labor banks participate in the deposit insurance system on a compulsory basis.

The Bank of Japan The Bank of Japan is the central bank of Japan and serves as the principal instrument for the execution of Japan’s monetary policy. The principal measures by which the Bank of Japan implements monetary policy are the adjustment of its discount rate, its operations in the open market and the imposition of deposit reserve requirements. All ordinary banks in Japan maintain deposits with the Bank of Japan and rely substantially upon obtaining borrowings from, and rediscounting bills with, the Bank of Japan. Moreover, all banks in Japan maintain current accounts under agreements with the Bank of Japan pursuant to which the Bank of Japan is entitled to supervise, examine and audit the banks. The supervisory functions of the Bank of Japan enable it to seek to execute monetary policy effectively, while the FSA’s supervisory practices have the purpose of maintaining the sound operations of banks in Japan and of promoting the security of depositors.

In June 1997, the law establishing the Bank of Japan was amended with the intention of granting greater independence to the Bank of Japan with respect to, inter alia, the setting of interest rates and giving additional power to aid ﬁnancial institutions with liquidity problems. The amendment came into effect on April 1, 1998. Under the amended law, the Bank of Japan’s examination of banks is given a more transparent statutory basis.

103 The Securities and Exchange Law Article 65 of the Japanese Securities and Exchange Law was intended to clearly separate the commercial banking and securities business in Japan. Under this law, banks, including the Bank, may not engage in any securities business except for certain approved activities. The Securities and Exchange Law now allows banks to underwrite and deal in Japanese government bonds, Japanese local government bonds and Japanese government guaranteed bonds; to sell beneficiary certificates of security investment trusts and investment securities in a security investment company; and to engage in over-the-counter securities derivatives transactions subject to the registration with or the approval of the FSA. The securities business is defined to include dealing, brokerage, underwriting and distribution of securities.

The Financial System Reform Law (which came into effect in April 1993) permits financial institutions and securities firms to compete through subsidiaries. Banks and other depository institutions are now allowed to set up securities subsidiaries and, within limits, compete in the securities industry. The Financial System Reform Act (the ‘‘Reform Act’’) in June of 1998, effective October 1999, made further substantial amendments to the Securities and Exchange Law, the Banking Law and related laws and abolished the provision in the Financial System Reform Law which had prohibited bank-owned securities subsidiaries from engaging in the securities business involving equity securities. In addition, as of April 1, 1999, some of the restrictions on the activities of a bank-owned securities subsidiary and its parent bank, so-called ‘‘fire wall restrictions’’ which were aimed at preventing such subsidiary’s unfair use of its parent bank’s business relationship with, and information of, its customers, were lifted or relaxed. The new ‘‘fire wall restrictions’’ include (1) a restriction preventing a bank- owned securities subsidiary from becoming a lead manager for the offering of corporate bonds where its parent bank is involved, (2) prohibitions against joint visits to customers and (3) the prohibition against joint marketing and the joint use of offices by a bank-owned securities company and its parent bank.

As a listed company, the Bank is required to file an annual ‘‘Securities Report’’ for each fiscal period with the Kanto Local Finance Bureau (authorized by the FSA). Such annual ‘‘Securities Reports’’ are supplemented by semi-annual and extraordinary reports, which must be prepared on a consolidated basis commencing from the fiscal year ended March 2000, pursuant to the Securities and Exchange Law.

Other Deregulation In connection with the so-called Japanese ‘‘Big Bang’’ proposals announced in November 1996 by the prime minister of Japan, various proposals have been made by the government and other bodies for the further deregulation of the Japanese ﬁnancial market and the improvement of the soundness of Japanese ﬁnancial institutions. Recent deregulations include:

(i) Effective October 1999, city banks were allowed to issue straight senior bonds following the abolishment of Ministry of Finance’s operational regulations, which had prohibited city banks from issuing such bonds. Also, effective as of June 30, 1997, ordinary banks are able to issue subordinated bonds.

(ii) Effective as of April 1, 1998, the restrictions were lifted on the maximum maturities of ﬂoating rate time deposits and on maturities of negotiable certiﬁcates of deposit.

(iii) Beginning in February 2002, the restrictions were relaxed on the business of trust banking subsidiaries and the trust business of banks so that banks and trust banking subsidiaries could engage in almost all aspects of the trust business except for brokerage of sales/lease of real estate, estate administration and certain other real estate-related businesses.

(iv) With the May 2000 amendment of the Insurance Business Law as from April 2001, banks became able to deal with several insurance products related to housing loans etc. as over-the-counter transactions.

104 Bank Holding Company In June 1997, the Japanese Diet adopted amendments to the Law relating to the Prohibition of Private Monopoly and Preservation of Fair Trade (the ‘‘Anti-Monopoly Law’’) to permit holding companies, except those which would constitute an excessive concentration of economic power. These amendments became effective as from December 1997. Additional legislative measures relating to the financial holding companies (holding companies for certain types of financial institutions, such as banks, securities companies and trust banks), became effective in March 1998: the Law Concerning Arrangement, etc. of Financial Laws in Relation to Lift of Prohibition of Establishment, etc. of a Holding Company (the ‘‘Arrangement Law’’) and the Law Concerning Special Rules, etc. of Consolidation Procedure in relation to Banks, etc. for Establishment of a Bank Holding Company (the ‘‘Establishment Special Law’’). In December 1997, in connection with such amendments, the Fair Trade Commission promulgated amendments to the the Anti-Monopoly Law guidelines which would relax the standards for approval of a financial institution’s stockholdings of more than 5 per cent in another company to permit a financial institution to acquire interests in other financial institutions without restrictions. The Arrangement Law established new provisions in the Banking Law which provide regulations for the establishment, business, and accounting of bank holding companies and the monitoring of bank holding companies. A bank holding company is prohibited from carrying on or administrating the business of its subsidiary. Business activities for subsidiaries of bank holding companies are limited to finance-related businesses. While the Anti-Monopoly Law provision which prohibits a bank from holding more than 5%of another company’s shares does not apply to a bank holding company, the Banking Law prohibits a bank holding company and its subsidiary, on aggregated basis, from holding more than 15%of the shares of certain types of companies which are not permitted to become subsidiaries of bank holding companies. The Establishment Special Law provides for special procedures for the consolidation of banks and companies in order to facilitate the establishment of bank holding companies.

Prompt Corrective Action and Self-Assessment Pursuant to amendments to the banking laws enacted in June 1996, the Prompt Corrective Action (‘‘PCA’’) system has been effective as from April 1, 1998. Under such banking laws, as so amended, and regulations recently issued thereunder, the FSA may, depending upon the extent of the capital deterioration of a financial institution, take certain corrective actions such as requiring a financial institution to formulate and implement reform measures, or requiring it to reduce assets or take other specific actions or suspend all or part of its business operations. The PCA system also requires financial institutions to establish ‘‘self-assessment’’ programs. Financial institutions, including the Bank, are required to analyze their assets giving due consideration to accounting principles and other applicable rules and to classify their assets into various categories taking into account the likelihood of repayment and the risk of impairment to the value of the assets. These classifications will determine whether an addition to or reduction in reserves or write-offs is necessary. Based on the amendments to the banking laws referred to above, the JICPA issued new guidelines for the accounting practices for Japanese banks in April 1997. Pursuant to such guidelines based on the outcome of each financial institution’s self-assessment, substantially all of a bank’s loans and other claims on customers are to be analyzed by classifying obligors into five categories: normal borrowers, borrowers requiring caution, potentially bankrupt borrowers, effectively bankrupt borrowers and bankrupt borrowers. The reserves for possible loan losses are then calculated based on such obligor categories. Also in 1997, in connection with the PCA system, the Ministry of Finance issued guidelines on the Ministry of Finance’s examination of bank assets. Such guidelines require banks to classify their assets not only by the five categories of obligor described above but also by four categories of quality relevant assets. The Bank has adopted its own internal guidelines for self- assessment which conform to such Ministry of Finance guidelines and comply with the requirements of the PCA system. Under the PCA system, if the capital ratio of a bank with international operations becomes less than 8%but not less than 4%, the FSA may require such bank to submit and implement a capital reform plan. If the capital ratio of a bank with international operations becomes less than 4%but not less than 2%or more, the FSA may order such bank to (i) submit and implement a plan for improving its capital, (ii) prohibit or restrict the

105 payment of dividends to shareholders or bonuses to officers, (iii) reduce its assets or restrict the increase of its assets, (iv) prohibit or restrict the acceptance of deposits under terms less advantageous than ordinary terms, (v) reduce the business of some offices, (vi) eliminate some offices other than the head office or (vii) take certain other actions. If the capital ratio of a bank with international operations becomes less than 2%but not less than 0%the FSA may order such bank to conduct any one of the following: (i) an increase of its capital, (ii) a substantial reduction in its business, (iii) a merger, or (iv) abolishment of its banking business. If the capital ratio of a bank with international operations becomes less than 0%, the FSA may order the bank to suspend all or part of its business.

Accounting Changes for Investment Securities and Financial Products In December 1997, the Ministry of Finance announced that it planned to permit Japanese financial institutions, at their option, to switch from the lower-of-cost-or market method to the historical cost method with respect to the values of their long-term investment in listed securities as shown on their balance sheets as of March 31, 1998 and any subsequent fiscal year end. If the value of such listed securities held by a financial institution decreases between March 31, 1997 and March 31, 1998, the financial institution could elect to make such accounting change in order to continue to record the value of such listed securities at the March 31, 1997 level on its March 31, 1998 balance sheet and in order not to incur a devaluation loss on its income statement for the year ended March 31, 1998. However, a bank adopting the historical cost method may not include the unrealized gains on long-term investments in listed securities in supplementary capital for the purpose of calculating its risk-adjusted capital ratio.

In January 1999, the Business Accounting Deliberation Council announced ‘‘Accounting Standards for Financial Instruments’’ which stipulated the scope of financial instruments, recognition and deletion of financial instruments, valuation methods, accounting for hedge transactions and accounting for composite financial instruments. It was incorporated into the corporate disclosure regulations under the Securities and Exchange Law that are applicable to public companies as a ‘‘generally fair and acceptable accounting rule’’. Under these standards, all the derivative financial instruments are basically valued at market value except for those qualifying as a hedge. Securities are classified into four categories: trading securities, held-to-maturity securities, investments in subsidiaries and affiliates and other securities. Trading securities shall be stated at market value and the unrealized gain or loss shall be recorded in the income statements. Held-to-maturity securities shall be stated at amortized cost. Investments in subsidiaries and affiliates shall be stated at cost. Other securities shall be stated at market value and the unrealized gain or loss shall be recorded as a separate component of stockholders’ equity. These new accounting standards have applied to the Bank since April 1, 2000, except the accounting standard with respect to other securities, which became effective as of April 1, 2001.

Accounting for the Impairment of Fixed Assets In April 2002, the FSA provided a draft opinion from its advisory committee with respect to accounting for the impairment of fixed assets, including investment in real property (but excluding financial products and deferred tax assets). According to the draft opinion, an extraordinary loss must be recognized if the book value of the asset exceeds the expected aggregate undiscounted future cash flow from such asset. The amount to be recognized is the difference between the book value of the asset and the greater of (i) the expected aggregate discounted cash flow from such asset and (ii) the expected resale price for such asset. The draft opinion suggests that this accounting will take effect in the fiscal years commencing on or after April 1, 2004.

System For Resolving Failed Financial Institutions After April 2001 General. In order to construct a permanent system for resolving failed financial institutions after April 2001, the Amendment Bill of the Deposit Insurance Law, as described hereinafter, was enacted as of May 24, 2000. Prior to such legislation, the system under the Financial Function Early Strengthening Law, (which provided for capital injection by the Japanese Government to financial institutions), and the Financial Revitalization Law, (which set forth the treatment of the failed financial institutions) had been in effect. The

106 capital injection under the Financial Function Early Strengthening Law is no longer available and has been replaced with the relevant provisions of the amended Deposit Insurance Law, except for cases in which application was made prior to March 31, 2001. The Financial Revitalization Law’s provisions for the treatment of failed ﬁnancial institutions, including the nationalization scheme and the Financial Reorganization Administrator’s operation scheme, have been replaced with new schemes by the relevant provisions of the amended Deposit Insurance Law.

Amended Deposit Insurance Law (i) General framework of resolution procedure.

The basic method of resolution for a failed financial institution under the Deposit Insurance Law is cessation of the business by paying insurance money to the depositors up to the principal amount of ¥10 million plus accrued interest (‘‘pay-off’’) per deposit or transfer of the business to another financial institution with financial aid provided within the cost of pay-off. Under the amended Deposit Insurance Law, transfer of business is regarded as the primary method. In order to effect a prompt transfer of business, the following framework has been introduced: (1) The Financial Reorganization Administrator will take control of the management and assets of a failed financial institution. Such administrator is expected to efficiently search for a financial institution which will succeed the business of such failed institution. (2) In the case where no such successor financial institution can be immediately found, a ‘‘bridge bank’’ (a subsidiary of the DIC), will conduct the business of the failed bank for a certain period. As one of such bridge banks, the Japan Succession Bank was established and licensed by the FSA on March 19, 2002. On March 28, 2002, the Japan Succession Bank obtained the approval and order from the FSA with respect to its first succession of businesses from two failed financial institutions. (3) In order to facilitate or encourage a financial institution to succeed a failed business, financial aid may be provided to the successor financial institution to enhance its capital after succession or to indemnify the loss incurred by such succession.

(ii) Addressing the possible ﬁnancial crisis.

Where it is anticipated that the failure of a financial institution may cause an extremely grave problem in maintaining the financial function’s order in of the area where such financial institution is operating, the following exceptional measures may be taken: (1) The DIC may subscribe to the shares or other instruments issued by the relevant financial institution and require such institution to submit a plan to regain soundness in its management to the DIC. (2) Once such financial institution fails, financial aid exceeding the cost for pay-off may be available to such institution. (3) In the case where the failed institution is a bank and systemic risk cannot be avoided by the measure mentioned in (2) above, the DIC may acquire all of the shares of such bank.

In order to fund the above-mentioned activities, the DIC may make borrowings from ﬁnancial institutions or issue bonds which may be guaranteed by the Government.

(iii) Postponement of pay-off.

The temporary special measures to protect the full amount of deposits (exceeding 10 million yen) were extended by one year, until the end of March 2002. Pay-off commenced in April 2002.

The deposits with current, savings and sundry accounts will be fully protected for another year until the end of March 2003.

107 Resolution and Collection Corporation. The Resolution and Collection Corporation (the ‘‘RCC’’) was established in April 2001 as a wholly owned subsidiary of the DIC by merging the Housing Loan Administration Corporation (‘‘HLAC’’), which had engaged in the management of mortgages assigned from the jusen, and the Resolution and Collection Bank, which had engaged in the collection of loan receivables assigned from failed financial institutions. The RCC can now purchase under-performing loan receivables from not only the failed financial institutions but also healthy ones to increase the credibility of the Japanese financial system. The RCC is also the only organization specialized in the purchase and collection of under-performing loan receivables, and therefore is expected to collect them swiftly to compensate and effectively. The DIC will provide guarantees to the RCC to finance such business and the RCC for losses it incurred.

Restriction on Bank’s Stockholding and the Bank-held Stock Acquisition Organization Effective September 30, 2004, banks and certain of their qualified subsidiaries and affiliates, on an aggregate basis, will not be able to hold stocks in an amount exceeding their Tier I capital amount. Therefore, banks, including the Bank, will have to dispose of a considerable amount of stock, including cross-held stocks, by such date. In order to prevent a decline in stock prices resulting from the inflow of a large volume of such stocks into the market, the Bank-held Stock Acquisition Organization (‘‘Stock Purchasing Agency’’) was established on January 30, 2002 with the contribution of more than ¥10 billion from 128 financial institutions. The Stock Purchasing Agency commenced its operations in mid-February. Primarily, the Stock Purchasing Agency intends to purchase stocks that can be readily resold to third parties based upon demand. These transactions are booked in its ‘‘General Account.’’ Other transactions are booked in the ‘‘Special Account,’’ to which the following special rules will apply: the Stock Purchasing Agency’s Special Account operations will be funded through loans from private banks, which are government guaranteed; the Stock Purchasing Agency may only buy stock of issuers with a credit rating of BBB or higher for its Special Account and the banks that sell their shares to the Stock Purchasing Agency must contribute 8%of the sale proceeds, which will be applied to the losses suffered by the Stock Purchasing Agency as a result of the resale of such stocks. The Stock Purchasing Agency is scheduled to be liquidated within 10 years.

Certain Amendment to Commercial Code In June 2001, the Commercial Code of Japan was amended to relax the restrictions on liquidation of statutory reserve (consisting of, e.g., proceeds of issued shares not included in the capital amount). Before the amendment, such statutory reserve could only be liquidated to remedy the impaired capital, or only transferred to the capital amount. The amendment enabled a corporation to dissolve such statutory reserve in excess of one fourth of the amount of the capital (in the case of a bank, under the Banking Law, this amount is increased to the amount equal to the capital amount), subject to the shareholders’ approval and the protective measures for the corporate creditors. The amount equal to the dissolved statutory reserve will be classiﬁed as a surplus and may be used in various ways, including for dividends. Such amendment took effect on October 1, 2001 and the Bank has decided to take the beneﬁt of this amendment and transfer some portion of its statutory reserve to retained earnings.

Capital Adequacy In 1988, the Basle Committee on Banking Supervision (the ‘‘Committee’’), comprised of representatives of the Group of Ten (‘‘G-10’’) countries (including Japan and the United States) and Luxembourg, issued a statement containing its agreement on a framework for measuring the capital adequacy of international banking organizations (‘‘Basle Accord’’). The Basle Accord, which was endorsed by the G-10 Central Bank Governors, also established a risk asset ratio as the principal measure of capital adequacy (‘‘BIS capital’’). This ratio compares a bank’s capital base, which is divided into two tiers, to its assets and off-balance sheet exposures adjusted according to broad categories of relative credit risk. The Basle Accord sets minimum international risk asset ratios, but national banking regulators are permitted to set additional ratios.

108 The capital adequacy guidelines currently supervised by the FSA and applicable to Japanese banks with international operations (the ‘‘Guidelines’’) closely follow the risk-adjusted approach proposed by the Committee and are intended to further strengthen the soundness and stability of Japanese banks. Under the risk-based capital framework of the Guidelines, balance sheet assets and off-balance sheet exposures are assessed according to broad categories of relative risk, based primarily on the credit risk of the counterparty, country transfer risk and the risk regarding the category of transactions. Five categories of risk weights (0%, 10%, 20%, 50% and 100%) are applied to the different types of balance sheet assets. Off-balance sheet exposures are taken into account by applying different categories of ‘‘credit conversion factors’’ to arrive at credit-equivalent amounts, which are then adjusted in the same manner as balance sheet assets involving similar counterparties (except that the maximum risk weight is 50%for exposures relating to derivatives, such as foreign exchange and interest rate swap or option contracts). In January 2001, the Committee announced the draft of amended rules with respect to minimum capital requirements, including the risk weight calculations, the inclusion of operational risk, and the introduction of the internal rating systems, the supervisory review and the market discipline through effective disclosure. This draft proposes to adopt variable risk weights according to the credit rating given to the obligor of the risk assets. The better the credit rating of an obligor, the less the risk weight applicable to the risk assets owed by it would be. Also, the new rule requires ﬁnancial institutions to establish an internal risk management system, to make thorough disclosure of relevant information and to set an appropriate reserve against the operational risk based upon fair evaluation thereof. Currently this new rule is scheduled to take effect from 2006.

With regard to capital, the Guidelines are in accord with the standards of the Basle Accord for a target minimum standard risk-adjusted capital ratio of 8.0%(at least half of which must consist of core capital, or a risk adjusted core capital ratio of 4.0%). The Guidelines place considerable emphasis on tangible common stockholders’ equity as the core element of the capital base, with appropriate recognition of other components of capital.

Capital is classiﬁed into three tiers, referred to as core, supplementary and junior supplementary. Core capital generally consists of stockholders’ equity less any recorded goodwill and amortization of consolidation difference. Supplementary capital generally consists of (i) general reserves for possible loan losses (subject to a limit of 1.25%of total risk-adjusted assets and off-balance sheet exposures), (ii) 45%of (a) the unrealized gains on investments in ‘‘other securities’’ (i.e., securities that are not those held for trading purpose, held-to-maturity bonds or shares in subsidiaries or certain afﬁliates) and (b) the unrealized appreciation on land, (iii) the balance of subordinated perpetual debt and (iv) the balance of subordinated term debt with original maturity of over five years and limited life preferred equity (up to a maximum of 50%of core capital). Junior supplementary capital consists of the balance of subordinated term debt with original maturity of at least two years. Junior supplementary capital may be counted, subject to certain conditions, according to the amount of market risk or the amount of core capital.

Supplementary capital may be counted up to the amount equivalent to core capital (less junior supplementary in case market risk is counted in the capital ratio calculation).

If a Japanese ﬁnancial institution fails to maintain the required capital ratios, under the PCA system, the FSA may, depending upon the extent of capital deterioration of such institution, take certain corrective action such as requiring it to formulate and implement reform measures, or requiring it to reduce assets or take other speciﬁc actions or suspend all or part of its business operations.

From and after March 31, 1998, banks are required to measure and apply capital charges in respect of their market risks in addition to their credit risks. Market risk is deﬁned as the risk of losses in on- and off- balance- sheet positions arising from movements in market prices. The risks subject to this requirement are:

• The risks pertaining to interest rate related instruments and equities in the trading book; and

• Foreign exchange risk and commodities risk throughout the bank.

109 Public Money Injection and Rationalization Plan The Law Concerning Emergency Measures for Stabilization of Financial Functions (Law No. 5 of 1998) and its successor, the Law Concerning Emergency Measures for Early Rehabilitation of Financial Functions (Law No. 143 of 1998, as amended) were enacted in February and October of 1998, respectively. The purpose of the laws was to prevent the failure of financial institutions by promoting prompt dispositions of bad debts and to provide measures for strengthening the capital structure of financial institutions. To achieve those targets, both laws provided that, in additional to its normal operations, the Resolution and Collection Bank (which has been merged into the Resolution and Collection Corporation) could purchase preferred stock or subordinated debts issued by, or extend a subordinated loan to, financial institutions. Such actions are subject to governmental approval of a rationalization plan submitted by each financial institution applying for such a public money injection. In the rationalization plan, the financial institution sets forth specific remedial action to restructure its management. A report verifying the result of the undertakings pursuant to the rationalization plan must be submitted to the supervisory authority semi-annually until such securities or loans have been fully redeemed or repaid. If there is considerable discrepancy between the rationalization plan and actual performance, the FSA may take administrative action, including the imposition of a partial business suspension order under the Banking Law. To date, such public money injection to the financial institutions, including the former Sakura Bank and Sumitomo Bank have occurred twice, in March of 1998 and 1999.

Law Concerning Sales, Etc. of Financial Products As a result of the various above-mentioned deregulations, more financial products, including highly structured and complicated ones, can now be more freely marketed to various types of customers. In response to this, the Law Concerning Sales Etc. of Financial Products was enacted in May 2000, taking effect as from April 2001, to better protect customers from incurring unexpected damages as a result of purchasing such financial products. Under this law, sellers of financial products have the duty of explanation with respect to the ‘‘important matters’’ of such products. If such sellers fail to do so, they will face strict liability regarding the resulting damages, with the decrease in the product’s value refutably presumed to be the amount of damages.

United States

The Bank As a result of its operations in the United States, the Bank is subject to supervision, examination and extensive regulation by the Federal Reserve Board under the International Banking Act of 1978 (the ‘‘IBA’’) and the Bank Holding Company Act of 1956 (together with regulations thereunder, the ‘‘BHCA’’). Under the BHCA and the IBA, the Bank is required to ﬁle certain reports with the Federal Reserve Board containing detailed information with respect to the Bank and its United States branches and subsidiaries. The Bank is also required to furnish the Federal Reserve Board with additional information that the Federal Reserve Board may request, and the Bank’s activities in the United States are subject to examination by the Federal Reserve Board and other bank regulatory authorities.

Under the BHCA, the Bank’s U.S. branches and bank subsidiaries are prohibited from engaging in certain tying arrangements in connection with any extension of credit or provision of any property or services. Under the IBA and BHCA, the Bank is subject to certain restrictions with respect to opening new U.S. domestic deposit- taking branches and establishing or acquiring subsidiary banks in states outside its ‘‘home state’’, which is California. These laws and related regulations also contain certain restrictions on the Bank’s ability to engage, directly or through subsidiaries, in non-banking activities in the United States. In addition, the Bank’s U.S. branches and certain of its subsidiaries are subject to reserve requirements established by the Federal Reserve Board, and to restrictions on the payment of interest on demand deposits.

The BHCA also generally prohibits the Bank from, directly or indirectly, acquiring more than 5%of the voting shares of any U.S. company engaged in non-banking activities in the United States unless the Federal

110 Reserve Board has determined, by order or regulation, that such proposed activities are so closely related to banking or managing or controlling banks as to be a proper incident thereto. In addition, the BHCA requires the Bank to obtain the prior approval of the Federal Reserve Board before acquiring, directly or indirectly, the ownership or control of more than 5%of the voting shares of any United States bank or bank holding company. Federal law also imposes certain limitations on the ability of the Bank and its subsidiaries to engage in certain aspects of securities business in the United States.

The Federal Deposit Insurance Corporation Improvement Act of 1991 (‘‘FDICIA’’), among other things, provides for expanded regulation of depository institutions and their parent holding companies. FDICIA and regulations promulgated thereunder have imposed certain additional restrictions on the activities of state-licensed branches of non-U.S. banks, have established new and more stringent capitalization requirements and have empowered U.S. federal bank regulatory bodies to restrict the activities of regulated institutions which become undercapitalized. FDICIA and related regulations also impose a number of additional regulatory requirements, including requirements relating to the safety and soundness of operations of regulated institutions. Among other things, FDICIA authorizes the Federal Reserve Board to order a non-U.S. bank which operates branches, agencies or certain subsidiaries in the U.S. to terminate its activities in the United States upon the determination by the Federal Reserve Board of the existence of certain conditions.

The Bank is also subject to supervision, examination and regulation by the banking authorities of the states in which it operates. The Bank currently has a bank subsidiary, branch or representative ofﬁce in 3 states.

The Branch The Branch is licensed by the New York Superintendent of Banks (the ‘‘Superintendent’’) to conduct a commercial banking business. The Branch is examined by the New York State Banking Department and the Federal Reserve Board and is subject to banking laws and regulations applicable to a foreign bank that operates a New York branch. Under the New York Banking Law (the ‘‘NYBL’’) and currently applicable regulations, the Branch must maintain with banks in the State of New York eligible assets (which consist of specified types of governmental obligations, U.S. dollar deposits, investment-grade commercial paper, obligations of certain international financial institutions and other specified obligations) in an amount equal to the greatest of (1) 5% of the total liabilities of the branch, excluding liabilities to other offices and affiliates of the Bank and liabilities of the Branch that are booked in its international banking facility, (2) 1%of the total liabilities of the branch, excluding liabilities to other offices and affiliates of the bank, or (3) $1,000,000, as security for the protection of depositors and certain other creditors of the Branch. The NYBL also empowers the Superintendent to require any branch of a foreign bank to maintain in New York specified assets equal to such percentage of the branch’s liabilities as the Superintendent may designate. At present, the Superintendent has set this percentage at 0%, although specific asset maintenance requirements may be imposed upon individual branches on a case-by-case basis.

The NYBL authorizes the Superintendent to take possession of the business and property of a New York branch of a foreign bank under circumstances similar to those which would permit the Superintendent to take possession of the business and property of a State-chartered bank. These circumstances include the violation of any law, the conduct of business in an unsafe manner, impairment of capital, suspension of payment of obligations and the initiation of liquidation proceedings against the foreign bank at its domicile or elsewhere.

The Branch is generally subject under the NYBL to the same lending limits as a ratio of capital as apply to a New York State-chartered bank, except that for the Branch such limits are based on the capital of the Bank.

The Foreign Bank Supervision Enhancement Act of 1991 (the ‘‘FBSEA’’) increased the degree of federal bank regulation of and supervision over U.S. branches of foreign banks such as the Branch. The FBSEA provides, among other things, that the Federal Reserve Board may examine such a branch and provides that each branch of a foreign bank shall be examined at least once during each 12 month period in an on-site examination. The FBSEA also provides that the Federal Reserve Board may order a foreign bank that operates a State branch

111 to terminate the activities of such branch if the Federal Reserve Board ﬁnds that the foreign bank is not subject to comprehensive supervision or regulation on a consolidated basis by the appropriate authorities in its home country, or that there is reasonable cause to believe that such foreign bank, or any afﬁliate of such foreign bank, has committed a violation of law or engaged in an unsafe or unsound banking practice in the United States and, as a result of such violation or practice, the continued operation of the branch would not be consistent with the public interest or with the IBA, BHCA or the Federal Deposit Insurance Act. A foreign bank so required to terminate activities conducted at a branch in the United States must comply with the requirements of applicable federal and state law with respect to procedures for the closure or dissolution thereof. The FBSEA provides that a state branch of a foreign bank such as the Branch may not engage in any type of activity that is not permissible for a federal branch of a foreign bank unless the Federal Reserve Board has determined that such activity is consistent with sound banking practice. The FBSEA also makes the Branch subject to the same lending limits as are applicable to a federally-licensed branch or agency of a foreign bank.

Other Elsewhere in the world the Bank Group’s operations are subject to regulation and control by local central banks and monetary authorities.

112 DESCRIPTION OF NOTES

The Notes will be issued pursuant to an indenture dated as of June 25, 2002, between the Bank, acting through the Branch, and JPMorgan Chase Bank, a bank organized under the laws of the State of New York, as trustee.

The following description of the Notes is a summary of the detailed provisions of the Notes and the indenture, copies of which (including the forms of the Notes) are available for inspection at the principal ofﬁce of the trustee located at 450 West 33rd Street, New York, New York 10001.

General The Notes, which will initially be issued in registered form, will be initially limited to an aggregate principal amount of $750,000,000. No Notes will be sold in this offering to any purchaser unless such purchaser purchases at least $100,000 principal amount of Notes or integral multiples of $1,000 in excess thereof. The Notes will mature on June 15, 2012 (the ‘‘Maturity Date’’) and are not redeemable prior to the maturity date except as described under ‘‘—Redemption for Taxation Reasons’’.

The Notes will bear interest at the rate per annum set forth on the ﬁrst page of this offering circular from June 25, 2002 until payment in full of the principal of the Notes has been made or duly made available for payment. Interest on the Notes will be payable semi-annually in arrears on June 15 and December 15 of each year, commencing on December 15, 2002 and on the Maturity Date (or, if any of those dates is not a business day, on the next succeeding business day) until the principal thereof is paid or duly made available for payment. Interest on the Notes will be calculated on the basis of a 360-day year of twelve 30-day months. Interest on the Notes will be paid to the persons in whose names such Notes (or one or more predecessor Notes) are registered as of the close of business on June 1 or December 1 (whether or not a business day), as the case may be, next preceding the applicable interest payment date (each a ‘‘record date’’). The principal of and interest on the Notes will be payable in U.S. dollars or in such other coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts. The term ‘‘business day’’ means a day on which banks generally in The City of New York and London are not authorized or required by law or executive order to close.

The Notes will constitute unsecured, subordinated obligations of the Branch and the Bank. Upon the occurrence of a Subordination Event (as described below), any amounts payable under the Notes will be subordinated in right of payment to the prior payment of all Senior Indebtedness of the Branch and the Bank to the extent described under ‘‘—Subordination’’. The obligations of the Branch are direct obligations of the Bank. The Bank has the same unsecured and, if a Subordination Event has occurred, subordinated (to the extent described herein) direct obligation to make such payment as it has with respect to any of its other unsecured and similarly subordinated debt and other obligations ranking pari passu with the notes.

The Notes have not been registered with the Securities and Exchange Commission and are offered pursuant to an exemption from registration under Section 3(a)(2) of the Securities Act of 1933, as amended. Accordingly, the indenture is not required to be, and has not been, qualiﬁed under the Trust Indenture Act of 1939, as amended. The Notes are not deposits and are not insured by the U.S. Federal Deposit Insurance Corporation or any other governmental agency.

Book-Entry; Delivery and Form

DTC, Clearstream and Euroclear The Notes will initially be issued to investors only in book-entry form. One or more fully-registered Global Notes, representing the total aggregate principal amount of notes, will be issued and registered in the name of Cede & Co., acting as nominee for The Depository Trust Company, or DTC, which will act as securities

113 depositary for the Notes. The Global Notes will initially be deposited with the trustee, acting as custodian for DTC.

Persons that acquire beneficial ownership interests in the Global Notes will hold their interests through DTC in the United States or Clearstream or Euroclear in Europe, if they are participants of those systems, or indirectly through organizations that are participants in those systems. Clearstream and Euroclear will hold omnibus positions on behalf of their participants through customers’ securities accounts in Clearstream’s and Euroclear’s names on the books of their respective depositaries, which in turn will hold those positions in customers’ securities accounts in the depositaries’ names on the books of DTC. JPMorgan Chase Bank will act as European depositary for Clearstream and for Euroclear. Unless and until certificated securities are issued, the only ‘‘holder’’ of the Notes will be Cede & Co., as nominee of DTC, or the nominee of a successor depositary. Beneficial owners will be permitted to exercise their rights only indirectly through DTC, Clearstream, Euroclear and their participants.

DTC has advised the Bank that DTC is a limited-purpose trust company organized under the New York Banking Law, a ‘‘banking organization’’ within the meaning of the New York Banking Law, a member of the Federal Reserve System, a ‘‘clearing corporation’’ within the meaning of the New York Uniform Commercial Code, and a ‘‘clearing agency’’ registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended. DTC holds securities that its participants deposit with DTC. DTC also facilitates the settlement among its participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in its participants’ accounts, thereby eliminating the need for physical movement of securities certiﬁcates. Participants in DTC include Clearstream and Euroclear, securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. DTC is owned by a number of its participants and by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc., or NASD. Access to the DTC system is also available to others such as securities brokers and dealers, banks and trust companies that clear through or maintain a custodial relationship with a DTC participant, either directly or indirectly. The rules applicable to DTC and its participants are on ﬁle with the SEC.

According to DTC, the foregoing information with respect to DTC has been provided to the ﬁnancial community for informational purposes only and is not intended to serve as a representation, warranty or contract modiﬁcation of any kind.

Clearstream advises that it is incorporated under the laws of Luxembourg as a professional depositary. Clearstream holds securities for its participating organizations and facilitates the clearance and settlement of securities transactions between its participants through electronic book-entry changes in accounts of its participants, eliminating the need for physical movement of certiﬁcates. Clearstream provides to its participants, among other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Clearstream interfaces with domestic markets in several countries. As a professional depositary, Clearstream is subject to regulation by the Luxembourg Monetary Institute. Clearstream participants are recognized ﬁnancial institutions around the world, including securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. Indirect access to Clearstream is also available to others, such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Clearstream participant, either directly or indirectly.

Euroclear advises that it was created in 1968 to hold securities for its participants and to clear and settle transactions between its participants through simultaneous electronic book-entry delivery against payment, eliminating the need for physical movement of certiﬁcates and any risk from lack of simultaneous transfers of securities and cash. Euroclear provides various other services, including securities lending and borrowing and interfaces with domestic markets in several countries. The Euroclear system is owned by Euroclear Clearance System Public Limited Company (ECS plc) and is operated by Euroclear Bank S.A./N.V., a bank incorporated under the laws of the Kingdom of Belgium as the ‘‘Euroclear operator’’. All operations are conducted by the Euroclear operator, and all Euroclear securities clearance accounts and Euroclear cash accounts are accounts with

114 the Euroclear operator. Euroclear participants include banks (including central banks), securities brokers and dealers and other professional ﬁnancial intermediaries. Indirect access to Euroclear is also available to other ﬁrms that clear through or maintain a custodial relationship with a Euroclear participant, either directly or indirectly.

Securities clearance accounts and cash accounts with the Euroclear operator are governed by the ‘‘Terms and Conditions Governing Use of Euroclear’’ and the related operating procedures of the Euroclear System and applicable Belgian law which collectively are referred to as the ‘‘Euroclear Terms and Conditions’’. The Euroclear Terms and Conditions govern transfers of securities and cash within Euroclear, withdrawals of securities and cash from Euroclear, and receipts of payments with respect to securities in Euroclear. All securities in Euroclear are held on a fungible basis without attribution of specific certificates to specific securities clearance accounts. The Euroclear operator acts under the Euroclear Terms and Conditions only on behalf of Euroclear participants, and has no record of or relationship with persons holding through Euroclear participants.

Purchases of Notes within the DTC system must be made by or through DTC participants, which will receive a credit for the Notes on DTC’s records and on the records of Clearstream or Euroclear, if applicable. The ownership interest of each actual purchaser of Notes, a beneficial owner of an interest in a Global Note, is in turn to be recorded on the DTC direct and indirect participants’ records. Beneficial owners will not receive written confirmation from DTC of their purchases, but beneficial owners are expected to receive written confirmations providing details of the transactions, as well as periodic statements of their holdings, from the DTC direct or indirect participants through which the beneficial owners purchased Notes. Transfers of ownership interests in the Notes are to be accomplished by entries made on the books of DTC direct and indirect participants acting on behalf of beneficial owners. Beneficial owners of interests in Notes will not receive certificates representing their ownership interests in Notes, unless use of the book-entry system for the Notes is discontinued.

Transfers Among DTC, Clearstream and Euroclear Transfers between DTC participants will occur in accordance with DTC rules. Transfers between Clearstream and Euroclear participants will occur in accordance with their respective rules and operating procedures.

Cross-market transfers between persons holding directly or indirectly through DTC participants, on the one hand, and directly or indirectly through Clearstream or Euroclear participants, on the other hand, will be effected in DTC in accordance with DTC rules on behalf of the relevant European international clearing system by its U.S. depositary; however, those cross-market transactions will require delivery of instructions to the relevant European international clearing system by the counterparty in that system in accordance with its rules and procedures and within its established deadlines (European time). The relevant European international clearing system will, if the transaction meets its settlement requirements, deliver instructions to its U.S. depositary to take action to effect ﬁnal settlement on its behalf by delivering or receiving securities in DTC, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Clearstream and Euroclear participants may not deliver instructions directly to the respective U.S. depositary.

Because of time zone differences, credits of securities received in Clearstream or Euroclear as a result of a transaction with a person that does not hold the Notes through Clearstream or Euroclear will be made during subsequent securities settlement processing and dated the business day following the DTC settlement date. Those credits or any transactions in those securities settled during that processing will be reported to the relevant Euroclear or Clearstream participants on that business day. Cash received in Clearstream or Euroclear as a result of sales of securities by or through a Clearstream or Euroclear participant to a DTC participant will be received with value on the DTC settlement date, but will be available in the relevant Clearstream or Euroclear cash account only as of the business day following settlement in DTC. For information with respect to tax documentation procedures, see ‘‘Taxation—United States Taxation’’.

115 Limitations on Responsibilities DTC, Clearstream and Euroclear have no knowledge of the actual beneficial owners of interests in a Global Note. DTC’s records reflect only the identity of the DTC participants (including Clearstream and Euroclear) to whose accounts those Notes are credited, which may or may not be the beneficial owners of interests in a Global Note. Similarly, the records of Clearstream and Euroclear reflect only the identity of the Clearstream or Euroclear participants to whose accounts those Notes are credited, which also may or may not be the beneficial owners of interests in a Global Note. DTC, Clearstream and Euroclear participants and indirect participants will remain responsible for keeping account of their holdings on behalf of their customers.

DTC’s Procedures for Notices, Voting and Payments So long as DTC, or its nominee, is the registered owner or holder of a Global Note, DTC or that nominee, as the case may be, will be considered the sole owner or holder of the Notes represented by the Global Note for all purposes under the Notes and the indenture. No beneﬁcial owner of an interest in a Global Note will be able to transfer that interest except in accordance with DTC’s applicable procedures, in addition to those provided for under the indenture.

DTC has advised the Bank that it will take any action permitted to be taken by a holder of Notes (including the presentation of Notes for exchange as described below) only at the direction of one or more of its participants to whose account the DTC interests in the Notes are credited and only in respect of that portion of the aggregate principal amount of Notes as to which that participant or participants has or have given the direction.

Conveyance of notices and other communications by DTC to its participants, by those participants to its indirect participants, and by participants and indirect participants to beneﬁcial owners of interests in a Global Note will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.

The trustee will make payments of principal of and interest on the Notes and send any notices in respect of the Notes held in book-entry form to Cede & Co.

Payment of principal of and interest on the Notes held in book-entry form will be made to DTC in immediately available funds. DTC’s practice is to credit its participants’ accounts on the relevant payment date in accordance with their respective holdings shown on DTC’s records unless DTC has reason to believe that it will not receive payments on that payment date. Payments by DTC’s participants and indirect participants to beneﬁcial owners of interests in a Global Note will be governed by standing instructions and customary practices, and will be the responsibility of those participants and indirect participants and not of DTC or the Bank, subject to any statutory or regulatory requirements that may be in effect from time to time. Payment of principal of and interest on the Notes or other amounts to DTC is the responsibility of the Bank, disbursement of those payments to participants is the responsibility of DTC, and disbursement of those payments to the beneﬁcial owner of an interest in a Global Note is the responsibility of participants and indirect participants.

The principal amount of the Notes in deﬁnitive form will be payable by check, drawn on a bank in The City of New York, upon presentation and surrender of such Notes at the Branch or at the principal ofﬁce of the trustee in The City of New York or at such other place or places in the Borough of Manhattan, The City of New York as the trustee shall designate by notice to the holders thereof. Interest on the Notes will be payable by check, drawn on a bank in The City of New York, mailed to the persons in whose names such Notes (or one or more predecessor Notes) are registered on each record date. Notwithstanding the foregoing, the person in whose name a Note is registered may elect to receive payments of principal at the maturity date or interest by wire transfer in immediately available funds to a bank account in The City of New York designated by such person in a written notice received by the trustee (a) in the case of a payment of interest, prior to the record date immediately preceding the interest payment date on which such payment is due and (b) in the case of payment of principal on the maturity date, prior to the record date immediately preceding the maturity date, provided that in the case of

116 such payment of principal, the Note shall have been surrendered to the trustee for payment together with such notice.

Except as described in this offering circular, a beneﬁcial owner of an interest in a Global Note will not be entitled to receive physical delivery of Notes. Accordingly, each beneﬁcial owner of an interest in a global Note must rely on the procedures of DTC to exercise any rights under the Notes.

Termination of and Changes to Depositary Arrangements A Global Note is exchangeable for Notes in registered certificated form if DTC (i) notifies the Branch that it is unwilling or unable to continue as depositary for the Global Notes and the Bank does not appoint a successor depositary or (ii) has ceased to be a clearing agency registered under the Exchange Act. Definitive Notes delivered in exchange for beneficial interests in any Global Note will be registered in the names, and issued in the denominations of $100,000 or integral multiples of $1,000 in excess thereof requested by or on behalf of the Depositary (in accordance with its customary procedures) and will be issued without coupons.

Although DTC, Clearstream and Euroclear have agreed to the foregoing procedures in order to facilitate transfers of interests in the Global Notes among participants, none of them is under any obligation to perform or continue to perform those procedures, and those procedures may be discontinued at any time. The Bank will not have any responsibility for the performance by DTC, Clearstream, Euroclear or their participants or indirect participants under the rules and procedures governing them. DTC, Clearstream and Euroclear may discontinue providing their services as securities depositary with respect to the Notes at any time by giving notice to the Branch. Under those circumstances, deﬁnitive Notes would be delivered as described above.

Limitations on Rights Resulting from Book-Entry Form The laws of some jurisdictions require that certain purchasers of securities take physical delivery of securities in deﬁnitive form. These laws may impair the ability to transfer beneﬁcial interests in the Notes which are represented by a Global Note.

Registration, Transfer and Exchange The trustee will maintain at its principal ofﬁce in The City of New York, currently located at 450 West 33rd Street, New York, New York 10001, a notes register with respect to the Notes. The name of the registered holder of each Note will be recorded in the notes register. The Bank and the trustee may treat the person in whose name any Note is registered as the absolute owner of such Note for all purposes and none of them shall be affected by any notice to the contrary.

At the option of the holder of a Note, subject to the restrictions contained in the Notes and in the indenture, such Note may be transferred or exchanged for a like aggregate principal amount of Notes of different authorized denominations, upon surrender for exchange or registration of transfer, at the trustee’s ofﬁce. Any Note surrendered for exchange or presented for registration of transfer shall be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the trustee, duly executed by the holder thereof or his attorney duly authorized in writing. Notes issued upon any such transfer will be executed by the Bank and authenticated by the trustee, registered in the name of the designated transferee or transferees and delivered at the trustee’s ofﬁce or mailed, at the request, risk and expense of, and to the address requested by, the designated transferee or transferees.

No service charge (other than any cost of delivery) shall be imposed for any transfer or exchange of Notes, but the Bank may require payment of a sum sufﬁcient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Notes.

117 Paying Agents The paying agents shall initially be JPMorgan Chase Bank, as the principal paying agent and JPMorgan Chase Bank London as the London paying agent. Each of the paying agents shall be permitted to resign as paying agent upon 30 days’ written notice to the Branch. In the event that either of the paying agents shall no longer be a paying agent, the Bank shall appoint a bank or trust company acceptable to the Bank to act as the successor paying agent, provided that the Branch will at all times maintain (i) a paying agent having specified offices in a major European city which, so long as the Notes are listed on the official list of the Financial Services Authority in its capacity as competent authority under the Financial Services and Markets Act 2000 and admitted to trading on the London Stock Exchange’s market for listed securities, shall be London and (ii) a paying agent with a specified office in a European Union member state that will not be obliged to withhold or deduct tax pursuant to any European Union Directive on the taxation of savings implementing the conclusions of the ECOFIN Council meeting of 26th-27th November, 2000 or any law implementing or complying with, or introduced in order to conform to such Directive.

Further Issues The Bank may from time to time, without the consent of the existing Note holders, create and issue further notes having the same terms and conditions as the Notes in all respects, except for the issue date, issue price and ﬁrst payment of interest thereon and certain temporary securities law transfer restrictions. Additional notes issued in this manner may, without the consent of any holder of Notes, be consolidated with and would form a single series with the previously outstanding Notes.

Although not anticipated, the Bank may offer additional Notes with original issue discount (‘‘OID’’) for U.S. federal income tax purposes as part of a further issue. Purchasers of Notes after the date of any further issue will not be able to differentiate between Notes sold as part of a further issue and previously issued Notes. If the Bank were to issue additional Notes with OID, purchasers of Notes after such further issue may be required to accrue OID (or greater amounts of OID than they would otherwise have accrued) with respect to their Notes. This may affect the price of outstanding Notes following a further issue. Purchasers are advised to consult legal counsel with respect to the implications of any further issue of Notes with OID.

Subordination Upon the occurrence of a Subordination Event, the obligations of the Bank and the Branch pursuant to the Notes shall be subordinated in right of payment to all Senior Indebtedness and, so long as such Subordination Event continues (and in the case of civil rehabilitation proceedings, so long as neither a summary rehabilitation order nor consent rehabilitation order shall have been issued), no payment will be made under the Notes (except for such amounts which shall have become due and payable, other than solely by way of acceleration, prior to the date on which a Subordination Event shall have occurred) unless and until (i) in the case of Subordination Event (a), all Senior Indebtedness appearing on the final distribution list prepared by the administrator for the final distribution of bankruptcy assets pursuant to the Japanese Bankruptcy Law (Law No. 71 of 1922 as amended) or any successor legislation thereto (the ‘‘Bankruptcy Law’’) is paid in full or provision has been made for the payment in full thereof pursuant to the Bankruptcy Law, (ii) in the case of Subordination Event (b), all Senior Indebtedness appearing in the plan of reorganization, at the date such plan has become final and conclusive after approval by a court of competent jurisdiction in Japan, as indebtedness of the Bank, subject to modification of such plan, is paid in full to the extent of the original amount of such indebtedness without regard to such modification, (iii) in the case of Subordination Event (c), all Senior Indebtedness of the Bank appearing in the plan of rehabilitation, at the date such a plan has become final and conclusive after approval by a court of competent jurisdiction in Japan, as indebtedness of the Bank subject to modification in such plan, is paid in full to the extent of the original amount of such indebtedness without regard to such modification or (iv) in the case of Subordination Event (d), conditions equivalent to those set out in (i), (ii) or (iii) above have been fulfilled; provided that, notwithstanding any provision herein to the contrary, if the imposition of any such condition is not

118 allowed under such proceedings, any amount which becomes due under the Notes shall become payable in accordance with these conditions and not subject to such condition. The rights of the holders of the Notes will be reinstated with respect to any payments made to holders that are subsequently avoided in the bankruptcy, reorganization or rehabilitation of the Bank, as though such payments had not been made. No amendment or modiﬁcation to the subordination provisions contained in the indenture which is prejudicial to any present or future creditor in respect of any Senior Indebtedness of the Bank shall be made by the Bank. No such amendment or modiﬁcation shall in any event be effective against any such creditor. A holder of a Note by his acceptance of such Note shall thereby agree that (i) if any payment is made to the holder of such Note after the occurence of a Subordination Event and the amount of such payment shall exceed the amount, if any, that should have been paid to such holder, the payment of such excess amount shall be deemed null and void and such holder shall be obliged to return the amount of the excess payment within ten days after receiving notice of the excess payment, and (ii) upon the occurrence of a Subordination Event and so long as such Subordination Event shall continue, and in the case of civil rehabilization proceedings, so long as neither a summary rehabilization order nor a consent rehabilization order shall have issued, such holder shall not exercise any right to set off any liabilities of the Bank or the Branch under the Notes (except for such amounts which shall have become due and payable, other than solely by way of acceleration, prior to the date on which the Subordination Event shall have occurred) against any liabilities of such holder owed to the Branch or the Bank unless, until and only in such amount as the liabilities of the Branch or the Bank under the Notes become payable pursuant to the proper application of the subordination provisions of the Notes. By the terms of the Notes, each holder of a Note by his acceptance of such Note shall thereby irrevocably waive his rights as an owner of claims that the Superintendent of Banks shall accept pursuant to Section 606.4 of the New York Banking Law to the extent necessary to effectuate the subordination provisions of the Notes. ‘‘Subordination Event’’ means any one of the following events: (a) a court of competent jurisdiction shall have adjudicated the Bank to be bankrupt pursuant to the provisions of the Bankruptcy Law; (b) a court of competent jurisdiction shall have commenced reorganization proceedings with regard to the Bank pursuant to the provisions of the Japanese Corporate Reorganization Law (Law No. 172 of 1952 as amended) or any successor legislation thereto (the ‘‘Reorganization Law’’); (c) a court of competent jurisdiction shall have commenced civil rehabilitation proceedings with regard to the Bank pursuant to the provisions of the Japanese Civil Rehabilitation Law (Law No. 225 of 1999 as amended) or any successor legislation thereto (the ‘‘Civil Rehabilitation Law’’); or (d) the Bank shall become subject to bankruptcy, corporate reorganization or other equivalent proceedings pursuant to any applicable law of any jurisdiction other than Japan, which proceedings have an equivalent effect to those set out in (a), (b) or (c) above. ‘‘Senior indebtedness’’ means all deposits and other liabilities of the Bank, including those of the Branch, other than (i) liabilities under the Notes which shall not have become due and payable prior to the date on which a Subordination Event shall have occurred, (ii) liabilities under the Notes which shall have become due and payable solely by way of acceleration prior to such date, and (iii) any other liabilities of the Branch or the Bank (including, without limitation, with respect to indebtedness or guarantees) which by their terms or judicial decree rank pari passu with or junior to the Notes (to the extent the Notes do not constitute Senior Indebtedness) including, without limitation, any subordinated liabilities under the Bank’s ¥1,000,000,000,000 Euro Medium Term Note Programme, Sakura Capital Funding (Cayman) Limited’s ¥500,000,000,000 Undated Subordinated Guaranteed Euro Medium Term Note Programme and Sakura Finance (Cayman) Limited’s ¥500,000,000,000 Subordinated Guaranteed Euro Medium Term Note Programme as well as liabilities related to Sumitomo Bank International Finance N.V.’s $1,000,000,000 8.5%Subordinated Notes due 2009. For the purposes of (iii) above, such liabilities shall include any liabilities with subordination provisions substantially similar to the subordination provisions of the Notes, but which omit a provision similar to (c) set forth above under Subordination Event.

119 ‘‘Administrator’’ means the bankruptcy administrator in the case of a bankruptcy pursuant to the Bankruptcy Law.

‘‘Consent rehabilitation order’’ means a decision of a court of competent jurisdiction under Article 217, paragraph 1 of the Civil Rehabilitation Law to the effect that the procedures for the investigation and conﬁrmation of civil rehabilitation claims as deﬁned in Article 84 of the Civil Rehabilitation Law, and the resolution of a civil rehabilitation plan shall be omitted.

‘‘Summary rehabilitation order’’ means a decision of a court of competent jurisdiction under Article 211, paragraph 1 of the Civil Rehabilitation Law to the effect that the procedures for the investigation and conﬁrmation of civil rehabilitation claims as deﬁned in Article 84 of the Civil Rehabilitation Law shall be omitted.

Pursuant to the Notes, and subject to certain exceptions, the Bank will pay to holders and beneﬁcial owners of the Notes such additional amounts as may be necessary in order that the net amounts received by the holders, after deductions or withholdings for any tax, assessment or other charge imposed or collected by the Japanese or United States government in connection with any payment under the Notes, will not be less than the amount then due and payable upon the Notes. See ‘‘—Taxation and Additional Amounts’’ and ‘‘—Redemption for Taxation Reasons’’.

As a consequence of the subordination provisions in the Notes, in the event of the occurrence of a Subordination Event, the holders of the Notes may recover less ratably than the holders of deposit liabilities and other unsubordinated liabilities of the Branch or the Bank. Holders of the Notes may be required to pursue their claims with respect to the Notes in Japan. To the extent that holders of the Notes are entitled to any recovery with respect to the Notes in any Japanese action or proceeding, such holders might not be entitled in such an action or proceeding to a recovery in U.S. dollars and might be entitled in such an action or proceeding only to a recovery in Japanese yen. The Bank will agree pursuant to the terms of the Notes to indemnify the holders of the Notes against certain losses incurred as a result of any judgment or order being given or made for any amount due under the Notes and such judgment or order being expressed and paid in a currency other than U.S. dollars. See ‘‘—Indemniﬁcation of Judgment Currency’’. Any amounts due under this indemniﬁcation and any additional amounts due in respect of Japanese or United States withholding taxes as provided by the terms of the Notes will be subordinated in right of payment in any such proceeding. See ‘‘—Taxation and Additional Amounts’’.

Pursuant to the provisions of the Bankruptcy Law, Reorganization Law or Civil Rehabilitation Law, the holders of liabilities (both subordinated and unsubordinated) of the Bank will be required to file a notice of claim in Japan upon the occurrence of a subordination event. Upon the expiration of the period for filing such notices, based on the notices filed and the records of the Bank, an official list of liabilities that will be entitled to receive distribution in a bankruptcy, reorganization proceeding or rehabilitation proceeding will be determined pursuant to the provisions of the Bankruptcy Law, the Reorganization Law or the Civil Rehabilitation Law. To the extent that any liabilities senior to the Notes are not included on the final official list in Japan or are not accorded equivalent status pursuant to any applicable bankruptcy, corporate reorganization, civil rehabilitation or other equivalent law of any jurisdiction other than Japan, such liabilities will no longer rank senior to any amounts payable under the Notes.

At March 31, 2002, the Bank had outstanding obligations to creditors (including deposits and other debt and guarantee obligations), which upon the occurrence of a subordination event would, upon the satisfaction of any procedural requirements, rank senior to the obligations under the Notes, with an aggregate principal amount equivalent to $714.5 billion. The indenture and the Notes do not contain any limitations on the amount of Senior Indebtedness or deposits or other liabilities that may be hereafter incurred or assumed (including through guarantee obligations) by the Bank. As of March 31, 2002, the Bank had outstanding subordinated debt, which upon the occurrence of a Subordination Event would rank pari passu to the obligations under the Notes, with an aggregate principal amount equivalent to $14.5 billion.

120 Actions Against the Bank; Limitations

In the event any payment of principal or interest or any additional amount due and payable by the Branch under any Note is not made by the Branch when due and payable, the Bank will have the same unsecured and, if a Subordination Event has occurred, subordinated (to the extent described herein) direct obligation to make such payment as it has with respect to any of its other unsecured and similarly subordinated debt and other obligations ranking pari passu with the Notes. The Bank has been advised by Japanese counsel that a ﬁnal judgment for the payment of money against the Bank rendered by a United States federal or state court will generally be enforceable in Japan if certain conditions are met.

Merger, Consolidation, Sale, Conveyance or Assumption

The indenture provides that the Bank may consolidate with or merge into any other corporation or entity or sell or dispose of its properties and assets substantially as an entirety, whether as a single transaction or a number of transactions, related or not, to any person provided that (a) such person assumes the obligations of the Bank under the Notes and the indenture and (b) after giving effect thereto, no event of default (as described below) or event which, with the giving of notice or lapse of time, or both, could become an event of default with respect to the Notes or indenture shall have occurred and be continuing. It is possible that the U.S. Internal Revenue Service may deem a merger or other similar transaction to cause an exchange for U.S. federal income tax purposes of Notes for new notes by the beneﬁcial owners of Notes. This could result in the recognition of gain or loss for U.S. federal income tax purposes and possible other adverse tax consequences.

Taxation and Additional Amounts

All payments of principal of and interest on the Notes will be made without withholding or deduction for or on account of any present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied by or on behalf of Japan or the United States, as the case may be, or any subdivision thereof, or any authority therein or thereof having power to tax, unless the withholding or deduction of such taxes, duties, assessments or governmental charges is required by law or by the administration of such law. The Bank will pay to any holder such additional amounts as may be necessary in order that the net amounts received by such holder after such withholdings or deductions shall equal the respective amounts of principal and interest which would have been receivable in respect of such holder’s Note in the absence of such withholdings or deductions, except that no such additional amounts shall be payable in respect of such withholdings or deductions to the extent that:

(a) such withholding or deduction would not have been imposed but for the existence of any present or former connection between the holder or beneﬁcial owner of a Note and Japan or the United States, as the case may be, or any political subdivision of the foregoing, other than the mere holding, use, enforcement or ownership of such Note;

(b) the holder or beneﬁcial owner would not be liable for or subject to such withholding or deduction by making a declaration of non-residence or other similar claim for exemption to the relevant tax authority;

(c) a Note is presented for payment, where presentation is required, more than 30 days after the relevant date, except to the extent that the holder or beneﬁcial owner thereof would have been entitled to additional amounts on presenting the same for payment on the last day of such period of 30 days;

(d) any withholding or deduction is imposed on a payment to an individual and is required to be made pursuant to any European Union Directive on the taxation of savings implementing the conclusions of the ECOFIN Council meeting of November 26-27, 2000, or any law implementing or complying with, or introduced in order to conform to, such directive;

121 (e) any withholding or deduction that is imposed on a Note that is presented for payment by or on behalf of a holder or beneﬁcial owner who would have been able to avoid such withholding or deduction by presenting the relevant Note to another paying agent in a Member State of the EU; or

(f) in addition to (a), (b), (c), (d) or (e) above, with respect to any withholding or deduction of United States taxes,

(1) the beneﬁcial owner is or has been a foreign or domestic personal holding company, a passive foreign investment company or a controlled foreign corporation with respect to the United States or a corporation that has accumulated earnings to avoid United States federal income tax; or

(2) the beneﬁcial owner is or has been a ‘‘10-percent shareholder’’ of the Bank as deﬁned in section 871(h)(3) of the United States Internal Revenue Code or any successor provision; or

(3) the beneﬁcial owner is a bank receiving payments on an extension of credit made pursuant to a loan agreement entered into in the ordinary course of its trade or business.

The obligation to pay taxes, duties, assessments and governmental charges shall not apply to (a) any estate, inheritance, gift, sales, transfer, personal property or any similar tax, assessment or other governmental charge or (b) any tax, assessment or other governmental charge which is payable otherwise than by deduction or withholding from payments of principal of or interest on the Notes.

Additional Amounts will also not be paid with respect to any payment of the principal of, or any interest on, any Notes to any holder who is a fiduciary or partnership or other than the sole beneficial owner of such payment to the extent such payment would be required by the laws of Japan or the United States, as the case may be, to be included in the income for tax purposes of a beneficiary or settlor with respect to such fiduciary or a member of such partnership or a beneficial owner who would not have been entitled to such amounts had it been the holder of such Note.

As used in this section, ‘‘relevant date’’ means whichever is the later of (a) the date on which such payment ﬁrst becomes due or (b) if the full amount of the moneys payable has not been received by the trustee on or prior to such date, the date on which the full amount of such moneys has been so received.

Redemption for Taxation Reasons

The Notes may be redeemed at the option of the Bank in whole, but not in part, subject to obtaining prior consent of the FSA, at any time, on giving not less than 30 nor more than 60 days’ notice of redemption to the Note holders (which notice shall be irrevocable) at the principal amount thereof (together with interest accrued to the date fixed for redemption and any additional amounts thereon) if (i) the Branch or the Bank has or will become obliged to pay additional amounts as described under ‘‘—Taxation and Additional Amounts’’ as a result of any change in, or amendment to, the laws or regulations of the United States or Japan or any political subdivision or any authority thereof or therein having power to tax, or any change in application or official interpretation of such laws or regulations, which change or amendment becomes effective on or after the date of this offering circular and (ii) such obligation cannot be avoided by the Branch or the Bank taking reasonable measures available to it, provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Branch or the Bank would be obliged to pay such additional amounts were a payment in respect of the Notes then due. Prior to the publication of any notice of redemption pursuant to this paragraph, the Branch shall deliver to the trustee a certificate signed by an authorized officer of the Bank (or, where applicable, an authorized officer of the Branch) stating that the conditions precedent to the right of the Branch or the Bank so to redeem have occurred, and an opinion of independent legal advisors of recognized standing to the effect that the Branch or the Bank has or will become obliged to pay such additional amounts as a result of such change or amendment.

122 Events of Default; Limited Rights of Acceleration

An event of default with respect to the Notes will be deﬁned to mean: (a) a court of competent jurisdiction shall have adjudicated the Bank to be bankrupt pursuant to the provisions of the Bankruptcy Law; (b) a court of competent jurisdiction shall have commenced reorganization proceedings with regard to the Bank pursuant to the provisions of the Reorganization Law; (c) a court of competent jurisdiction shall have commenced civil rehabilitation proceedings with regard to the Bank pursuant to the provisions of the Civil Rehabilitation Law; or (d) The Bank shall become subject to bankruptcy, corporate reorganization or other equivalent proceedings pursuant to any applicable law of any jurisdiction other than Japan, which proceedings have an equivalent effect to those set out in (a), (b) and (c) above.

In case an event of default set forth above shall occur and be continuing, the trustee or the holders of not less than 25%in aggregate principal amount of the Notes may, by written notice to the Branch and the trustee (if given by the holders), declare the principal of and all interest then accrued on the Notes to be forthwith due and payable upon receipt of such notice by the Branch and, if applicable, the trustee. At any time after such a declaration of acceleration has been made and before a judgment or decree for payment of the money due has been obtained by the trustee pursuant to the provisions of the indenture, the holders of a majority in principal amount of the Notes, by written notice to the Branch and the trustee, may rescind and annul such declaration and its consequences provided certain conditions set forth in the indenture have been satisﬁed. Except as provided above, neither the trustee nor the holders of the Notes will have any right to accelerate any payment of principal or interest in respect of the Notes.

If the holders of a majority in principal amount of the Notes rescind and annul a declaration of acceleration or if (i) a court of competent jurisdiction shall rescind or terminate a bankruptcy action with respect to the Bank without a distribution of assets pursuant to the Bankruptcy Law, (ii) a court of competent jurisdiction shall rescind or terminate a reorganization proceeding with respect to the Bank without approving the plan or reorganization pursuant to the Reorganization Law, (iii) a court of competent jurisdiction shall rescind or terminate a rehabilitation proceeding or shall issue a summary rehabilitation order or a consent rehabilitation order, or (iv) a court of competent jurisdiction shall rescind or terminate any proceedings giving rise to an event of default due to the occurrence of subordination event (d) described under ‘‘—Subordination’’, such rescission or termination having an equivalent effect to that set forth in the foregoing clause (i), (ii) or (iii), as applicable, then such event of default shall have the same effect as if it had not occurred.

The indenture provides that the trustee shall, within 90 days after the occurrence of any default, give to the holders of the Notes notice of such default known to the trustee, unless such default shall have been cured or waived (the term ‘‘default’’ being deﬁned for this purpose to include any event which is, or after notice or lapse of time or both would become, an event of default).

Indemniﬁcation of Judgment Currency

The Bank will indemnify each holder of a Note to the full extent permitted by applicable law against any loss incurred by such holder as a result of any judgment or order being given or made for any amount due under such Notes and such judgment or order being expressed and paid in a judgment currency other than U.S. dollars and as a result of any variation as between (a) the rate of exchange at which the U.S. dollar is converted into the judgment currency for the purpose of such judgment or order and (b) the spot rate of exchange in The City of New York at which the holder on the date that payment is made pursuant to such judgment or order is able to purchase U.S. dollars with the amount of the judgment currency actually received by the holder.

123 Modification and Waiver Modifications of the Notes and the indenture may be made by the Bank with the written consent of the holders of at least 662⁄3%in aggregate principal amount of the outstanding Notes; provided, however, that (a) if any such modification would change the date on which the principal of or interest on any Note becomes due and payable, or reduce the principal amount thereof or the rate of interest thereon, or affect the rights of holders of less than all the Notes outstanding at the time, or change the place of payment where, or the coin or currency in which, any Note is payable, or impair the right to institute suit for the enforcement of any such payment on or after the date when due, the consent of the holders of all Notes affected thereby is required, and (b) if any such modification would alter the respective percentages of outstanding Notes necessary, pursuant to the indenture, to modify the terms of the Notes or indenture, waive past defaults or accelerate the payment of the principal amount of the Notes, the consent of the holders of all Notes outstanding at the time is required.

The holders of a majority in aggregate principal amount of the outstanding Notes may waive any past default under the indenture, except a default in the payment of principal of or interest on any Note and except in respect of a covenant or provision of the indenture that cannot be modiﬁed or amended without the consent of the holder of each Note affected thereby.

No amendment or modiﬁcation to the subordination provisions contained in the indenture which is prejudicial to any present or future creditor in respect of any Senior Indebtedness of the Bank shall be made by the Bank. No such amendment or modiﬁcation shall in any event be effective against any such creditor.

The Trustee The trustee, JPMorgan Chase Bank, is organized under the laws of the State of New York with ofﬁces located at 450 West 33rd Street, New York, New York 10001. The indenture provides that during the existence of an event of default, the trustee will exercise the rights and powers vested in it by the indenture, using the same degree of care and skill as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. In the absence of an event of default, the trustee need only perform the duties speciﬁcally set forth in the indenture.

The indenture does not contain limitations on the rights of the trustee thereunder, should it be or become a creditor of the Bank, to obtain payment of claims. The trustee is not precluded from engaging in other transactions and if it has or acquires any conflicting interest (as defined in Section 310(b) of the Trust Indenture Act of 1939, as amended), it is not required to eliminate such conflict or resign.

Successor Trustee The indenture provides that the trustee may resign or be removed by the Bank at any time, effective upon the acceptance by a successor trustee of its appointment. The indenture provides that any successor trustee shall have a combined capital and surplus of not less than $50,000,000 and shall be a bank or trust company organized and doing business under the laws of the United States or of the State of New York, in good standing and having an ofﬁce in the Borough of Manhattan, The City of New York.

Repayment of Funds All monies paid by the Bank to the trustee or a paying agent for payment of principal of or interest and any additional amounts on any Note which remain unclaimed at the end of two years after such payment has been made will be repaid to the Bank and all liability of the trustee with respect thereto will cease, and to the extent permitted by law, the holder of such note shall thereafter look only to the Bank for payment as a general unsecured creditor thereof.

124 Governing Law; Consent to Jurisdiction and Service of Process; Communications The indenture and the Notes will be governed by, and construed in accordance with, the laws of the State of New York.

The Bank has irrevocably consented to the jurisdiction of the courts of the State of New York and the United States courts located in The City of New York with respect to any action that may be brought in connection with the indenture or the Notes. The Bank has irrevocably appointed the trustee and, to the extent required by applicable law, the Superintendent of Banks as authorized agents thereof upon whom process may be served in any action arising out of or based on the indenture or the Notes that may be instituted in any court of the State of New York or the United States located in the Borough of Manhattan, The City of New York, and the Bank expressly accepts the jurisdiction of any such court in respect of any such action.

The indenture provides that if any holder of a Note applies in writing to the trustee for access to the list of names and addresses of the holders of the Notes (which list is required to be preserved by the trustee) for the purpose of communicating with other holders of the Notes with respect to their rights under the indenture or the Notes, the trustee must, upon satisfaction of certain conditions by such applicant, either afford such applicant access to such information or mail copies of the communication speciﬁed by such applicant to the listed holders of the Notes, at the expense of such applicant.

Limitation on Suits Except for the right to institute a suit for the enforcement of the payment of principal of, or interest on a Note, no holder of any Note shall have any right to institute any proceeding with respect to the indenture or for the appointment of a receiver or trustee, or for any other remedy thereunder, unless: (a) such holder has previously given written notice to the trustee of a continuing event of default with respect to the Notes, (b) the holders of not less than 25%in principal amount of the outstanding Notes shall have made written request to the trustee to institute proceedings in respect of such event of default, (c) such holders have offered to the trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request, (d) the trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (e) no direction inconsistent with such written request has been given to the trustee during such 60-day period by the holders of a majority in principal amount of the outstanding Notes.

Undertaking for Costs The indenture provides that the Bank and the trustee agree, and each holder of a Note by his acceptance thereof shall be deemed to have agreed, that in any suit for the enforcement of any right or remedy under the indenture or against the trustee for action taken, suffered or omitted by it as trustee (other than a suit instituted by the Bank, the trustee, a holder or group of holders holding more than 10%in aggregate principal amount of the Notes, or any holder for the enforcement of the payment of the principal of or interest on any Note on or after the maturity thereof), a court may in its discretion require the ﬁling by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant.

125 TAXATION

Japanese Taxation The following description of Japanese taxation (limited to national tax) applies exclusively to interest and issue differential (as deﬁned below) on the Notes issued or to be issued during the period from and including April 1, 1998 to and including March 31, 2004 by the Bank whose issuance will be made outside Japan and whose interest will be payable outside Japan. The following description is not intended to be exhaustive and holders of Notes are recommended to consult with their tax advisors as to their exact tax position.

Interest payments on the Notes to an individual resident of Japan or a Japanese corporation (except for a Japanese financial institution or a Japanese securities company designated by the Special Taxation Measures Law Enforcement Order (the ‘‘Cabinet Order’’) pursuant to Article 6, paragraph 8 of the Special Taxation Measures Law of Japan (Law No. 26 of 1957, as amended) (together with the Cabinet Order and ministerial ordinances thereunder, the ‘‘Special Taxation Measures Regulations’’) which has complied with the requirements under Article 6 of the Special Taxation Measures Law) will be subject to Japanese income tax under the Income Tax Law of Japan (Law No. 33 of 1965, as amended) on the amount specified in sub-paragraph (a) or (b) below, as applicable: (a) If interest is paid to an individual resident of Japan or to a Japanese corporation (except as provided in sub-paragraph (b) below), the amount of such interest; or (b) If interest is paid to a public corporation, a financial institution or a securities company designated by Article 3-3, paragraph 6 of the Special Taxation Measures Law (which has complied with the Japanese tax exemption requirements under the said paragraph 6) through its payment handling agent in Japan as provided in the said paragraph 6, the amount of such interest minus the amount accrued during the period in which the Notes have been held by such recipient as provided in the Cabinet Order relating to the said paragraph 6.

It should be noted that if the recipient of interest on the Notes is a Japanese corporation, the amount of such interest will be included in the recipient’s income which is subject to Japanese corporate tax under the Corporate Tax Law of Japan (Law No. 34 of 1965, as amended); provided that the amount of Japanese income tax withheld under the Income Tax Law of Japan will be generally credited against the amount of Japanese corporate tax.

Under the Special Taxation Measures Regulations, payment of interest on the Notes outside Japan to a non- resident of Japan or a foreign corporation for Japanese tax purposes will not be subject to withholding of Japanese income tax, if such recipient of interest establishes that it is a non-resident of Japan or a foreign corporation in compliance with the requirements under the Special Taxation Measures Regulations as summarized below: (1) If the Notes are deposited with an agent which handles the interest payments on the Notes as defined in the Cabinet Order (the ‘‘payment handling agent’’) in accordance with the Cabinet Order, (A) the recipient of the interest provides such payment handling agent which holds the Notes or Coupons in its custody (the ‘‘payment handling custodian’’) with information including, inter alia, its name and address and obtains confirmation from the payment handling custodian of the correctness of such information by presenting certain documentary or other evidence to such payment handling custodian; (B) such payment handling custodian notifies ‘‘Interest Recipient Information’’ (providing, inter alia, (i) that all recipients are non-residents of Japan or foreign corporations (if applicable); and (ii) the amount of the interest payable to the recipients which are non-residents of Japan or foreign corporations) which is prepared by such payment handling custodian based on the information provided by the recipient, to the Bank or (if the Notes are further sub-deposited with another handling custodian) through such sub-depositary to the Bank, at the latest one day prior to the date on which such payment handling custodian receives from the Bank the amount of the interest for the payment to the recipients; and (C) the Bank prepares ‘‘Interest Recipient Confirmation’’ based upon

126 the Interest Recipient Information and submits it to the competent Japanese tax authority (the ‘‘tax authority’’); or (2) If the Notes are not held through a payment handling custodian, upon each payment of the interest on the Notes, the holder of the Note ﬁles a ‘‘Claim for Exemption from Taxation’’ (providing, inter alia, the name and address of the recipient of the interest) with the tax authority through the Bank or (if payment of interest is made through the payment handling agent) through the payment handling agent and the Bank.

If the recipient of interest on the Notes is a non-resident of Japan or a foreign corporation, failure by such non-resident or foreign corporation to comply with the above requirements will result in the withholding of Japanese income tax.

The above exemption from the withholding of Japanese income tax on the interest payments of the Notes is also applied to a Japanese ﬁnancial institution or a Japanese securities company (as designated by the Cabinet Order pursuant to Article 6, paragraph 8 of the Special Taxation Measures Law) which receives the interest on the Notes outside of Japan (i.e., receives the interest otherwise than through a payment handling agent in Japan).

If the recipient of interest on the Notes is a non-resident of Japan or a foreign corporation which complies with the above requirements and if such non-resident or foreign corporation has a permanent establishment within Japan and the receipt of interest is attributable to the business of such non-resident or foreign corporation carried on within Japan through such permanent establishment, such interest will be subject to Japanese income tax or corporate tax, as appropriate, payable other than by way of withholding.

If the recipient of any difference between the issue price of Notes and the amount which the holder receives upon redemption of such Notes (hereinafter referred to as the ‘‘issue differential’’) is a non-resident of Japan or a foreign corporation having no permanent establishment within Japan or having a permanent establishment within Japan but the receipt of such issue differential is not attributable to the business carried on within Japan by such non-resident or foreign corporation through such permanent establishment, no income tax or corporate tax is payable with respect to such issue differential. If the receipt of such issue differential is attributable to the business of any such non-resident of Japan or foreign corporation carried on within Japan through a permanent establishment maintained by it within Japan, such issue differential will be subject to Japanese income tax or corporate tax, as appropriate, payable other than by way of withholding.

Capital Gains, Inheritance, Gift, Stamp and Certain Other Taxes Gains derived from sales of Notes, in general, are not subject to Japanese income or corporate tax if they are from: • sales outside Japan by a non-resident of Japan or a non-Japanese corporation, or • sales in Japan by a non-resident of Japan or a non-Japanese corporation not having a permanent establishment in Japan.

Japanese inheritance or gift tax at progressive rates may be payable by an individual, wherever resident, who has acquired notes as legatee, heir or donee from an individual.

No stamp, issue, registration or similar taxes or duties will, under present Japanese law, be payable by Note holders in connection with the issue of the Notes.

United States Taxation The following summary describes certain United States federal income tax consequences of ownership of the Notes with respect to United States Holders and Non-United States Holders (each as deﬁned below). This summary is based on the Internal Revenue Code of 1986, as amended to the date hereof (the ‘‘Code’’), and

127 existing Treasury Regulations, Revenue Rulings and judicial decisions, changes to any of which subsequent to the date of this offering circular may affect the tax consequences described herein. This summary deals only with Notes held as capital assets within the meaning of Section 1221 of the Code by holders who have purchased the Notes at their ‘‘issue price’’ (i.e. the first price to the public (not including bond houses, brokers or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers) at which a substantial amount of the Notes is sold for money) pursuant to this offering. It does not discuss all of the tax consequences that may be relevant to a holder in light of its particular circumstances or to holders subject to special rules, such as certain financial institutions, insurance companies, dealers or traders in securities, partnerships or United States Holders whose functional currency (as defined in Code Section 985) is not the U.S. dollar. Persons considering the purchase of Notes should consult their own tax advisors with regard to the application of the United States federal income tax laws to their particular situations as well as any tax consequences arising under the laws of any state, local or foreign taxing jurisdictions.

As used herein, the term ‘‘United States Holder’’ means a beneﬁcial owner of a Note that is, for United States federal income tax purposes, (i) a citizen or resident of the United States, (ii) a corporation created or organized in or under the laws of the United States or of any political subdivision thereof, or (iii) an estate or trust the income of which is subject to United States federal Income taxation regardless of its source.

As used herein, the term ‘‘non-United States Holder’’ means a beneﬁcial owner of a Note that is, for United States federal income tax purposes, (i) a nonresident alien individual, (ii) a foreign corporation or, (iii) a nonresident alien ﬁduciary of a foreign estate or trust.

United States Holders Interest on a Note will generally be taxable to a United States Holder as ordinary interest income at the time it accrues or is received in accordance with the United States Holder’s method of accounting for United States income tax purposes. Upon the sale, exchange or retirement of a Note, a United States Holder will recognize capital gain or loss equal to the difference between the amount realized on the sale, exchange or retirement and such Holder’s adjusted tax basis in the Note. For these purposes, the amount realized does not include any amount attributable to accrued but unpaid interest on the Note, which would be taxed as interest in the manner described herein.

Interest paid by the Branch on a Note will, for United States federal income tax purposes, be allocated between income from U.S. sources and foreign sources in each year the Notes are outstanding. As a result, a portion of the interest paid by the Branch in any taxable year could constitute foreign source income for such purposes. Any foreign source interest income on the Notes will generally be considered ‘‘passive income’’ or, for certain holders, ‘‘ﬁnancial services income’’ for purposes of computing the foreign tax credit allowable under the United States tax laws. Gain or loss recognized upon the sale, exchange or retirement of a Note will generally be treated as U.S. source gain or loss.

Non-United States Holders Subject to the discussion below concerning backup withholding: • payments of principal, interest and premium (if any) on the Notes by the Branch or any paying agent to any non-United States Holder will not be subject to United States federal withholding tax, provided that, in the case of interest, • the Holder does not own, actually or constructively, 10 percent or more of the total combined voting power of all classes of stock of the Bank entitled to vote and is not a controlled foreign corporation related, directly or indirectly, to the Bank through stock ownership and is not a bank receiving certain types of interest; and • the beneﬁcial owner of that Note certiﬁes (generally on Internal Revenue Service Form W-8BEN), under penalties of perjury, that it is not a United States person;

128 • a non-United States Holder of a Note will not be subject to United States federal income tax on gain realized on the sale, exchange or other disposition of such Note, unless the gain is effectively connected with the conduct by the Holder of a trade or business in the United States or the holder is an individual present in the United States for 183 days or more in the taxable year of disposition and certain other conditions are met.

If a non-United States Holder of a Note is engaged in a trade or business in the United States, and if interest on the Note is effectively connected with the conduct of this trade or business, the non-United States Holder, although exempt from the withholding tax discussed in the preceding paragraph, will generally be taxed in the same manner as a United States Holder (see ‘‘United States Taxation—United States Holders’’ above), except that the Holder will be required to provide to the Branch or its paying agent a properly executed Internal Revenue Service Form W-8ECI in order to claim an exemption from withholding tax. These holders should consult their own tax advisors with respect to other U.S. tax consequences of the ownership and disposition of Notes including the possible imposition of a 30%branch proﬁts tax.

Information Reporting and Backup Withholding Information returns may be filed with the Internal Revenue Service in connection with payments on the Notes and the proceeds from a sale or other disposition of the Notes. A United States Holder, other than a corporation or other exempt recipient, will be subject to United States backup withholding tax on these payments if the United States Holder fails to provide its taxpayer identification number to the paying agent and comply with certain certification procedures or otherwise establish an exemption from backup withholding. A Non- United States Holder may be subject to United States backup withholding tax on these payments if they are made within the United States or through certain U.S.-related financial intermediaries unless the Non-United States Holder complies with certification procedures to establish that it is not a United States person.

The amount of any backup withholding from a payment to a holder will be allowed as a credit against the holder’s United States federal income tax liability and may entitle the holder to a refund, provided that the required information is furnished to the Internal Revenue Service.

129 CERTAIN ERISA CONSIDERATIONS

The fiduciary standards of the Employee Retirement Income Security Act of 1974, as amended (‘‘ERISA’’), should be considered by the fiduciary of a pension, profit-sharing or other employee benefit plan subject to Title I of ERISA (‘‘ERISA Plan’’) in the context of the ERISA Plan’s particular circumstances before authorizing an investment in the Notes. Among other factors, the fiduciary should consider whether such an investment is in accordance with the documents governing the ERISA Plan and whether an investment is appropriate for the ERISA Plan in view of its overall investment policy and the composition and diversification of its portfolio.

Section 406 of ERISA and Section 4975 of the Code, prohibit ERISA Plans, as well as individual retirement accounts, self-employment retirement plans and other pension and profit sharing plans subject to Section 4975 of the Code (together with ERISA Plans, the ‘‘Plans’’) from engaging in certain transactions involving ‘‘plan assets’’ with persons who are ‘‘parties in interest’’ under ERISA or ‘‘disqualified persons’’ under the Code with respect to the Plan; governmental plans may be subject to similar prohibitions. Therefore, a Plan fiduciary considering purchasing the Notes should consider whether the purchase or holding of the Notes might constitute a ‘‘prohibited transaction’’.

The Bank, the Branch and certain of their affiliates may be considered a ‘‘party in interest’’ or a ‘‘disqualified person’’ with respect to certain Plans by reason of, for example, the Bank or the Branch providing services to such Plans. Prohibited transactions within the meaning of ERISA or the Code may arise, for example, if the Notes are acquired by or with the assets of a Plan with respect to which the Bank, the Branch or any of their affiliates is a ‘‘party in interest’’ or a ‘‘disqualified person’’, unless the Notes are acquired under one of the exemptions issued by the U.S. Department of Labor for transactions effected on behalf of that Plan by a ‘‘qualified professional asset manager’’ or an ‘‘in-house asset manager’’, for transactions involving insurance company general accounts, for transactions involving insurance company pooled separate accounts or for transactions involving bank collective investment funds.

By purchasing and holding the Notes or exercising any rights related thereto, the person making the decision on behalf of a Plan or a governmental plan shall be deemed to represent, on behalf of itself and the Plan, that such purchase, holding and exercise will not result in a non-exempt prohibited transaction under ERISA or the Code (or, with respect to a governmental plan, under any similar applicable law or regulation).

Due to the complexity of the rules and the penalties that may be imposed upon persons involved in non- exempt prohibited transactions, it is particularly important that ﬁduciaries or other persons considering the purchase of Notes on behalf of a Plan consult with their counsel regarding the consequences under ERISA and the Code of the acquisition of the Notes.

130 JAPANESE FOREIGN EXCHANGE LAW

As a result of the latest amendment to the Foreign Exchange and Foreign Trade Control Law of Japan (now called the Foreign Exchange and Foreign Trade Law of Japan), the issue of the Notes by the Branch is no longer subject to a prior notiﬁcation requirement or a prior approval requirement.

131 UNDERWRITING Subject to the terms and conditions set forth in the Underwriting Agreement, the Branch has agreed to sell to each of the Underwriters named below, and each of the Underwriters has severally agreed to purchase, the principal amount of the Notes set forth opposite its name below: Principal Amount of Underwriters Notes Goldman, Sachs & Co...... $300,000,000 Morgan Stanley & Co. Incorporated ...... 300,000,000 Daiwa Securities SMBC Europe Limited ...... 52,500,000 UBS Warburg LLC ...... 45,000,000 Deutsche Bank Securities, Inc...... 15,000,000 J.P. Morgan Securities Inc...... 15,000,000 Nomura International plc ...... 15,000,000 Credit Suisse First Boston Corporation ...... 7,500,000 Total ...... $750,000,000

Under the terms and conditions of the Underwriting Agreement, the Underwriters are committed to take and pay for all of the Notes, if any are taken. The Underwriters are entitled to be released and discharged from their obligations under the Underwriting Agreement or to terminate the Underwriting Agreement in certain circumstances prior to payment being made to the Branch as set out therein in the event of which the issue may be cancelled at any time until the document of title is issued and the listing of the Notes may not become effective. In addition to the offering of Notes in the United States, certain of the Underwriters may offer and sell Notes in certain jurisdictions outside of the United States through their respective affiliates or selling agents that are authorized to offer and sell such securities in such jurisdictions. The Underwriters propose to offer the Notes in part directly to purchasers at the initial public offering price set forth on the first page of this offering circular and in part to certain securities dealers at such price less a concession of 0.40%of the principal amount of the Notes. The Underwriters may allow, and such dealers may reallow, a concession not to exceed 0.25%of the principal amount of the Notes to certain brokers and dealers. After the Notes are released for sale to the public, the offering price and other selling terms may from time to time be varied by the Underwriters. The Notes are a new issue of securities with no established trading market. Application has been made to the London Stock Exchange for the Notes to be admitted to the Official List. The Branch and the Bank have been advised by the Underwriters that the Underwriters intend to make a market in the Notes but are not obligated to do so and may discontinue market making at any time without notice. No assurance can be given as to the liquidity of the trading market for the Notes. The Bank (including the Branch) has agreed to indemnify the several Underwriters against certain liabilities, including liabilities under the Exchange Act and other applicable securities laws. The Branch has agreed to reimburse the Underwriters for certain expenses of the Offering. Daiwa Securities SMBC Europe Limited, an affiliate of the Bank, is acting as an Underwriter in connection with the offer and sale of the Notes. J.P. Morgan Securities Inc., an affiliate of the Trustee, is acting as an Underwriter in connection with the offer and sale of the Notes. Certain of the Underwriters and their affiliates have provided from time to time, and expect to provide in the future, investment banking services to the Bank and its affiliates, for which such Underwriters or their affiliates have received or will receive customary fees and commissions. In connection with the Offering, Goldman, Sachs & Co. (or any person acting for it) may purchase and sell Notes in the open market outside Japan. These transactions may include over-allotment and stabilizing transactions and purchases to cover short positions created by Goldman, Sachs & Co. (or any person acting for

132 it) in connection with the Offering. Stabilizing transactions consist of certain bids or purchases for the purpose of preventing or retarding a decline in the market prices of the Notes, and short positions created by Goldman, Sachs & Co. (or any person acting for it) involve the sale by Goldman, Sachs & Co. (or any person acting for it) of a greater principal amount of Notes than it is required to purchase from the Branch in the Offering. Goldman, Sachs & Co. (or any person acting for it) also may impose a penalty bid, whereby selling concessions allowed to broker-dealers in respect of the Notes sold in the Offering may be reclaimed by Goldman, Sachs & Co. (or any person acting for it) if such Notes are repurchased by Goldman, Sachs & Co. (or any person acting for it) in stabilizing or covering transactions. These activities may stabilize, maintain or otherwise affect the market prices of the Notes, which may be higher than the prices that might otherwise prevail in the open market; and these activities, if commenced, may be discontinued at any time and must be brought to an end after a limited period. These transactions may be effected on the London Stock Exchange, in the over-the-counter market or otherwise outside of Japan. The Bank has agreed, from the date of the Underwriting Agreement and continuing until the date 30 days after the time of delivery for the Notes, not to offer, sell, contract to sell or otherwise dispose of, in the United States any debt securities of the Bank or a subsidiary of the Bank which mature more than one year after the time of delivery for the Notes and which are denominated in U.S. dollars and, in the case of debt securities of subsidiaries of the Bank, are supported or guaranteed on a subordinated basis upon the occurrence of an event similar to a Subordination Event by a letter of credit or otherwise of the Branch, without the prior written consent of the Underwriters; provided that nothing in this paragraph shall limit any customary deposit raising activities by the branches and agents of the Bank in the United States. Each Underwriter has represented, warranted and agreed that: 1. It has not offered or sold and will not offer or sell any Notes to persons in the United Kingdom prior to admission of the Notes to listing in accordance with Part VI of the Financial Services and Markets Act 2000 (the ‘‘FSMA’’), except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995 or the FSMA 2. it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of the FSMA) received by it in connection with the issue or sale of any Notes in circumstances in which section 21(1) of the FSMA does not apply to the Bank, acting through the Branch and 3. it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Notes in, from or otherwise involving the United Kingdom. The Notes have not been and will not be registered under the Securities and Exchange Law of Japan (Law No. 25 of 1948) (as amended) and are subject to the Special Taxation Measures Law of Japan (Law No. 26 of 1957) (as amended). Each of the Underwriters has represented and agreed that (i) it has not, directly or indirectly, offered or sold and will not, directly or indirectly, offer or sell Notes in Japan or to any person resident in Japan for Japanese securities law purposes (including any corporation or other entity organized under the laws of Japan), except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Securities and Exchange Law of Japan; and (ii) it has not, directly or indirectly, offered or sold and will not, (a) as part of its distribution at any time and (b) otherwise until forty days after the closing date, directly or indirectly offer or sell Notes to any person other than a Gross Recipient. A ‘‘Gross Recipient’’ for this purpose is (i) a beneficial owner that is not an individual resident of Japan or a Japanese corporation for Japanese tax purposes, (ii) a Japanese financial institution, designated in Article 3-2 paragraph (19) of the Cabinet Order of December 17, 1997 (the ‘‘Cabinet Order’’) relating to the Special Taxation Measures Law that will hold Notes for its own proprietary account or (iii) an individual resident of Japan or a Japanese corporation whose receipt of interest on the Notes will be made through a payment handling agent in Japan as defined in Article 2-2 paragraph (2) of the Cabinet Order.

133 Each Underwriter has acknowledged and agreed that it has not offered or sold and will not offer or sell in Hong Kong, by means of any document, any Notes other than to persons whose ordinary business is to buy or sell shares or debentures, whether as principal or agent, or in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap. 32) of Hong Kong, and unless permitted to do so under the securities laws of Hong Kong, no person has issued or had in its possession for the purpose of issue, and will issue or have in its possession for the purpose of issue, any advertisement, invitation or document relating to the Notes in Hong Kong other than with respect to the Notes intended to be disposed of to persons outside Hong Kong or only to persons whose business involves the acquisition, disposal or holding of securities whether as principal or agent.

This offering circular has not been registered as a prospectus with the Registrar of Companies and Businesses in Singapore. Accordingly, each Underwriter has acknowledged and agreed that it has not offered or sold and will not offer or sell the Notes, nor will it circulate or distribute this offering circular or any other offering document or material relating to the Notes, either directly or indirectly, to the public or any member of the public in Singapore other than (i) to an institutional investor or other person speciﬁed in Section 106C of the Companies Act, Chapter 50 of Singapore (the ‘‘Singapore Companies Act’’); (ii) to a sophisticated investor, and in accordance with the conditions, speciﬁed in Section 106D of the Singapore Companies Act; or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the Singapore Companies Act.

The Notes may not be offered, sold, transferred or delivered in or from The Netherlands, as part of their initial distribution or as part of any re-offering, and neither this offering circular nor any other document in respect of the offering may be distributed or circulated in The Netherlands, other than to individuals or legal entities which include, but are not limited to, banks, brokers, dealers, institutional investors and undertakings with a treasury department, who or which trade or invest in securities in the conduct of a business or profession.

Purchasers of Notes sold by an Underwriter may be required to pay stamp taxes and other charges in accordance with the laws and practice of the country of purchase in addition to the Note offering prices.

It is expected that delivery of the Notes will be made against payment for the Notes on or about the date speciﬁed in the last paragraph of the cover page of this offering circular, which will be the ﬁfth business day following the date of pricing of the Notes (such settlement cycle being referred to herein as ‘‘T+5’’). Under Rule 15c6-1 of the Commission under the Securities Exchange Act of 1934, as amended, trades in the secondary market generally are required to settle in three business days, unless the parties to any trade expressly agree otherwise. Accordingly purchasers who wish to trade the Notes on the date of pricing or the next three succeeding business days will be required, by virtue of the fact that the Notes initially will settle in T+5, to specify an alternate settlement cycle at the time of any trade to prevent a failed settlement. Purchasers of the Notes who wish to trade the Notes on the date of pricing or the next three succeeding business days should consult their own advisor.

Mr. Akio Asuke, the deputy president of the Bank, will become Chairman of Goldman Sachs (Japan) on June 27, 2002. Mr. Asuke will retire from the Bank on June 26, 2002. Mr. Yoshifumi Nishikawa, the president of the Bank, is a member of the advisory board of Goldman Sachs (Japan). Goldman Sachs (Japan) is an afﬁliate of Goldman, Sachs & Co.

134 VALIDITY OF NOTES

The validity of the Notes will be passed upon for the Bank by Davis Polk & Wardwell. The validity of the Notes will be passed upon for the Underwriters by Sullivan & Cromwell. Davis Polk & Wardwell and Sullivan & Cromwell will rely as to all matters of Japanese law on the opinion of Yuwa Partners.

CERTIFIED PUBLIC ACCOUNTANTS

The non-consolidated financial statements of the Bank at March 31, 2002 and for the year ended March 31, 2002 appearing in this offering circular have been examined by Asahi & Co., independent certified public accountants in Japan, as set forth in their reports appearing elsewhere herein, and are included in reliance upon such reports and upon the authority of such firm as experts in auditing and accounting.

The consolidated financial statements of Sumitomo Bank at March 31, 2000 and 2001 and for the two years in the period ended March 31, 2001 appearing in this offering circular have been examined by Asahi & Co., independent certified public accountants in Japan, as set forth in their reports appearing elsewhere herein, and are included in reliance upon such reports and upon the authority of such firm as experts in auditing and accounting.

The consolidated financial statements of Sakura Bank at March 31, 2000 and 2001 and for the two years in the period ended March 31, 2001 appearing in this offering circular have been examined by Century Ota Showa & Co. and Tohmatsu & Co., independent certified public accountants in Japan, as set forth in their reports appearing elsewhere herein, and are included in reliance upon such reports and upon the authority of such firm as independent certified public accountants. Due to the merger of Sakura Bank and Sumitomo Bank, Century Ota Showa & Co. and Tohmatsu & Co. have not performed any audit procedures subsequent to June 28, 2001 with respect to either Sakura Bank or its successor (the Bank).

135 GENERAL INFORMATION

1. The listing of the Notes on the London Stock Exchange will be in U.S. dollars expressed as a percentage of their principal amount. Transactions will normally be effected for settlement in U.S. dollars and for delivery on the ﬁfth working day after the date of the transaction. It is expected that listing on the London Stock Exchange will be granted for the Notes on June 25, 2002, subject only to the issue of the Global Notes. Prior to the ofﬁcial listing, however, dealings in the Notes will be permitted by the London Stock Exchange in accordance with its rules.

2. The Notes have been accepted for clearance through Clearstream and Euroclear with a Common Code of 014960112. The International Securities Identiﬁcation Number for the Notes is US865622AA28. The CUSIP Number for the Notes is 865622AA2. Application has also been made for acceptance of the Notes into DTC’s book-entry settlement system.

3. The Bank has obtained all necessary consents, approvals and authorizations in connection with the issue and performance of the Notes. The issue of the Notes was authorized by the Board of Directors of the Bank on May 24, 2002.

4. Except as disclosed in this document, there has been no material adverse change in the financial position or prospects and no significant change in the financial or trading position of the Bank since March 31, 2002, being the date as of which the latest audited accounts of the Bank have been prepared.

5. Copies of the latest annual report containing audited annual consolidated financial statements in English and of the unaudited semiannual nonconsolidated financial statements in English of the Bank may be obtained, and copy of the Indenture will be available for inspection, at the specified office of the Trustee during normal business hours, so long as any of the Notes is outstanding.

6. Except as disclosed in this document, neither the Bank nor any of the Bank’s subsidiaries is or has been involved in any litigation or arbitration proceedings which may have, or have had during the 12 months preceding the date of this document, a signiﬁcant effect on the ﬁnancial position of the Bank and the Bank’s subsidiaries taken as a whole, nor is the Bank aware that any such proceedings are pending or threatened. See ‘‘Business—Legal Matters’’ on page 92.

7. Asahi & Co., certiﬁed public accountants, have audited the non-consolidated accounts of the Bank without qualiﬁcation for the year ended March 31, 2002.

Asahi & Co., certiﬁed public accountants, have audited the consolidated accounts of Sumitomo Bank without qualiﬁcation for each of the two years ended March 31, 2000 and 2001.

Century Ota Showa & Co. and Tohmatsu & Co., certiﬁed public accountants, have audited the consolidated accounts of Sakura Bank without qualiﬁcation for each of the two years ended March 31, 2000 and 2001 as set forth in their report appearing elsewhere in this offering circular.

8. Copies of the following documents may be inspected on any weekday (Saturdays and public holidays excepted) during usual business hours at the Bank’s offices at Temple Court 11, Queen Victoria Street, London EC4N 4TA, UK, for a period of 14 days from the date of this offering circular: (a) the Articles of Incorporation and the Regulations of the Board of Directors of the Bank (together with an English translation); (b) the audited non-consolidated financial statements of the Bank including the auditor’s report appertaining thereto for the financial year ended March 31, 2002, the audited consolidated financial statements of Sumitomo Bank including the auditor’s report appertaining thereto for the two financial years ended March 31, 2000 and 2001 and the audited consolidated financial statements of Sakura Bank including the auditor’s report appertaining thereto for the two financial years ended March 31, 2000 and 2001; (c) the Underwriting Agreement; (d) the Indenture (including the form of the Global Notes); (e) the legal opinion of Yuwa Partners; and (f) the legal opinion of Davis Polk & Wardwell.

136 9. Asahi & Co., Century Ota Showa & Co. and Tohmatsu & Co. have given and have not withdrawn their consent to the inclusion herein of their reports and references thereto and their names in the form and context in which they appear and have authorized the contents of that part of the Listing Particulars for the purpose of Regulation 6(1)(e) of the Financial Services Act and Markets Act 2000 (Ofﬁcial Listing of Securities) Regulations 2001.

10. The Bank and any of its subsidiaries and afﬁliates may at any time purchase Notes in the open market or otherwise at any price. Any purchase by tender shall be made available to all holders alike.

11. Under New York law, claims arising from non-payment of principal of and interest on the Notes will be barred after six years from the relevant due date for payment in respect thereof, which, in respect of the principal, is June, 2018.

12. The paying agent in the United Kingdom is JPMorgan Chase Bank.

13. As long as the Notes are listed on the London Stock Exchange, the Branch will maintain a paying agent having a speciﬁed ofﬁce in London.

137 SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN JAPANESE GAAP AND U.S. GAAP

The consolidated financial statements of the Bank and its subsidiaries and non-consolidated financial statements of the Bank presented in this offering circular conform with generally accepted accounting principles in Japan. Such principles vary from the accounting principles generally accepted in the United States and significant differences between Japanese GAAP and U.S. GAAP are summarized as follows:

Japanese GAAP U.S. GAAP

Consolidated Subsidiaries Consolidated Subsidiaries The consolidated ﬁnancial statements include all enterprises that are controlled by the parent, Statement of Financial Accounting Standards irrespective of the percentage of the voting shares (‘‘SFAS’’) No. 94 requires, with a few exceptions, a owned. parent company to consolidate all of its majority- owned subsidiaries with more than 50%of outstanding voting shares. Control is deﬁned as the power to govern the decision making body of an enterprise.

Equity Method of Accounting Equity Method of Accounting Affiliates are enterprises over which the Bank Investments representing ownership of 20%to has material influences over their financial and 50%of the outstanding voting shares are accounted operating policies. for by the equity method.

Investments in non-consolidated subsidiaries or afﬁliates are accounted for by the equity method in the consolidated ﬁnancial statements.

Business Combinations Business Combinations Currently, there are no established accounting Effective July 1, 2001, SFAS No. 141, principles for business combinations. Accounting for Business Combinations, prescribes the purchase method for all business combinations. Accounting treatment that is similar to the The purchase method requires the valuation of the pooling-of-interest method is normally used for acquired assets and liabilities based on fair market business combinations in accordance with the values at the time of combination. The difference Commercial Code of Japan. Under the accounting between the fair market values of the net assets and treatment, the balance sheet items of the acquired the consideration paid represents goodwill. company are combined with those of the acquiring company at their carrying amount or fair value, and Previously, there were two mutually exclusive the effect of such pooling shall not be reﬂected in methods of accounting for business combinations prior years’ ﬁnancial statements. —purchase method and pooling-of-interests method.

Securities Securities Prior to April 1, 2000, securities held for trading Investments in marketable equity and all debt purposes were recorded at fair value, and securities securities are classiﬁed at acquisition, according to held for purposes other than trading were recorded at management’s intent, into one of the following either the lower of cost or market or at cost. categories: trading, available-for-sale or held-to-

138 Effective April 1, 2000, debt securities that the maturity. Trading securities are marked to fair value, Bank has the intent and ability to hold to maturity with the resulting unrealized gain or loss recognized (held-to-maturity securities) are carried at amortized to income. Available-for-sale securities should be cost. Trading securities are carried at market value marked to fair valve, with the resulting unrealized with gains or losses included in the current period gain or loss recorded to other comprehensive income. income. Securities of subsidiaries and afﬁliates are Held-to-maturity securities are carried at amortized carried at cost in the non-consolidated ﬁnancial cost. statements. Other securities (available-for-sale securities) can be carried at cost.

Effective April 1, 2001, other securities (available-for-sale securities) are carried at fair value with unrealized gains or losses recorded directly to equity, net of taxes.

Accounting for Derivatives and Hedging Activities Accounting for Derivatives and Hedging Activities Prior to April 1, 2000, derivative instruments for trading purposes were accounted for at fair values, Effective for all fiscal years beginning after June while other derivative instruments were accounted 15, 2000, SFAS No. 133, Accounting for Derivative for on an accrual basis. Instruments and Hedging Activities, as amended, requires the recognition of all derivatives as assets or Effective April 1, 2000, derivative instruments liabilities in the balance sheet measured at fair value. are carried at fair value with changes included in the Changes in the fair values of derivatives are included current period income unless certain hedge in earnings unless the derivative qualifies for hedge accounting criteria are met. In general, if derivative accounting criteria. The changes in the fair value of instruments are used as hedges and meet certain derivatives qualifying for hedge accounting criteria hedging criteria, a company defers recognition of depends on the intended use. gains or losses resulting from changes in fair value of derivative instruments as either an asset or liability For derivatives designated as hedging the until the related losses or gains on the hedged items exposure to changes in the fair value of an asset or are recognized. liability or a firm commitment, the gain or loss is recognized in earnings in the period of change Also effective April 1, 2000, a bank is permitted together with the offsetting loss or gain on the hedged to adopt ‘‘Macro Hedge Accounting’’ as hedge item. accounting method , under which the bank manage the total interest rate risk arising from various For derivatives designated as hedging the financial assets and liabilities as a whole by using exposure to variable cash flows of a forecasted financial derivative transactions. transaction, the effective portion of the derivative’s gain or loss is initially reported as a component of other comprehensive income.

For derivatives designated as hedging the foreign currency exposure of a net investment in a foreign operation, the gain or loss is reported in other comprehensive income as part of the cumulative translation adjustment.

Such macro hedge accounting under Japanese GAAP is not permissible.

139 Accounting for Sales of Loans with Recourse Accounting for Sales of Loans with Recourse Certain loan participations which meet specified Under U.S. GAAP, pursuant to SFAS 140, criteria are allowed to be accounted for as sales, even financial assets are recorded as sold and removed though the loans are not legally isolated from the from the balance sheet only when legal title has transferor. passed and the purchaser obtains the asset free of conditions that constrain it from taking advantage of the right to pledge or sell the asset. Sales that are not free of such constraints are recorded as a financing. A transfer of assets qualifying as a sale under U.S. GAAP but in connection with which the seller has retained recourse would result in recording liability for the estimated recourse.

Gensaki Transactions Gensaki Transactions Prior to April 1, 2000, repurchase agreement Certain Gensaki transactions may be accounted transactions without margin maintenance (‘‘Gensaki for as sales with related off-balance sheet forward transactions’’) were accounted for as a sale. Effective repurchase commitments. April 1, 2000, Gensaki transactions are accounted for as ﬁnancing transactions.

Restructured Loans Restructured Loans Discounted present value is not usually used to SFAS No. 114 requires that impaired loans, measure impairment of a loan. Reserve for including troubled debt restructurings, be measured restructured loans is computed based on historical based on the present value of expected future cash loss experience. ﬂows discounted at the loan’s effective interest rate or, as is practically expedient, at the loan’s observable market price or the fair value of the collateral if the loan is collateral-dependent.

Accrued Interest on Non-Performing Loans Accrued Interest on Non-Performing Loans The Bank places into the nonaccrual status the Loans are generally placed on nonaccrual status loans which management assessed as ‘‘Bankrupt’’, when they become 90 days past due or when they are ‘‘Effectively Bankrupt’’ or ‘‘Potentially Bankrupt.’’ deemed uncollectible based on management’s Accrued interest related to such loans is written-off. assessment. Accrued interest related to such loans is reversed against interest income.

Impairment of Long-Lived Assets Impairment of Long-Lived Assets Currently, there is no requirement for SFAS No. 144 requires to recognize an considering the impairment of long-lived assets. impairment loss only if the carrying amount of a long-lived asset is not recoverable from its undiscounted cash ﬂows and to measure an impairment loss as the difference between the carrying amount and fair value of the long-lived assets. The impairment loss shall be included in the current period income.

140 Goodwill Goodwill Goodwill that is the excess of investment cost Prior to the effective date of SFAS No. 142, goodwill over the parent’s share of the underlying equity in net was amortized over its estimated economic life, not assets of the subsidiary at the date of acquisition and to exceed 40 years. that is created in consolidation procedures shall be amortized within 20 years. Under SFAS No. 142 effective from the ﬁscal year beginning after December 15, 2001, goodwill shall not be amortized but rather shall be tested at least annually for impairment.

Reserve for Employee Retirement Benefit Reserve for Employee Retirement Benefit Prior to April 1, 2000, for unfunded retirement U.S. GAAP generally requires the use of allowances, an accrual was established for the actuarial methods for measuring annual employee amount payable if all employees voluntarily benefit costs including the use of assumptions as to terminated their employment at the balance sheet the rate of salary progression and discount rate, the date, and for pension plans, pension expense was amortization of prior service costs over the remaining provided based on actuarial determinations and was service period of active employees and the immediate charged to income when paid. recognition of a liability when the accumulated benefit obligation exceeds the fair market value of Effective April 1, 2000, reserve for employee plan assets. retirement benefit is recorded based on an actuarial computation, which uses the present value of the projected benefit obligation and pension assets, due to employee’s credited years of services at the balance sheet date.

Earned Surplus Reserve Earned Surplus Reserve Under the Banking Law of Japan, an amount Such earned surplus reserve is not provided for equivalent to at least 20%of cash disbursements paid under U.S. GAAP. was appropriated and was set aside as earned surplus reserve in the retained earnings up to the amount of capital. Effective October 1, 2001, such earned surplus reserve is recorded until total of both earned surplus reserve and capital surplus equals to the amount of capital. The excess of the total amount over the amount of capital may be transferred to retained earnings by resolution of stockholders.

Land Revaluation Excess Land Revaluation Excess Land which had been recorded at acquired cost Such land revaluation excess is not permissible. was allowed to be revalued at fair value at one time during a ﬁscal year beginning after March 31, 1998. The resulting gains were recorded in land revaluation excess as a separate component in the stockholders’ equity, net of tax. The land shall not be revaluated after the initial revaluation even in case that the fair value declined.

141 Guarantees Guarantees Guarantees, including standby letters of credit Such guarantees and reimbursement obligations and the related reimbursement obligations of are disclosed in the footnotes and not presented on customers, are presented on the balance sheet with the balance sheet. assets of equal amounts.

Loan Fees Loan Fees Loan origination fees are recognized when Loan origination fees are deferred and income is received. recognized over the life of the loan as an adjustment of yield based on the effective interest method.

Directors’ Bonuses Directors’ Bonuses Directors’ bonuses are charged directly to Directors’ compensation is generally expensed retained earnings by resolution of stockholders. on an accrual basis.

Leases Leases Unless transfer of ownership occurs, financing Leases are classified as either capital or leases may be accounted for as operating leases operating, based on specified criteria. A lease which accompanied with sufficient footnote disclosure. transfers substantially all of the benefits and risks of ownership to the lessee is reported as a capital lease. Other leases are accounted for as operating leases.

Other Comprehensive Income Other Comprehensive Income There are no specific accounting principles for U.S. GAAP requires that all items that are reporting comprehensive income. required to be recognized under accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. Comprehensive income includes all changes in shareholders’ equity during an accounting period except those resulting from investments by or distributions to owners, including certain items not included in the current results of operations.

142 ANNEX SUPPLEMENTAL FINANCIAL INFORMATION The following tables set forth certain consolidated and non-consolidated financial information of Sakura Bank and Sumitomo Bank as of and for the fiscal years ended March 31, 1998, 1999, 2000 and 2001 on an individual bank and a combined basis. The unaudited combined historical financial information does not eliminate cross holdings of debt or equity securities between the banks or transactions conducted between the banks as of the dates or during the respective periods shown. The transactions conducted between the banks were entered into on an arm’s length basis and the Bank does not believe that the cross holdings or other transactions, including any inter-bank deposits, were significant. The supplemental combined financial information is not necessarily indicative of the combined financial position or the combined results of operations in the future or of the combined financial position or the combined results of operations which would have been realized had the merger been consummated during these periods or as of the dates for which such information is presented. The financial data provided in this section is unaudited unless marked with (*), (**) or (***).

Non-Consolidated Financial Information Year ended and as Year ended and as of March 31, 1998 of March 31, 1999 Sakura Sumitomo Sakura Sumitomo Bank Bank Combined Bank Bank Combined (billions of yen, except ratios) Income Statement Data: Interest income ...... ¥1,693 ¥1,968 ¥ 3,661 ¥1,543 ¥1,646 ¥ 3,189 Interest expense ...... (1,104) (1,383) (2,486) (979) (1,043) (2,022) Net interest income ...... 589 586 1,175 563 603 1,166 Net fees and commissions ...... 68 69 137 54 61 115 Net trading income ...... 9 15 24 11 37 47 Net other operating income ...... 59 38 97 67 46 113 General and administrative expenses(*) ...... (457) (388) (844) (446) (366) (813) Transfer to reserves for possible loan losses(*) ...... (603) (829) (1,432) (559) (566) (1,125) Other income(*) ...... 944 254 1,198 284 171 454 Other expenses(*) ...... (725) (329) (1,053) (622) (618) (1,240) Income (loss) before income taxes(*) ...... (115) (584) (699) (649) (633) (1,282) Income taxes: Current(*) ...... (105) (38) (143) (7) (21) (27) Deferred(*) ...... — — — 280 280 560 Net income (loss)(*) ...... ¥(221) ¥ (622) ¥ (842) ¥ (375) ¥ (374) ¥ (749)

Balance Sheet Data: Total assets(*) ...... 51,650 58,077 109,727 47,209 51,531 98,740 Loans and bills discounted(*) ...... 35,084 35,930 71,014 32,291 33,717 66,008 Securities(*) ...... 6,449 7,257 13,706 6,218 6,680 12,897 Deposits(*) ...... 36,381 37,390 73,771 32,966 33,001 65,967 Stockholders’ equity(*) ...... 1,298 1,138 2,436 2,224 1,846 4,070 Average Data: Total assets ...... 53,787 58,695 112,483 50,262 54,422 104,685 Stockholders’ equity ...... 1,520 1,787 3,307 1,119 1,178 2,297 Credit Quality Data: Credit costs(1) ...... 1,181 1,073 2,254 1,024 1,072 2,096 Reserves for possible loan losses(2)(*) ...... 1,044 1,257 2,301 736 1,053 1,789 Bankrupt loans ...... 403 258 661 165 115 281 Non-accrual loans ...... 592 545 1,137 995 1,524 2,519 Past due loans (3 months or more) ...... 217 311 528 59 82 141 Restructured loans ...... 263 355 619 542 238 779 Loans for financial assistance ...... 1 118 119 — — — Selected Ratios: Net income as a percentage of average total assets ...... (0.41)%(1.06)%(0.75)%(0.75)%(0.69)%(0.72)% Net income as a percentage of average stockholder’s equity ...... (14.51) (34.79) (25.47) (33.55) (31.75) (32.63) Net interest margin(3) ...... 1.25 1.15 1.20 1.31 1.31 1.31 Average stockholder’s equity as a percentage of average total assets ...... 2.83 3.04 2.94 2.23 2.17 2.19 Reserves for possible loan losses as a percentage of loans and bills discounted ...... 2.98 3.50 3.24 2.28 3.12 2.71 Loan losses as a percentage of period-end loans and bills discounted ...... 3.37 2.99 3.17 3.17 3.18 3.18 (*) Figures of Sumitomo Bank in the items marked with (*) are figures derived from the audited financial statements. (1) Credit costs equal the aggregate of net additions to general reserves, direct write-offs, net additions to specific reserves, net additions to reserves for specific overseas loan losses, losses on sale of loans to CCPC, losses on financial assistance for associated companies, transfers to reserve for losses on loans sold and losses on sales of problem loans. (2) Reserves for possible loan losses include general reserves, specific reserves and reserves for specific overseas countries. (3) Net interest margin equals net interest income as a percentage of average total interest-earning assets.

A-1 Non-Consolidated Financial Information Year ended and Year ended and as of March 31, 2000 as of March 31, 2001 Sakura Sumitomo Sakura Sumitomo Bank Bank Combined Bank Bank Combined (billions of yen, except ratios) Income Statement Data: Interest income ...... ¥1,339 ¥1,417 ¥2,755 ¥1,017 ¥1,259 ¥ 2,276 Interest expense ...... (731) (813) (1,544) (418) (618) (1,036) Net interest income ...... 608 603 1,211 599 641 1,240 Net fees and commissions ...... 60 69 129 69 81 151 Net trading income ...... 8 33 41 21 75 95 Net other operating income ...... 34 12 46 42 (25) 16 General and administrative expenses(*) ...... (430) (351) (781) (381) (331) (712) Transfer to reserves for possible loan losses(*) . . . (155) (292) (447) 44 (6) 38 Other income(*) ...... 423 566 989 243 373 616 Other expenses(*) ...... (393) (492) (885) (498) (674) (1,172) Income (loss) before income taxes(*) ...... 154 149 303 139 134 273 Income taxes: Current(*) ...... (4) (7) (11) (2) (8) (10) Deferred(*) ...... (93) (93) (186) (55) (71) (126) Net income (loss)(*) ...... ¥ 57 ¥ 49 ¥ 106 ¥ 82 ¥ 56 ¥ 138 Balance Sheet Data: Total assets(*) ...... 46,559 51,089 97,649 48,462 65,266 113,727 Loans and bills discounted(*) ...... 31,940 31,359 63,299 30,575 31,172 61,748 Securities(*) ...... 6,912 8,982 15,894 10,200 16,860 27,060 Deposits(*) ...... 33,343 34,230 67,572 33,534 37,196 70,730 Stockholders’ equity(*) ...... 2,252 1,881 4,133 2,281 1,919 4,200 Averages Data: Total assets ...... 46,659 51,116 97,775 46,429 55,768 102,198 Stockholders’ equity ...... 1,966 1,857 3,822 2,045 1,883 3,928 Credit Quality Data: Credit costs(1) ...... 450 681 1,131 261 558 819 Reserves for possible loan losses(2)(*) ...... 660 909 1,569 425 671 1,096 Bankrupt loans ...... 157 73 230 175 61 236 Non-accrual loans ...... 1,068 1,436 2,504 850 1,358 2,208 Past due loans (3 months or more) ...... 35 40 76 66 37 103 Restructured loans ...... 413 335 747 125 62 186 Selected Ratios: Net income as a percentage of average total assets ...... 0.12%0.10% 0.11%0.18%0.10% 0.13% Net income as a percentage of average stockholder’s equity ...... 2.91 2.63 2.77 4.02 2.96 3.51 Net interest margin(3) ...... 1.52 1.37 1.44 1.48 1.31 1.39 Average stockholder’s equity as a percentage of average total assets ...... 4.21 3.63 3.91 4.40 3.38 3.84 Reserves for possible loan losses as a percentage of loans and bills discounted ...... 2.07 2.90 2.48 1.39 2.15 1.77 Loan losses as a percentage of period-end loans and bills discounted ...... 1.41 2.17 1.79 0.85 1.79 1.33 (*) Figures of Sumitomo Bank in the items marked with (*) are figures derived from the audited financial statements. (1) Credit costs equal the aggregate of net additions to general reserves, direct write-offs, net additions to specific reserves, net additions to reserves for specific overseas loan losses, losses on sale of loans to CCPC, losses on financial assistance for associated companies, transfers to reserve for losses on loans sold and losses on sales of problem loans. (2) Reserves for possible loan losses include general reserves, specific reserves and reserves for specific overseas countries. (3) Net interest margin equals net interest income as a percentage of average total interest-earning assets.

A-2 Consolidated Financial Information

Year ended and Year ended and as of March 31, 1998 as of March 31, 1999 Sakura Sumitomo Sakura Sumitomo Bank Bank Combined Bank Bank Combined (billions of yen, except ratios) Income Statement Data: Interest income ...... ¥1,760 ¥1,993 ¥ 3,754 ¥1,630 ¥1,705 ¥ 3,335 Interest expense ...... (1,152) (1,324) (2,476) (1,027) (1,049) (2,076) Net interest income ...... 609 669 1,278 603 656 1,259 Net fees and commissions ...... 78 91 169 116 178 294 Net trading income ...... 14 (17) (2) 24 26 49 Net other operating income ...... 56 15 70 64 150 213 General and administrative expenses(**) ...... (494) (444) (938) (517) (524) (1,041) Transfer to reserves for possible loan losses(**) ...... (617) (840) (1,457) (469) (654) (1,124) Other income(*) ...... 948 308 1,255 268 188 456 Other expenses(*) ...... (692) (252) (945) (793) (779) (1,572) Income (loss) before income taxes and minority interests(**) ...... (100) (469) (569) (706) (759) (1,465) Income taxes(**) ...... (107) (55) (162) (11) (43) (54) Deferred taxes(**) ...... 118 278 397 228 231 460 Minority interests in net income(**) ...... (0) (5) (5) 9 2 11 Net income (loss)(**) ...... ¥ (88) ¥ (251) ¥ (340) ¥ (479) ¥ (569) ¥ (1,048)

Balance Sheet Data(1): Total assets(**) ...... 53,160 64,370 117,530 49,015 54,974 103,989 Loans and bills discounted(**) ...... 35,983 36,928 72,911 32,963 35,590 68,553 Securities(**) ...... 6,447 7,096 13,543 6,265 6,643 12,908 Deposits(**) ...... 36,894 38,507 75,401 33,369 33,909 67,277 Stockholders’ equity(**) ...... 1,727 1,672 3,398 2,174 1,757 3,932 Credit Quality Data: Credit costs ...... —(2) —(2) —(2) —(2) —(2) —(2) Reserve for possible loan losses(**) ...... 1,064 1,279 2,343 667 1,268 1,935 Bankrupt loans(**) ...... —(2) —(2) —(2) 169 208 378 Non-accural Loans(**) ...... —(2) —(2) —(2) 1,276 1,678 2,955 Past due loans (3 months or more)(**) ...... —(2) —(2) —(2) 84 171 255 Restructured loans(**) ...... —(2) —(2) —(2) 237 283 520 Risk-Adjusted Capital Data: Tier I capital ...... 1,711 1,949 3,660 2,397 2,180 4,577 Total qualifying capital ...... 3,423 3,780 7,203 4,121 4,282 8,403 Total risk-adjusted assets ...... 37,501 40,933 78,433 33,399 39,084 72,483 Tier I risk-adjusted capital ratio ...... 4.56%4.76% 4.66%7.18%5.58% 6.31% Total risk-adjusted capital ratio ...... 9.12 9.23 9.18 12.33 10.95 11.59

(*) Figures of Sumitomo Bank in the items marked with (*) are figures derived from the audited financial statements. (**) In the items marked (**) the figures of Sakura Bank and Sumitomo Bank are derived from the respective audited financial statements. (1) The bank is not required under Japanese GAAP to maintain records which would enable it to determine averages and related ratios on a consolidated basis and therefore such information is not included herein. Accordingly, the balance sheet data included herein has been prepared as of year-end only. (2) This information was not required on a consolidated basis for this period. Accordingly, this information is unavailable.

A-3 Consolidated Financial Information

Year ended and as Year ended and as of March 31, 2000 of March 31, 2001 Sakura Sumitomo Sakura Sumitomo Bank Bank Combined Bank Bank Combined (billions of yen, except ratios) Income Statement Data: Interest income ...... ¥1,399 ¥1,528 ¥ 2,927 ¥1,108 ¥1,328 ¥ 2,436 Interest expense ...... (746) (874) (1,620) (438) (675) (1,112) Net interest income ...... 653 654 1,307 670 654 1,324 Net fees and commissions ...... 120 146 266 147 169 316 Net trading income (loss) ...... 16 47 63 27 82 109 Net other operating income ...... 31 79 111 42 47 89 General and administrative expenses(**) ...... (487) (466) (954) (491) (450) (941) Transfer to reserves for possible loan losses(**) ...... (224) (245) (469) (17) (32) (49) Other income(*) ...... 455 644 1,099 332 560 892 Other expenses(*) ...... (439) (641) (1,080) (579) (756) (1,335) Income (loss) before income taxes and minority interests(**) ...... 126 217 343 132 273 406 Income taxes(**) ...... (8) (51) (59) (8) (57) (66) Deferred taxes(**) ...... (74) (96) (171) (70) (128) (198) Minority interests in net income ...... 19 (7) 11 (5) (4) (9) Net income (loss)(**) ...... ¥ 63 ¥ 62 ¥ 124 ¥ 49 ¥ 83 ¥ 132

Balance Sheet Data:(1) Total assets(**) ...... 48,496 53,768 102,263 51,850 67,393 119,243 Loans and bills discounted(**) ...... 32,333 32,941 65,274 32,907 32,630 65,537 Securities(**) ...... 6,929 8,969 15,898 10,467 16,846 27,312 Deposits(**) ...... 33,739 35,231 68,970 36,625 38,071 74,696 Stockholders’ equity(**) ...... 2,209 1,804 4,013 2,176 1,837 4,013

Credit Quality Data: Credit costs ...... 527 733 1,260 347 646 993 Reserve for possible loan losses(**) ...... 682 950 1,633 512 757 1,269 Bankrupt loans(**) ...... 176 87 264 197 76 273 Non-accrual loans(**) ...... 1,275 1,662 2,937 1,042 1,536 2,578 Past due loans (3 months or more)(**) ...... 40 79 119 76 50 126 Restructured loans(**) ...... 171 375 546 151 129 280

Risk-Adjusted Capital Data: Tier I capital ...... 2,441 2,204 4,645 2,496 2,258 4,755 Total qualifying capital ...... 4,101 4,348 8,449 3,834 4,150 7,984 Total risk-adjusted assets ...... 32,722 37,477 70,198 33,891 37,925 71,817 Tier I risk-adjusted capital ratio ...... 7.46%5.88% 6.61%7.36%5.95% 6.62% Total risk-adjusted capital ratio ...... 12.53 11.60 12.03 11.31 10.94 11.11

A-4 Operating Results The following table presents certain information as to the Bank’s income, expenses and net income for the two ﬁscal years ended March 31, 2000 and 2001:

Year ended March 31, 2000 Year ended March 31, 2001 Sakura Sumitomo Sakura Sumitomo Bank Bank Combined Bank Bank Combined (millions of yen) Interest income ...... ¥1,338,818 ¥1,416,579 ¥ 2,755,397 ¥1,016,508 ¥1,259,171 ¥ 2,275,679 Interest expenses ...... (731,140) (813,101) (1,544,241) (417,944) (617,697) (1,035,641) Net interest income ...... 607,678 603,478 1,211,156 598,564 641,474 1,240,038 Fees and commissions (income)(*) ...... 102,556 106,565 209,121 111,790 119,990 231,780 Fees and commissions (expenses)(*) ...... (42,441) (37,306) (79,747) (42,512) (38,575) (81,087) Net fees and commissions ...... 60,115 69,259 129,374 69,278 81,415 150,693 Trading income(*) ...... 8,498 34,227 42,725 20,776 74,609 95,385 Trading expenses(*) ...... (412) (944) (1,356) — — — Net trading income ...... 8,086 33,283 41,369 20,776 74,609 95,385 Other operating income(*) ...... 57,954 61,072 119,026 49,455 24,021 73,476 Other operating expenses(*) ...... (24,231) (49,091) (73,322) (7,810) (49,272) (57,082) Net other operating income ...... 33,723 11,981 45,704 41,645 (25,251) 16,394 Other income(*) ...... 423,100 565,902 989,002 243,304 373,042 616,346 Other expenses(*) ...... (393,004) (492,402) (885,406) (497,715) (674,115) (1,171,830) General and administrative expenses(*) ...... (430,417) (350,791) (781,208) (380,520) (331,467) (711,987) Transfer to reserve for possible loan losses(*) .... (155,208) (292,209) (447,417) 43,728 (5,653) 38,075 Income (loss) before income taxes(*) ...... 154,069 148,500 302,569 139,060 134,051 273,111 Income tax (expense)/beneﬁt ...... (96,951) (99,681) (196,632) (56,898) (78,375) (135,273) Net income (loss)(*) ...... ¥ 57,117 ¥ 48,818 ¥ 105,935 ¥ 82,160 ¥ 55,675 ¥ 137,835 Banking proﬁt (excluding transfer to general reserve for possible loan losses)(1) ...... ¥ 313,459 ¥ 389,438 ¥ 702,897 ¥ 355,401 ¥ 447,672 ¥ 803,073

(*) Figures of Sumitomo Bank in the items marked with (*) are figures derived from the audited financial statements. (1) Banking profit (excluding transfer to general reserve for possible loan losses), a commonly used indicator of the profitability of banking operations among Japanese banks, is calculated as follows: net interest income + net fees and commissions + net trading revenue + net other operating income – general and administrative expenses (adjusted to exclude certain retirement-related benefits and certain non- recurring items).

A-5 Interest Income and Interest Expenses The following table sets forth information regarding the Bank’s interest income and average interest-earning assets for the two ﬁscal years ended March 31, 2000 and 2001:

Year ended March 31, 2000 Year ended March 31, 2001 Percentage Change 2000/2001 Sumitomo Sumitomo Sakura Sumitomo Sakura Bank Bank Combined Sakura Bank Bank Combined Bank Bank Combined (millions of yen, except percentages) Interest income ...... ¥ 1,338,818 ¥ 1,416,579 ¥ 2,755,397 ¥ 1,016,508 ¥ 1,259,171 ¥ 2,275,679 (24.07)%(11.11)% (17.41)% Average interest-earning assets ...... 40,029,393 44,095,017 84,124,410 40,607,371 48,816,823 89,424,194 1.44 %10.70 % 6.29 % Loans and bills discounted ...... 32,298,163 32,985,032 65,283,195 31,040,579 31,783,455 62,824,034 (3.89)%(3.64)% (3.76)% Securities ...... 6,738,805 8,366,581 15,105,386 7,451,656 12,183,588 19,635,244 10.57 %45.62 % 29.98 % Deposits with banks ...... 511,150 1,919,215 2,430,365 1,500,571 3,489,086 4,989,657 193.56 %81.79 %105.30 % Other interest-earning assets ...... 481,275 824,189 1,305,464 614,565 1,360,693 1,975,258 27.69 %65.09 % 51.30 % Average rate ...... 3.34%3.21%3.27%2.50%2.57%2.54%(0.84)%(0.64)%(0.73)%

The following table sets forth the Bank’s interest expenses, average interest-bearing liabilities and average non-interest-bearing current deposits for the two ﬁscal years ended March 31, 2000 and 2001:

Year ended March 31, 2000 Year ended March 31, 2001 Percentage Change 2000/2001 Sumitomo Sumitomo Sakura Sumitomo Sakura Bank Bank Combined Sakura Bank Bank Combined Bank Bank Combined (millions of yen, except percentages) Interest expenses(1) ...... ¥ 729,509 ¥ 811,878 ¥ 1,541,387 ¥ 417,814 ¥ 617,132 ¥ 1,034,946 (42.72)%(23.98)% (32.86)% Average interest-bearing liabilities(1) ...... 38,422,568 41,176,612 79,599,180 39,397,609 45,611,774 85,009,383 2.53 %10.77 % 6.79 % Deposits ...... 33,790,020 34,320,081 68,110,101 32,929,385 35,109,570 68,038,955 (2.54)%2.30 %(0.10)% Other interest-bearing liabilities ...... 4,632,548 6,856,531 11,489,079 6,468,224 10,502,204 16,970,428 39.62 %53.17 % 47.70 % Average rate ...... 1.89%1.97%1.93%1.06%1.35%1.21%(0.83)%(0.62)%(0.72)% Average non-interest-bearing current deposits ...... 1,469,249 1,301,373 2,770,622 1,507,867 1,385,971 2,893,838 2.62 %6.50 % 4.44 %

(1) Money held in trust is not included in interest-earning assets. Accordingly, the amounts of interest-bearing liabilities are shown after deduction of amounts equivalent to the average balance of money held in trust (Sakura Bank 2001, ¥50,775 million, 2000, ¥133,459 million; Sumitomo Bank 2001, ¥85,519 million, 2000, ¥107,550 million, combined 2001, ¥136,294 million; 2000, ¥241,009 million) and corresponding interest (Sakura Bank 2001, ¥130 million, 2000, ¥1,631 million; Sumitomo Bank 2001, ¥565 million, 2000, ¥1,222 million; combined, 2001, ¥695 million; 2000, ¥2,853 million).

A-6 Information relating to the Bank’s interest-earning assets and interest-bearing liabilities. Average balances are based on daily averages.

Year ended March 31, 2000 Year ended March 31, 2001 Sakura Sumitomo Sakura Sumitomo Bank Bank Combined Bank Bank Combined (millions of yen, except percentages) Domestic operations(1) Average total interest-earning assets(2) . . . ¥34,852,646 ¥35,397,481 ¥70,250,127 ¥34,841,034 ¥38,740,834 ¥73,581,868 Interest income ...... 832,456 757,299 1,589,755 669,088 632,210 1,301,298 Average rate ...... 2.38%2.13%2.26%1.92%1.63%1.76% Average total interest-bearing liabilities(2) ...... ¥33,884,278 ¥32,504,927 ¥66,389,205 ¥33,977,837 ¥36,168,247 ¥70,146,084 Interest expenses ...... 220,375 242,028 462,403 79,035 113,065 192,100 Average rate ...... 0.65%0.74%0.69%0.23%0.31%0.27% Net interest income ...... ¥ 612,081 ¥ 515,271 ¥ 1,127,352 ¥ 590,053 ¥ 519,144 ¥ 1,109,197 Net interest margin(3) ...... 1.75%1.45%1.60%1.69%1.34%1.50% International operations(1) Average total interest-earning assets(2) . . . ¥ 5,360,655 ¥ 8,713,177 ¥14,073,832 ¥ 6,028,024 ¥10,405,393 ¥16,433,417 Interest income ...... 506,823 659,318 1,166,141 348,079 630,186 978,265 Average rate ...... 9.45%7.56%8.28%5.77%6.05%5.95% Average total interest-bearing liabilities(2) ...... ¥ 4,722,198 ¥ 8,687,325 ¥13,409,523 ¥ 5,681,458 ¥ 9,772,930 ¥15,454,388 Interest expenses(2) ...... 509,596 569,889 1,079,485 339,438 507,292 846,730 Average rate ...... 10.79%6.56%8.05%5.97%5.19%5.47% Net interest income(2) ...... ¥ (2,773) ¥ 89,429 ¥ 86,656 ¥ 8,641 ¥ 122,893 ¥ 131,534 Net interest margin(3) ...... (0.05)%1.02%0.61%0.14%1.18%0.80%

(1) Domestic operations consist of yen-denominated transactions at offices in Japan. International operations are comprised of transactions in foreign currencies at offices in Japan and transactions at overseas offices. In addition, yen-denominated transactions with non- residents of Japan, transactions included in Tokyo offshore accounts for international financial transactions and certain other transactions are included in international operations. (2) Does not include balances/transactions between business units. (3) Net interest margin equals net interest income as a percentage of average total interest-earning assets.

A-7 The following table shows changes in interest income of the Bank allocated between changes in volume and changes in rate for the periods shown. Rate/volume variance is allocated based on the percentage relationship of changes in volume and changes in rate to the total ‘‘net change’’. Volume/rate variance is prorated according to changes in volume and rate.

Fiscal 2000 Versus Fiscal 1999 Increase (Decrease) Due to Changes in Volume Rate Net Change Sakura Sumitomo Sakura Sumitomo Sakura Sumitomo Bank Bank Combined Bank Bank Combined Bank Bank Combined (millions of yen) Interest income: Loans and bills discounted:(1) Domestic ...... ¥(19,300) ¥(12,192) ¥(31,492) ¥ 4,291 ¥ 190 ¥ 4,481 ¥ (15,009) ¥ (12,002) ¥ (27,011) International ...... (13,445) (27,465) (40,910) 30,324 50,790 81,114 16,878 23,324 40,202 Total ...... 1,869 11,321 13,190 Securities:(2) Domestic ...... 10,063 37,318 47,381 3,485 (25,944) (22,459) 13,548 11,373 24,921 International ...... (4,470) 11,140 6,670 9,270 52,913 62,183 4,799 64,054 68,853 Total ...... 18,348 75,428 93,776 Call loans:(1) Domestic ...... (64) 54 (10) 68 (61) 7 4 (6) (2) International ...... 1,535 (433) 1,102 748 785 1,533 2,283 352 2,635 Total ...... 2,287 345 2,632 Receivables under resale agreements:(3) Domestic ...... — — — — — — — — — International ...... — — — — — — — — — Total ...... ——— Bills bought:(1) Domestic ...... (3) 66 63 61 664 725 57 730 787 International ...... — — — — — — — — — Total ...... 57 730 787 Deposits with banks:(4) Domestic ...... (1) 0 (1) (0) (1) (1) (2) (1) (3) International ...... 62,287 88,138 150,425 9,732 44,219 53,951 72,019 132,358 204,377 Total ...... 72,019 132,357 204,374 Effect of a change in accounting standard(5) Domestic ...... — — — — — — (79,274) (105,237) (184,511) International ...... — — — — — — (72,686) (359,193) (431,879) Total ...... (151,961) (466,757) (618,718) Total interest income: Domestic ...... (277) 67,889 67,612 (83,816) (87,740) (171,556) (163,368) (125,088) (288,456) International ...... 57,773 142,202 199,975 (143,831) 187,857 44,026 (158,743) (29,132) (187,875) Total ...... ¥(322,310) ¥(157,408) ¥(479,718)

(1) Loans and bills discounted, call loans and bills bought relate to ‘‘Interest on loans and discounts’’ in the statements of income. (2) Securities relates to ‘‘Interest and dividends on securities’’ in the statements of income. (3) Beginning in ﬁscal 2000, the Bank records receivables under resale agreements as lending transactions. (4) Interest-bearing deposits in other banks relate to ‘‘Other interest income’’ in the statements of income. (5) Effect of a change in accounting standard relates to the application of a new accounting standard for ﬁnancial instruments, effective April 1, 2000, which requires that income and expenses on hedging-purpose derivatives be presented under the net method.

A-8 The following table shows changes in interest expense of the Bank allocated between changes in volume and changes in rate for the periods shown. Rate/volume variance is allocated based on the percentage relationship of changes in volume and changes in rate to the total ‘‘net change’’. Volume/rate variance is prorated according to changes in volume and rate. Fiscal 2000 Versus Fiscal 1999 Increase (Decrease) Due to Changes in Volume Rate Net Change Sakura Sumitomo Sakura Sumitomo Sakura Sumitomo Bank Bank Combined Bank Bank Combined Bank Bank Combined (millions of yen) Interest expenses(1): Deposits: Domestic ...... ¥(3,963) ¥ (378) ¥ (4,341) ¥ (5,637) ¥ (3,494) ¥ (9,131) ¥ (9,601) ¥ (3,873) ¥ (13,474) International ...... 25,368 50,304 75,672 50,916 64,414 115,330 76,285 114,719 191,004 Total ...... 66,684 110,846 177,530 Negotiable certiﬁcates of deposit: Domestic ...... 838 (516) 322 5,492 7,033 12,525 6,331 6,517 12,848 International ...... (123) (2,496) (2,619) (203) 1,175 972 (326) (1,321) (1,647) Total ...... 6,004 5,196 11,200 Call money: Domestic ...... 1,186 41 1,227 1,727 2,876 4,603 2,914 2,917 5,831 International ...... 1,387 2,538 3,925 579 74 653 1,967 2,613 4,580 Total ...... 4,881 5,531 10,412 Bills sold: Domestic ...... 155 582 737 359 761 1,120 514 1,344 1,858 International ...... — 33 33 — (6) (6) — 26 26 Total ...... 514 1,370 1,884 Commercial paper: Domestic ...... 940 209 1,149 941 842 1,783 1,882 1,051 2,933 International ...... — — — — — — — — — Total ...... 1,882 1,051 2,933 Borrowed money: Domestic ...... (3,729) 5,000 1,271 340 (8,848) (8,508) (3,389) (3,848) (7,237) International ...... 3,085 (15,117) (12,032) 4,468 19,193 23,661 7,554 4,075 11,629 Total ...... 4,164 227 4,391 Bonds: Domestic ...... 4,053 9,857 13,910 73 (127) (54) 4,127 9,730 13,857 International ...... — — — — — — — — — Total ...... 4,127 9,730 13,857 Effect of a change in accounting standard: Domestic ...... — — — — — — (79,274) (105,237) (184,511) International ...... — — — — — — (72,686) (359,193) (431,879) Total ...... (151,961) (466,757) (618,718) Total interest expenses: Domestic ...... 606 25,349 25,955 (62,671) (49,074) (111,745) (141,339) (128,962) (270,301) International ...... 90,535 77,781 168,316 (188,006) 218,815 30,809 (170,157) (62,596) (232,753) Total ...... ¥(311,694) ¥(194,746) ¥(506,440)

(1) The above breakdown between domestic and international information does not exclude inter-area transfers by the Bank.

A-9 Net Fees and Commission The following table sets forth the Bank’s fees and commissions income and expenses for the two ﬁscal years ended March 31, 2000 and 2001:

Year ended March 31, 2000 Year ended March 31, 2001 Sakura Sumitomo Sakura Sumitomo Bank Bank Combined Bank Bank Combined (millions of yen) Fees and commissions (income)(*) ...... ¥102,556 ¥106,565 ¥209,121 ¥111,790 ¥119,990 ¥231,780 Deposits and loans ...... 11,457 19,394 30,851 13,750 23,522 37,272 Remittances and transfers ...... 50,356 46,818 97,174 50,705 50,934 101,639 Securities ...... 9,151 6,315 15,466 8,741 5,839 14,580 Fees and commissions (expenses)(*) ..... (42,441) (37,306) (79,747) (42,512) (38,575) (81,087) Remittances and transfers ...... (10,118) (11,827) (21,945) (10,871) (11,672) (22,543) Net fees and commissions ...... 60,115 69,259 129,374 69,278 81,415 150,693

(*) Figures of Sumitomo Bank in the items marked with (*) are ﬁgures derived from the audited ﬁnancial statements.

Net Other Operating Income

The following table sets forth the Bank’s net other operating income for the two ﬁscal years ended March 31, 2000 and 2001:

Year ended March 31, 2000 Year ended March 31, 2001 Sakura Sumitomo Sakura Sumitomo Bank Bank Combined Bank Bank Combined (millions of yen) Gains on sale of bonds ...... ¥21,918 ¥37,302 ¥ 59,220 ¥14,202 ¥ 22,786 ¥ 36,988 Gains on redemption of bonds ...... 3,126 4,315 7,441 54 — 54 Losses on sale of bonds ...... (16,292) (30,537) (46,829) (4,481) (19,286) (23,767) Losses on redemption of bonds ...... (6,076) (14,983) (21,059) (1,446) (1,192) (2,638) Losses on devaluation of bonds ...... (180) (46) (226) (384) (1,457) (1,841) Net gains on bond-related operations ...... 2,496 (3,949) (1,453) 7,945 851 8,796 Bond issuance costs ...... (684) (3,340) (4,024) (580) (1,348) (1,928) Gains (losses) on foreign exchange transactions ...... 31,963 18,919 50,882 15,393 (25,651) (10,258) Gains on ﬁnancial derivatives ...... — — — 18,123 266 18,389 Other (net) ...... (52) 352 300 763 631 1,394 Net other operating income ...... ¥33,723 ¥11,981 ¥ 45,704 ¥41,645 ¥(25,251) ¥ 16,394

A-10 General and Administrative Expenses

The following table sets forth the Bank’s general and administrative expenses for the periods indicated:

Year ended March 31, 2000 Year ended March 31, 2001 Sakura Sumitomo Sakura Sumitomo Bank Bank Combined Bank Bank Combined (millions of yen) Salaries and related expenses ...... ¥135,833 ¥117,345 ¥253,178 ¥128,175 ¥113,829 ¥242,004 Retirement beneﬁt cost ...... 30,757 15,553 46,310 17,269 13,873 31,142 Welfare expenses ...... 32,415 30,350 62,765 18,908 15,943 34,851 Depreciation expense ...... 28,562 15,873 44,435 24,651 17,337 41,988 Rent and lease expenses ...... 62,089 39,099 101,188 55,694 35,022 90,716 Building and maintenance expenses ...... 1,268 1,099 2,367 1,795 1,344 3,139 Supplies expenses ...... 5,333 5,441 10,774 4,699 5,311 10,010 Water, lighting and heating expenses ...... 4,392 4,554 8,946 4,245 4,306 8,551 Traveling expenses ...... 1,659 1,962 3,621 1,556 2,235 3,791 Communication expenses ...... 5,055 6,767 11,822 4,981 7,770 12,751 Publicity and advertising expenses ...... 4,074 2,300 6,374 3,138 3,700 6,838 Taxes, other than income taxes ...... 19,899 17,647 37,546 18,334 17,199 35,533 Other ...... 99,073 92,796 191,869 97,070 93,592 190,662 Total(*) ...... ¥430,417 ¥350,791 ¥781,208 ¥380,520 ¥331,467 ¥711,987

(*) Figures of Sumitomo Bank in the items marked with (*) are ﬁgures derived from the audited ﬁnancial statements.

A-11 Other Income and Expenses The following table sets forth below the Bank’s other income and expenses for the periods indicated:

Year ended March 31, 2000 Year ended March 31, 2001 Sakura Sumitomo Sakura Sumitomo Bank Bank Combined Bank Bank Combined (millions of yen) Gains on sale of stock and other securities ...... ¥406,308 ¥551,239 ¥ 957,547 ¥ 160,707 ¥ 335,534 ¥ 496,241 Gains on money held in trust ...... 469 1,484 1,953 942 1,199 2,141 Gains on securities contributed to employee retirement beneﬁts trust . . . — — — 29,602 23,300 52,902 Gains on disposition of premises and equipment ...... 697 1,621 2,318 1,147 958 2,105 Collection of written-off claims ...... 259 420 679 730 276 1,006 Dividends from liquidation of a subsidiary ...... — — — — — — Write-off of loans ...... (113,381) (347,350) (460,731) (240,536) (500,896) (741,432) Transfer to reserves for possible losses on loans sold ...... (55,466) (17,299) (72,765) (33,864) (19,053) (52,917) Losses on sale of stock and other securities ...... (29,928) (35,150) (65,078) (28,944) (37,817) (66,761) Losses on devaluation of stock and other securities ...... (34,619) (29,400) (64,019) (80,281) (37,776) (118,057) Losses on money held in trust ...... (809) (2,288) (3,097) (352) (871) (1,223) Losses on disposition of premises and equipment ...... (6,817) (8,558) (15,375) (17,203) (15,436) (32,639) Amortization of unrecognized net transition obligation for employee retirement beneﬁts ...... — — — (36,361) (20,167) (56,528) Losses on disposals of software ...... — — — — — — Additional contribution to pension fund ...... — (21,460) (21,460) — — — Other (net) ...... (136,615) (19,757) (156,372) (9,998) (30,321) (40,319) Net other income (expenses) ...... ¥ 30,095 ¥ 73,500 ¥ 103,595 ¥(254,411) ¥(301,073) ¥(555,484)

A-12 Consolidated Results The following table sets forth selected consolidated and non-consolidated ﬁnancial data for the two ﬁscal years ending March 31, 2000 and 2001:

Fiscal 1999 Fiscal 2000 Consolidated Non-consolidated Consolidated Non-consolidated Sakura Sumitomo Sakura Sumitomo Sakura Sumitomo Sakura Sumitomo Bank Bank Combined Bank Bank Combined Bank Bank Combined Bank Bank Combined (billions of yen) Net interest income ...... ¥653 ¥654 ¥ 1,307 ¥ 608 ¥ 603 ¥ 1,211 ¥ 670 ¥ 654 ¥1,324 ¥ 599 ¥ 641 ¥1,240 Net fees and commissions ...... 120 146 266 60 69 129 147 169 316 69 81 151 Net trading income ...... 16 47 63 8 33 41 27 82 109 21 75 95 Net other operating income ...... 31 79 111 34 12 46 42 47 89 42 (25) 16 Gross proﬁt ...... 821 926 1,747 710 718 1,428 886 952 1,838 730 773 1,503 General and administrative expenses(***) ...... (487) (466) (954) (430) (351) (781) (491) (450) (941) (381) (331) (712) Credit cost ...... 527 733 (1,260) 450 681 (1,131) 347 646 (993) 261 558 (819) Gain (loss) on stocks ...... 343 516 859 342 486 828 74 395 469 51 260 311 Net income (loss)(***) ...... ¥ 63 ¥ 62 ¥ 124 ¥ 57 ¥ 49 ¥ 106 ¥ 49 ¥ 83 ¥ 132 ¥ 82 ¥ 56 138

(***) In the items marked (***) the consolidated figures of Sakura Bank and the consolidated and non-consolidated figures of Sumitomo Bank are derived from the respective audited financial statements. A-13 Capital Resources

The table below presents information relating to the Bank’s stockholders’ equity as of March 31, 2000 and 2001:

As of March 31, 2000 As of March 31, 2001 Sakura Sumitomo Sakura Sumitomo Bank Bank Combined Bank Bank Combined (millions of yen, except percentages) Stockholders’ equity(*) ...... ¥2,252,289 ¥1,880,637 ¥4,132,926 ¥2,281,230 ¥1,918,707 ¥4,199,937 Stockholders’ equity as a percentage of total assets .... 4.83%3.68%4.23%4.70%2.93%3.69%

(*) Figures of Sumitomo Bank in the items marked with (*) are ﬁgures derived from the audited ﬁnancial statements.

The table below presents information relating to the Bank’s net unrealized gains (losses) (before taxes) with respect to securities with a readily ascertainable market value for the periods presented:

As of March 31, 2000 As of March 31, 2001 Sakura Sumitomo Sakura Sumitomo Bank Bank Combined Bank Bank Combined (millions of yen, except percentages) Net unrealized gains (losses) ...... ¥662,799 ¥901,356 ¥1,564,155 ¥(346,628) ¥(83,216) ¥(429,844) Net unrealized gains (losses) as a percentage of book value of securities ...... 11.4%12.3% 11.9% (3.7)%(0.5)% (1.7)%

Capital Adequacy—Consolidated

Set forth below is a schedule of risk-adjusted assets and details of qualifying capital of the Bank determined on a consolidated basis.

As of March 31, 2000 As of March 31, 2001 Sakura Sumitomo Sakura Sumitomo Bank Bank Combined Bank Bank Combined (millions of yen, except percentages) Tier I capital ...... ¥ 2,440,605 ¥ 2,203,904 ¥ 4,644,509 ¥ 2,496,449 ¥ 2,258,261 ¥ 4,754,710 Tier II capital: Reserves for possible loan losses (excluding speciﬁc reserves) ...... 227,338 365,408 592,746 163,151 232,707 395,858 Subordinated term debt (with an original maturity of over 5 years) ...... 1,382,246 1,652,889 3,035,135 1,141,806 1,653,197 2,795,003 Land revaluation excess after 55%discount . . . 51,672 126,143 177,815 46,670 122,193 168,863 Total Tier II capital ...... 1,661,257 2,144,442 3,805,699 1,351,627 2,008,098 3,359,725 Tier II capital included as qualifying capital . . 1,661,257 2,144,442 3,805,699 1,351,627 1,995,364 3,346,991 Deduction ...... (999) — (999) (13,752) (103,632) (117,384) Total capital ...... ¥ 4,100,864 ¥ 4,348,346 ¥ 8,449,210 ¥ 3,834,324 ¥ 4,149,993 ¥ 7,984,317 Risk-adjusted assets: On-balance sheet items ...... ¥30,676,736 ¥34,744,749 ¥65,421,485 ¥31,812,599 ¥34,609,029 ¥66,421,628 Off-balance sheet items ...... 1,824,204 2,510,855 4,335,059 1,924,737 3,096,291 5,021,028 Market risk items ...... 220,657 221,112 441,769 154,078 219,900 373,978 Total risk-adjusted assets ...... ¥32,721,599 ¥37,476,716 ¥70,198,315 ¥33,891,414 ¥37,925,221 ¥71,816,635 Tier I risk-adjusted capital ratio ...... 7.45%5.88%6.61%7.36%5.95%6.62% Total risk-adjusted capital ratio ...... 12.53 11.60 12.03 11.31 10.94 11.11

A-14 Return on Equity and Assets The following table sets forth the return on the Bank’s equity and assets for the periods indicated.

Year ended March 31, 2000 Year ended March 31, 2001 Sakura Sumitomo Sakura Sumitomo Bank Bank Combined Bank Bank Combined (millions of yen, except percentages) Net income (loss)(*) ...... ¥ 57,117 ¥ 48,818 ¥ 105,935 ¥ 82,160 ¥ 55,675 ¥ 137,835 Average total assets ...... 46,658,604 51,116,135 97,774,739 46,429,446 55,768,463 102,197,909 Average total assets, excluding customers’ liabilities for acceptances and guarantees . . . . 43,882,471 48,157,109 92,039,580 43,795,777 52,603,464 96,399,241 Average stockholders’ equity . . . . . 1,965,592 1,856,846 3,822,438 2,045,053 1,883,116 3,928,169 Net income (loss) as a percentage of: Average total assets ...... 0.12 0.09 0.10%0.17 0.09 0.13% Average total assets, excluding customers’ liabilities for acceptances and guarantees ...... 0.13 0.10 0.11 0.18 0.10 0.14 Average stockholders’ equity ...... 2.90 2.62 2.77 4.01 2.95 3.50 Declared cash dividends(1) ...... ¥ 35,667 ¥ 22,398 ¥ 58,065 ¥ 35,706 ¥ 22,398 ¥ 58,104 Dividend payout ratio ...... 62.44%45.88%54.81%43.45%40.22% 42.15% Average stockholders’ equity as a percentage of average total assets ...... 4.21 3.63 3.90 4.40 3.37 3.84

(*) Figures of Sumitomo Bank in the items marked with (*) are figures derived from the audited financial statements. (1) Declared cash dividends for the fiscal year ended March 31, 2001 include the funds delivered as year-end cash dividends to the stockholders of Sakura Bank listed in its final register of stockholders.

Year ended Year ended Year ended Year ended March 31, 1998 March 31, 1999 March 31, 2000 March 31, 2001 Sakura Sumitomo Sakura Sumitomo Sakura Sumitomo Sakura Sumitomo Bank Bank Combined Bank Bank Combined Bank Bank Combined Bank Bank Combined Region: Japan ...... 77%56% 67%73%68% 70%82%77% 79%76%73% 74% Foreign ...... 23 44 33 27 32 30 18 23 21 24 27 26 Americas ...... 8 17 12 12 10 11 7 11 9 14 14 14 Europe ...... 6 17 12 7 15 12 5 5 5 3 8 6 Asia (excluding Japan) ..... 9 10 9 8 7 7 6 7 7 7 5 6 Total ...... 100%100% 100%100%100% 100%100%100% 100%100%100% 100%

A-15 Funding The following table illustrates the composition of the Bank’s funding by average balances and related interest and average interest rates as of March 31, 2000, and 2001. Average balances are based on a daily average. Year ended March 31, 2000 Year ended March 31, 2001 Average Balance Interest Average Rate Average Balance Interest Average Rate Sakura Sumitomo Sakura Sumitomo Sakura Sumitomo Sakura Sumitomo Sakura Sumitomo Sakura Sumitomo Bank Bank Combined Bank Bank Combined Bank Bank Combined Bank Bank Combined Bank Bank Combined Bank Bank(1) Combined (millions of yen, except percentages) Interest-bearing liabilities: Deposits: Domestic ...... ¥27,660,195 ¥21,958,363 ¥49,618,558 ¥ 49,438 ¥ 44,183 ¥ 93,621 0.17%0.20% 0.18%¥25,326,957 ¥21,768,745 ¥ 47,095,702 ¥ 39,837 ¥ 40,310 ¥ 80,147 0.15% 0.18%0.17% International ...... 3,389,244 6,536,656 9,925,900 110,144 220,241 330,385 3.24 3.36 3.32 4,076,775 7,875,662 11,952,437 186,430 334,960 521,390 4.57 4.25 4.36 Total ...... 31,049,440 28,495,019 59,544,459 159,583 264,425 424,008 0.51 0.92 0.71 29,403,732 29,644,408 59,048,140 226,267 375,271 601,538 0.76 1.26 1.01 Negotiable certiﬁcates of deposit: Domestic ...... 2,690,916 5,651,266 8,342,182 4,169 8,782 12,951 0.15 0.15 0.15 3,478,211 5,335,742 8,813,953 10,501 15,300 25,801 0.30 0.28 0.29 International ...... 49,663 173,795 223,458 2,838 8,952 11,790 5.71 5.15 5.27 47,442 129,420 176,862 2,511 7,631 10,142 5.29 5.89 5.73 Total ...... 2,740,580 5,825,062 8,565,642 7,008 17,735 24,743 0.25 0.30 0.28 3,525,653 5,465,162 8,990,815 13,012 22,932 35,944 0.36 0.41 0.39 Call money: Domestic ...... 2,106,478 3,297,640 5,404,118 3,240 3,595 6,835 0.15 0.10 0.12 2,758,205 3,335,588 6,093,793 6,154 6,513 12,667 0.22 0.19 0.20 International ...... 101,411 106,601 208,012 4,701 4,779 9,480 4.63 4.48 4.55 129,120 162,395 291,515 6,668 7,392 14,060 5.16 4.55 4.82 Total ...... 2,207,889 3,404,242 5,612,131 7,941 8,375 16,316 0.35 0.24 0.29 2,887,325 3,497,983 6,385,308 12,823 13,906 26,729 0.44 0.39 0.41 Payable under repurchase agreements: Domestic ...... — — — — — — — — — — 2,579,529 2,579,529 — 5,368 5,368 — 0.20 0.20 International ...... — — — — — — — — — — 42,859 42,859 — 2,144 2,144 — 5.00 5.00 Total ...... — — — — — — — — — — 2,622,388 2,622,388 — 7,512 7,512 — 0.28 0.28 Bills Sold: A-16 Domestic ...... 136,361 200,921 337,282 64 118 182 0.04 0.05 0.05 309,568 642,732 952,300 579 1,462 2,041 0.18 0.22 0.21 International ...... — 910 910 — 27 27 — 2.96 2.96 — 2,276 2,276 — 53 53 — 2.32 2.32 Total ...... 136,361 201,832 338,193 64 145 209 0.04 0.07 0.06 309,568 645,008 954,576 579 1,516 2,095 0.18 0.23 0.21 Commercial paper: Domestic ...... 267,443 267,406 534,849 1,094 515 1,609 0.40 0.19 0.30 441,024 353,806 794,830 2,976 1,567 4,543 0.67 0.44 0.57 International ...... — — — — — — — — — — — — — — — — — — Total ...... 267,443 267,406 534,849 1,094 515 1,609 0.40 0.19 0.30 441,024 353,806 794,830 2,976 1,567 4,543 0.67 0.44 0.57 Borrowed money: Domestic ...... 809,422 820,000 1,629,422 22,920 24,275 47,195 2.83 2.96 2.89 679,491 1,015,688 1,695,179 19,530 20,427 39,957 2.87 2.01 2.35 International ...... 1,166,971 1,712,602 2,879,573 47,676 76,988 124,664 4.08 4.49 4.32 1,239,812 1,409,212 2,649,024 55,230 81,064 136,294 4.45 5.75 5.14 Total ...... 1,976,394 2,532,603 4,508,997 70,596 101,263 171,859 3.57 3.99 3.81 1,919,304 2,424,901 4,344,205 74,761 101,491 176,252 3.89 4.18 4.05 Bonds: Domestic ...... 141,284 242,329 383,613 1,987 5,038 7,025 1.40 2.07 1.83 419,589 728,269 1,147,858 6,114 14,769 20,883 1.45 2.02 1.81 International ...... — — — — — — — — — — — — — — — — — — Total ...... 141,284 242,329 383,613 1,987 5,038 7,025 1.40 2.07 1.83 419,589 728,269 1,147,858 6,114 14,769 20,883 1.45 2.02 1.81 Total interest-bearing liabilities: Domestic ...... 33,884,278 32,504,927 66,389,205 220,375 242,028 462,403 0.65 0.74 0.69 33,977,837 36,168,247 70,146,084 79,035 113,065 192,100 0.23 0.31 0.27 International ...... 4,722,198 8,687,325 13,409,523 509,596 569,889 1,079,485 10.79 6.56 8.05 5,681,458 9,772,930 15,454,388 339,438 507,292 846,730 5.97 5.19 5.47 Offset(1) ...... (183,908) (15,641) (199,549) (461) (38) (499) — — — (261,686) (329,404) (591,090) (660) (3,225) (3,885) — — — Total ...... ¥38,422,568 ¥41,176,612 ¥79,599,180 ¥729,509 ¥811,878 ¥1,541,387 1.89%1.97% 1.93%¥39,397,609 ¥45,611,774 ¥ 85,009,383 ¥417,814 ¥617,132 ¥1,03 4,946 1.06%1.35% 1.21% Non-interest-bearing liabilities ...... 6,270,444 8,082,677 14,353,121 4,986,784 8,273,573 13,260,357 Stockholders’ equity ...... 1,965,592 1,856,846 3,822,438 2,045,053 1,883,116 3,928,169 Total funding ...... ¥46,658,604 ¥51,116,135 ¥97,774,739 ¥46,429,446 ¥55,768,463 ¥102,197,909 Net interest income and net interest margin(2) ...... ¥609,309 ¥604,700 ¥1,214,008 1.52%1.37% 1.44% ¥598,693 ¥642,038 ¥1,240,731 1.48% 1.31% 1.39% (1) The amounts resulting from lending and borrowing activities between domestic and international operations are offset. (2) Net interest margin equals net interest income as a percentage of average total interest-earning assets. Deposits The following table shows a breakdown of domestic and international deposits of the Bank as of the dates indicated:

As of March 31, 2000 As of March 31, 2001 Sumitomo Sumitomo Sakura Bank Bank Combined Sakura Bank Bank Combined (millions of yen) Domestic Deposits Current deposits(1) . . . ¥ 1,880,281 ¥ 1,660,463 ¥ 3,540,744 ¥ 2,262,605 ¥ 1,879,415 ¥ 4,142,020 Ordinary deposits(2) . . 8,828,079 6,514,761 15,342,840 8,587,741 7,006,299 15,594,040 Savings deposits(3) . . . 537,085 1,015,053 1,552,138 488,197 946,143 1,434,340 Deposits at notice(4) . . 1,802,026 785,201 2,587,227 1,297,112 701,310 1,998,422 Time deposits(5) ..... 12,575,336 11,051,229 23,626,565 11,670,537 10,847,563 22,518,100 Negotiable certiﬁcates of deposit ...... 3,505,660 6,728,300 10,233,960 4,615,440 6,893,350 11,508,790 Other deposits ...... 734,563 317,340 1,051,903 503,318 217,504 720,822 Total domestic yen deposits ...... ¥29,863,033 ¥28,072,348 ¥57,935,381 ¥29,424,953 ¥28,491,587 ¥57,916,540

(1) Non-interest bearing deposits used for the payment of checks and bills. (2) Interest-bearing unrestricted deposits which can be used for many purposes including the settlement of accounts and acceptance of salaries. (3) Interest-bearing accounts for individuals with, inter alia, limitations on the number of withdrawals per month. (4) Interest-bearing demand deposits with a maturity of at least seven days and which require the depositor to give at least two days’ advance notice for withdrawal. (5) Deposits (other than maturity date specific time deposits and money market certificates) range in maturity from one month to five years.

As of March 31, 2000 As of March 31, 2001 Sakura Sumitomo Sakura Sumitomo Bank Bank Combined Bank Bank Combined (millions of yen) International Deposits(1) Current deposits(2) ...... ¥ 42,364 ¥ 52,047 ¥ 94,411 ¥ 56,793 ¥ 66,144 ¥ 122,937 Ordinary deposits ...... 63,938 43,804 107,742 67,390 52,128 119,518 Deposits at notice(3) ...... 2,204,673 3,642,647 5,847,320 2,606,481 5,938,830 8,545,311 Time deposits ...... 179,069 819,629 998,698 182,668 611,715 794,383 Negotiable certiﬁcates of deposit ...... 33,274 113,326 146,600 46,391 133,278 179,669 Other deposits ...... 956,300 1,486,026 2,442,326 1,149,399 1,902,008 3,051,407 Total international deposits . . ¥3,479,621 ¥6,157,482 ¥9,637,103 ¥4,109,126 ¥8,704,105 ¥12,813,231

(1) The exact nature of these accounts varies from country to country. (2) Generally, checking accounts. (3) Principally interbank Euro-deposits.

A-17 Year ended March 31, 2000 Year ended March 31, 2001 Sakura Sumitomo Sakura Sumitomo Bank Bank Combined Bank Bank Combined Average Average Average Average Average Average Average Average Average Average Average Average balance rate balance rate balance rate balance rate balance rate balance rate (millions of yen, except percentages) Liquid deposits Domestic . . . . ¥12,309,456 0.05%¥10,011,511 0.04%¥22,320,967 0.05%¥12,379,429 0.06%¥10,298,369 0.07%¥22,677,798 0.07% International . . 2,149,844 2.54 3,783,824 3.67 5,933,668 3.26 2,767,742 4.09 5,195,051 4.20 7,962,793 4.16 Total . . . ¥14,459,300 0.42 ¥13,795,335 1.04 ¥28,254,635 0.72 ¥15,147,171 0.80 ¥15,493,420 1.45 ¥30,640,591 1.13

Time deposits Domestic . . . . ¥15,081,124 0.28 ¥11,772,247 0.33 ¥26,853,371 0.30 ¥12,681,899 0.24 ¥11,282,294 0.29 ¥23,964,193 0.26 International . . 221,009 3.10 878,884 1.19 1,099,893 1.57 204,263 4.61 779,281 2.74 983,544 3.12 Total . . . ¥15,302,133 0.32 ¥12,651,131 0.39 ¥27,953,264 0.35 ¥12,886,162 0.31 ¥12,061,575 0.45 ¥24,947,737 0.38

Negotiable certiﬁcates of deposit Domestic . . . . ¥ 2,690,916 0.15 ¥ 5,651,266 0.15 ¥ 8,342,182 0.15 ¥ 3,478,211 0.30 ¥ 5,335,742 0.28 ¥ 8,813,953 0.29 International . . 49,663 5.71 173,795 5.15 223,458 5.27 47,442 5.29 129,420 5.89 176,862 5.73 Total . . . ¥ 2,740,579 0.25 ¥ 5,825,061 0.30 ¥ 8,565,640 0.28 ¥ 3,525,653 0.36 ¥ 5,465,162 0.41 ¥ 8,990,815 0.39

Other Domestic . . . . ¥ 269,613 0.00 ¥ 174,603 0.00 ¥ 444,216 0.00 ¥ 265,625 0.00 ¥ 188,081 0.00 ¥ 453,706 0.00 International . . 1,018,390 4.77 1,873,948 3.77 2,892,338 4.12 1,104,767 5.76 1,901,328 4.99 3,006,095 5.27 Total . . . ¥ 1,288,003 3.77 ¥ 2,048,551 3.45 ¥ 3,336,554 3.57 ¥ 1,370,392 4.64 ¥ 2,089,409 4.54 ¥ 3,459,801 4.58

Total deposits Domestic . . . . ¥30,351,111 0.17 ¥27,609,629 0.19 ¥57,960,740 0.18 ¥28,805,168 0.17 ¥27,104,488 0.20 ¥55,909,656 0.18 International . . 3,438,907 3.28 6,710,451 3.41 10,149,358 3.37 4,124,217 4.58 8,005,082 4.27 12,129,299 4.38 Total . . . ¥33,790,018 0.49 ¥34,320,080 0.82 ¥68,110,098 0.65 ¥32,929,385 0.72 ¥35,109,570 1.13 ¥68,038,955 0.93

A-18 Assets The following table shows the Bank’s average asset balances and related interest and average interest rates for the ﬁscal years ended March 31, 2000. Average asset balances are based on a daily average.

Year ended March 31, 2000 Sakura Bank Sumitomo Bank Combined Average Average Average Average Average Average Balance Interest Rate Balance Interest Rate Balance Interest Rate (millions of yen, except percentage) Loans and bills discounted(1): Domestic ...... ¥28,855,023 ¥ 592,848 2.05%¥28,019,739 ¥ 537,952 1.91%¥56,874,762 ¥1,130,800 1.98% International ...... 3,443,140 133,934 3.88 4,965,293 223,218 4.49 8,408,433 357,152 4.24 Total ...... 32,298,163 726,783 2.25 32,985,032 761,170 2.30 65,283,195 1,487,953 2.27 Securities: Domestic ...... 5,882,989 71,373 1.21 7,199,331 89,385 1.24 13,082,320 160,758 1.22 International ...... 855,816 40,280 4.70 1,167,250 53,359 4.57 2,023,066 93,639 4.62 Total ...... 6,738,805 111,654 1.65 8,366,581 142,745 1.70 15,105,386 254,399 1.68 Call loans: Domestic ...... 76,285 58 0.07 391 37 9.46 76,676 95 0.12 International ...... 49,376 2,505 5.07 100,758 4,995 4.95 150,134 7,500 4.99 Total ...... 125,662 2,563 2.03 101,150 5,032 4.97 226,812 7,595 3.34 Receivables under resale agreements: Domestic ...... — — — — — — — — — International ...... — — — — — — — — — Total ...... — — — — — — — — — Bills bought: Domestic ...... 28,454 7 0.02 170,746 82 0.04 199,200 89 0.04 International ...... — — — — — — — — — Total ...... 28,454 7 0.02 170,746 82 0.04 199,200 89 0.04 Deposits with banks: Domestic ...... 8,868 32 0.36 3,311 2 0.06 12,179 34 0.27 International ...... 502,282 24,956 4.96 1,915,904 84,452 4.40 2,418,186 109,408 4.52 Total ...... 511,150 24,988 4.88 1,919,215 84,455 4.40 2,430,365 109,443 4.50 Total interest-earning assets: Domestic ...... 34,852,646 832,456 2.38 35,397,481 757,299 2.13 70,250,127 1,589,755 2.26 International ...... 5,360,655 506,823 9.45 8,713,177 659,318 7.56 14,073,832 1,166,141 8.28 Offset(2) ...... (183,908) (461) — (15,641) (38) — (199,549) (499) — Total ...... 40,029,393 1,338,818 3.34 44,095,017 1,416,579 3.21 84,124,410 2,755,397 3.27 Non-interest-earning assets: Cash and due from banks ...... 873,699 681,578 1,555,277 Other non-interest-earning assets ...... 5,755,512 6,339,540 12,095,052 Total non-interest- earning assets ..... 6,629,211 7,021,118 13,650,329 Total average assets . . ¥46,658,604 ¥51,116,135 ¥97,774,739

(1) Loan amounts include non-accrual and restructured loans. (2) The amounts arising from lending and borrowing activities between domestic and international operations are offset.

A-19 The following table shows the Bank’s average asset balances and related interest and average interest rates for the ﬁscal year ended March 31, 2001. Average asset balances are based on a daily average.

Year ended March 31, 2001 Sakura Bank Sumitomo Bank Combined Average Average Average Average Average Average Balance Interest Rate Balance Interest Rate Balance Interest Rate (millions of yen, except percentages) Loans and bills discounted(1): Domestic ...... ¥27,921,156 ¥ 577,839 2.06%¥27,384,887 ¥ 525,950 1.92%¥ 55,306,043 ¥1,103,789 1.99% International ...... 3,119,422 150,813 4.83 4,398,567 246,542 5.60 7,517,989 397,355 5.28 Total ...... 31,040,579 728,652 2.34 31,783,455 772,492 2.43 62,824,034 1,501,144 2.38 Securities: Domestic ...... 6,684,363 84,922 1.27 10,804,411 100,759 0.93 17,488,774 185,681 1.06 International ...... 767,292 45,080 5.87 1,379,176 117,414 8.51 2,146,468 162,494 7.57 Total ...... 7,451,656 130,003 1.74 12,183,588 218,173 1.79 19,635,244 348,176 1.77 Call loans: Domestic ...... 22,116 62 0.28 3,435 30 0.87 25,551 92 0.36 International ...... 75,217 4,788 6.36 92,473 5,347 5.78 167,690 10,135 6.04 Total ...... 97,333 4,851 4.98 95,909 5,378 5.60 193,242 10,229 5.29 Receivables under resale agreements: Domestic ...... — — — 277,192 1,130 0.40 277,192 1,130 0.40 International ...... — — — 38,209 484 1.26 38,209 484 1.26 Total ...... — — — 315,402 1,614 0.51 315,402 1,614 0.51 Bills bought: Domestic ...... 18,628 65 0.34 263,432 813 0.30 282,060 878 0.31 International ...... — — — — — — — — — Total ...... 18,628 65 0.34 263,432 813 0.30 282,060 878 0.31 Deposits with banks: Domestic ...... 8,349 29 0.34 3,373 1 0.02 11,722 30 0.25 International ...... 1,492,222 96,976 6.49 3,485,713 216,811 6.21 4,977,935 313,787 6.30 Total ...... 1,500,571 97,005 6.46 3,489,086 216,812 6.21 4,989,657 313,817 6.28 Total interest-earning assets: Domestic ...... 34,841,034 669,088 1.92 38,740,834 632,210 1.63 73,581,868 1,301,298 1.76 International ...... 6,028,024 348,079 5.77 10,405,393 630,186 6.05 16,433,417 978,265 5.95 Offset(2) ...... (261,686) (660) — (329,404) (3,225) — (591,090) (3,885) — Total ...... 40,607,371 1,016,508 2.50 48,816,823 1,259,171 2.57 89,424,194 2,275,679 2.54 Non-interest-earning assets: Cash and due from banks ...... 840,974 608,427 1,449,401 Other non-interest-earning assets ...... 4,981,101 6,343,213 11,324,314 Total non-interest- earning assets .... 5,822,075 6,951,640 12,773,715 Total average assets ...... ¥46,429,446 ¥55,768,463 ¥102,197,909

(1) Loan amounts include non-accrual and restructured loans. (2) The amounts arising from lending and borrowing activities between domestic and international operations are offset.

A-20 Loans The following table sets forth the Bank’s loans outstanding (including bills discounted) classiﬁed by class of collateral as of the dates indicated: As of March 31, 2000 As of March 31, 2001 Sakura Sumitomo Sakura Sumitomo Bank Bank Combined Bank Bank Combined (millions of yen, except percentages) Class of collateral: Securities ...... ¥ 466,011 ¥ 404,339 ¥ 870,350 1.37%¥ 349,829 ¥ 610,862 ¥ 960,691 1.55% Commercial claims ...... 726,271 671,998 1,398,270 2.21 654,906 638,724 1,293,632 2.10 Commodities ...... 5,805 2,629 8,434 0.01 14,425 1,311 15,736 0.03 Real estate ...... 5,969,048 5,086,535 11,055,583 17.47 5,519,713 4,899,404 10,419,117 16.87 Other ...... 363,930 564,479 928,409 1.47 176,027 379,653 555,680 0.90 Total secured loans ...... 7,531,067 6,729,983 14,261,050 22.53 6,714,903 6,529,958 13,244,861 21.45 Guaranteed(1) ...... 14,575,126 11,344,309 25,919,435 40.95 13,982,765 10,923,896 24,906,661 40.34 Unsecured ...... 9,833,758 13,284,267 23,118,025 36.52 9,877,829 13,718,527 23,596,356 38.21 Total(**) ...... ¥31,939,952 ¥31,358,560 ¥63,298,512 100.00%¥30,575,498 ¥31,172,382 ¥61,747,880 100.00%

(**) In the items marked (**) the figures of Sakura Bank and Sumitomo Bank are derived from the respective audited financial statements. (1) Including housing loans guaranteed by SMBC Guarantee Company and SUMIGIN GUARANTEE COMPANY. These are not categorized as guaranteed loans in the Bank’s consolidated financial statements.

Domestic Lending The following table shows the outstanding loans (including bills discounted) of the Bank’s domestic offices, before deduction of reserves for possible loan losses, as of the dates indicated. Classification of loans by industry is based on industry segment loan classifications as defined by the Bank of Japan for regulatory reporting purposes and is not necessarily based on use of loan proceeds.

As of March 31, 2000 As of March 31, 2001 Sakura Bank Sumitomo Bank Combined Sakura Bank Sumitomo Bank Combined (millions of yen, except percentages) Domestic Ofﬁces(1): Manufacturing ...... 3,915,347 13.39%3,503,080 12.63%¥7,418,427 13.02%3,904,954 13.94%3,550,436 12.90%¥7,455,390 13.42% Agriculture, Forestry, Fishing and Mining . . . 208,717 0.71 62,571 0.23 271,288 0.48 129,915 0.46 58,906 0.21 188,821 0.34 Construction ...... 1,554,587 5.32 1,643,547 5.92 3,198,134 5.61 1,392,438 4.97 1,536,723 5.58 2,929,161 5.27 Wholesale and retail .... 4,342,496 14.85 3,529,773 12.72 7,872,269 13.81 4,119,667 14.70 3,511,471 12.75 7,631,138 13.74 Financial and insurance . . 2,533,877 8.66 2,325,102 8.38 4,858,979 8.53 2,534,110 9.05 2,316,069 8.41 4,850,179 8.73 Real Estate ...... 4,397,180 15.04 4,318,381 15.56 8,715,561 15.29 4,664,247 16.65 4,557,995 16.56 9,222,242 16.60 Transportation, communication and other public enterprises ...... 1,635,050 5.59 1,213,159 4.37 2,848,209 5.00 1,590,162 5.68 1,392,034 5.06 2,982,196 5.37 Services ...... 3,026,554 10.35 4,481,351 16.15 7,507,905 13.17 2,616,772 9.34 4,103,634 14.90 6,720,406 12.10 Municipalities ...... 332,396 1.14 104,263 0.38 436,659 0.77 222,230 0.79 81,823 0.30 304,143 0.55 Other ...... 7,298,431 24.95 6,564,674 23.66 13,863,105 24.32 6,843,319 24.42 6,424,205 23.33 13,267,524 23.88 Total ...... 29,244,635 100.00%27,745,905 100.00%¥56,990,540 100.00%28,017,904 100.00%27,533,299 100.00%¥55,551,203 100.00%

(1) The above ﬁgures exclude Tokyo offshore accounts for international ﬁnancial transactions.

A-21 The following table shows a breakdown of the Bank’s domestic loan portfolio by type of borrower as of the dates indicated:

As of March 31, 2000 As of March 31, 2001 Sakura Bank Sumitomo Bank Combined Sakura Bank Sumitomo Bank Combined (millions of yen, except percentages) Individuals ...... 7,010.5 24.0%6,180.2 22.3%¥13,190.7 23.1%6,580.5 23.5%5,954.5 21.6%¥12,535.0 22.6% Small and medium-sized enterprises ...... 14,249.5 48.7 14,018.8 50.5 28,268.3 49.6 14,223.8 50.8 13,712.4 49.8 27,936.2 50.2 Large corporations(1) ...... 7,984.6 27.3 7,546.9 27.2 15,531.4 27.3 7,213.6 25.7 7,866.4 28.6 15,079.9 27.2 Total ...... 29,244.6 100.00%27,745.9 100.00%¥56,990.5 100.0%28,017.9 100.00%27,533.3 100.00%¥55,551.2 100.0%

(1) Includes medium-sized enterprises with a capital stock of more than ¥300 million or with more than 300 employees.

The following table sets forth the Bank’s short-term and long-term prime rates (old basis and new basis) for the ﬁscal years indicated.

As of As of As of As of March 31, 1998 March 31, 1999 March 31, 2000 March 31, 2001 Sakura Sumitomo Sakura Sumitomo Sakura Sumitomo Sakura Sumitomo Bank Bank Bank Bank Bank Bank Bank Bank Short-term prime rate ...... 1.625%1.625% 1.375%1.375% 1.375%1.375% 1.375%1.375% Long-term prime rate (new basis) ...... 2.125 2.125 1.875 1.875 1.875 1.875 1.875 1.875 Long-term prime rate (old basis) ...... 2.6 2.6 2.6 2.6 2.2 2.2 1.9 1.9

Overseas Lending The following table shows the outstanding loans (including bills discounted) of the Bank’s overseas ofﬁces, before deduction of reserves for possible loan losses, as of the dates indicated, classiﬁed according to type of borrower:

As of March 31, 2000 As of March 31, 2001 Sakura Sakura Bank Sumitomo Bank Combined Bank Sumitomo Bank Combined (millions of yen, except percentages) Overseas Ofﬁces(1) Public sector ...... ¥ 48,494 1.80%¥ 159,359 4.41%¥ 207,853 3.30%¥ 60,746 2.38%¥ 203,275 5.59%¥ 264,021 4.26% Financial institutions .... 144,389 5.36 289,080 8.00 433,469 6.87 111,235 4.35 267,529 7.35 378,764 6.11 Commerce and industry ...... 2,432,434 90.24 3,162,658 87.55 5,595,092 88.70 2,320,569 90.73 3,167,650 87.04 5,488,219 88.57 Other ...... 69,998 2.60 1,556 0.04 71,554 1.13 65,042 2.54 627 0.02 65,669 1.06 Total ...... ¥2,695,317 100.00%¥3,612,655 100.00%¥6,307,972 100.00%¥2,557,594 100.00%¥3,639,082 100.00%¥6,196,676 100.00%

(1) The above ﬁgures include Tokyo offshore accounts for international ﬁnancial transactions.

A-22 Credit Costs The following table shows an analysis of the Bank’s credit costs for each of the periods indicated:

Year ended March 31, 2000 Year ended March 31, 2001 Sumitomo Sumitomo Sakura Bank Bank Combined Sakura Bank Bank Combined (millions of yen, except percentages) Write-off of loans . . . ¥ 113,381 ¥ 347,350 ¥ 460,731 ¥ 240,536 ¥ 500,896 ¥ 741,432 Transfer to specific reserve ...... 194,715 253,060 447,775 9,793 146,703 156,496 Transfer to reserve for losses on loans sold ...... 55,466 17,299 72,765 33,864 19,053 52,917 Losses on loans sold to CCPC ...... 37,105 7,651 44,756 20,367 11,378 31,745 Losses on sale of delinquent loans . . 14,162 19,608 33,770 8,520 16,588 25,108 Losses on financial support for associated companies ...... 35,216 — 35,216 — — — Transfer from loan loss reserve for specific overseas countries ...... (2,626) (3,127) (5,753) 3,991 (3,993) (2) Transfer to general reserve for possible loan losses ...... (14,625) 38,860 24,235 (55,975) (132,621) (188,596) Total ...... ¥ 432,797 ¥ 680,701 ¥ 1,113,498 ¥ 261,098 ¥ 558,005 ¥ 819,103 Loans and bills discounted (period end)(*) ...... 31,939,952 31,358,560 63,298,512 30,575,498 31,172,382 61,747,880 Ratio of total loan losses to loans and bills discounted . . . 1.36%2.17% 1.76%0.85%1.79%1.33%

(*) Figures of Sumitomo Bank in the items marked with (*) are ﬁgures derived from the audited ﬁnancial statements.

A-23 Reserves

The following table shows the changes in the Bank’s reserves for possible loan losses as of the dates indicated:

As of March 31, 2000 As of March 31, 2001 Sakura Sumitomo Sakura Sumitomo Bank Bank Combined Bank Bank Combined (millions of yen, except percentages) Reserves for possible loan losses at beginning of fiscal year ended ...... 735,562 1,052,958 ¥1,788,520 660,454 909,039 ¥1,569,493 Foreign currency translation adjustment ...... (3,639) (7,760) (11,399) (1,529) 9,670 8,141 Charge-offs to specific reserves for possible loan losses ...... (226,676) (428,367) (655,043) (193,454) (253,320) (446,774) Aggregate additions to reserves ...... 155,208 292,209 447,417 (40,671) 5,653 (35,018) Reserves for possible loan losses at end of fiscal year ended(*) . . 660,454 909,039 1,569,493 424,799 671,042 1,095,841 General reserves ...... 198,802 357,574 556,376 142,826 224,953 367,779 Specific reserves ...... 454,002 539,114 993,116 270,342 437,731 708,073 Reserves for specific overseas loan losses ...... 7,650 12,351 20,001 11,631 8,358 19,989 Loans and bills discounted(*) . . . 31,939,952 31,358,560 63,298,512 30,575,498 31,172,382 61,747,880 Reserves for possible loan losses as a percentage of loans and bills discounted ...... 2.06 2.89 2.47%1.38 2.15 1.77% Specific reserve as a percentage of bankrupt loans and non- accrual loans ...... 37.1 35.7 36.3 26.4 30.9 28.9

(*) Figures of Sumitomo Bank in the items marked with (*) are ﬁgures derived from the audited ﬁnancial statements.

Disclosure of Problem Assets Under the Financial Reconstruction Law The following tables sets forth the Bank’s disclosure as to the quality of its loan portfolio and other extensions of credit, in the disclosure categories required under the Financial Reconstruction Law and the corresponding amount of speciﬁc reserves for each category, as of March 31, 2000 and 2001.

As of March 31, 2000 As of March 31, 2001 Sakura Sumitomo Sakura Sumitomo Bank Bank Combined Bank Bank Combined (billions of yen) Non-consolidated Bankrupt and quasi-bankrupt assets (Hasan kousei saiken tou)...... ¥ 394.7 ¥ 190.8 ¥ 585.5 ¥ 390.9 ¥ 199.0 ¥ 589.9 Doubtful assets (Kiken saiken) ..... 880.8 1,351.2 2,232.0 679.7 1,263.5 1,943.1 Substandard loans (Youkanri saiken)...... 448.0 375.0 823.0 190.3 99.1 289.4 Total problem assets ...... 1,723.5 1,917.0 3,640.5 1,260.9 1,561.6 2,822.5 Normal assets (Seijou saiken)...... 33,184.9 32,849.8 66,034.7 32,302.5 33,855.3 66,157.8 Total ...... ¥34,908.4 ¥34,766.8 ¥69,675.2 ¥33,563.4 ¥35,416.9 ¥68,980.3

A-24 As of March 31, 2000 As of March 31, 2001 Sakura Sumitomo Sakura Sumitomo Bank Bank Combined Bank Bank Combined (billions of yen, except percentages) Bankrupt and quasi-bankrupt assets: Secured by collateral or guarantees ...... 370.8 185.7 ¥ 556.5 368.9 188.2 ¥ 557.1 Fully reserved ...... 23.8 5.1 28.9 22.0 10.8 32.8 Reserve for possible loan losses ...... 23.8 8.3 32.1 23.6 14.2 37.8 Reserve ratio ...... 100.0%100.0% 100.0%100.0%100.0% 100.0% Doubtful assets: Secured by collateral or guarantees ...... 343.0 388.6 ¥ 731.6 334.3 494.1 ¥ 828.4 Necessary amount to be reserved ...... 537.7 962.6 1,500.3 345.4 769.4 1,114.8 Reserve for possible loan losses ...... 377.4 530.8 908.2 246.2 419.2 665.4 Reserve ratio ...... 70.2%55.1% 60.5%71.3%54.5% 59.7%

As of March 31, 2001 Sakura Sumitomo Consolidated Bank Bank Combined (billions of yen) Bankrupt and quasi-bankrupt assets (Hasan kousei saiken tou)...... 489.6 287.8 ¥ 777.3 Doubtful assets (Kiken saiken) ...... 803.2 1,363.2 2,166.4 Substandard loans (Youkanri saiken)...... 227.3 184.0 411.2 Total problem assets ...... 1,520.1 1,834.9 3,355.0 Normal assets (Seijou saiken)...... 34,704.2 33,586.3 68,290.6 Total ...... 36,224.3 35,421.2 ¥71,645.6

Disclosure of Risk-Monitored Loans Under the Banking Law

The following table sets forth the Bank’s risk monitored loans for the ﬁscal years ended March 31, 2000 and 2001: As of March 31, 2000 As of March 31, 2001 Sakura Sumitomo Sakura Sumitomo Bank Bank Combined Bank Bank Combined (billions of yen) Bankrupt loans ...... ¥ 156.6 ¥ 73.0 ¥ 229.6 ¥ 174.8 ¥ 60.8 ¥ 235.7 Non-accrual loans ...... 1,067.7 1,436.1 2,503.8 849.9 1,357.6 2,207.5 Past due loans (3 months or more) ...... 35.3 40.3 75.6 65.7 37.5 103.2 Restructured loans ...... 412.7 334.7 747.4 124.6 61.6 186.2 Total risk-monitored loans ...... ¥1,672.4 ¥1,884.1 ¥3,556.5 ¥1,215.1 ¥1,517.5 ¥2,732.6

Loans to Speciﬁc Overseas Countries

The following table sets forth the Bank’s exposure to speciﬁc overseas countries. As of March 31, 2000 As of March 31, 2001 Sakura Sumitomo Sakura Sumitomo Bank Bank Combined Bank Bank Combined (billions of yen) Indonesia ...... ¥116.2 ¥59.8 ¥176.0 ¥124.2 ¥60.4 ¥184.6 Argentina ...... — — — — — — Algeria ...... 0.2 4.4 4.5 0.2 4.3 4.5 Other ...... 5.9 1.3 7.2 3.3 0.5 3.8 ¥122.3 ¥65.4 ¥187.7 ¥127.7 ¥65.2 ¥192.9 Number of countries ...... 10 10 14 6 6 9

A-25 Securities-Related Activities Securities Portfolio The following table shows the total composition and maturity of Sakura Bank’s investment securities portfolio as of the dates indicated: As of March 31, 2001 More than More than More than More than One Year One Year to Three Years Five Years to Seven Years Over Ten Unspeciﬁed or Less Three Years to Five Years Seven Years to Ten Years Years Term Total (%) (millions of yen, except percentages) Japanese government bonds ...... ¥2,343,951 ¥ 639,739 ¥ 833,779 ¥ 76,139 ¥ 775,428 ¥ 0 ¥ — ¥ 4,669,037 45.8% Japanese local government bonds(1) ...... 2,271 0 26 2,997 91 0 — 5,387 0.1 Japanese corporate bonds(1)(2) ..... 22,492 126,313 198,977 54,145 56,076 0 — 458,005 4.5 Japanese corporate stocks ...... — — — — — — 3,994,883 3,994,883 39.1 Others(3) ...... 358,684 125,752 138,177 60,873 85,831 146,528 156,505 1,072,354 10.5 Foreign bonds ...... 354,120 106,603 109,950 33,377 65,686 141,797 0 811,535 8.0 Foreign stocks ...... — — — — — — 153,195 153,195 1.5 Total ...... ¥2,727,398 ¥ 891,804 ¥1,170,959 ¥194,154 ¥ 917,426 ¥146,528 ¥4,151,388 ¥10,199,669 100%

The following table shows the total composition and maturity of Sumitomo Bank’s investment securities portfolio as of the dates indicated: As of March 31, 2001 More than More than More than More than One Year One Year to Three Years Five Years to Seven Years Over Ten Unspeciﬁed or Less Three Years to Five Years Seven Years to Ten Years Years Term Total (%) (millions of yen, except percentages) Japanese government bonds ...... ¥4,676,556 ¥3,496,121 ¥ 673,742 ¥406,071 ¥1,349,574 ¥ 0 ¥ — ¥10,602,067 62.9% Japanese local government bonds(1) ...... 22,532 30,372 24,161 55,674 184,561 563 — 317,865 1.9 Japanese corporate bonds(1)(2) ..... 109,709 93,249 169,380 33,815 128,263 3,000 — 537,418 3.2 Japanese corporate stocks ...... — — — — — — 3,172,776 3,172,776 18.8 Others(3) ...... 112,080 551,913 305,154 38,344 100,879 351,412 770,395 2,230,181 13.2 Foreign bonds ...... 107,027 551,671 304,997 35,708 91,404 351,412 0 1,442,222 8.6 Foreign stocks ...... — — — — — — 766,501 767,501 4.6 Total ...... ¥4,920,877 ¥4,171,655 ¥1,172,437 ¥533,904 ¥1,763,277 ¥354,975 ¥3,943,171 ¥16,860,309 100%

The following table shows the total composition and maturity of the combined investment securities portfolio as of the dates indicated: As of March 31, 2001 More than More than More than More than One Year One Year to Three Years Five Years to Seven Years Over Ten Unspeciﬁed or Less Three Years to Five Years Seven Years to Ten Years Years Term Total (%) (millions of yen, except percentages) Japanese government bonds ...... ¥7,020,507 ¥4,135,860 ¥1,507,521 ¥482,210 ¥2,125,002 — — ¥15,271,104 56.4% Japanese local government bonds(1) ...... 24,803 30,372 24,187 58,671 184,652 ¥ 563 — 323,252 1.2 Japanese corporate bonds(1)(2) ..... 132,201 219,562 368,357 87,960 184,339 3,000 — 995,423 3.7 Japanese corporate stocks ...... — — — — — — ¥7,167,659 7,167,659 26.5 Others(3) ...... 470,764 677,665 443,331 99,217 186,710 497,940 926,900 3,302,535 12.2 Foreign bonds ...... 461,147 658,274 414,947 69,085 157,090 493,209 — 2,253,757 8.3 Foreign stocks ...... — — — — — — 920,696 920,696 3.4 Total ...... ¥7,648,275 ¥5,063,459 ¥2,343,396 ¥728,058 ¥2,680,703 ¥501,503 ¥8,094,559 ¥27,059,978 100.0%

(1) Many of the corporate bonds and some of the Japanese local government bonds held by the Bank are not listed on an established market and are, therefore, recorded at cost. (2) Includes, in addition to corporate bonds, bonds guaranteed by the government of Japan and bank debenture. (3) Includes foreign securities such as non-yen denominated securities, yen denominated securities issued outside Japan and yen denominated securities of non-Japanese issuers issued in Japan.

A-26 The following table shows the total composition and maturity of the Sakura Bank’s investment securities portfolio as of the dates indicated: As of March 31, 2000 More than One Year More than More than More than One Year to Three Three Years to Five Years to Seven Years to Over Ten Unspeciﬁed or Less Years Five Years Seven Years Ten Years Years Term Total (%) (millions of yen, except percentages) Japanese government bonds ...... ¥441,852 ¥200,854 ¥581,518 ¥172,449 ¥447,727 ¥ — ¥ — ¥1,844,402 26.7% Japanese local government bonds(1) ...... 264 2,292 26 2,997 129,083 — — 134,665 2.0 Japanese corporate bonds(1)(2) ...... 57,764 65,657 148,379 74,423 59,717 9,004 — 414,946 6.0 Japanese corporate stocks . . — — — — — — 3,546,345 3,546,345 51.3 Others(3) ...... 197,216 209,107 55,912 41,267 103,083 181,049 167,829 955,468 13.8 Foreign bonds ...... 183,578 181,767 33,674 14,341 75,822 175,291 — 664,478 9.6 Foreign stocks ...... — — — — — — 167,829 167,829 2.4 Securities lent ...... 663 993 668 — — — 13,451 15,775 0.2 Total ...... 697,759 478,903 786,503 291,136 739,610 190,053 3,727,625 6,911,602 100

The following table shows the total composition and maturity of Sumitomo Bank’s investment securities portfolio as of the dates indicated: As of March 31, 2000 More than One One Year More than More than More than Year or to Three Three Years to Five Years to Seven Years to Over Ten Unspeciﬁed Less Years Five Years Seven Years Ten Years Years Term Total (%) (millions of yen, except percentages) Japanese government bonds ...... ¥745,746 ¥1,314,828 ¥405,022 ¥513,221 ¥468,403 ¥ — ¥ — ¥3,447,223 38.4% Japanese local government bonds(1) ...... 24,709 43,695 20,285 25,784 241,991 566 — 357,033 4.0 Japanese corporate bonds(1)(2) ...... 252,305 170,249 64,455 44,690 85,179 — — 616,881 6.9 Japanese corporate stocks . . — — — — — — 3,427,261 3,427,261 38.1 Others(3) ...... 88,026 141,185 89,199 35,349 63,304 95,359 621,380 1,133,805 12.6 Foreign bonds ...... 84,827 135,987 89,136 34,458 57,992 95,359 — 497,761 5.5 Foreign stocks ...... — — — — — — 598,494 598,494 6.7 Securities lent ...... — 30 9 — — — — 39 0.0 Total ...... 1,110,786 1,669,987 578,970 619,044 858,877 95,925 4,048,641 8,982,244 100

A-27 The following table shows the total composition and maturity of the combined investment securities portfolio as of the dates indicated: As of March 31, 2000 More than One Year More than More than More than One Year to Three Three Years to Five Years to Seven Years to Over Ten Unspeciﬁed or Less Years Five Years Seven Years Ten Years Years Term Total (%) (millions of yen, except percentages) Japanese government bonds ...... ¥1,187,598 ¥1,515,682 ¥ 986,540 ¥685,670 ¥ 916,130 — — ¥ 5,291,625 33.3% Japanese local government bonds(1) . . 24,973 45,987 20,311 28,781 371,074 ¥ 566 — 491,698 3.0 Japanese corporate bonds(1)(2) ...... 310,069 235,906 212,834 119,113 144,896 9,004 — 1,031,827 6.5 Japanese corporate stocks ...... — — — — — — ¥6,973,606 6,973,606 43.9 Others(3) ...... 285,242 350,292 145,111 76,616 166,387 276,408 789,209 2,089,273 13.2 Foreign bonds .... 268,405 317,754 122,810 48,799 133,814 270,650 — 1,162,239 7.3 Foreign stocks .... — — — — — — 766,323 766,323 4.8 Securities lent ...... 663 1,023 677 — — — 13,451 15,814 0.1 Total ...... ¥1,808,545 ¥2,148,890 ¥1,365,473 ¥910,180 ¥1,598,487 ¥285,978 ¥7,776,266 ¥15,893,846 100.0%

A-28 The following tables show the book value and market value of, and the unrealized gain or loss on, the Bank’s investment securities portfolio as of the dates indicated. Unlisted securities without market value are not reﬂected in these tables.

March 31, 2000 Balance Market Net unrealized Unrealized Unrealized Sakura Bank sheet amount value gains (losses) gains losses (millions of yen) Listed Securities Corporate and Government bonds ...... ¥ 465,599 ¥ 440,537 ¥ (25,061) ¥ 2,909 ¥ 27,971 Corporate Stocks ...... 3,310,493 3,932,903 622,410 1,007,438 385,027 Other ...... 438,246 444,587 6,340 18,396 12,056 Listed Securities Total ...... 4,214,339 4,818,028 603,689 1,028,744 425,055 Unlisted Securities with Market Value Corporate and Government Bonds ...... 1,531,429 1,528,635 (2,793) 4,355 7,149 Corporate Stocks ...... 33,154 93,656 60,502 68,164 7,662 Other ...... 28,160 29,562 1,401 2,632 1,230 Unlisted Securities Total ...... 1,592,743 1,651,853 59,110 75,152 16,042 Total ...... ¥5,807,082 ¥6,469,881 ¥662,799 ¥1,103,896 ¥441,097

March 31, 2000 Balance Market Net unrealized Unrealized Unrealized Sumitomo Bank sheet amount value gains (losses) gains losses (millions of yen) Listed Securities Corporate and Government bonds ...... ¥ 836,315 ¥ 830,280 ¥ (6,034) ¥ 21,935 ¥ 27,970 Corporate Stocks ...... 3,099,624 3,947,132 847,508 1,159,552 312,044 Other ...... 263,251 259,722 (3,529) 1,602 5,131 Listed Securities Total ...... 4,199,190 5,037,135 837,944 1,183,091 345,146 Unlisted Securities with Market Value Corporate and Government Bonds ...... 3,080,230 3,085,671 5,440 11,753 6,312 Corporate Stocks ...... 33,739 90,705 56,966 62,380 5,414 Other ...... 8,509 9,514 1,004 2,032 1,027 Unlisted Securities Total ...... 3,122,478 3,185,890 63,412 76,167 12,755 Total ...... ¥7,321,668 ¥8,223,025 ¥901,356 ¥1,259,258 ¥357,901

March 31, 2000 Balance sheet Market Net unrealized Unrealized Unrealized Combined amount value gains (losses) gains losses (millions of yen) Listed Securities Corporate and Government bonds ...... ¥ 1,301,914 ¥ 1,270,817 ¥ (31,095) ¥ 24,844 ¥ 55,941 Corporate Stocks ...... 6,410,117 7,880,035 1,469,918 2,166,990 697,071 Other ...... 701,497 704,309 2,811 19,998 17,187 Listed Securities Total ...... 8,413,529 9,855,163 1,441,633 2,211,835 770,201 Unlisted Securities with Market Value Corporate and Government Bonds ...... 4,611,659 4,614,306 2,647 16,108 13,461 Corporate Stocks ...... 66,893 184,361 117,468 130,544 13,076 Other ...... 36,669 39,076 2,405 4,664 2,257 Unlisted Securities Total ...... 4,715,221 4,837,743 122,522 151,319 28,797 Total ...... ¥13,128,750 ¥14,692,906 ¥1,564,155 ¥2,363,154 ¥798,998

A-29 Derivatives

(1) Interest Rate Derivatives As of March 31, 2001 Contract Amount (Over 1 year) Market Value Net Gains/(Losses) Sakura Sumitomo Sakura Sumitomo Sakura Sumitomo Sakura Sumitomo Bank Bank Combined Bank Bank Combined Bank Bank Combined Bank Bank Combined (millions of yen) Transactions Listed on Exchange: Interest rate futures .... ¥ 110,061 ¥ 6,770,871 ¥ 6,880,932 — 503,515 ¥ 503,515 521 8,554 ¥ 9,075 ¥ 521 8,554 ¥ 9,075 Interest rate options .... 2,632,827 358,020 2,990,847 — — — (333) (4) (337) 1,042 (4) 1,038 Over-the-Counter Transactions: Forward rate agreements ...... 1,350,372 1,223,000 2,573,372 10,000 — 10,000 (1,235) 23 (1,212) (1,235) 23 (1,212) Interest rate swaps ..... 69,258,463 101,272,734 170,531,197 41,245,937 65,775,820 107,021,757 (30,049) (53,066) (83,115) (30,049) (53,066) (83,115) Others ...... 2,221,722 3,859,927 6,081,649 1,834,906 2,713,405 4,548,311 3,875 2,142 6,017 11,534 2,142 13,676

Total ...... (27,221) (42,349) ¥(69,570) (18,186) (42,349) ¥(60,535)

(2) Currency Derivatives As of March 31, 2001 Contract Amount (Over 1 year) Market Value Net Gains/(Losses) Sakura Sumitomo Sakura Sumitomo Sakura Sumitomo Sakura Sumitomo Bank Bank Combined Bank Bank Combined Bank Bank Combined Bank Bank Combined (millions of yen) Over-the- Counter Transactions: Currency swaps ...... ¥3,651,958 ¥ 2,486,772 ¥6,138,730 ¥2,868,206 ¥ 282,620 ¥3,150,826 ¥ 8,460 ¥(5,251) ¥3,209 ¥ 8,460 ¥(5,251) ¥3,209 Others ...... — — — — — — — — — — — —

Total ...... ¥ 8,460 ¥(5,251) ¥3,209 ¥ 8,460 ¥(5,251) ¥3,209

Contract amount of currency swaps which are valued at the balance sheet date:

Contract Amount As of March 31, 2001 Sakura Sumitomo Bank Bank Combined (millions of yen) Over-the-Counter Transactions: Forward foreign exchange ...... ¥9,890,063 ¥47,998,003 ¥57,888,066 Currency options ...... 1,379,832 3,483,464 4,863,296

A-30 (3) Equity Derivatives As of March 31, 2001 Net Contract (Over 1 Market Gains/ Sakura Bank Amount year) Value (Losses) (millions of yen) Over-the-Counter Transactions: Equity options ...... ¥— ¥— ¥— ¥— Equity price index swaps ...... — — — — Others ...... — — — — Total ...... ¥— ¥—

As of March 31, 2001 Net Contract (Over 1 Market Gains/ Sumitomo Bank Amount year) Value (Losses) (millions of yen) Over-the-Counter Transactions: Equity options ...... ¥— ¥— ¥— ¥— Equity price index swaps ...... — — — — Others ...... 875 — 0 0 Total ...... ¥ 0 ¥ 0

As of March 31, 2001 Net Contract (Over 1 Market Gains/ Combined Amount year) Value (Losses) (millions of yen) Over-the-Counter Transactions: Equity options ...... — — — — Equity price index swaps ...... — — — — Others ...... ¥875 — ¥ 0 ¥ 0 Total ...... ¥ 0 ¥ 0

A-31 (4) Bond Derivatives As of March 31, 2001 Net Contract (Over 1 Market Gains/ Sakura Bank Amount year) Value (Losses) (millions of yen) Transactions Listed on Exchange: Bond futures ...... ¥ — ¥ — ¥— ¥— Bond options ...... — — — — Over-the-Counter Transactions: Bond options ...... — — — — Total ...... ¥— ¥—

As of March 31, 2001 Net Contract (Over 1 Market Gains/ Sumitomo Bank Amount year) Value (Losses) (millions of yen) Transactions Listed on Exchange: Bond futures ...... ¥2,000 ¥2,000 ¥ 8 ¥ 8 Bond options ...... — — — — Over-the-Counter Transactions: Bond options ...... — — — — Total ...... ¥ 8 ¥ 8

As of March 31, 2001 Net Contract (Over 1 Market Gains/ Combined Amount year) Value (Losses) (millions of yen) Transactions Listed on Exchange: Bond futures ...... ¥2,000 ¥2,000 ¥ 8 ¥ 8 Bond options ...... — — — — Over-the-Counter Transactions: Bond options ...... — — — — Total ...... ¥ 8 ¥ 8

A-32 (5) Commodity Derivatives

As of March 31, 2001 Contract (Over Market Net Gains/ Sakura Bank Amount 1 year) Value (Losses) (millions of yen) Over-the-Counter Transactions: Commodity Swaps ...... ¥ — ¥ — ¥— ¥— Commodity options ...... — — — — Total ...... ¥— ¥—

As of March 31, 2001 Contract (Over Market Net Gains/ Sumitomo Bank Amount 1 year) Value (Losses) (millions of yen) Over-the-Counter Transactions: Commodity Swaps ...... ¥ — ¥ — ¥— ¥— Commodity options ...... 5,414 5,414 51 51 Total ...... ¥ 51 ¥ 51

As of March 31, 2001 Contract (Over Market Net Gains/ Combined Amount 1 year) Value (Losses) (millions of yen) Over-the-Counter Transactions: Commodity Swaps ...... — — — — Commodity options ...... ¥5,414 ¥5,414 ¥ 51 ¥ 51 Total ...... ¥ 51 ¥ 51

A-33 (6) Credit Derivatives

As of March 31, 2001 Contract (Over Market Net Gains/ Sakura Bank Amount 1 year) Value (Losses) (millions of yen) Over-the-Counter Transactions: Credit Default Options ...... ¥ — ¥ — ¥ — ¥ — Other ...... 294 — 2 2 Total ...... ¥ 2 ¥ 2

As of March 31, 2001 Contract (Over Market Net Gains/ Sumitomo Bank Amount 1 year) Value (Losses) (millions of yen) Over-the-Counter Transactions: Credit Default Options ...... ¥ — ¥ — ¥ — ¥ — Other ...... 29,000 14,500 (8,291) (8,291) Total ...... ¥(8,291) ¥(8,291)

As of March 31, 2001 Contract (Over Market Net Gains/ Combined Amount 1 year) Value (Losses) (millions of yen) Over-the-Counter Transactions: Credit Default Options ...... — — — — Other ...... ¥29,294 ¥14,500 ¥(8,289) ¥(8,289) Total ...... ¥(8,289) ¥(8,289)

A-34 INDEX TOTHE FINANCIAL STATEMENTS

Page Report of Independent Certified Public Accountants on the Non-Consolidated Financial Statements of the Bank as of and for the year ended March 31, 2002 ...... F-2 Non-Consolidated Financial Statements of the Bank as of and for the year ended March 31, 2002 .... F-3 Unaudited Consolidated Financial Statements of the Bank as of and for the year ended March 31, 2002 ...... F-26 Consolidated Financial Statements of Sakura Bank as of and for the years ended March 31, 2001 and 2000 ...... F-39 Report of Independent Certified Public Accountants on the Consolidated Financial Statements of Sakura Bank as of and for the years ended March 31, 2001 and 2000 ...... F-85 Unaudited Non-Consolidated Financial Statements of Sakura Bank as of and for the years ended March 31, 2001 and 2000 ...... F-87 Consolidated Financial Statements of Sumitomo Bank as of and for the years ended March 31, 2001 and 2000(*) ...... F-90 Report of Independent Certified Public Accountants on the Consolidated Financial Statements of Sumitomo Bank as of and for the years ended March 31, 2001 and 2000 ...... F-145

(*) Non-Consolidated Financial Statements of Sumitomo Bank as of and for the year ended March 31, 2001 and 2000 (included as Note 34 to the Consolidated Financial Statements of Sumitomo Bank as of and for such years) ...... F-143

F-1 Report of Independent Public Accountants

To The Board of Directors of Sumitomo Mitsui Banking Corporation

We have audited the accompanying non-consolidated balance sheet of Sumitomo Mitsui Banking Corporation as of March 31, 2002, and the related non-consolidated statements of income and stockholders’ equity for the year then ended, expressed in Japanese yen. Our audit was made in accordance with generally accepted auditing standards in Japan and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.

In our opinion, the non-consolidated ﬁnancial statements referred to above present fairly the non-consolidated ﬁnancial position of Sumitomo Mitsui Banking Corporation as of March 31, 2002, and the non-consolidated results of its operations for the year then ended in conformity with accounting principles generally accepted in Japan (Note 1) applied on a basis consistent with that of the preceding year, except as noted in the following paragraph.

As explained in Note 2, effective April 1, 2001, Sumitomo Mitsui Banking Corporation prospectively adopted the accounting standard for ﬁnancial instruments on Other securities.

Also, in our opinion, the U.S. dollar amounts in the accompanying non-consolidated ﬁnancial statements have been translated from Japanese yen on the basis set forth in Note 1.

Asahi & Co. Tokyo, Japan May 20, 2002

F-2 NON-CONSOLIDATED FINANCIAL STATEMENTS OF SUMITOMO MITSUI BANKING CORPORATION NON-CONSOLIDATED BALANCE SHEET MARCH 31, 2002

Millions of U.S. Millions of Yen dollars (Note 1) 2002 2002 Assets Cash and due from banks ...... ¥ 1,871,121 $ 14,042 Deposits with banks ...... 3,587,308 26,922 Call loans and bills bought ...... 620,406 4,656 Receivables under resale agreements ...... 432,730 3,247 Commercial paper and other debt purchased ...... 146,650 1,101 Trading assets ...... 2,705,648 20,305 Money held in trust ...... 33,858 254 Securities ...... 20,442,996 153,418 Loans and bills discounted ...... 59,928,368 449,744 Foreign exchanges ...... 779,142 5,847 Other assets ...... 5,344,106 40,106 Premises and equipment ...... 890,981 6,687 Deferred tax assets ...... 1,741,114 13,066 Customers’ liabilities for acceptances and guarantees ...... 5,529,996 41,501 Reserve for possible loan losses ...... (1,971,849) (14,798) Total assets ...... ¥102,082,581 $766,098 Liabilities and stockholders’ equity Liabilities Deposits ...... ¥ 67,629,353 $507,537 Call money and bills sold ...... 10,752,791 80,696 Payables under repurchase agreements ...... 1,100,446 8,258 Commercial paper ...... 1,001,000 7,512 Trading liabilities ...... 1,797,086 13,487 Borrowed money ...... 3,406,286 25,563 Foreign exchanges ...... 300,162 2,253 Bonds ...... 2,133,754 16,013 Convertible bonds ...... 1,106 8 Other liabilities ...... 4,962,176 37,240 Reserve for employee bonuses ...... 11,342 85 Reserve for employee retirement beneﬁts ...... 116,854 877 Reserve for possible losses on loans sold ...... 80,576 605 Other reserves ...... 18 0 Deferred tax liabilities for land revaluation ...... 63,137 474 Acceptances and guarantees ...... 5,529,996 41,501 Total liabilities ...... ¥ 98,886,088 $742,109 Stockholders’ equity Preferred stock; authorized 970,000,000 shares and issued 967,000,000 shares . . ¥ 650,500 $ 4,882 Common stock; authorized 15,000,000,000 shares and issued 5,708,989,836 shares ...... 676,246 5,075 Capital surplus ...... 1,326,758 9,957 Land revaluation excess ...... 100,346 753 Retained earnings ...... 740,874 5,560 Net unrealized losses on other securities ...... (297,950) (2,236) Treasury stock ...... (283) (2) Total stockholders’ equity ...... ¥ 3,196,492 $ 23,989 Total liabilities and stockholders’ equity ...... ¥102,082,581 $766,098

See accompanying notes.

F-3 SUMITOMO MITSUI BANKING CORPORATION NON-CONSOLIDATED STATEMENT OF INCOME YEAR ENDED MARCH 31, 2002

Millions of U.S. Millions of Yen dollars (Note 1) 2002 2002 Income Interest income: Interest on loans and discounts ...... ¥1,261,307 $ 9,466 Interest and dividends on securities ...... 504,732 3,788 Other interest income ...... 426,920 3,204 Fees and commissions ...... 239,645 1,799 Trading proﬁts ...... 121,414 911 Other operating income ...... 150,886 1,132 Other income ...... 113,281 850 Total income ...... ¥2,818,189 $21,150 Expenses Interest expenses: Interest on deposits ...... ¥ 337,679 $ 2,534 Interest on borrowings and rediscounts ...... 147,932 1,110 Other interest expenses ...... 231,064 1,734 Fees and commissions ...... 74,373 558 Trading losses ...... 125 1 Other operating expenses ...... 60,445 454 General and administrative expenses ...... 696,775 5,229 Transfer to reserve for possible loan losses ...... 1,158,947 8,698 Other expenses ...... 647,482 4,859 Total expenses ...... ¥3,354,826 $25,177 Loss before income taxes ...... ¥ 536,637 $ 4,027 Income taxes: Current ...... ¥ 32,737 $ 246 Deferred ...... (246,522) (1,850) Net loss ...... ¥ 322,852 $ 2,423

U.S. dollars Yen (Note 1) Per share data: Net loss ...... ¥ 59.20 $ 0.44 Declared dividends on common stock ...... 4.00 0.03 Declared dividends on preferred stock (ﬁrst series type I) ...... 10.50 0.08 Declared dividends on preferred stock (second series type I) ...... 28.50 0.21 Declared dividends on preferred stock (type V) ...... 13.70 0.10

See accompanying notes.

F-4 SUMITOMO MITSUI BANKING CORPORATION NON-CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY YEAR ENDED MARCH 31, 2002 Millions of Yen Net Earned Land Unrealized Preferred Common Capital Surplus Revaluation Retained Losses on Treasury Stock Stock Surplus Reserve Excess Earnings Securities Stock Total Balance at March 31, 2001 ...... ¥250,500 ¥502,348 ¥ 643,080 ¥ 107,859 ¥166,893 ¥ 248,026 ¥ — ¥ — ¥1,918,707 Merger with The Sakura Bank, Limited ...... 400,309 123,542 991,326 131,261 42,690 165,051 1,854,182 Conversion of preferred stock to common stock ...... (309) 309 — Conversion of convertible bonds to common stock ...... 50,045 49,954 100,000 Change of effective tax rates ...... (693) (693) Cash dividends paid ..... (11,199) (11,199) Transfer from retained earnings to earned surplus reserve ...... 2,300 (2,300) — Revaluation of land ...... (48,575) (48,575) Transfer from land revaluation excess to retained earnings ...... (59,967) 59,967 — Transfer from legal reserve to retained earnings .... (357,614) (241,421) 599,035 — Net loss ...... (322,852) (322,852) Adoption of accounting standards for ﬁnancial instruments ...... (297,950) (297,950) Merger with a subsidiary . . 11 5,146 5,157 Change of Treasury Stock ...... (283) (283) Balance at March 31, 2002 ...... ¥650,500 ¥676,246 ¥1,326,758 ¥ — ¥100,346 ¥ 740,874 ¥(297,950) ¥(283) ¥3,196,492

See accompanying notes.

F-5 SUMITOMO MITSUI BANKING CORPORATION NON-CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY YEAR ENDED MARCH 31, 2002—(Continued)

Millions of U.S. dollars (Notes 1) Net Earned Land Unrealized Preferred Common Capital Surplus Revaluation Retained Losses on Treasury Stock Stock Surplus Reserve Excess Earnings Securities Stock Total Balance at March 31, 2001 ..... $1,880 $3,770 $4,826 $ 810 $1,252 $ 1,861 $ — $ — $14,399 Merger with The Sakura Bank, Limited ...... 3,004 927 7,440 985 321 1,238 13,915 Conversion of preferred stock to common stock ...... (2) 2 — Conversion of convertible bonds to common stock ...... 376 375 751 Change of effective tax rates ..... (5) (5) Cash dividends paid ...... (84) (84) Transfer from retained earnings to earned surplus reserve ...... 17 (17) — Revaluation of land ...... (365) (365) Transfer from land revaluation excess to retained earnings .... (450) 450 — Transfer from legal reserve to retained earnings ...... (2,684) (1,812) 4,496 — Net loss ...... (2,423) (2,423) Adoption of accounting standards for ﬁnancial instruments ...... (2,236) (2,236) Merger with a subsidiary ...... 0 39 39 Change of Treasury Stock ...... (2) (2) Balance at March 31, 2002 ..... $4,882 $5,075 $9,957 $ — $ 753 $ 5,560 $(2,236) $ (2) $23,989

See accompanying notes.

F-6 SUMITOMO MITSUI BANKING CORPORATION NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2002

1. Basis of Financial Statements Sumitomo Mitsui Banking Corporation (the ‘‘Bank’’), a Japanese corporation, maintains its records and prepares its ﬁnancial statements in Japanese yen.

On April 1, 2001, The Sumitomo Bank, Limited (‘‘Sumitomo’’) merged with The Sakura Bank, Limited (‘‘Sakura’’) and succeeded its assets, liabilities, all the claims, obligations and employees, and changed its corporate name to Sumitomo Mitsui Banking Corporation.

The accompanying non-consolidated financial statements are prepared in accordance with accounting principles and prevailing practices generally accepted in the banking industry in Japan (‘‘Japanese GAAP’’), and are not intended to present the financial position and results of operations in accordance with International Accounting Standards or accounting principles generally accepted in countries other than Japan. Certain accounting principles and practices generally accepted in Japan are different from International Accounting Standards and standards in other countries in certain respects as to application and disclosure requirements. Accordingly, the accompanying non-consolidated financial statements are intended for use by those who are informed about Japanese accounting principles and practices.

The accompanying non-consolidated financial statements have been restructured and translated into English (with some expanded descriptions and the inclusion of non-consolidated statement of stockholders’ equity) from the financial statements of the Bank prepared in accordance with Japanese GAAP. Some supplementary information included in the statutory Japanese language financial statements, but not required for fair presentation, is not presented in the accompanying financial statements.

Amounts less than one million yen have been omitted. As a result, the totals in Japanese yen shown in the ﬁnancial statements do not necessarily agree with the sum of the individual amounts.

For the convenience of the readers, the accompanying U.S. dollar ﬁnancial statements have been translated from Japanese yen at the rate of ¥133.25 to US$1.00, the exchange rate prevailing on March 31, 2002. These translations should not be construed as a representation that Japanese yen have been or could have been converted into U.S. dollars at that rate.

2. Signiﬁcant Accounting Policies

(a) Trading assets and liabilities Financial instruments, such as derivatives and trading securities, which are held for the short term in anticipation of market gains, are recorded at fair value. Such gains and losses are included in trading proﬁts or losses on the non-consolidated statement of income. Trading assets and liabilities are recorded at trade date.

(b) Securities As for securities other than those in trading portfolio, debt securities that the Bank has the intent and ability to hold to maturity (held-to-maturity securities) are carried at amortized cost using the moving-average method.

Investments in subsidiaries and afﬁliates are carried at cost using the moving-average method.

Securities excluding those classified as trading securities, held-to-maturity or investments in subsidiaries and affiliates are defined as other securities. Prior to April 1, 2001, debt securities classified as other securities were

F-7 SUMITOMO MITSUI BANKING CORPORATION NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS—(Continued) carried at amortized cost using the moving-average method and equity securities classiﬁed as other securities were carried at cost using the moving-average method.

Effective April 1, 2001, the accounting standard for financial instruments was adopted on other securities. Stocks classified as other securities that have market value are carried at the average market value during the final month of the fiscal year, and other securities excluding such marketable stocks that have market value are carried at market value at the balance sheet date. Other securities that do not have market value are carried at cost or amortized cost, using the moving-average method. Net unrealized gains (losses) on other securities are recognized, net of applicable income taxes, as a separate component of stockholders’ equity. As a result, the total amount of Securities and Money held in trust decreased by ¥485,418 million ($3,643 million) and Net unrealized losses on other securities of ¥297,950 million ($2,236 million) is reported on the non-consolidated balance sheet. Declines in the fair value of other securities are charged to earnings when declines are determined to be other than temporary.

Securities included in money held in trust account are carried in the same manner as for securities mentioned above.

(c) Derivative transactions Derivative transactions, excluding those classiﬁed as trading derivatives, are carried at fair value.

(d) Hedge accounting In accordance with the Industry Audit Committee Report No. 15 ‘‘Temporary Treatment for Accounting and Auditing of Application of Accounting Standard for Financial Instruments in Banking Industry’’, issued by JICPA in 2000, the Bank applies hedge accounting, abiding by the following requirements: (i) Loans, deposits and other interest-bearing assets and liabilities as a whole shall be recognized as the hedged portfolio. (ii) Derivatives as hedging instruments shall effectively reduce the interest rate exposure of the hedged portfolio. (iii) Effectiveness of hedging activities shall be evaluated on a quarterly basis.

Certain derivatives for the purpose of hedging are recorded on an accrual basis using the short-cut method (exceptional treatment for interest rate swaps), in view of consistency with the risk management policy.

Net amount of deferred unrealized gains (losses) on hedging instruments to which hedge accounting is applied is reported in other liabilities. Gross deferred unrealized losses and gross deferred unrealized gains on hedging instruments at March 31, 2002 are ¥1,057,953 million ($7,940 million) and ¥1,150,941 million ($8,637 million), respectively.

(e) Nonaccrual loans Loans are generally placed on nonaccrual status when such loans are classiﬁed as Bankrupt, Effectively Bankrupt or Potentially Bankrupt by the self-assessment rule (see (h) Reserve for possible loan losses).

(f) Premises and equipment Premises and equipment are generally stated at cost less accumulated depreciation. The Bank computes depreciation for premises using the straight-line method over the estimated useful lives of the respective assets. F-8 SUMITOMO MITSUI BANKING CORPORATION NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The depreciation for equipment is computed using the declining-balance method over the estimated useful lives of the respective assets.

(g) Software costs Capitalized software for internal use is depreciated using the straight-line method over its estimated useful life (ﬁve years) and is included in other assets.

(h) Reserve for possible loan losses Reserve for possible loan losses is provided based on the Bank’s internal rules for write-offs and reserves for loans.

Based on the self-assessment rule for the credit quality of the assets (‘‘self-assessment rule’’), the Bank classiﬁes a borrower into one of the following ﬁve risk categories according to the borrower’s credit risk: Bankrupt Borrowers who are legally bankrupt, Effectively Bankrupt Borrowers who are regarded as substantially in the same situation as legally bankrupt borrowers, Potentially Bankrupt Borrowers who are not currently in the status of bankrupt but are likely to become bankrupt in future, Borrowers Requiring Caution or Normal Borrowers.

For collateral and/or guaranteed loans to Bankrupt Borrowers and Effectively Bankrupt Borrowers, the Bank recognizes a portion exceeding the appraised value of collateral of and/or the amount deemed collectible from guarantees of those loans as irrecoverable, and writes off the portion. For the year ended March 31, 2002, the Bank made such write-offs of ¥1,405,069 million ($10,545 million).

For loans to Bankrupt Borrowers and Effectively Bankrupt Borrowers, the Bank provides speciﬁc reserves. The amounts of the speciﬁc reserves are calculated by deducting the estimated disposal value of collateral and/or the amount deemed collectible from guarantees, from the book balances of those loans which remain after the write-offs.

The Bank also provides speciﬁc reserves for loans to Potentially Bankrupt Borrowers based on the estimated amount of recoveries from the collateral and/or guarantees and other pertinent indicators speciﬁc to the borrowers.

The Bank also provides general reserves for loans to Borrowers Requiring Caution and Normal Borrowers. The ratio of the general reserves is determined based on the Bank’s loan loss experiences and economic conditions.

The Bank provides additional reserve for the loans originated in certain countries based on management’s assessment of economic or political conditions of such countries.

(i) Reserve for possible losses on loans sold Reserve for possible losses on loans sold is provided for contingent losses arising from decline of market value of underlying collateral for loans sold to the Cooperative Credit Purchasing Company, Limited.

(j) Reserve for employee bonuses Reserve for employee bonuses is provided, in provision for payment of bonuses to employees, by the amount of estimated bonuses, which are attributable to respective ﬁscal year. Prior to April 1, 2001, accrued

F-9 SUMITOMO MITSUI BANKING CORPORATION NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS—(Continued) bonuses to employees were included in Accrued expenses, but effective April 1, 2001 Reserve for employee bonuses is reported in accordance with ‘‘Concerning Financial Statement Titles to be used for Accrued Bonuses for Employees’’ (Research Center Review Information No. 15 issued by JICPA). Consequently, Accrued expenses decreased by ¥11,342 million ($85 million) and Reserve for employee bonuses increased by the same amount.

(k) Reserve for employee retirement benefits Under the terms of the Bank’s retirement plan, substantially all employees are entitled to a lump-sum payment at the time of retirement. The amount of the lump-sum payment is, in general, calculated based on length of service, basic salary at the time of retirement and reason for retirement. In addition, the Bank has defined benefit pension plans which substantially cover all employees.

Reserve for employee retirement benefits is recorded based on an actuarial computation, which uses the present value of the projected benefit obligation and pension assets, due to employee’s credited years of services at the balance sheet date. Prior service cost and unrecognized net actuarial gain or loss is amortized from the next fiscal year using the straight-line method over the 10 years that is within the average remaining service period of active employees. Unrecognized net obligation of ¥100,837 million ($757 million) from initial application of the accounting standard for employees’ severance and retirement benefits is amortized using the straight-line method over five years.

(l) Translation of foreign currencies Assets and liabilities denominated in foreign currencies and overseas branches’ accounts are translated into Japanese yen mainly at the exchange rate prevailing at the balance sheet date, with the exception of stocks of subsidiaries and afﬁliates translated at rates prevailing at the time of acquisition.

(m) Lease transactions Financing leases, except for those which transfer the ownership of the property to the lessee, are accounted for in the same manner as operating leases.

(n) Amounts per share Net income (loss) per share is computed by deducting dividends for preferred stock from net income (loss), divided by the weighted average number of shares of common stock, excluding treasury stock outstanding during each ﬁscal year.

Declared dividends represent the cash dividends declared applicable to respective years, including dividends to be paid after the end of the year.

F-10 SUMITOMO MITSUI BANKING CORPORATION NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(o) Adoption of new accounting standards Prior to April 1, 2001, unsecured borrowed securities and securities under resale agreements were reported on the non-consolidated balance sheet as Securities in custody and Trading account securities borrowed or Securities borrowed by the same amounts. Effective April 1, 2001, they are not reported on the non-consolidated balance sheet in accordance with the revision of the accounting standards for ﬁnancial instruments. Consequently, Securities in custody, Trading account securities borrowed and Securities borrowed decreased by ¥3,098,200 million ($23,251 million), ¥164,100 million ($1,232 million) and ¥2,934,100 million ($22,020 million) respectively as compared with the former manner. ¥3,193,191 million ($23,964 million) of borrowed securities and securities purchased under resale agreements which the Bank has the right to sell or repledge were repledged and ¥507,010 million ($3,805 million) were on hand at March 31, 2002.

Prior to April 1, 2001, treasury stock was included in Securities. Effective April 1, 2001, treasury stock is reported at the bottom of stockholders’ equity and reduces stockholders’ equity in pursuant to the amendment of the disclosure form due to issuance of ‘the Partial Revision of the Enforcement Ordinance for the Banking Law’ on April 19, 2002. Consequently, total assets and stockholders’ equity decreased by ¥283 million ($2 million), respectively as compared with the former manner.

3. Trading Assets Trading assets at March 31, 2002 consisted of the following:

Millions of Millions of yen U.S. dollars Trading securities ...... ¥ 9,827 $ 74 Derivatives on trading securities ...... 91 1 Derivatives on securities related to trading transactions ...... 12 0 Trading-related ﬁnancial derivatives ...... 1,831,961 13,748 Other trading assets(1) ...... 863,755 6,482 ¥2,705,648 $ 20,305

(1) Includes certiﬁcates of deposit and commercial paper in the trading account.

4. Securities Securities at March 31, 2002 consisted of the following:

Millions of Millions of yen U.S. dollars Japanese government bonds(1) ...... ¥9,599,109 $ 72,038 Japanese local government bonds ...... 429,412 3,223 Japanese corporate bonds ...... 1,183,562 8,882 Japanese stocks(2) ...... 5,595,410 41,992 Other(2) ...... 3,635,501 27,283 ¥20,442,996 $153,418

(1) Includes ¥999 million ($7 million) of unsecured loaned securities for which borrowers have rights to sell or pledge and loaned securities of ¥827 million ($6 million) for which borrowers have rights to pledge but no rights to sell. (2) Japanese stocks and other include investments in subsidiaries of ¥638,477 million ($4,792 million).

F-11 SUMITOMO MITSUI BANKING CORPORATION NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

5. Loans and Bills Discounted Loans and bills discounted at March 31, 2002 consisted of the following:

Millions of Millions of yen U.S. dollars Bills discounted ...... ¥ 857,827 $ 6,438 Loans on notes ...... 7,897,569 59,269 Loans on deeds ...... 39,435,408 295,950 Overdrafts ...... 11,737,562 88,087 ¥59,928,368 $449,744

The following summarizes the non-accrual loans at March 31, 2002.

Millions of Millions of yen U.S. dollars Bankrupt loans ...... ¥ 195,653 $ 1,468 Non-accrual loans ...... 3,184,459 23,898 Total non-accrual loans ...... ¥ 3,380,112 $ 25,366

In addition to the non-accrual loans, the Bank also classiﬁes loans overdue by three months or longer as substandard loans, and such loan balances at March 31, 2002 were ¥92,324 million ($693 million).

Restructured loans are loans for which the Bank has adjusted the terms of the loans in favor of borrowers as a means of ﬁnancial assistance. These restructured loans are also classiﬁed as substandard and amounted to ¥2,344,016 million ($17,591 million) at March 31, 2002.

6. Other Assets Other assets at March 31, 2002 consisted of the following:

Millions of Millions of yen U.S. dollars Domestic exchange settlement account, debit ...... ¥ 29,087 $ 218 Prepaid expenses ...... 5,650 43 Accrued income ...... 362,359 2,720 Initial margins of futures markets ...... 20,653 155 Variation margins of futures markets ...... 155 1 Securities in custody ...... 825 6 Financial derivatives ...... 1,396,901 10,483 Deferred bond discounts ...... 220 2 Pledged money for securities borrowing transactions ...... 3,020,519 22,668 Other ...... 507,732 3,810 ¥ 5,344,106 $40,106

F-12 SUMITOMO MITSUI BANKING CORPORATION NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

7. Premises and Equipment Premises and equipment at March 31, 2002 consisted of the following:

Millions of Millions of yen U.S. dollars Land(1), building and equipment(2) ...... ¥ 788,197 $ 5,915 Construction in progress ...... 2,606 20 Surety deposits and intangible ...... 100,177 752 ¥ 890,981 $ 6,687

(1) Includes land revaluation excess for land referred to in Note 15. (2) Less accumulated depreciation of ¥522,831 million ($3,924 million).

8. Assets Pledged as Collateral

Assets pledged as collateral at March 31, 2002 consisted of the following:

Millions of Millions of yen U.S. dollars Assets pledged as collateral Cash and due from banks and Deposits with banks ...... ¥ 45,623 $ 342 Trading assets ...... 621,047 4,661 Securities ...... 8,926,055 66,987 Loans and bills discounted ...... 3,239,033 24,308 Liabilities corresponding to assets pledged as collateral Call money and bills sold ...... ¥8,373,800 $62,843 Payables under repurchase agreements ...... 1,100,446 8,259 Borrowed money ...... 98,128 736 Pledged money for securities lending transactions ...... 2,504,332 18,794 Acceptances and guarantees ...... 45,571 342

In addition to the assets presented above, the following assets were pledged as collateral for exchange settlements, initial margins of futures markets and certain other purposes at March 31, 2002:

Millions of Millions of yen U.S. dollars Cash and due from banks and Deposits with banks ...... ¥ 101,669 $ 763 Trading assets ...... 296 2 Securities ...... 2,764,145 20,744 Loans and bills discounted ...... 58,095 436

F-13 SUMITOMO MITSUI BANKING CORPORATION NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

9. Deposits Deposits at March 31, 2002 consisted of the following:

Millions of Millions of yen U.S. dollars Current deposits ...... ¥ 4,598,808 $ 34,513 Ordinary deposits ...... 23,915,577 179,479 Savings deposits ...... 1,314,621 9,866 Deposits at notice ...... 6,241,545 46,841 Time deposits ...... 20,932,561 157,092 Other deposits ...... 4,048,698 30,384 Negotiable certiﬁcates of deposit ...... 6,577,539 49,362 ¥67,629,353 $507,537

10. Trading Liabilities Trading liabilities at March 31, 2002 consisted of the following:

Millions of Millions of yen U.S. dollars Derivatives on trading securities ...... ¥ 79 $ 1 Trading-related ﬁnancial derivatives ...... 1,797,006 13,486 ¥ 1,797,086 $ 13,487

11. Borrowed Money Borrowed money at March 31, 2002 consisted of the following:

Millions of Millions of yen U.S. dollars Bills rediscounted ...... ¥ 58,784 $ 441 Subordinated debt obligation ...... 3,050,790 22,895 Borrowings from The Bank of Japan and other ﬁnancial institutions ...... 296,711 2,227 ¥ 3,406,286 $ 25,563

12. Bonds Bonds at March 31, 2002 consisted of the following:

Millions of Millions of yen U.S. dollars Subordinated bonds ...... ¥ 625,854 $ 4,697 Straight Bonds ...... 1,507,900 11,316 ¥2,133,754 $16,013

F-14 SUMITOMO MITSUI BANKING CORPORATION NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

13. Convertible Bonds Convertible bonds at March 31, 2002 consisted of the following:

Millions of Millions of yen U.S. dollars Convertible bonds payable in U.S. dollars: 31⁄8%due 2004, convertible into Common stock at ¥3,606.90 per share ...... ¥ 1,106 $ 8

14. Other Liabilities Other liabilities at March 31, 2002 consisted of the following:

Millions of Millions of yen U.S. dollars Domestic exchange settlement account, credit ...... ¥ 7,886 $ 59 Income taxes payables ...... 31,874 239 Accrued expenses ...... 166,950 1,253 Unearned income ...... 37,055 278 Employees’ deposits ...... 46,253 347 Initial margins of futures markets ...... 860 7 Variation margins of futures markets ...... 795 6 Financial derivatives ...... 887,205 6,658 Deferred unrealized gain on hedging instrument ...... 92,987 698 Pledged money for securities lending transactions ...... 3,162,009 23,730 Other ...... 528,297 3,965 ¥4,962,176 $37,240

15. Land Revaluation Excess Pursuant to the Enforcement Ordinance for the Law Concerning Land Revaluation (the ‘‘Law’’) effective March 31, 1998, the Bank recorded its own land for business activities at fair value at March 31, 1998. According to the Law, net unrealized gains are reported in a separate component of stockholders’ equity net of applicable income taxes as Land revaluation excess, and the related deferred tax liabilities are reported in liabilities as Deferred tax liabilities for land revaluation. According to the Law, the Bank is not permitted to revalue the land at any time, even if the fair value of the land declines. Such unrecorded revaluation losses at March 31, 2002 was ¥90,526 million ($679 million).

Pursuant to the Law, as amended, effective March 31, 2001, the Bank revalued the land for business activities that was succeeded from SMBC Property Management Service Co., Ltd. at March 31, 2002 due to the merger with it. The net unrealized losses on the land, net of applicable income taxes, was deducted from Land revaluation excess, and the related deferred tax assets were deducted from Deferred tax liabilities for land revaluation. The book value of the land of ¥248,659 million ($1,866 million) before the revaluation was revaluated at ¥169,520 million ($1,272 million) at March 31, 2002.

16. Stockholders’ Equity Prior to October 1, 2001, under the Banking Law of Japan, the Bank was required to appropriate as an earned surplus reserve an amount equal to at least 20 percent of cash disbursements in each period until the earned surplus reserve equals 100 percent of the amount of capital (total amount of preferred stock and common

F-15 SUMITOMO MITSUI BANKING CORPORATION NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS—(Continued) stock). Capital surplus and earned surplus reserve were not available for distribution as dividends but may be used to reduce a deﬁcit by resolution of the stockholders or may be capitalized by resolution of the Board of Directors.

The Commercial Code of Japan provided that at least one-half of the proceeds from shares issued at prices in excess of par value be included in capital. In conformity therewith, the Bank has divided the paid-in amount of the stock issued upon conversion of bonds and notes into common stock equally between common stock and capital surplus.

Effective October 1, 2001, pursuant to the Article 289-2 of the amended Commercial Code and the Article 18-2 of the amended Banking Law, Earned surplus reserve is appropriated until the total amount of both Earned surplus reserve and Capital surplus equals to the amount of capital. The excess of the total amount over the amount of capital may be transferred to retained earnings by resolution of stockholders. The Bank transferred Capital surplus of ¥357,614 million ($2,684 million) and Earned surplus reserve of ¥241,421 million ($1,812 million) to retained earnings at March 31, 2002.

In accordance with the Law Concerning Emergency Measures for the Early Strengthening of the Functions of the Financial System, Sumitomo and Sakura issued non-cumulative preferred stock in the aggregate amount of ¥1,301 billion (the ﬁrst issuance of 67 million shares at ¥201 billion and the second issuance of 100 million shares at ¥300 billion by Sumitomo and the issuance of 800 million shares at ¥800 billion by Sakura). All of the preferred stock had been subscribed by The Resolution and Collection Corporation, Limited on March 30, 1999. The non-cumulative preferred stocks are redeemable at the option of the Bank at any time. ¥201 billion of the Preferred Shares are convertible into common stock of the Bank at any time from May 1, 2002 until February 26, 2009, ¥300 billion of the Preferred Shares are convertible into common stock of the Bank at any time from August 1, 2005 until February 26, 2009 and ¥800 billion of Preferred Shares are convertible into common stock of the Bank at any time from October 1, 2002 until September 30, 2009, in each case subject to certain adjustments to the conversion period.

17. Fees and Commissions (income) Fees and Commissions (income) for the year ended March 31, 2002 consisted of the following:

Millions of Millions of yen U.S. dollars Remittances and transfers ...... ¥100,509 $ 755 Other ...... 139,135 1,044 ¥239,645 $1,799

18. Trading Proﬁts Trading proﬁts for the year ended March 31, 2002 consisted of the following:

Millions of Millions of yen U.S. dollars Gains on trading-related ﬁnancial derivatives ...... ¥120,302 $ 903 Other ...... 1,112 8 ¥121,414 $ 911

F-16 SUMITOMO MITSUI BANKING CORPORATION NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

19. Other Operating Income Other operating income for the year ended March 31, 2002 consisted of the following:

Millions of Millions of yen U.S. dollars Gains on foreign exchange transactions ...... ¥ 10,439 $ 78 Gains on sale of bonds ...... 124,773 936 Gains on ﬁnancial derivatives ...... 15,110 114 Other ...... 562 4 ¥150,886 $1,132

20. Other Income Other income for the year ended March 31, 2002 consisted of the following:

Millions of Millions of yen U.S. dollars Gains on sale of stocks and other securities ...... ¥ 54,196 $ 407 Gains on money held in trust ...... 1,810 13 Gains on securities contributed to employee retirement beneﬁts trust ...... 7,715 58 Gains on dispositions of premises and equipment ...... 4,360 33 Collection of written-off claims ...... 258 2 Dividends from liquidation of a subsidiary ...... 22,164 166 Other ...... 22,775 171 ¥113,281 $ 850

21. Other Operating Expenses Other operating expenses for the year ended March 31, 2002 consisted of the following:

Millions Millions of U.S. of yen dollars Losses on sale of bonds ...... ¥50,522 $379 Losses on redemption of bonds ...... 1,985 15 Losses on devaluation of bonds ...... 5,704 43 Bond issuance costs ...... 2,161 16 Other ...... 71 1 ¥60,445 $454

F-17 SUMITOMO MITSUI BANKING CORPORATION NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

22. Other Expenses Other expenses for the year ended March 31, 2002 consisted of the following:

Millions of Millions of U.S. yen dollars Write-off of loans ...... ¥283,895 $ 2,131 Transfer to reserve for possible losses on loans sold ...... 37,034 278 Losses on sale of stocks and other securities ...... 54,300 408 Losses on devaluation of stocks and other securities ...... 130,585 980 Losses on money held in trust ...... 1,867 14 Losses on disposition of premises and equipment ...... 18,562 139 Amortization of unrecognized net transition obligation for employee retirement beneﬁts ...... 20,167 151 Losses on disposal of software ...... 2,584 19 Other ...... 98,485 739 ¥647,482 $ 4,859

23. Income Taxes (1) Signiﬁcant components of deferred tax assets and liabilities at March 31, 2002, were as follows:

Millions of Millions of yen U.S. dollars Deferred tax assets: Reserve for possible loan losses ...... ¥ 737,707 $ 5,536 Write-off of loans ...... 403,067 3,025 Net operating loss carryforwards ...... 59,798 449 Reserve for possible losses on loans sold ...... 31,118 233 Write-off securities ...... 205,700 1,544 Net unrealized losses on other securities ...... 187,468 1,407 Reserve for employee retirement beneﬁts ...... 98,475 739 Depreciation ...... 9,130 69 Other ...... 49,067 368 Subtotal ...... ¥1,781,534 $13,370 Valuation allowance ...... (6,628) (50) Total deferred tax assets ...... ¥1,774,905 $13,320 Deferred tax liabilities: Gains on securities contributed to employee retirement beneﬁts trust ...... ¥ 23,402 $ 176 Other ...... 10,389 78 Total deferred tax liabilities ...... ¥ 33,791 $ 254 Net deferred tax assets ...... ¥1,741,114 $13,066

F-18 SUMITOMO MITSUI BANKING CORPORATION NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(2) A reconciliation of the effective income tax rate reﬂected in the accompanying non-consolidated statement of income to the statutory tax rate for the year ended March 31, 2002, was as follows:

Statutory tax rate ...... 38.62% Non-taxable dividends income ...... 5.30% Foreign tax credit ...... (3.42)% Change of tax rate at beginning of year due to merger ...... 0.13% Other ...... (0.80)% Effective income tax rate ...... 39.83%

(3) With the implementation of the ‘‘Metropolitan ordinance regarding the imposition of enterprise taxes through external standards taxation on banks in Tokyo’’ (Tokyo Metropolitan Ordinance No. 145, April 1, 2000) (‘‘the metropolitan ordinance’’), enterprise taxes relating to banks in Tokyo which had been hitherto levied on income were changed to be levied on gross banking proﬁt.

The Bank recorded enterprise tax of ¥19,862 million ($149 million) in Other expenses for the year ended March 31, 2002 as a result of the metropolitan ordinance. The implementation of the metropolitan ordinance resulted in a reduction of the effective statutory tax rate used by the Bank to calculate deferred tax assets and liabilities. Consequently, Deferred tax assets, Deferred tax liabilities for land revaluation and stockholders’ equity at March 31, 2002 decreased by ¥96,904 million ($727 million), ¥3,694 million ($28 million) and ¥93,209 million ($699 million), respectively, as compared with the amount that would be if the metropolitan ordinance had not been implemented.

With the implementation of the ‘‘Municipal Ordinance regarding the imposition of enterprise taxes through external standards taxation on banks in Osaka’’ (Osaka Municipal Ordinance No. 131, June 9, 2000) (‘‘the municipal ordinance’’), enterprise taxes relating to banks in Osaka which had been hitherto levied on income were also changed to be levied on gross banking proﬁt.

The Bank recorded enterprise tax of ¥10,137 million ($76 million) in Other expenses for the year ended March 31, 2002 as a result of the municipal ordinance. The implementation of the municipal ordinance also resulted in a reduction of the effective statutory tax rate used by the Bank to calculate deferred tax assets and liabilities. Consequently, Deferred tax assets, Deferred tax liabilities for land revaluation and stockholders’ equity at March 31, 2002 decreased by ¥46,631 million ($350 million), ¥1,798 million ($14 million) and ¥44,833 million ($336 million), respectively, as compared with the amount that would be if the municipal ordinance had not been implemented.

24. Employee Retirement Beneﬁts Reserve for employee retirement beneﬁts at March 31, 2002 consisted of the following:

Millions of Millions of yen U.S. dollars Projected beneﬁt obligation ...... ¥(1,070,564) $(8,034) Pension assets ...... 730,307 5,480 Unfunded projected beneﬁt obligation ...... ¥ (340,256) $(2,554) Unrecognized net transition obligation ...... 60,502 454 Unrecognized actuarial differences ...... 221,954 1,666 Unrecognized prior service cost ...... (59,055) (443) Net amount recorded on the non-consolidated balance sheet ...... ¥ (116,854) $ (877)

F-19 SUMITOMO MITSUI BANKING CORPORATION NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Bank contributes certain marketable securities to an employee retirement beneﬁts trust. Gains on securities contributed to the employee retirement beneﬁt trust is recorded in Other income.

25. Lease Transactions (1) Financing leases (lessee side)

A summary of assumed amounts of acquisition cost, accumulated depreciation and net book value for ﬁnancing leases without transfer of ownership was as follows:

Millions of yen Millions of U.S. dollars Equipment Other Total Equipment Other Total Acquisition cost ...... ¥56,283 ¥9,629 ¥65,913 $422 $72 $495 Accumulated depreciation ...... 25,518 3,226 28,745 191 24 216 Net book value ...... ¥30,765 ¥6,403 ¥37,168 $231 $48 $279

Future minimum lease payments excluding interests at March 31, 2002, were as follows: Millions of Millions of yen U.S. dollars Due within one year ...... ¥10,650 $ 80 Due after one year ...... 27,417 206 ¥38,068 $286

Total lease expenses for the year ended March 31, 2002 were ¥11,366 million ($85 million). Assumed depreciation charges for the year ended March 31, 2002 amounted to ¥10,477 million ($79 million). Assumed depreciation charges is calculated using the straight-line method over the lease term of the respective assets. The difference between the minimum lease payments and the acquisition costs of the lease assets represents interest expenses. The allocation of such interest expenses over the lease term is computed using the effective interest method. Interest expenses for the year ended March 31, 2002 amounted to ¥945 million ($7 million).

(2) Operating leases (lessee side)

Future minimum lease payments at March 31, 2002 were as follows: Millions of Millions of yen U.S. dollars Due within one year ...... ¥16,719 $125 Due after one year ...... 109,107 819 ¥125,827 $944

26. Loan Commitments Commitment line contracts on overdrafts and loans are agreements to lend to customers when they apply for borrowing, to a prescribed amount, as long as there is no violation of any condition established in the contracts. The amount of unused commitments was ¥23,565,257 million ($176,850 million), and the amount of unused commitments whose original contract terms are within one year or unconditionally cancellable at any time was ¥21,097,495 million ($158,330 million) at March 31, 2002. Since many of these commitments are expected to expire without being drawn upon, the total amount of unused commitments does not necessarily represent actual future cash ﬂow requirements. Many of these commitments have clauses that the Bank can reject

F-20 SUMITOMO MITSUI BANKING CORPORATION NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS—(Continued) an application from customers or reduce the contract amounts in case economic conditions are changed, the Bank needs to secure claims or other events occur. In addition, the Bank requests the customers to pledge collateral such as premises and securities at the conclusion of the contracts, and take necessary measures such as grasping customers’ ﬁnancial positions, revising contracts when need arises and securing claims after the conclusion of the contracts.

27. Market Value of Marketable Securities (1) Securities The market value of marketable securities at March 31, 2002, was as follows:

In addition to Securities in the non-consolidated balance sheet, trading securities, negotiable certiﬁcates of deposit and commercial paper in Trading assets, negotiable certiﬁcates of deposit in Deposits with banks, and commercial papers and claims on loan trust in Commercial paper and other debt purchased are included in the amounts of following tables.

(a) Securities classiﬁed as trading Millions of Millions of yen U.S. dollars Non-consolidated balance sheet amount ...... ¥873,583 $6,556 Gains included in proﬁt/loss during the year ...... 265 2

(b) Bonds classiﬁed as held-to-maturity with market value Millions of yen Non-consolidated balance sheet Market Net unrealized amount Value gains (losses) Gains Losses Japanese government bonds ...... ¥100,968 ¥101,400 ¥ 431 ¥ 431 ¥— Other ...... 26,992 27,708 715 734 19 Total ...... ¥127,961 ¥129,108 ¥1,146 ¥1,165 ¥19

Millions of U.S. dollars Non-consolidated balance sheet Market Net unrealized amount Value gains (losses) Gains Losses Japanese government bonds ...... $ 758 $ 761 $ 3 $ 3 $— Other ...... 202 208 6 6 0 Total ...... $ 960 $ 969 $ 9 $ 9 $ 0

(c) Investments in subsidiaries or afﬁliates with market value Millions of yen Non-consolidated balance sheet Market Net unrealized amount value gains (losses) Stocks of subsidiaries ...... ¥104,003 ¥101,413 ¥(2,589) Stocks of afﬁliates ...... 8,485 10,974 2,488 Total ...... ¥112,488 ¥112,387 ¥ (101)

F-21 SUMITOMO MITSUI BANKING CORPORATION NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Millions of U.S. dollars Non-consolidated balance sheet Market Net unrealized amount value gains (losses) Stocks of subsidiaries ...... $781 $761 $(20) Stocks of afﬁliates ...... 63 82 19 Total ...... $844 $843 $ (1)

(d) Other securities with market value Millions of yen Non-consolidated Acquisition balance sheet Net unrealized cost amount gains (losses) Gains Losses Stocks ...... ¥ 5,234,755 ¥ 4,733,857 ¥(500,897) ¥180,943 ¥681,841 Bonds ...... ¥10,517,923 ¥10,555,706 ¥ 37,783 ¥ 55,597 ¥ 17,814 Japanese government bonds ...... 9,463,294 9,498,141 34,847 39,207 4,360 Japanese local government bonds . . 421,315 429,412 8,097 9,764 1,667 Corporate bonds ...... 633,314 628,153 (5,161) 6,625 11,786 Other ...... ¥ 2,775,933 ¥ 2,757,392 ¥ (18,540) ¥ 7,696 ¥ 26,236 Change of purpose of holding ...... — — ¥ 61 ¥ 61 — Total ...... ¥18,528,611 ¥18,046,957 ¥(481,593) ¥244,299 ¥725,892

Millions of U.S. dollars Non-consolidated Acquisition balance sheet Net unrealized cost amount gains (losses) Gains Losses Stocks ...... $ 39,285 $ 35,526 $ (3,759) $ 1,358 $ 5,117 Bonds ...... $ 78,933 $ 79,217 $ 284 $ 417 $ 133 Japanese government bonds ...... 71,019 71,280 261 294 33 Japanese local government bonds . . 3,162 3,223 61 73 12 Corporate bonds ...... 4,752 4,714 (38) 50 88 Other ...... $ 20,833 $ 20,694 $ (139) $ 58 $ 197 Change of purpose of holding ...... — — $ 0 $ 0 — Total ...... $ 139,051 $ 135,437 $ (3,614) $ 1,833 $ 5,447

(e) Other securities sold during ﬁscal 2001 Millions of yen Gains on Losses Year ended March 31, 2002 Sales amount sales on sales Other securities ...... ¥31,513,898 ¥174,190 ¥90,314

Millions of U.S. dollars Gains on Losses Year ended March 31, 2002 Sales amount sales on sales Other securities ...... $ 236,502 $ 1,307 $ 678

F-22 SUMITOMO MITSUI BANKING CORPORATION NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(f) Securities with no available market value Millions of U.S. Millions of yen dollars Non-consolidated Non-consolidated balance sheet balance sheet March 31, 2002 amount amount Bonds classified as held-to-maturity Nonlisted foreign securities ...... ¥ 3,384 $ 25 Investments in subsidiaries or affiliates Stocks of subsidiaries ...... ¥894,584 $6,714 Stocks of affiliates ...... 177,502 1,332 Other ...... 16,507 124 Other securities Nonlisted foreign securities ...... ¥347,494 $2,608 Nonlisted bonds ...... 555,408 4,168 Nonlisted stocks (excluding OTC stocks) ...... 143,314 1,076 Other ...... 112,358 843

(g) Redemption schedule of other securities with maturities and bonds classiﬁed as held-to-maturity Millions of yen March 31, 2002 1 year or less 1 to 5 years 5 to 10 years Over 10 years Bonds ...... ¥2,268,355 ¥ 6,927,429 ¥1,813,599 ¥202,700 Japanese government bonds ...... 2,155,760 6,006,279 1,236,840 200,230 Japanese local government bonds ...... 25,433 110,409 292,998 570 Japanese corporate bonds ...... 87,161 810,740 283,760 1,900 Other ...... ¥ 311,056 ¥ 1,948,876 ¥ 126,360 ¥510,543 Total ...... ¥2,579,411 ¥ 8,876,305 ¥1,939,960 ¥713,243

Millions of U.S. dollars March 31, 2002 1 year or less 1 to 5 years 5 to 10 years Over 10 years Bonds ...... $17,023 $51,988 $13,611 $1,521 Japanese government bonds ...... 16,178 45,075 9,282 1,503 Japanese local government bonds ...... 191 829 2,199 4 Japanese corporate bonds ...... 654 6,084 2,130 14 Other ...... $ 2,334 $14,626 $ 948 $3,831 Total ...... $19,357 $66,614 $14,559 $5,352

F-23 SUMITOMO MITSUI BANKING CORPORATION NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(2) Money held in trust (a) Money held in trust classiﬁed as trading Millions of March 31, 2002 Millions of yen U.S. dollars Non-consolidated balance sheet amount ...... ¥3,715 $28 Gains included in proﬁt/loss during the year ...... — —

(b) Other money held in trust Millions of yen Non-consolidated Acquisition balance sheet Net unrealized March 31, 2002 cost amount gains (losses) Gains Losses Other money held in trust ...... ¥33,968 ¥30,142 ¥(3,825) ¥135 ¥3,960

Millions of U.S. dollars Non-consolidated Acquisition balance sheet Net unrealized March 31, 2002 cost amount gains (losses) Gains Losses Other money held in trust ...... $255 $226 $(29) $1 $30

F-24 (THIS PAGE INTENTIONALLY LEFT BLANK)

F-25 UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE BANK AND SUBSIDIARIES SUMITOMO MITSUI BANKING CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED BALANCE SHEET MARCH 31, 2002 Millions of Millions of U.S. dollars yen (Note 1) Assets Cash and due from banks ...... ¥ 2,128,742 $ 15,976 Deposits with banks ...... 3,503,554 26,293 Call loans and bills bought ...... 720,154 5,405 Receivables under resale agreements ...... 793,266 5,953 Commercial paper and other debt purchased ...... 461,879 3,466 Trading assets ...... 3,278,105 24,601 Money held in trust ...... 33,860 254 Securities ...... 20,694,632 155,307 Loans and bills discounted ...... 63,645,586 477,640 Foreign exchanges ...... 795,755 5,972 Other assets ...... 6,447,644 48,388 Premises and equipment ...... 1,207,589 9,063 Lease assets ...... 927,120 6,958 Deferred tax assets ...... 1,882,464 14,127 Deferred tax assets for land revaluation ...... 726 5 Goodwill ...... 18,518 139 Customers’ liabilities for acceptances and guarantees ...... 3,625,047 27,205 Reserve for possible loan losses ...... (2,159,649) (16,208) Total assets ...... ¥108,005,001 $810,544 Liabilities, minority interests and stockholders’ equity Liabilities Deposits ...... ¥ 71,648,073 $537,697 Call money and bills sold ...... 10,775,484 80,867 Payables under repurchase agreements ...... 1,468,504 11,021 Commercial paper ...... 1,167,500 8,762 Trading liabilities ...... 2,331,500 17,497 Borrowed money ...... 2,889,907 21,688 Foreign exchanges ...... 299,610 2,248 Bonds ...... 3,505,820 26,310 Convertible bonds ...... 1,106 8 Pledged money for securities lending transactions ...... 3,174,799 23,826 Other liabilities ...... 2,861,669 21,476 Reserve for employee bonuses ...... 21,606 162 Reserve for employee retirement beneﬁts ...... 147,972 1,110 Reserve for possible losses on loans sold ...... 86,371 648 Other reserves ...... 336 3 Deferred tax liabilities ...... 39,206 294 Deferred tax liabilities for land revaluation ...... 64,015 480 Acceptances and guarantees ...... 3,625,047 27,205 Total liabilities ...... ¥104,108,534 $781,302 Minority interests ...... ¥ 983,847 $ 7,384 Stockholders’ equity Preferred stock; authorized 970,000,000 shares and issued 967,000,000 shares ...... ¥ 650,500 $ 4,882 Common stock; authorized 15,000,000,000 shares and issued 5,697,737,528 shares ...... 676,246 5,075 Capital surplus ...... 1,326,758 9,957 Land revaluation excess ...... 121,244 910 Retained earnings ...... 475,357 3,567 Net unrealized losses on other securities ...... (304,837) (2,288) Foreign currency translation adjustments ...... (15,174) (114) Treasury stock ...... (283) (2) Parent bank stock held by subsidiaries ...... (17,191) (129) Total stockholders’ equity ...... ¥ 2,912,619 $ 21,858 Total liabilities, minority interests and stockholders’ equity ...... ¥108,005,001 $810,544

F-26 SUMITOMO MITSUI BANKING CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENT OF INCOME YEAR ENDED MARCH 31, 2002

Millions of Millions of U.S. yen dollars (Note 1) Income Interest income: Interest on loans and discounts ...... ¥1,426,139 $10,703 Interest and dividends on securities ...... 318,508 2,390 Interest on receivables under resale agreements ...... 8,399 63 Other interest income ...... 423,638 3,179 Fees and commissions ...... 387,280 2,907 Trading proﬁts ...... 129,450 971 Other operating income ...... 845,583 6,346 Other income ...... 270,130 2,027 Total income ...... ¥3,809,130 $28,586 Expenses Interest expenses: Interest on deposits ...... 347,077 2,605 Interest on borrowings and rediscounts ...... 75,989 570 Interest on payables under repurchase agreements ...... 29,238 219 Other interest expenses ...... 274,596 2,061 Fees and commissions ...... 67,747 508 Trading losses ...... 17 0 Other operating expenses ...... 666,651 5,003 General and administrative expenses ...... 935,553 7,021 Transfer to reserve for possible loan losses ...... 1,204,335 9,038 Other expenses ...... 812,261 6,096 Total expenses ...... ¥4,413,469 $33,121 Loss before income taxes and minority interests ...... ¥ 604,338 $ 4,535 Income taxes: Current ...... ¥ 101,860 $ 764 Deferred ...... (289,305) (2,171) ¥ (187,445) $ (1,407) Minority interests in net income ...... 46,993 353 Net Loss ...... ¥ 463,887 $ 3,481

Per share data Yen U.S. dollars Net loss ...... ¥ 84.12 $ 0.63 Declared dividends on common stock ...... 4.00 0.03 Declared dividends on preferred stock (ﬁrst series type I) ...... 10.50 0.08 Declared dividends on preferred stock (second series type I) ...... 28.50 0.21 Declared dividends on preferred stock (type V) ...... 13.70 0.10

F-27 SUMITOMO MITSUI BANKING CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY YEAR ENDED MARCH 31, 2002 Millions of yen Net Foreign Land Unrealized Currency Preferred Common Capital Revaluation Retained Losses on Translation Stock Stock Surplus Excess Earnings Securities Adjustments Other* Total Balance at March 31, 2001 ...... ¥250,500 ¥502,348 ¥ 643,080 ¥167,613 ¥319,924 ¥ — ¥(32,171) ¥(14,144) ¥1,837,151 Merger with The Sakura Bank, Limited ...... 400,309 123,542 991,326 42,690 296,313 (42) 1,854,139 Change due to increase/decrease of subsidiaries and afﬁliates ...... 20,366 (96,404) (20,939) (4,555) (101,533) Conversion of preferred stock to common stock . . . (309) 309 — Conversion of convertible bonds to common stock ...... 50,045 49,954 100,000 Change of effective tax rates and others ...... (444) (444) Cash dividends paid ...... (11,199) (11,199) Transfer from capital surplus to retained earnings ...... (357,614) 357,614 — Revaluation of land ...... (48,848) (48,848) Transfer from land revaluation excess to retained earnings ...... (60,132) 60,132 — Net loss ...... (463,887) (463,887) Adoption of accounting standards for ﬁnancial instruments ...... (304,837) (304,837) Change of foreign currency translation adjustments ..... 37,935 37,935 Change of treasury stock and parent bank stock held by subsidiaries ..... 1,267 1,267 Other ...... 11 12,864 12,876 Balance at March 31, 2002 ...... ¥650,500 ¥676,246 ¥1,326,758 ¥121,244 ¥475,357 ¥(304,837) ¥(15,174) ¥(17,475) ¥2,912,619

* Other includes treasury stock and parent bank stock held by subsidiaries.

F-28 SUMITOMO MITSUI BANKING CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY—(Continued) YEAR ENDED MARCH 31, 2002

Millions of U.S. dollars (Note 1) Net Foreign Land Unrealized Currency Preferred Common Capital Revaluation Retained Losses on Translation Stock Stock Surplus Excess Earnings Securities Adjustments Other* Total Balance at March 31, 2001 ...... $1,880 $3,770 $4,826 $1,258 $2,401 $ — $(242) $(106) $13,787 Merger with The Sakura Bank, Limited ...... 3,004 927 7,440 320 2,224 (1) 13,914 Change due to increase/decrease of subsidiaries and afﬁliates ...... 153 (724) (157) (34) (762) Conversion of preferred stock to common stock ...... (2) 2 — Conversion of convertible bonds to common stock ...... 376 375 751 Change of effective tax rates and others ...... (3) (3) Cash dividends paid ..... (85) (85) Transfer from capital surplus to retained earnings ...... (2,684) 2,684 — Revaluation of land ..... (367) (367) Transfer from land revaluation excess to retained earnings ..... (451) 451 — Net loss ...... (3,481) (3,481) Adoption of accounting standards for ﬁnancial instruments ...... (2,288) (2,288) Change of foreign currency translation adjustments ...... 285 285 Change of treasury stock and parent bank stock held by subsidiaries . . . 10 10 Other ...... 0 97 97 Balance at March 31, 2002 ...... $4,882 $5,075 $9,957 $ 910 $3,567 $(2,288) $(114) $(131) $21,858

* Other includes treasury stock and parent bank stock held by subsidiaries.

F-29 SUMITOMO MITSUI BANKING CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS YEAR ENDED MARCH 31, 2002

Millions of U.S. Millions of yen dollars (Note 1) Cash flows from operating activities: Loss before income taxes and minority interests ...... ¥ (604,338) $ (4,535) Depreciation of premises, equipment and others ...... 96,374 723 Depreciation of lease assets ...... 306,044 2,297 Amortization of goodwill ...... 4,806 36 Net income from unconsolidated entities accounted for by the equity method ...... (2,964) (22) Net change in reserve for possible loan losses ...... 884,174 6,635 Net change in reserve for possible losses on loans sold ...... (58,895) (442) Net change in reserve for employee bonuses ...... 21,606 162 Net change in reserve for employee retirement benefits ...... (42,469) (319) Interest income ...... (2,176,685) (16,335) Interest expenses ...... 726,901 5,455 Net gains on securities ...... (64,057) (481) Net loss from money held in trust ...... 56 0 Net exchange gains ...... (160,717) (1,206) Net losses from disposition of premises and equipment ...... 23,052 173 Net losses from disposition of lease assets ...... 995 7 Gain on sale of business operation ...... (5,000) (38) Net change in trading assets ...... (757,328) (5,684) Net change in trading liabilities ...... 1,030,514 7,734 Net change in loans and bills discounted ...... 1,794,503 13,467 Net change in deposits ...... 1,887,932 14,168 Net change in negotiable certificates of deposit ...... (4,989,141) (37,442) Net change in borrowed money (excluding subordinated debt) ...... (456,519) (3,426) Net change in deposits with banks ...... 2,018,942 15,152 Net change in call loans, bills bought and receivables under resale agreements ...... 1,904,425 14,292 Net change in pledged money for securities borrowing transactions . . . (2,196,808) (16,486) Net change in call money, bills sold and payables under repurchase agreements ...... (3,020,667) (22,669) Net change in commercial paper ...... (569,827) (4,276) Net change in pledged money for securities lending transactions ..... (1,715,984) (12,878) Net change in foreign exchanges (assets) ...... (56,299) (422) Net change in foreign exchanges (liabilities) ...... 48,749 366 Issuance and redemption of bonds (excluding subordinated bonds) . . . 359,901 2,701 Interest received ...... 2,342,208 17,578 Interest paid ...... (829,888) (6,228) Other, net ...... (1,070,901) (8,037) Subtotal ...... ¥(5,327,304) $(39,980) Income taxes paid ...... (54,205) (407) Net cash used in operating activities ...... ¥(5,381,510) $(40,387)

F-30 (continued)

Millions of U.S. Millions of yen dollars (Note 1) Cash flows from investing activities: Purchases of securities ...... ¥(39,722,661) $(298,106) Proceeds from sale of securities ...... 32,828,672 246,369 Proceeds from maturity of securities ...... 12,828,207 96,272 Purchases of money held in trust ...... (5,011) (38) Proceeds from sale of money held in trust ...... 42,663 320 Purchases of premises and equipment ...... (73,354) (551) Proceeds from sale of premises and equipment ...... 134,704 1,011 Purchases of lease assets ...... (342,964) (2,574) Proceeds from sale of lease assets ...... 37,736 283 Purchases of stocks of subsidiaries ...... (599) (4) Proceeds from sale of stocks of subsidiaries ...... 416 3 Proceeds from sale of business operation ...... 5,000 38 Net cash provided by investing activities ...... ¥ 5,732,808 $ 43,023 Cash flows from financing activities: Proceeds from issuance of subordinated debt ...... ¥ 128,000 $ 961 Repayment of subordinated debt ...... (278,000) (2,086) Proceeds from issuance of subordinated bonds, convertible bonds and notes ...... 201,198 1,510 Repayment of subordinated bonds, convertible bonds and notes ..... (262,361) (1,969) Dividends paid ...... (11,101) (83) Payment of delivered money due to merger ...... (17,839) (134) Capital contributions from minority stockholders ...... 9,000 67 Dividends paid to minority stockholders ...... (39,064) (293) Purchases of treasury stock ...... (8,539) (64) Proceeds from sale of treasury stock ...... 8,286 62 Proceeds from sale of parent bank stocks held by subsidiaries ...... 1,607 12 Net cash used in financing activities ...... ¥ (268,813) $ (2,017) Effect of exchange rate changes on cash and due from banks ...... 3,595 27 Net change in cash and due from banks ...... ¥ 86,079 $ 646 Cash and due from banks at beginning of year ...... ¥ 868,132 $ 6,515 Change in cash and due from banks due to merger ...... 1,075,527 8,072 Change in cash and due from banks due to merger of consolidated subsidiaries ...... 2,544 19 Change in cash and due from banks due to newly consolidated subsidiaries ...... 96,459 724 Cash and due from banks at end of year ...... ¥ 2,128,742 $ 15,976

F-31 SUMITOMO MITSUI BANKING CORPORATION NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2002

1. Basis of Financial Statements Sumitomo Mitsui Banking Corporation (the ‘‘Bank’’), a Japanese corporation, maintains its records and prepares its ﬁnancial statements in Japanese yen.

On April 1, 2001, The Sumitomo Bank, Limited merged with The Sakura Bank, Limited and succeeded its assets, liabilities, all the claims, obligations and employees, and changed its corporate name to Sumitomo Mitsui Banking Corporation.

The Bank and its consolidated domestic subsidiaries maintain their accounts and record in accordance with accounting principles and prevailing practices generally accepted in Japan (‘‘Japanese GAAP’’).

The accounts of overseas consolidated subsidiaries are based on their accounting records maintained in conformity with generally accepted accounting principles prevailing in the respective countries of domicile.

Certain accounting principles and practices generally accepted in Japan are different from International Accounting Standards and standards in other countries in certain respects as to application and disclosure requirements. Accordingly, the accompanying ﬁnancial statements are intended for use by those who are informed about Japanese accounting principles and practices.

The accompanying consolidated ﬁnancial statements have been restructured and translated into English (with some expanded descriptions and the inclusion of consolidated statements of stockholders’ equity) from the ﬁnancial statements of the Bank prepared in accordance with Japanese GAAP.

Some supplementary information included in the statutory Japanese language consolidated ﬁnancial statements, but not required for fair presentation is not presented in the accompanying consolidated ﬁnancial statements.

Amounts less than one million yen have been omitted. As a result, the totals in Japanese yen shown in the ﬁnancial statements do not necessarily agree with the sum of the individual amounts.

For the convenience of the readers, the accompanying U.S. dollar ﬁnancial statements have been translated from Japanese yen, as a matter of arithmetical computation only, at the rate of ¥133.25 to US$1, the exchange rate prevailing at March 31, 2002. The translations should not be construed as a representation that Japanese yen have been or could have been converted into U.S. dollars at that rate.

2. Signiﬁcant Accounting Policies

(a) Consolidation The consolidated financial statements include the accounts of the Bank and its significant subsidiaries. All significant intercompany balances and transactions have been eliminated.

F-32 SUMITOMO MITSUI BANKING CORPORATION NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The consolidated financial statements include the accounts of consolidated subsidiaries, of which the fiscal year ends on or after December 31. In case that these subsidiaries have a significant transaction during the period from their fiscal year-end to March 31, the Bank makes certain adjustments to the consolidated financial statements to be comprehensive.

In the elimination of investments in subsidiaries, the assets and liabilities of the subsidiaries, including the portion attributable to minority shareholders, are evaluated using the fair value at the time the Bank acquired control of the respective subsidiaries.

Goodwill on The Sumitomo Credit Service Company, Ltd. is amortized using the straight-line method over ﬁve years. Goodwill on the other entities is charged or credited to income directly.

Investments in major afﬁliates are accounted for by the equity method. Net income from such investments were ¥2,964 million ($22 million) recorded as other income.

(b) Statements of cash ﬂows For the purposes of the consolidated statements of cash ﬂows, cash and cash equivalents represent cash and due from banks.

(c) Trading assets and liabilities Financial instruments, such as derivatives and trading securities, which are held for the short term in anticipation of market gains, are recorded at fair value. Such gains and losses are included in trading proﬁts or losses on the consolidated statement of income. Trading assets and liabilities are recorded at trade date.

(d) Securities As for securities other than those in trading portfolio, debt securities that the Bank and consolidated subsidiaries have the intent and ability to hold to maturity (held-to-maturity securities) are carried at amortized cost using the moving-average method.

Investments in nonconsolidated subsidiaries and afﬁliates that are not accounted for by the equity method are carried at cost using the moving-average method.

Securities excluding those classified as trading securities, held-to-maturity or investments in nonconsolidated subsidiaries and affiliates are defined as other securities. Prior to April 1, 2001, debt securities in other securities were carried at amortized cost using the moving-average method and equity securities classified as other securities were carried at cost using the moving-average method.

Effective April 1, 2001, the accounting standard for financial instruments was adopted on other securities. Stocks classified as other securities that have market value are carried at the average market value during the final month of the fiscal year, and other securities excluding such marketable stocks that have market value are carried at market value at the balance sheet date. Other securities that do not have market value are carried at cost or amortized cost, using the moving-average method. Net unrealized gains (losses) on other securities are recognized, net of applicable income taxes, as a separate component of stockholders’ equity. As a result, the total amount of Securities and Money held in trust decreased by ¥499,332 million ($3,747 million) and Net unrealized losses on other securities of ¥304,837 million ($2,288 million) is reported on the consolidated balance sheet. Declines in the fair value of other securities are charged to earnings when declines are determined to be other than temporary.

F-33 SUMITOMO MITSUI BANKING CORPORATION NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Securities held by certain consolidated overseas subsidiaries are carried at amortized cost using primarily the speciﬁc identiﬁcation method.

Securities included in money held in trust account are carried in the same manner as for securities mentioned above.

(e) Derivative transactions Derivative transactions, excluding those classiﬁed as trading derivatives, are carried at fair value, though some consolidated overseas subsidiaries account for derivative transactions in accordance with local accounting standards.

(f) Hedge accounting In accordance with the Industry Audit Committee Report No. 15 Temporary ‘‘Treatment for Accounting and Auditing of Application of Accounting Standard for Financial Instruments in Banking Industry’’, issued by JICPA in 2000, the Bank applies hedge accounting, abiding by the following requirements: (i) Loans, deposits and other interest-bearing assets and liabilities as a whole shall be recognized as the hedged portfolio. (ii) Derivatives as hedging instruments shall effectively reduce the interest rate exposure of the hedged portfolio. (iii) Effectiveness of hedging activities shall be evaluated on a quarterly basis.

Certain derivatives for the purpose of hedging are recorded on an accrual basis using the short-cut method (exceptional treatment for interest rate swaps) in view of consistency with the risk management policy.

In accordance with the Industry Audit Committee Report No. 19 ‘Temporary Treatment for Accounting and Auditing of Application of Accounting Standard for Financial Instruments in Leasing Industry’ issued by JICPA in 2000, one of the consolidated domestic subsidiaries in the leasing industry applies a deferred hedge accounting related to portfolio hedge on liabilities.

Other domestic subsidiaries use the deferred hedge accounting or the short-cut method for interest rate swaps.

Net amount of deferred unrealized gains (losses) on hedging instruments to which hedge accounting is applied is reported in other liabilities. Gross deferred unrealized losses and gross deferred unrealized gains on hedging instruments at March 31, 2002 are ¥1,071,749 million ($8,043 million) and ¥1,156,384 million ($8,678 million), respectively.

(g) Nonaccrual loans Loans are generally placed on nonaccrual status when such loans are classiﬁed as Bankrupt, Effectively Bankrupt or Potentially Bankrupt by the self-assessment rule (see (j) Reserve for possible loan losses).

(h) Premises and equipment Premises and equipment are generally stated at cost less accumulated depreciation. The Bank computes depreciation for premises using the straight-line method over the estimated useful lives of the respective assets.

F-34 SUMITOMO MITSUI BANKING CORPORATION NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The depreciation for equipment is computed using the declining-balance method over the estimated useful lives of the respective assets.

Depreciation of premises and equipment owned by consolidated domestic subsidiaries is mainly computed using the declining-balance method, while depreciation of those owned by consolidated overseas subsidiaries is mainly computed using the straight-line method over the estimated useful lives of respective assets.

(i) Software costs Capitalized software for internal use is depreciated using the straight-line method over its estimated useful life (mainly ﬁve years) at the Bank and consolidated domestic subsidiaries, and is included in other assets.

(j) Reserve for possible loan losses Reserve for possible loan losses of the Bank and its major consolidated subsidiaries is provided based on the internal rules for write-offs and reserves for loans.

Based on the self-assessment rule for the credit quality of the assets (‘‘self-assessment rule’’), the Bank and its major consolidated subsidiaries classify a borrower into one of the following ﬁve risk categories according to the borrower’s credit risk: Bankrupt Borrowers who are legally bankrupt, Effectively Bankrupt Borrowers who are regarded as substantially in the same situation as legally bankrupt borrowers, Potentially Bankrupt Borrowers who are not currently in the status of bankrupt but are likely to become bankrupt in future, Borrowers Requiring Caution or Normal Borrowers.

For collateral and/or guaranteed loans to Bankrupt Borrowers and Effectively Bankrupt Borrowers, the Bank recognizes a portion exceeding the appraised value of collateral of and/or the amount deemed collectible from guarantees of those loans as irrecoverable, and writes off the portion. For the year ended March 31, 2002, the Bank and the consolidated subsidiaries made such write-offs of ¥1,824,274 million ($13,691 million).

The Bank provides additional reserve for the loans originated in certain countries based on management’s assessment of economic or political conditions of such countries.

Reserve for possible loan losses of other consolidated subsidiaries is provided for general claims by the amount deemed necessary based on the historical loan-loss ratio, and for doubtful claims by the amount deemed uncollectible based on respective assessments.

F-35 SUMITOMO MITSUI BANKING CORPORATION NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(k) Reserve for possible losses on loans sold Reserve for possible losses on loans sold is provided for contingent losses arising from decline of market value of underlying collateral for loans sold to the Cooperative Credit Purchasing Company, Limited.

(l) Reserve for employee bonuses Reserve for employee bonuses is provided, in provision for payment of bonuses to employees, by the amount of estimated bonuses, which are attributable to respective ﬁscal year. Prior to April 1, 2001, accrued bonuses to employees were included in Other liabilities, but effective April 1, 2001 Reserve for employee bonuses is reported in accordance with ‘Concerning Financial Statement Titles to be used for Accrued Bonuses for Employees’ (Research Center Review Information No. 15 issued by JICPA). Consequently, Other liabilities decreased by ¥21,606 million ($162 million) and Reserve for employee bonuses increased by the same amount.

(m) Reserve for employee retirement benefits Under the terms of the Bank’s retirement plan, substantially all employees are entitled to a lump-sum payment at the time of retirement. The amount of the lump-sum payment is, in general, calculated based on length of service, basic salary at the time of retirement and reason for retirement. In addition, the Bank has defined benefit pension plans which cover substantially all employees.

Reserve for employee retirement benefit (prepaid pension cost) is recorded based on an actuarial computation, which uses the present value of the projected benefit obligation and pension assets, due to employee’s credited years of services at the balance sheet date. Unrecognized net actuarial gain or loss is amortized from the next fiscal year using the straight-line method over certain years (mainly 10 years) within the average remaining service period of active employees. Unrecognized net obligation from initial application of the accounting standard for employees’ severance and retirement benefits is amortized using the straight-line method over five years.

(n) Translation of foreign currencies The Bank’s assets and liabilities denominated in foreign currencies and overseas branches’ accounts are translated into Japanese yen mainly at the exchange rate prevailing at the consolidated balance sheet date, with the exception of stocks of subsidiaries and afﬁliates translated at rates prevailing at the time of acquisition.

Consolidated subsidiaries’ assets and liabilities denominated in foreign currencies are translated into Japanese yen at the exchange rate prevailing at their respective balance sheet date.

(o) Lease transactions Financing leases where the ownership of the property is deemed to be transferred to the lessee are capitalized, while other ﬁnancing leases are allowed to be accounted for in the same manner as operating leases.

Lease assets are depreciated using the straight-line method over the lease term with estimated salvage value.

Lease-related income is recognized on a straight-line basis over the full term of the lease, based on the contractual amount of lease fees per month.

(p) Amounts per share Net income (loss) per share is computed by deducting dividends for preferred stock from net income (loss), divided by the weighted average number of shares of common stock, excluding treasury stock and parent bank stock held by subsidiaries, outstanding during each ﬁscal year.

F-36 SUMITOMO MITSUI BANKING CORPORATION NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Declared dividends represent the cash dividends declared applicable to respective years, including dividends to be paid after the end of the year.

(q) Adoption of new accounting standards Prior to April 1, 2001, unsecured borrowed securities and securities under resale agreements were reported on the consolidated balance sheet as Securities in custody in Other assets and Trading account securities borrowed or Securities borrowed in Other liabilities by the same amounts. Effective April 1, 2001, they are not reported on the consolidated balance sheet in accordance with the revision of the accounting standards for ﬁnancial instruments. Consequently, Other assets and Other liabilities decreased by ¥3,098,200 million ($23,251 million) as compared with the former manner.

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F-38 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries) CONSOLIDATED BALANCE SHEETS MARCH 31, 2001 and 2000

Millions of Millions of yen U.S. dollars (Note 1) 2001 2000 2001 Assets Cash and due from banks (Notes 9, 34) ...... ¥ 2,896,268 ¥ 2,168,836 $ 23,375 Call loans and bills bought ...... 368,425 182,712 2,973 Commercial paper and other debt purchased (Note 34) ...... 90,519 42,256 730 Trading assets (Notes 2, 9, 34, 35) ...... 577,578 1,425,028 4,661 Money held in trust (Note 34) ...... 22,208 72,581 179 Securities (Notes 3, 9, 34) ...... 10,466,528 6,928,746 84,475 Loans and bills discounted (Notes 4, 9, 33) ...... 32,906,703 32,333,211 265,590 Foreign exchanges (Note 5) ...... 268,669 316,395 2,168 Other assets (Notes 6, 9) ...... 1,359,442 2,747,979 10,972 Premises and equipment (Notes 7, 9) ...... 883,059 855,726 7,127 Deferred tax assets (Note 30) ...... 558,234 611,694 4,505 Customers’ liabilities for acceptances and guarantees (Note 18) ...... 1,964,073 1,492,628 15,852 Reserve for possible loan losses (Note 8) ...... (512,023) (682,188) (4,132) Total assets ...... ¥51,849,687 ¥48,495,608 $418,480 Liabilities, minority interests and stockholders’ equity Liability Deposits (Notes 9, 10) ...... ¥36,625,010 ¥33,738,616 $295,601 Call money and bills sold (Notes 9, 11) ...... 4,608,193 2,579,499 37,192 Commercial paper ...... 1,141,697 467,268 9,214 Trading liabilities (Notes 12, 35) ...... 201,407 360,706 1,625 Borrowed money (Notes 9, 13) ...... 1,138,305 1,508,783 9,187 Foreign exchanges (Note 5) ...... 37,094 29,346 299 Bonds (Note 14) ...... 1,133,368 1,053,354 9,147 Convertible bonds (Note 15) ...... — 95 — Other liabilities (Notes 9, 16) ...... 2,296,793 4,553,878 18,537 Reserve for employee retirement beneﬁt (Note 31) ...... 31,716 41,366 255 Reserve for possible losses on loans sold ...... 70,627 95,992 570 Other reserves (Note 17) ...... 643 513 5 Deferred tax liabilities (Note 30) ...... 369 271 2 Deferred tax liabilities for land revaluation ...... 40,654 45,494 328 Acceptances and guarantees (Note 18) ...... 1,964,073 1,492,628 15,852 Total liabilities ...... ¥49,289,955 ¥45,967,816 $397,820 Minority interests ...... ¥ 383,922 ¥ 319,237 $ 3,098 Stockholders’ equity Capital stock (Note 19) Common stock ...... ¥ 640,129 ¥ 639,934 $ 5,166 Preferred stock: Series II ...... 2,577 2,772 20 Series III (Type-2) ...... 400,000 400,000 3,228 Capital surplus (Note 19) ...... 899,521 899,521 7,260 Land revaluation excess ...... 63,056 69,333 508 Retained earnings (Note 20) ...... 196,060 198,161 1,582 Foreign currency translation adjustments ...... (20,939) — (169) Treasury stock ...... (42) (10) (0) Parent bank stock held by subsidiaries ...... (4,552) (1,157) (36) Total Stockholders’ equity ...... ¥ 2,175,809 ¥ 2,208,554 $ 17,561 Total liabilities, minority interests and stockholders’ equity ...... ¥51,849,687 ¥48,495,608 $418,480

See accompanying notes to consolidated ﬁnancial statements.

F-39 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries) CONSOLIDATED STATEMENTS OF INCOME YEARS ENDED MARCH 31, 2001 and 2000 Millions of Millions of yen U.S. dollars (Note 1) 2001 2000 2001 Income Interest income: Interest on loans and discounts ...... ¥ 800,818 ¥ 767,063 $ 6,463 Interest and dividends on securities ...... 134,621 117,759 1,086 Other interest income (Note 21) ...... 172,389 514,118 1,391 Fees and commissions ...... 209,261 186,213 1,688 Trading proﬁts ...... 26,807 17,484 216 Other operating income (Note 22) ...... 97,621 99,261 787 Other income (Note 23) ...... 332,094 455,196 2,680 Transfer from other reserves (Note 24) ...... — 3 — Total income ...... ¥1,773,614 ¥2,157,102 $14,314 Expenses Interest expenses: Interest on deposits ...... ¥ 246,224 ¥ 170,171 $ 1,987 Interest on borrowings, bonds and rediscounts ...... 103,636 84,923 836 Other interest expenses (Note 25) ...... 87,979 490,455 710 Fees and commissions ...... 61,863 66,414 499 Trading losses ...... — 994 — Other operating expenses (Note 26) ...... 55,471 67,883 447 General and administrative expenses (Note 27) ...... 490,621 487,472 3,959 Transfer to reserve for possible loan losses ...... 16,870 224,003 136 Other expenses (Note 28) ...... 578,896 438,643 4,672 Transfer to other reserves (Note 29) ...... 2 0 0 Total expenses ...... ¥1,641,567 ¥2,030,963 $13,249 Income before income taxes and minority interests ...... ¥ 132,046 ¥ 126,139 $ 1,065 Income taxes (Note 30): Current ...... 8,091 7,831 65 Deferred ...... 69,900 74,247 564 Minority interests in net income (loss) ...... 5,115 (18,521) 41 Net income ...... ¥ 48,939 ¥ 62,581 $ 394

Yen U.S. Dollars Per share of common stock: Net income ...... ¥9.22 ¥12.58 $0.07 Net income—diluted ...... 9.21 — 0.07

See accompanying notes to consolidated ﬁnancial statements.

F-40 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries) CONSOLIDATED STATEMENTS OF RETAINED EARNINGS YEARS ENDED MARCH 31, 2001 and 2000

Millions of U.S. dollars Millions of yen (Note 1) 2001 2000 2001 Balance at beginning of year (Note 20) ...... ¥198,161 ¥164,329 $1,599 Increase: Transfer from land revaluation excess ...... 6,759 2,115 54 Increase of retained earnings due to exclusion in afﬁliates under the equity method ...... 938 — 7 Decrease: Dividends paid ...... 35,705 30,182 288 Delivered money due to merger ...... 17,853 — 144 Decrease of retained earnings due to consolidation of additional subsidiaries ...... — 682 — Decrease of retained earnings due to the merger of consolidated subsidiaries ...... 5,177 — 41 Net income ...... 48,939 62,581 394 Balance at end of year (Note 20) ...... ¥196,060 ¥198,161 $1,582

See accompanying notes to consolidated ﬁnancial statements.

F-41 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries) CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED MARCH 31, 2001 and 2000

Millions of Millions of yen U.S. dollars (Note 1) 2001 2000 2001 Cash flows from operating activities Income before income taxes and minority interests ...... ¥ 132,046 ¥ 126,139 $ 1,065 Depreciation of premises and equipment ...... 35,123 35,029 283 Amortization of goodwill ...... 7,077 5,330 57 Net (income) loss from nonconsolidated entities accounted for by the equity method ...... (7,883) 1,487 (63) Net change in reserve for possible loan losses ...... (231,386) 11,419 (1,867) Net change in reserve for possible losses on loans sold ...... (27,006) (19,539) (217) Net change in reserve for employee retirement benefit ...... (15,319) (3,614) (123) Interest income ...... (1,107,828) (1,398,941) (8,941) Interest expenses ...... 437,840 745,550 3,533 Net gains on securities ...... (82,439) (346,591) (665) Net (income) loss from money held in trust ...... (536) 625 (4) Net exchange (gains) losses ...... (48,638) 145,561 (392) Net losses from disposition of premises and equipment ...... 18,810 12,209 151 Net change in trading assets ...... 873,036 (542) 7,046 Net change in trading liabilities ...... (189,217) (194) (1,527) Net change in payable on trading contracts ...... (588,359) 408,834 (4,748) Net change in loans and bills discounted ...... 1,390,760 503,351 11,224 Net change in deposits ...... 417,630 415,842 3,370 Net change in borrowed money (excluding subordinated debt) ...... (409,051) (214,107) (3,301) Net change in deposits with banks (except for demand deposits with the Bank of Japan) ...... (902,846) (247,833) (7,286) Net change in call loans and bills bought ...... (211,068) (162,311) (1,703) Net change in pledged money for securities borrowing transactions ...... 680,428 (335,705) 5,491 Net change in call money and bills sold ...... 2,019,431 253,678 16,298 Net change in commercial paper ...... 675,474 (99,731) 5,451 Net change in pledged money for securities lending transactions ...... (797,435) (34,993) (6,436) Net change in foreign exchanges (Assets) ...... 61,228 (7,101) 494 Net change in foreign exchanges (Liabilities) ...... 7,474 6,994 60 Net change in bonds (excluding subordinated bonds) ...... 200,967 155,486 1,622 Interest received ...... 1,149,235 1,625,911 9,275 Interest paid ...... (439,998) (1,005,204) (3,551) Other, net ...... 181,585 325,421 1,465 Subtotal ...... ¥ 3,229,136 ¥ 902,462 $ 26,062 Income taxes paid ...... (10,663) (13,719) (86) Net cash provided by operating activities ...... ¥ 3,218,472 ¥ 888,743 $ 25,976 Cash flows from investing activities Purchases of securities ...... ¥(16,532,695) ¥(7,671,286) $(133,435) Proceeds from sale of securities ...... 9,537,615 5,672,199 76,978 Proceeds from maturity of securities ...... 3,944,752 1,535,603 31,838 Purchases of money held in trust ...... (9,171) (31,319) (74) Proceeds from sale of money held in trust ...... 60,289 113,981 486 Purchases of premises and equipment ...... (118,836) (54,707) (959) Proceeds from sale of premises and equipment ...... 60,584 67,918 488 Purchases of subsidiaries stocks ...... (2,684) — (21) Net cash used in investing activities ...... ¥ (3,060,146) ¥ (367,609) $ (24,698)

See accompanying notes to consolidated ﬁnancial statements.

F-42 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries)

Millions of Millions of yen U.S. dollars (Note 1) 2001 2000 2001 Cash flows from financing activities Proceeds from issuance of subordinated debt ...... ¥112,283 ¥— $ 906 Repayment of subordinated debt ...... (319,774) (15,000) (2,580) Proceeds from issuance of subordinated bonds ...... 149,500 136,088 1,206 Repayment of subordinated bonds, convertible bonds and notes ...... (332,631) (103,257) (2,684) Dividends paid ...... (35,705) (30,182) (288) Proceeds from issuance of subsidiaries’ stocks paid by minority stockholders ...... 14,000 — 112 Dividends paid to minority stockholders ...... (7,474) (9,767) (60) Purchases of treasury stock ...... (808) (25) (6) Proceeds from sale of treasury stock ...... 586 18 4 Net cash used in financing activities ...... ¥(420,024) ¥(22,124) $(3,390) Effects of exchange rate changes on cash and cash equivalents ...... 830 3,614 6 Net change in cash and cash equivalents ...... ¥(260,867) ¥502,623 $(2,105) Cash and cash equivalents at beginning of year ...... ¥1,408,146 ¥905,496 $11,365 Change in cash and cash equivalents due to the inclusion of subsidiaries in consolidation ...... 90 83 0 Change in cash and cash equivalents due to the exclusion of subsidiaries from consolidation ...... — (57) — Cash and cash equivalents at end of year ...... ¥1,147,369 ¥1,408,146 $ 9,260

See accompanying notes to consolidated ﬁnancial statements.

F-43 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED MARCH 31 2001 and 2000

1. Basis of Consolidated Financial Statements and Summary of Signiﬁcant Accounting Policies

(1) Basis of consolidated financial statements Sumitomo Mitsui Banking Corporation (formerly The Sakura Bank, Limited) (the ‘‘Bank’’), a Japanese corporation, maintains its record and prepares its financial statements in Japanese yen. The accompanying consolidated financial statements have been prepared on the basis of accounting principles and practices generally accepted in Japan and in conformity with the ‘‘Regulation for consolidated financial statements,’’ which may differ to some degree from accounting principles and practices generally accepted in countries and jurisdictions other than Japan, and are compiled from the consolidated financial statements as required by the Securities and Exchange Law of Japan.

Certain reclassifications and rearrangements have been made to present the accompanying consolidated financial statements in a form which is familiar to readers outside Japan. In addition, the accompanying notes include information which is not required under accounting principles and practices generally accepted in Japan, but is presented herein as additional information. References to fiscal 2000 and fiscal 1999 are to the Bank’s fiscal years ended March 31, 2001 and 2000, respectively. As permitted by the Securities and Exchange Law of Japan, amounts less than one million yen have been omitted. As a result, the totals in Japanese yen shown in the financial statements do not necessarily agree with the sum of the individual amounts.

The U.S. dollar amounts shown in the accompanying consolidated financial statements and notes thereto represent the arithmetical results of translating original Japanese yen amounts of respective account balances to U.S. dollars on a basis of ¥123.90 to US$1.00, the exchange rate prevailing as of March 31, 2001. The inclusion of such U.S. dollar amounts is solely for convenience and not intended to imply that yen amounts have been or could have been converted, realized or settled in U.S. dollars at that or at any other rate. (2) Principles of consolidation The consolidated financial statements of the Bank include accounts of the Bank and its significant subsidiaries. Major consolidated subsidiaries for fiscal 2000 are listed below: Percentage Name Location Ownership Sakura Securities Co., Ltd...... Tokyo 100% Manufacturers Bank ...... LosAngeles 100% Sakura Finance International Limited ...... London 100% Sakura Finance Australia Limited ...... Sydney 100% Under the control and influence concept, those companies in which the Bank, directly or indirectly, is able to exercise control over operations are to be fully consolidated and those companies in which the Bank, directly or indirectly, is able to exercise significant influence over operations are to be accounted for by the equity method. The number of consolidated subsidiaries and affiliates as of March 31, 2001 and 2000, was as follows: 2001 2000 Consolidated subsidiaries ...... 65 51 Subsidiaries and affiliates accounted for by the equity method ...... 12 32

F-44 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The net decrease in the number of consolidated subsidiaries and equity method subsidiaries and afﬁliates listed above is mainly due to stock sales or mergers whereby consolidation or equity method accounting for certain subsidiaries or afﬁliates was no longer required. The decrease was partially offset by the establishment of new subsidiaries, the purchase of additional stock or the injection of capital that required their consolidation or the equity method of accounting.

All signiﬁcant intercompany transactions, account balances and unrealized proﬁts and losses have been eliminated in consolidation.

The financial statements of consolidated subsidiaries, whose fiscal year-ends are principally December 31, are included in the consolidated financial statements on the basis of their respective fiscal years after making appropriate adjustments for significant transactions during the periods from their respective year-ends to the date of the consolidated financial statements.

Any difference between the cost of an investment in a consolidated subsidiary and the Bank’s share of the underlying equity in the net assets fair value of the consolidated subsidiary is charged or credited to income, as the case may be, in the year incurred.

(3) Translation of foreign currency financial statements (i) The financial statements of foreign consolidated subsidiaries and affiliates are translated into Japanese yen at exchange rates as of the balance sheet date, except for stockholders’ equity, which is translated at the historical exchange rate. In accordance with the revised accounting standard for foreign currency translation, the presentation of Foreign currency translation adjustments is changed from Assets to Stockholders’ equity and Minority interests.

(ii) (a) Foreign currency denominated assets and liabilities and the accounts of overseas branches are translated into Japanese yen at the exchange rates prevailing at the balance sheet date, except that certain assets and liabilities are translated at the relevant historical exchange rates.

(b) Foreign currency accounts held by consolidated foreign subsidiaries are translated into the currency of the subsidiary at the respective year-end exchange rates.

(4) Valuation of trading account activities Trading account positions representing earnings or losses derived from trades made for the purpose of seeking to capture gains arising from short-term changes in interest rates, currency exchange rates, or market prices of securities and other market related indices or from gaps among markets are included in trading assets and trading liabilities on a trade date basis.

Trading securities and monetary claims purchased for trading purposes recorded in these accounts are stated at market value and ﬁnancial derivatives related to trading transactions are stated at the amounts that would be settled if they were terminated at the end of the ﬁscal year.

Trading proﬁts and trading losses include interest received and paid, the amount of increase/decrease in evaluation gains/losses on the balance sheet date for securities and monetary claims, and the amount of increase/decrease of evaluation gains/losses incurred from the estimated settlement price assuming settlement in cash on the balance sheet date for derivatives, compared with that at the end of the previous term.

F-45 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(5) Valuation of securities Prior to April 1, 2000, securities, including stocks, corporate bonds, and Japanese national and local government bonds, were stated at moving-average cost.

Securities included in money held in trust were also recorded at moving-average cost.

Effective April 1, 2000, as for securities other than those in trading portfolio, debt securities that the Bank and consolidated subsidiaries have the intent and ability to hold to maturity (held-to-maturity securities) are carried at amortized cost, using the moving-average method.

Investments in nonconsolidated subsidiaries and afﬁliates that are not accounted for by the equity method are carried at cost, using the moving-average method.

Securities excluding those classified as trading securities, held-to-maturity or investments in nonconsolidated subsidiaries and affiliates are defined as other securities. Debt securities in other securities are carried at amortized cost, using the moving-average method. Equity securities in other securities are carried at cost, using the moving-average method.

Valuation of securities held in individually managed money trusts for asset management purposes are determined by the same method as above.

(6) Valuation of derivatives for nontrading purposes Derivative ﬁnancial instruments other than those held for trading purposes are accounted for by the market value method.

(7) Hedge accounting In accordance with the Industry Audit Committee Report No. 15 ‘Temporary Treatment for Accounting and Auditing of Application of Accounting Standard for Financial Instruments in Banking Industry’ issued by JICPA in 2000, the Bank applies hedge accounting, abiding by the following requirements: (i) Loans, deposits and other interest-bearing assets and liabilities as a whole shall be recognized as the hedged portfolio. (ii) Derivatives as hedging instruments shall effectively reduce the interest rate exposure of the hedged portfolio. (iii) Effectiveness of hedging activities shall be evaluated on a quarterly basis. Certain derivatives are recorded on a cost basis using the short-cut method for interest rate swaps in view of consistency with the risk management policy.

The subsidiaries use the deferred hedge accounting or the short-cut method for interest rate swaps.

Net of deferred unrealized gains and losses from hedging instruments is reported in other liabilities. Deferred unrealized losses and unrealized gains from hedging instruments are ¥191,628 million ($1,546 million) and ¥208,232 million ($1,680 million), respectively.

(8) Depreciation method Premises and equipment are stated at cost less accumulated depreciation.

F-46 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The depreciation of premises and equipment of the Bank is computed by the declining balance method (except for that of buildings, which is computed by the straight-line method.)

Depreciation of buildings (which were acquired on or before March 31, 1998), building fixtures and structures were computed by the declining balance method before this term. The Bank reviewed the actual condition of buildings and related assets and observed that they had been consistently used for branch offices and other purposes over a long period of time. As a result, the Bank found that the straight-line method, which calculates level depreciation charges over their useful lives, was a more reasonable method to reflect profit and loss for each accounting term more properly. Accordingly, we have changed the depreciation method to the straight-line method from this fiscal year. As a result of this change, Income before income taxes for this fiscal year increased by ¥1,482 million ($11 million) from the corresponding amount that would have been recorded if the declining balance method was adopted.

The estimated useful lives of major items are as follows: Buildings 10 to 50 years Equipment 5 to 20 years Depreciation of premises and equipment of subsidiaries is computed mainly by the straight-line method based on estimated useful life.

Capitalized software for internal use is depreciated by the straight-line method based on useful life estimated by the Bank and subsidiaries (mainly ﬁve years). Capitalized software for internal use is included in other assets.

(9) Accounting for leases All leases by the Bank and its domestic consolidated subsidiaries have been accounted for as operating leases. Under Japanese accounting standards for leases, if financing leases where the ownership of the property is deemed to transfer to the lessee are capitalized, while other financing leases can be accounted for as operating leases if necessary information is disclosed in the notes to the lessee’s consolidated financial statements.

(10) Reserve for possible loan losses The reserve for possible loan losses of the Bank has been established based on the Bank’s internal rules for establishing a reserve for possible loan losses.

Customers are initially classified into ten categories, in accordance with the Bank’s own credit rating system. Based on the results of the self-assessment, those customers are classified into five categories: such as ‘‘Normal Borrowers,’’ ‘‘Borrowers Requiring Caution,’’ ‘‘Potentially Bankrupt Borrowers,’’ ‘‘Effectively Bankrupt Borrowers’’ and ‘‘Bankrupt Borrowers,’’ as defined by the report of JICPA.

The reserve for possible loan losses was calculated based on the specific actual past loss ratio for Normal Borrowers and Borrowers Requiring Caution categories as a general reserve, and the fair value of the collateral for collateral-dependent loans and other factors of solvency for other self-assessment categories for a specific reserve. For collateral or guaranteed claims of Effectively Bankrupt Borrowers and Bankrupt Borrowers, the amount exceeding the estimated value of collateral or guarantees was deducted, as deemed uncollectible, directly from those claims. The deducted amount was ¥1,121,687 million ($9,053 million) and ¥1,125,967 million for fiscal 2000 and fiscal 1999, respectively. For foreign claims, there is a reserve for loans to restructuring countries which has been established based on losses estimated by considering political and economic situations in those countries.

F-47 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

All claims are being assessed by the branches and credit supervision divisions based on the Bank’s internal rules for the self-assessment of asset quality. The Assets Review and Inspection Division, which is independent from branches and credit supervision divisions, conducts audits of these assessments.

The consolidated subsidiaries provide reserves for possible loan losses at the amounts considered reasonable in accordance with local accounting standards and are based on prior experience with loan losses.

(11) Reserve for employee retirement beneﬁt Under the terms of the Bank’s retirement plan, substantially all employees are entitled to a lump-sum payment at the time of retirement. The amount of reserve for employee retirement beneﬁt is, in general, based on length of service, basic salary at the time of retirement and reason for retirement. Prior to April 1, 2000, the liability for lump-sum payments is stated at the amount which would be required to be paid by the Bank if all eligible employees voluntarily retired at the balance sheet date.

In addition, the Bank has deﬁned beneﬁt pension plans which substantially cover all employees. Annual contributions, which consist of normal costs and amortization of prior service costs, are included in general and administrative expenses.

Effective April 1, 2000, a new accounting standard for pension plans and severance indemnity plans, reserve for employee retirement beneﬁt is recorded based on an actuarial computation, which uses the present value of the projected beneﬁt obligation and pension assets, due to employee’s credited years of services at the balance sheet date.

Prior service cost and unrecognized net actuarial differences are amortized as follows respectively.

Prior service cost: Amortized by the straight-line basis over the prescribed years within the average remaining service period (primarily 11 years) of active employees.

Unrecognized net actuarial differences: Amortized from the next ﬁscal year by the straight-line basis over the prescribed years within the average remaining service period (primarily 11 years) of active employees.

Unrecognized net obligation from initial application of the new accounting standard of ¥193,823 million ($1,564 million) is amortized using the straight-line method over mainly ﬁve years.

Due to the new accounting standard, Income before income taxes and minority interests for the year ended March 31, 2001 has decreased compared with prior accounting method by ¥29,590 million ($238 million).

(12) Reserve for possible losses on loans sold Reserve for possible losses on loans sold to the Cooperative Credit Purchasing Company, Limited (CCPC), is made to provisions in amounts which it views to be necessary based on estimates of possible losses it may sustain in the future on loans sold to the CCPC, taking into account of the value of real estate collateral securing these loans.

(13) Land revaluation excess Under the Law of Land Revaluation, effective on March 31, 1998, the Bank elected the one-time revaluation for its own-use land to current value based on real estate appraisal information as of March 31, 1998. Continuous readjustment is not permitted unless the value of the land subsequently declines signiﬁcantly such that the amount of the decline in value should be removed from the land revaluation excess account and deferred

F-48 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) tax liabilities. The amount equivalent to the tax on the revaluation is provided as deferred tax liability for land revaluation, and the remaining amount after the deferred tax liability is included in stockholders’ equity as land revaluation excess.

The details of the one-time revaluation were as follows:

The date of land revaluation: March 31, 1998

The revaluation of land used for banking business was rationally made, reﬂecting appropriate adjustments for land shape, timing of the appraisal, etc., based on the appraisal reports for real estate issued by real estate appraisers under the Law of Land Revaluation.

The excess of book value over current value was ¥35,942 million ($290 million) as of March 31, 2001 and ¥29,181 million as of March 31, 2000.

(14) Income taxes Deferred income taxes relating to temporary differences between ﬁnancial and tax reporting have been recognized.

(15) Cash and cash equivalents Cash and cash equivalents consist of cash on hand and demand deposits with the Bank of Japan.

The assets and liabilities of the newly consolidated company due to acquisition of stocks of The Minato Bank, Ltd. and net expenditure of cash and cash equivalents due to the acquisition of The Minato Bank, Ltd. is as follows:

Millions of yen Assets (including ¥1,806,408 million of loans) ...... ¥2,342,587 Liabilities ...... (2,264,968) Minority interests ...... (46,981) Goodwill ...... 3,359 Cost of investment of The Minato Bank, Ltd...... 33,997 Cash and cash equivalents of The Minato Bank, Ltd...... 32,972 Net: Expenditure for acquisition of The Minato Bank, Ltd...... 1,024

(16) Appropriation of retained earnings Cash dividends are recorded in the ﬁnancial year that the relevant proposed appropriation of retained earnings is approved by the Board of Directors and/or at the General Meeting of Shareholders.

(17) Net income per share Net income per share calculations represent net income less dividends on preferred shares, divided by the weighted average number of outstanding shares of common stock during the respective year.

The calculation considers the dilutive effect of common stock equivalents, which includes preferred shares and certain convertible bonds, assuming that all convertible bonds and preferred shares were converted into common stock. Diluted net income per common share is to be appropriately adjusted for free distributions of common stock. For ﬁscal 1999, however, diluted net income per common share is not applicable because it is anti-dilutive.

F-49 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(18) Differences between the accounting principles and practices adopted in the accompanying consolidated ﬁnancial statements and International Accounting Standards The accompanying consolidated ﬁnancial statements conform with accounting principles and practices generally accepted in Japan. Such principles and practices differ from International Accounting Standards in several respects, such as methods for valuation of securities, hedge accounting and accounting for leases, among others.

(19) New accounting standard for ﬁnancial instruments Effective April 1, 2000, a new accounting standard for ﬁnancial instruments was adopted in Japan. Accordingly, the valuation methods of securities and derivatives, excluding those in the trading portfolio, have been changed, and hedge accounting has been adopted. As a result, Income before income taxes and minority interests has increased ¥36,146 million ($291 million) compared with the prior accounting method. Income and expenses relating to derivative transactions that meet the criteria for hedge accounting are presented net by account, which represents a change from the prior accounting that presented net by transaction. As a result, Income and expenses for 2001 have decreased ¥155,585 million ($1,255 million), though Income before income taxes and minority interests did not change.

2. Trading Assets Trading assets as of March 31, 2001 and 2000, consisted of the following:

Millions of U.S. Millions of yen dollars 2001 2000 2001 Trading securities ...... ¥ 41,360 ¥ 466,397 $ 333 Derivatives of trading securities ...... — 273 — Securities related to trading transactions ...... 5,403 40,793 43 Trading-related ﬁnancial derivatives ...... 108,374 112,225 874 Other trading assets(1) ...... 422,439 805,338 3,409 Total ...... ¥577,578 ¥1,425,028 $4,661

(1) Other trading assets includes commercial paper and other debt purchased related to trading transactions.

3. Securities Securities as of March 31, 2001 and 2000, consisted of the following:

Millions of U.S. Millions of yen dollars 2001 2000 2001 Japanese government bonds ...... ¥ 4,903,153 ¥1,870,908 $39,573 Japanese local government bonds ...... 20,769 137,619 167 Japanese corporate bonds ...... 588,893 448,294 4,752 Japanese stocks ...... 3,899,246 3,515,820 31,470 Other ...... 1,054,465 956,102 8,510 Total ...... ¥10,466,528 ¥6,928,746 $84,475

F-50 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Japanese stocks and other include investments in unconsolidated subsidiaries and afﬁliates of ¥3,784 million ($30 million) and ¥27,425 million as of March 31, 2001 and 2000, respectively.

Securities of ¥292,171 million ($2,358 million), which are used for securities lending transactions for consumption are included in securities, other assets and trading assets as of March 31, 2001.

4. Loans and Bills Discounted Loans and bills discounted as of March 31, 2001 and 2000, consisted of the following:

Millions of U.S. Millions of yen dollars 2001 2000 2001 Bills discounted ...... ¥ 738,621 ¥ 585,254 $ 5,961 Loans on bills ...... 3,490,209 3,469,320 28,169 Loans on deeds ...... 22,543,959 21,817,990 181,952 Overdrafts ...... 6,119,474 6,440,517 49,390 Financing receivables, including leasing ...... 14,437 20,127 116 Total ...... ¥32,906,703 ¥32,333,211 $265,590

‘‘Non-accrual Loans’’ includes loans classiﬁed as ‘‘Potentially Bankrupt Borrowers’’ and ‘‘Effectively Bankrupt Borrowers’’ under the Bank’s self-assessment guidelines. Accrual interest receivable for these categories is not recognized on an accrual basis for accounting purposes.

Loans and bills discounted includes loans held by the Bank and its consolidated subsidiaries to borrowers in bankruptcy totaling ¥197,398 million ($1,593 million) and ¥176,313 million as of March 31, 2001 and 2000, respectively, as well as Non-accrual Loans held by the Bank and its consolidated subsidiaries totaling ¥1,041,951 million ($8,409 million) and ¥1,274,607 million as of March 31, 2001 and 2000, respectively.

In addition to ‘‘Non-accrual Loans’’ as deﬁned, certain other loans classiﬁed as ‘‘Borrowers Requiring Caution’’ under the Bank’s self-assessment guidelines include ‘‘Past due loans (3 months or more).’’

‘‘Past due loans (3 months or more)’’ consist of loans for which the principal and/or interest is three months or more past due but exclude ‘‘Bankrupt Loans’’ and ‘‘Non-accrual Loans.’’ The balances of Past due loans (3 months or more) as of March 31, 2001 and 2000, were ¥75,870 million ($612 million) and ¥39,777 million, respectively.

‘‘Restructured loans’’ are loans in which the Bank and its subsidiaries are relaxing lending conditions, such as reduction of the original interest rate, forbearance of interests payments or principal repayments to support the borrowers’ reorganization, but exclude ‘‘Bankrupt Loans,’’ ‘‘Non-accrual Loans’’ or ‘‘Past due loans (3 months or more).’’ The outstanding balances of restructured loans as of March 31, 2001 and 2000, were ¥151,413 million ($1,222 million) and ¥170,741 million, respectively.

F-51 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

5. Foreign Exchanges Foreign exchange assets and foreign exchange liabilities as of March 31, 2001 and 2000, consisted of the following:

Millions of U.S. Millions of yen dollars 2001 2000 2001 Assets: Due from foreign banks ...... ¥ 32,427 ¥ 14,786 $ 261 Foreign bills bought ...... 150,719 217,114 1,216 Foreign bills receivable ...... 85,522 84,493 690 Total ...... ¥ 268,669 ¥ 316,395 $ 2,168 Liabilities: Due to foreign banks ...... ¥ 28,272 ¥ 17,321 $ 228 Foreign bills sold ...... 2,254 3,066 18 Foreign bills payable ...... 6,566 8,958 52 Total ...... ¥ 37,094 ¥ 29,346 $ 299

6. Other Assets Other assets as of March 31, 2001 and 2000, consisted of the following:

Millions of Millions of yen U.S. dollars 2001 2000 2001 Prepaid expenses ...... ¥ 50,025 ¥ 68,333 $ 403 Accrued income ...... 369,163 557,122 2,979 Other ...... 940,254 2,122,524 7,588 Total ...... ¥1,359,442 ¥2,747,979 $10,972

7. Premises and Equipment Premises and equipment as of March 31, 2001 and 2000, consisted of the following:

Millions of Millions of yen U.S. dollars 2001 2000 2001 Land(1) ...... ¥ 483,335 ¥ 495,244 $ 3,901 Building ...... 277,874 268,480 2,242 Equipment ...... 222,702 212,059 1,797 Other ...... 334,879 301,508 2,702 Total ...... ¥1,318,791 ¥1,277,293 $10,643 Accumulated depreciation ...... 435,732 421,566 3,516 Net book value ...... ¥ 883,059 ¥ 855,726 $ 7,127

(1) Land includes land revaluation excess with related taxes referred to in Note 1 (13).

F-52 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

8. Reserve for Possible Loan Losses Reserve for possible loan losses as of March 31, 2001 and 2000, consisted of the following:

Millions of Millions of yen U.S. dollars 2001 2000 2001 General reserve ...... ¥163,151 ¥227,338 $1,316 Speciﬁc reserve ...... 348,872 454,849 2,815 Total ...... ¥512,023 ¥682,188 $4,132

9. Assets Pledged as Collateral Assets pledged as collateral as of March 31, 2001 and 2000, consisted of the following:

Millions of Millions of yen U.S. dollars 2001 2000 2001 Assets pledged as collateral: Cash and due from banks ...... ¥1¥—$0 Trading assets ...... 3,037 — 24 Securities ...... 1,932,374 654,854 15,596 Loans and bills discounted ...... 701,282 1,122,063 5,660 Other assets ...... 58,620 39,308 473 Premises and equipment ...... 559 1,414 4 Liabilities corresponding to assets pledged as collateral: Deposits ...... ¥ 62,243 ¥ 78,711 $ 502 Call money and bills sold ...... 2,116,699 945,700 17,083 Borrowed money ...... 68,774 96,754 555 Other liabilities ...... 17,928 72,706 144

In addition, securities with a balance of ¥3,096,063 million ($24,988 million) and ¥1,107,597 million, loans and bills discounted of ¥397,546 million ($3,208 million) and ¥9,627 million, cash and due from banks of ¥3 million ($0 million) and ¥— million and other assets of ¥10 million ($0 million) and ¥97,638 million are pledged as collateral for cash settlement and replacement of initial margins of futures markets and so on as of March 31, 2001 and 2000, respectively.

The following items are included in premises and equipment and other assets, respectively as of March 31, 2001. Surety deposits and intangible: ¥70,421 million ($568 million) Initial margins of futures markets in other assets: ¥3,006 million ($24 million)

F-53 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

10. Deposits Deposits as of March 31, 2001 and 2000, consisted of the following:

Millions of Millions of yen U.S. dollars 2001 2000 2001 Current deposits ...... ¥ 2,440,824 ¥ 1,947,618 $ 19,699 Ordinary deposits ...... 9,425,381 8,902,508 76,072 Deposits at notice ...... 3,923,656 3,981,865 31,667 Time deposits ...... 13,972,593 13,137,772 112,773 Negotiable certiﬁcates of deposit ...... 4,621,021 3,512,634 37,296 Other deposits ...... 2,241,531 2,256,217 18,091 Total ...... ¥36,625,010 ¥33,738,616 $295,601

11. Call Money and Bills Sold Call money and Bills sold as of March 31, 2001 and 2000, consisted of the following:

Millions of Millions of yen U.S. dollars 2001 2000 2001 Call money ...... ¥3,320,493 ¥2,283,799 $26,799 Bills sold ...... 1,287,700 295,700 10,393 Total ...... ¥4,608,193 ¥2,579,499 $37,192

12. Trading Liabilities Trading liabilities as of March 31, 2001 and 2000, consisted of the following:

Millions of Millions of yen U.S. dollars 2001 2000 2001 Trading securities sold for short sales ...... ¥ 3,914 ¥146,536 $ 31 Derivatives of trading securities ...... — 256 — Securities related to trading transaction sold for short sales ...... 3,756 — 30 Derivatives of securities related to trading transactions ...... — 3 — Trading-related ﬁnancial derivatives ...... 193,736 213,909 1,563 Total ...... ¥201,407 ¥360,706 $1,625

F-54 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

13. Borrowed Money

Borrowed money as of March 31, 2001 and 2000, consisted of the following:

Millions of Millions of yen U.S. dollars 2001 2000 2001 Bills rediscounted ...... ¥ 20,465 ¥ 23,053 $ 165 Borrowings from the Bank of Japan and other ﬁnancial institutions ...... 478,748 559,519 3,863 Subordinated debt ...... 503,364 716,237 4,062 Other ...... 135,726 209,972 1,095 Total ...... ¥1,138,305 ¥1,508,783 $9,187

The repayment schedule within ﬁve years on borrowed money as of March 31, 2001, is shown as follows:

Millions of yen One year or less One to two years Two to three years Three to four years Four to ﬁve years ¥296,200 ¥80,670 ¥70,546 ¥139,777 ¥167,847

Millions of U.S. dollars One year or less One to two years Two to three years Three to four years Four to ﬁve years $2,390 $651 $569 $1,128 $1,354

14. Bonds

Bonds as of March 31, 2001 and 2000, consisted of the following:

Millions of Millions of yen U.S. dollars 2001 2000 2001 Subordinated bonds ...... ¥ 758,426 ¥ 877,767 $6,121 Other ...... 374,942 175,586 3,026 Total ...... ¥1,133,368 ¥1,053,354 $9,147

The redemption schedule within ﬁve years on bonds as of March 31, 2001, is shown as follows:

Millions of yen One year or less One to two years Two to three years Three to four years Four to ﬁve years ¥1,079 ¥— ¥29,039 ¥170,539 ¥126,453

Millions of U.S. dollars One year or less One to two years Two to three years Three to four years Four to ﬁve years $8 $— $234 $1,376 $1,020

F-55 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

15. Convertible Bonds Convertible bonds as of March 31, 2001 and 2000, consisted of the following: Millions of Millions of yen U.S. dollars 2001 2000 2001 2.625%U.S. dollar convertible bonds due 2003 ...... ¥— ¥95 $— Total ...... ¥— ¥95 $—

16. Other Liabilities Other liabilities as of March 31, 2001 and 2000, consisted of the following:

Millions of Millions of yen U.S. dollars 2001 2000 2001 Accrued expenses ...... ¥ 170,796 ¥ 202,906 $ 1,378 Unearned income ...... 95,407 97,681 770 Income taxes payable ...... 11,673 8,325 94 Trading account payable ...... 400,651 988,801 3,233 Pledged money for securities lending transactions ...... 283,686 1,081,122 2,289 Other ...... 1,334,578 2,175,041 10,771 Total ...... ¥2,296,793 ¥4,553,878 $18,537

Other includes delivered money due to merger of ¥17,853 million ($144 million) as of March 31, 2001.

17. Other Reserves Other reserves as of March 31, 2001 and 2000, consisted of the following:

Millions of Millions of yen U.S. dollars 2001 2000 2001 Reserve for contingent liabilities from ﬁnancial futures transactions ...... ¥ 9 ¥ 9 $0 Reserve for contingent liabilities from securities transactions ...... 633 503 5 Total ...... ¥643 ¥513 $5

18. Acceptances and Guarantees Acceptances and guarantees as of March 31, 2001 and 2000, consisted of the following: Millions of Millions of yen U.S. dollars 2001 2000 2001 Acceptances ...... ¥ 17,939 ¥ 31,909 $ 144 Letters of credit ...... 183,423 178,131 1,480 Guarantees ...... 1,762,710 1,282,586 14,226 Total ...... ¥1,964,073 ¥1,492,628 $15,852

F-56 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

All contingent liabilities arising in connection with customers’ foreign trade and other transactions are classiﬁed under acceptances and guarantees. A contra account, customers’ liabilities for acceptances and guarantees, is classiﬁed as an asset representing the Bank and its subsidiaries’ right of indemnity from customers.

19. Capital Stock and Capital Surplus The authorized number of shares of capital stock (common stock and preferred stock) as of March 31, 2001, was as follows: (i) 10,000,000 thousand common shares, voting and ranking equally with any other class of shares, except preferred shares, with respect to payment of dividends and distributions on liquidation or closing of the Bank. (ii) 1,027,577 thousand preferred shares, nonvoting and ranking prior to common shares with respect to payment of dividends and distributions on liquidation or closing of the Bank. The dividend rate, redemption and conversion rights, if any, are to be determined prior to issuance by the Board of Directors.

The Bank is authorized to repurchase, at management’s discretion, up to 350 million shares of the Bank’s stock for the purpose of canceling shares by crediting them against retained earnings.

The changes in the capital stock and capital surplus accounts for the years ended March 31, 2001 and 2000, were as follows: Millions of yen Common stock Preferred stock Capital surplus Shares Stated Shares Stated Stated (thousands) value (thousands) value value March 31, 1999 ...... 4,083,121 ¥631,399 811,307 ¥411,307 ¥899,521 Conversion of preferred stocks ...... 34,175 8,535 (8,535) (8,535) — March 31, 2000 ...... 4,117,297 639,934 802,772 402,772 899,521 Conversion of preferred stocks ...... 780 195 (195) (195) — March 31, 2001 ...... 4,118,077 ¥640,129 802,577 ¥402,577 ¥899,521 Millions of U.S. dollars ...... — $ 5,166 — $ 3,249 $ 7,260

Under the Japanese Commercial Code (the ‘‘Code’’), at least 50%of the issue price of new shares, with a minimum of the par value thereof, is required to be designated as stated capital. The portion which is to be designated as stated capital is determined by resolution of the Board of Directors. Proceeds in excess of the amounts designated as stated capital have been credited to capital surplus.

Under the Code, (i) the Bank may, by resolution of the stockholders, transfer a portion of retained earnings available for dividends to the capital stock account, and (ii) the Bank may, by resolution of the Board of Directors, issue new shares of common stock to the existing stockholders without consideration to the extent that the amount calculated by multiplying the number of outstanding shares after the issuance by par value per share does not exceed the stated capital, or that the amount calculated by dividing the total amount of stockholders’ equity by the number of outstanding shares after the issuance shall not be less than ¥50. These issuances of the new shares are treated as stock splits.

F-57 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Holders of Series II preferred shares issued on October 1, 1996, are entitled to priority as to the payment of dividends and as to distributions on liquidation of the Bank to common stock of the Bank, to receive noncumulative dividends of ¥15 and a distribution of ¥2,000 per preferred share.

Series II preferred shares are convertible on or after October 1, 1997, and up to and including September 30, 2001, at the option of the stockholders, into fully paid shares of common stock of the Bank at an initial exchange price of ¥1,122.

Unless previously converted at the option of Series II preferred stockholders, all outstanding Series II preferred shares will be mandatorily exchanged for fully paid shares of common stock of the Bank on October 1, 2001, at the number of common shares calculated by dividing ¥2,000 by the average market price per share during a certain period immediately preceding October 1, 2001.

The Series III preferred stockholders are entitled to priority as to the payment of dividends and as to distributions on liquidation of the Bank, ranking equally with Series II preferred shares, to common stock of the Bank, to receive noncumulative dividends of ¥13.70 and a distribution of ¥1,000 per preferred share. Series III preferred shares are convertible on or after October 1, 2002, and up to and including September 30, 2009, at the option of stockholders, into fully paid shares of common stock of the Bank.

The Bank has the following stock option plan for the Bank’s directors and certain employees: A plan provides for granting options to directors and certain employees to purchase up to 279 thousand shares of the Bank’s common stock in the period from June 30, 2001 to June 29, 2009. The issue price of the stock is ¥674 per share.

Another plan provides for granting options to directors and certain employees to purchase up to 291 thousand shares of the Bank’s common stock in the period from June 30, 2002 to June 29, 2010. The issue price of the stock is ¥772 per share.

20. Retained Earnings

Earned surplus reserve as of March 31, 2001 and 2000, is included in retained earnings. The changes for the years ended March 31, 2001 and 2000, were as follows:

Millions of Millions of yen U.S. dollars 2001 2000 2001 Balance at beginning of year ...... ¥198,161 ¥164,329 $1,599 Appropriation of retained earnings ...... (2,100) 33,832 (16) Balance at end of year ...... ¥196,060 ¥198,161 $1,582

Under the Banking Law of Japan, an amount equivalent to at least 20%of any distribution of proﬁts must be appropriated as an earned surplus reserve until such reserve equals 100%of stated capital. This reserve is not available for dividends, but may be used to reduce a deﬁcit by resolution of the stockholders or may be transferred to the capital stock account by resolution of the Board of Directors.

F-58 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

21. Other Interest Income

The composition of other interest income for the years ended March 31, 2001 and 2000, was as follows:

Millions of Millions of yen U.S. dollars 2001 2000 2001 Deposits with banks ...... ¥100,750 ¥25,884 $ 813 Interest rate swaps ...... — 371,105 — Other ...... 71,638 117,128 578 Total ...... ¥172,389 ¥514,118 $1,391

Income and expenses relating to derivative transactions that meet the criteria for hedge accounting are presented net by account, which represents a change from the prior accounting that presented net by transaction.

22. Other Operating Income

Other operating income for the years ended March 31, 2001 and 2000, was as follows:

Millions of Millions of yen U.S. dollars 2001 2000 2001 Gains on foreign exchange transactions ...... ¥17,015 ¥31,714 $137 Gains on sales of bonds ...... 16,043 22,206 129 Gains on redemption of bonds ...... 310 3,690 2 Other ...... 64,251 41,650 518 Total ...... ¥97,621 ¥99,261 $787

23. Other Income

Other income for the years ended March 31, 2001 and 2000, was as follows:

Millions of Millions of yen U.S. dollars 2001 2000 2001 Gains on sales of stocks ...... ¥175,756 ¥427,122 $1,418 Gains on money held in trust ...... 942 471 7 Gains on disposition of premises and equipment ...... 3,957 7,754 31 Collection of written-off claims ...... 1,947 1,848 15 Net income from nonconsolidated entities by the equity method ...... 7,883 — 63 Gains on exemption of obligation ...... 44,525 — 359 Gains on securities contributed to employee retirement beneﬁt trust ..... 29,602 — 238 Gains on stock-related derivative transactions ...... 43,661 — 352 Other ...... 23,815 17,998 192 Total ...... ¥332,094 ¥455,196 $2,680

F-59 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

24. Transfer from Other Reserves Transfer from other reserves for the years ended March 31, 2001 and 2000, was as follows:

Millions of Millions of yen U.S. dollars 2001 2000 2001 Reserve for contingent liabilities from securities transactions ...... ¥— ¥3 $— Total ...... ¥— ¥3 $—

25. Other Interest Expenses Other interest expenses for the years ended March 31, 2001 and 2000, was as follows:

Millions of Millions of yen U.S. dollars 2001 2000 2001 Convertible bonds ...... ¥ 2 ¥ 17 $ 0 Interest rate swaps ...... 18,606 370,907 150 Other ...... 69,371 119,530 559 Total ...... ¥87,979 ¥490,455 $710

26. Other Operating Expenses Other operating expenses for the years ended March 31, 2001 and 2000, was as follows:

Millions of Millions of yen U.S. dollars 2001 2000 2001 Losses on sales of bonds ...... ¥ 4,710 ¥15,510 $ 38 Losses on redemption of bonds ...... 2,290 6,262 18 Losses on devaluation of bonds ...... 395 475 3 Other ...... 48,074 45,635 388 Total ...... ¥55,471 ¥67,883 $447

F-60 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

27. General and Administrative Expenses General and administrative expenses for the years ended March 31, 2001 and 2000, was as follows:

Millions of Millions of yen U.S. dollars 2001 2000 2001 Salaries and welfare expenses ...... ¥218,548 ¥221,317 $1,763 Retirement beneﬁts ...... 21,689 32,611 175 Depreciation ...... 35,123 35,029 283 Rent and lease expenses ...... 44,785 44,793 361 Taxes and public impositions ...... 24,314 25,430 196 Other ...... 146,160 128,289 1,179 Total ...... ¥490,621 ¥487,472 $3,959

Other includes cost of research and development of ¥212 million ($1 million) and ¥225 million for ﬁscal 2000 and 1999, respectively.

28. Other Expenses Other expenses for the years ended March 31, 2001 and 2000, was as follows:

Millions of Millions of yen U.S. dollars 2001 2000 2001 Write-offs of loans ...... ¥257,762 ¥146,374 $2,080 Losses on sales of stocks and other securities ...... 44,653 50,925 360 Losses on devaluation of stocks and other securities ...... 57,621 33,255 465 Losses on money held in trust ...... 405 1,097 3 Losses on disposition of premises and equipment ...... 22,767 19,964 183 Losses on disposal of loans at a subsidiary ...... 40,354 — 325 Amortization of unrecognized net transition obligation for employee retirement beneﬁt ...... 39,135 — 315 Other ...... 116,196 187,026 937 Total ...... ¥578,896 ¥438,643 $4,672

Other includes provisions for possible losses on loans sold of ¥55,905 million and equity in losses of afﬁliates of ¥1,487 million for ﬁscal 1999.

29. Transfer to Other Reserves Transfer to other reserves for the years ended March 31, 2001 and 2000, was as follows:

Millions of Millions of yen U.S. dollars 2001 2000 2001 Reserve for contingent liabilities from ﬁnancial futures transactions ...... ¥— ¥0 $— Reserve for contingent liabilities from securities transactions ...... 2 — 0 Total ...... ¥ 2 ¥0 $ 0

F-61 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

30. Income Taxes The Bank is subject to a number of taxes based on income such as corporation tax, inhabitants tax, and enterprise tax which, in the aggregate, resulted in a normal Japanese statutory tax rate of approximately 39.62% for ﬁscal 2000, and 42.05%for ﬁscal 1999.

The actual effective tax rates for ﬁscal 2000 and 1999, as shown below, differed from the normal Japanese statutory rate due to a number of factors, including, among others, (1) certain expenses permanently not deductible for tax purposes, (2) the new establishment of Tokyo Metropolitan Government’s ordinance concerning the special treatment for the standard of enterprise taxes to banking industries, (3) the new establishment of the Osaka Prefectural Governments ordinance concerning the special treatment for the standard of enterprise taxes to banking industries, (4) different tax rates for the subsidiaries outside Japan, (5) valuation allowance for deferred income tax assets and (6) dividend excluded from taxable income in ﬁscal 1999.

Millions of Millions of yen U.S. dollars 2001 2000 2001 Income taxes (corporation, inhabitants and enterprise) (a) ...... ¥ 77,991 ¥ 82,079 $ 629 Income before income taxes and minority interests (b) ...... ¥132,046 ¥126,139 $1,065 Actual effective tax rates ((a) / (b)) ...... 59.0%65.0%59.0%

The tax effects of signiﬁcant temporary differences and loss carryforwards, which resulted in deferred tax assets and liabilities at March 31, 2001 and 2000, were as follows:

Millions of Millions of yen U.S. dollars 2001 2000 2001 Deferred tax assets: Reserve for possible loan losses ...... ¥397,704 ¥440,289 $3,209 Net operating loss carryforwards ...... 120,891 90,826 975 Other(1) ...... 92,703 88,352 748 Subtotal ...... ¥611,300 ¥619,467 $4,933 Valuation allowance ...... (34,317) (7,749) (276) Total ...... ¥576,982 ¥611,718 $4,656 Deferred tax liabilities: Gains on securities contributed to employee retirement beneﬁt trust ...... ¥ 11,604 ¥ — $ 93 Reserve for losses on overseas investments ...... — 24 — Other ...... 7,513 271 60 Total ...... 19,117 295 154 Net deferred tax assets ...... ¥557,864 ¥611,423 $4,502

(1) The following items are included in Other of Deferred tax assets for the year ended March 31, 2001.

Reserve for possible losses on loans sold ...... ¥27,783 ($224 million) Reserve for employee retirement beneﬁt ...... 26,437 ($213 million) Losses on devaluation of stocks and other securities ...... 15,697 ($126 million)

F-62 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Due to the establishment of the Tokyo Metropolitan Government’s ordinance concerning the special treatment for the standard of enterprise taxes to banking industries on March 31, 2000, the normal statutory tax rate for the computation of deferred tax assets and liabilities decreased from 42.05%to 39.62%.This change decreased the amount of deferred tax assets by ¥35,791 million and increased deferred tax in ﬁscal 1999 by the same amount. The amount of deferred tax liabilities for land revaluation decreased by ¥1,968 million as a result of the revaluation and increased the land revaluation excess by the same amount.

Due to the establishment of the Osaka Prefectural Government’s ordinance concerning the special treatment for the standard of enterprise taxes to banking industries on June 9, 2000, the normal statutory tax rate for the computation of deferred tax assets and liabilities decreased from 39.62%to 39.20%.This change decreased the amount of deferred tax assets and deferred tax liabilities for land revaluation by ¥5,616 million ($45 million) and ¥294 million ($2 million), respectively.

Enterprise taxes other than those relating to income are included in other expenses. Effective April 1, 2000, the Special Ordinance Concerning Taxation Standard for Enterprise Taxes in Relation to Banks in the Tokyo Metropolis (Tokyo Metropolis Ordinance 145 of April 1, 2000) was enacted, and enterprise taxes in Tokyo, which were included in income taxes, current for the prior period, are now included in other expenses in the amount of ¥8,733 million ($70 million).

31. Reserve for Employee Retirement Beneﬁt

(1) Outline of retirement benefit The Bank and consolidated subsidiaries in Japan have contributory funded defined benefit pension plans, such as contributory pension plans, qualified pension plans and lump-sum severance indemnity plans. They may grant additional benefit in cases where certain requirements are met when employees retire.

The Bank contributed certain marketable equity securities to an employee retirement beneﬁt trust.

At March 31, 2001, the Bank and The Minato Bank, Ltd. have contributed funded defined benefit pension plans. Sakura Friend Securities Co., Ltd. and SAKURA K.C.S. Corporation have qualified pension plans. The Bank and most subsidiaries in Japan have lump-sum severance indemnity plans.

(2) Projected beneﬁt obligation Information on projected beneﬁt obligation and others at March 31, 2001 is shown as follows:

Millions of Millions of yen U.S. dollars 2001 2001 Projected benefit obligation ...... ¥(645,033) $(5,206) Pension assets ...... 390,318 3,150 Unfunded projected benefit obligation ...... ¥(254,714) $(2,055) Unrecognized net transition obligation ...... 153,676 1,240 Unrecognized actuarial differences ...... 70,985 572 Unrecognized prior service cost ...... (1,664) (13) Net amount recorded on the consolidated balance sheets ...... ¥ (31,716) $ (255) Reserve for employee retirement benefit ...... (31,716) (255)

F-63 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(3) Pension expenses Millions of Millions of yen U.S. dollars 2001 2001 Service cost ...... ¥16,535 $ 133 Interest cost on projected beneﬁt obligation ...... 21,114 170 Expected return on plan assets ...... (20,536) (165) Amortization of net transition obligation ...... 39,164 316 Other ...... 2,681 21 Pension expenses ...... ¥58,959 $ 475

(4) Assumptions The principal assumptions used in determining beneﬁt obligation and pension expenses at or for the year ended March 31, 2001, were as follows:

2001 Discount rate ...... 1.7%to 3.5% Expected rate of return on plan assets ...... 2.0%to 5.6% Term to amortize prior service cost ...... Mainly 11 years Term to amortize actuarial differences ...... Mainly 11 years Term to amortize net transition obligation ...... Mainly 5 years

The estimated amount of all retirement beneﬁts to be paid at the future retirement date is allocated equally to each service year using the estimated number of total service years.

32. Leases Financing leases where the ownership of the property is not deemed to transfer to the lessee as of March 31, 2001 and 2000, consisted of the following:

(i) As lessee Acquisition cost, accumulated depreciation and net balance of the leased property as of March 31, 2001 and 2000, were as follows:

Millions of Millions of yen U.S. dollars 2001 2000 2001 Acquisition cost ...... ¥10,527 ¥7,078 $84 Accumulated depreciation ...... 4,216 5,324 34 Net balance ...... ¥ 6,311 ¥1,754 $50

Acquisition cost includes the imputed interest expense portion because of its immateriality.

F-64 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Obligations as of March 31, 2001 and 2000, were as follows:

Millions of Millions of yen U.S. dollars 2001 2000 2001 Due within one year ...... ¥2,553 ¥1,060 $20 Due after one year ...... 3,757 693 30 Total ...... ¥6,311 ¥1,754 $50

The amount of obligations includes the imputed interest expenses portion because of its immateriality.

Total lease payments were ¥2,183 million ($17 million) and ¥1,847 million, and depreciation was ¥2,183 million ($17 million) and ¥1,847 million for the years ended March 31, 2001 and 2000, respectively. Depreciation was calculated based on the straight-line method with zero residual value.

(ii) As lessor Acquisition cost, accumulated depreciation and net balance of the leased property as of March 31, 2001 and 2000, were as follows:

Millions of Millions of yen U.S. dollars 2001 2000 2001 Acquisition cost ...... ¥187,912 ¥143,665 $1,516 Accumulated depreciation ...... 93,908 74,077 757 Net balance ...... ¥ 94,004 ¥ 69,587 $ 758

Future lease payment receivables as of March 31, 2001 and 2000, were as follows:

Millions of Millions of yen U.S. dollars 2001 2000 2001 Due within one year ...... ¥ 34,949 ¥31,004 $282 Due after one year ...... 78,938 63,428 637 Total ...... ¥113,887 ¥94,432 $919

The amount of future lease payment receivables includes the imputed interest income portion, because of its immateriality.

Total lease revenues were ¥32,980 million ($266 million) and ¥23,585 million, and depreciation was ¥25,416 million ($205 million) and ¥14,642 million for the years ended March 31, 2001 and 2000, respectively.

F-65 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Operating leases as of March 31, 2001 and 2000, consisted of the following:

(i) As lessee The minimum rental commitments under noncancellable operating leases as of March 31, 2001 and 2000, were as follows: Millions of Millions of yen U.S. dollars 2001 2000 2001 Due within one year ...... ¥1,124 ¥ 1,344 $ 9 Due after one year ...... 6,533 8,693 52 Total ...... ¥7,657 ¥10,038 $61

(ii) As lessor There were no minimum rental commitments receivable under noncancelable operating leases as of March 31, 2001 and 2000.

33. Loan Commitments Commitment line contracts on overdrafts and loans are agreements to lend to customers when they apply for borrowing, to a prescribed amount, as long as there is no violation of any condition established in the contracts. The amount of unused commitments was ¥6,912,401 million ($55,790 million), and the amount of unused commitments whose original contract terms are within one year or unconditionally cancelable at any time was ¥6,322,207 million ($51,026 million) as of March 31, 2001. Since many of these commitments are expected to expire without being drawn upon, the total amount of unused commitments does not necessarily represent actual future cash ﬂow requirements. Many of these commitments have clauses that the Bank and consolidated subsidiaries can reject an application from customers or reduce the contract amounts in case economic conditions are changed, the Bank and consolidated subsidiaries need to secure claims and other events occur. In addition, the Bank and consolidated subsidiaries request the customers to pledge collateral such as premises and securities at the conclusion of the contracts, and take necessary measures such as grasping customers’ ﬁnancial positions, revising contracts when the need arises and securing claims after the conclusion of the contracts.

F-66 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

34. Market Value of Marketable Securities

(1) Securities The market value of marketable securities as of March 31, 2001, was as follows:

In addition to securities in the consolidated balance sheets, trading securities, securities related to trading transactions, negotiable certiﬁcates of deposit and commercial paper within trading assets, negotiable certiﬁcates of deposit in cash and due from banks, and commercial paper within commercial paper and other debt purchased are included in the following amounts:

(a) Securities classified as trading Millions of yen Consolidated balance Gains included March 31, 2001 sheet amount in profit/loss Securities classified as trading ...... ¥469,204 ¥244

Millions of U.S. dollars Consolidated Gains balance sheet included in March 31, 2001 amount proﬁt/loss Securities classiﬁed as trading ...... $ 3,786 $ 1

(b) Bonds classiﬁed as held-to-maturity with market value Millions of yen Consolidated balance Net unrealized Unrealized Unrealized March 31, 2001 sheet amount Market value gains (losses) gains losses Japanese government bonds ...... ¥14,295 ¥14,298 ¥2 ¥2 ¥0 Japanese local government bonds ...... — — — — — Japanese corporate bonds ...... — — — — — Other ...... — — — — — Total ...... ¥14,295 ¥14,298 ¥2 ¥2 ¥0

Millions of U.S. dollars Consolidated balance Net unrealized Unrealized Unrealized March 31, 2001 sheet amount Market value gains (losses) gains losses Japanese government bonds ...... $115 $115 $0 $0 $0 Japanese local government bonds ...... — — — — — Japanese corporate bonds ...... — — — — — Other ...... — — — — — Total ...... $115 $115 $0 $0 $0

Note: Market value is calculated by using market prices at ﬁscal year-end.

F-67 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(c) Other securities with market value Market value is not reﬂected in the consolidated ﬁnancial statements. Summary information on other securities that have market value are shown in the following table:

Millions of yen Consolidated balance Net unrealized Unrealized Unrealized March 31, 2001 sheet amount Market value gains (losses) gains losses Stocks ...... ¥3,782,106 ¥3,420,904 ¥(361,202) ¥139,239 ¥500,442 Bonds ...... 5,182,955 5,207,684 24,728 27,743 3,014 Japanese government bonds ...... 4,888,857 4,908,522 19,664 22,294 2,629 Japanese local government bonds ...... 16,589 16,977 387 387 0 Japanese corporate bonds ...... 277,507 282,184 4,676 5,061 385 Other ...... 899,034 882,663 (16,371) 3,560 19,931 Total ...... ¥9,864,096 ¥9,511,251 ¥(352,844) ¥170,544 ¥523,388

Millions of U.S. dollars Consolidated balance Net unrealized Unrealized Unrealized March 31, 2001 sheet amount Market value gains (losses) gains losses Stocks ...... $ 30,525 $ 27,610 $ (2,915) $ 1,123 $ 4,039 Bonds ...... 41,831 42,031 199 223 24 Japanese government bonds ...... 39,458 39,616 158 179 21 Japanese local government bonds ...... 133 137 3 3 0 Japanese corporate bonds ...... 2,239 2,277 37 40 3 Other ...... 7,256 7,123 (132) 28 160 Total ...... $ 79,613 $ 76,765 $ (2,847) $ 1,376 $ 4,224

Note: For the Bank’s stocks, market value is based on the average market price during one month before the ﬁscal year-end, and for the others the market prices at the balance sheet date.

(d) Bonds sold during ﬁscal 2000 that are classiﬁed as held-to-maturity There are no corresponding items.

(e) Other securities sold during ﬁscal 2000 Millions of yen March 31, 2001 Sales amount Gains on sale Losses on sale Other securities ...... ¥9,773,852 ¥192,631 ¥42,095

Millions of U.S. dollars March 31, 2001 Sales amount Gains on sale Losses on sale Other securities ...... $78,885 $1,554 $339

F-68 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(f) Securities with no available market value Millions of yen Millions of U.S. Dollars Consolidated Consolidated balance balance March 31, 2001 sheet amount sheet amount Bonds classiﬁed as held-to-maturity: Nonlisted foreign securities ...... ¥ 7,094 $ 57 Other securities: Nonlisted bonds ...... 315,565 2,546 Nonlisted stocks (except OTC stocks) ...... 117,140 945 Nonlisted foreign securities ...... 63,341 511

(g) Change of classiﬁcation of securities There are no corresponding items.

(h) Redemption schedule on other securities with maturities and bonds classiﬁed as held-to-maturity Millions of yen March 31, 2001 1 year or less 1 to 5 years 5 to 10 years Over 10 years Bonds ...... ¥2,428,170 ¥2,031,335 ¥ 994,009 ¥ 59,300 Japanese government bonds ...... 2,372,038 1,612,608 859,706 58,800 Japanese local government bonds ...... 2,749 46,824 15,843 — Japanese corporate bonds ...... 53,382 371,903 118,459 500 Other ...... 406,355 277,212 151,917 147,428 Total ...... ¥2,834,526 ¥2,308,547 ¥1,145,927 ¥206,728

Millions of U.S. dollars March 31, 2001 1 year or less 1 to 5 years 5 to 10 years Over 10 years Bonds ...... $ 19,597 $ 16,394 $ 8,022 $ 478 Japanese government bonds ...... 19,144 13,015 6,938 474 Japanese local government bonds ...... 22 377 127 — Japanese corporate bonds ...... 430 3,001 956 4 Other ...... 3,279 2,237 1,226 1,189 Total ...... $ 22,877 $ 18,632 $ 9,248 $ 1,668

(2) Money held in trust

(a) Money held in trust classiﬁed as trading There are no corresponding items.

(b) Money held in trust classiﬁed as held-to-maturity There are no corresponding items.

(c) Other money held in trust (money held in trust that are classified neither as trading nor as held-to- maturity) Market value is not reflected on consolidated financial statements.

F-69 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Summary information on other money held in trust that have market value are shown in the following table: Millions of yen Consolidated balance Net unrealized March 31, 2001 sheet amount Market value gains (losses) Unrealized gains Unrealized losses Other money held in trust ...... ¥22,208 ¥22,677 ¥468 ¥494 ¥25

Millions of U.S. dollars Consolidated balance Net unrealized March 31, 2001 sheet amount Market value gains (losses) Unrealized gains Unrealized losses Other money held in trust ...... $179 $183 $3 $3 $0

Note: Market value is calculated by using market prices at ﬁscal year-end. (3) Net unrealized gains (losses) on other securities and other money held in trust If other securities and other money held in trust were evaluated by market value, net unrealized gains (losses) on valuation would be as shown in the following table: Millions of Millions of yen U.S. dollars March 31, 2001 2001 2001 Difference (Market value - Balance sheet amount) ...... ¥(352,375) $(2,844) Other securities ...... (352,844) (2,847) Other money held in trust ...... 468 3 (+) Deferred tax assets ...... 138,131 1,114 Net unrealized gains (losses) on valuation (before following adjustment) ..... (214,244) (1,729) (-) Minority interests ...... (2,173) (17) (+) Parent company’s share in net unrealized gains (losses) on valuation of other securities held by afﬁliates accounted for by the equity method ...... (42) 0 Net unrealized gains (losses) on valuation ...... ¥(212,113) $(1,711)

(Appendix) Previous Year’s Information on Market Value of Marketable Securities (1) Securities The market value of marketable securities as of March 31, 2000, was as follows: Millions of Yen Market Net unrealized March 31, 2000 Book value value gains (losses) Unrealized gains Unrealized losses Bonds ...... ¥ 485,177 ¥ 460,384 ¥ (24,793) ¥ 3,490 ¥ 28,284 Stocks ...... 3,361,262 3,977,851 616,588 1,011,530 394,941 Others ...... 461,115 461,187 72 14,540 14,468 Total ...... ¥4,307,555 ¥4,899,422 ¥591,866 ¥1,029,561 ¥437,694

Notes: 1. Figures in the above table are for marketable securities listed on securities exchanges. The fair market value of listed bonds is calculated mainly using the closing prices on the Tokyo Stock

F-70 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Exchange at the consolidated balance sheet date or the prices calculated under the yield published on the Japan Securities Dealers Association’s Indication Chart in most cases. Other listed securities are calculated primarily using the closing price on the Tokyo Stock Exchange at the balance sheet date. Others are mainly foreign bonds. 2. Listed below are ﬁgures calculated to correspond to the fair market value of unlisted securities if it is possible to calculate. Millions of yen Market Net unrealized March 31, 2000 Book value value gains (losses) Unrealized gains Unrealized losses Bonds ...... ¥1,571,230 ¥1,569,330 ¥ (1,900) ¥ 5,331 ¥ 7,231 Stocks ...... 37,807 101,720 63,913 71,806 7,893 Others ...... 100,291 101,176 884 2,756 1,872 Total ...... ¥1,709,330 ¥1,772,226 ¥62,896 ¥79,894 ¥16,998

Values of non-listed securities are calculated using the Japan Securities Dealers Association’s figures for securities traded over the counter, using the prices calculated under the yield published on the Japan Securities Dealers Association’s Indication Chart for public bonds, and using standard prices for the beneficiary certificate of securities investment trusts. Others are mainly beneficiary certificates of securities investment trusts. 3. Securities excluded from the above information on values of the consolidated balance sheet are principally as follows:

Millions of yen March 31, 2000 Book value Bonds ...... ¥400,413 Stocks ...... 116,750 Others ...... 394,696

4. Figures on trading account securities and securities related to trading transactions are omitted from the above tables because those securities are valued at market prices and evaluation gains (losses) are stated in the consolidated statements of income.

(2) Money held in trust Millions of yen Net unrealized March 31, 2000 Book Value Market value gains (losses) Unrealized Gains Unrealized Losses Money held in trust ...... ¥72,581 ¥72,887 ¥305 ¥542 ¥237

Notes: The market value represents the prices that the ﬁduciaries of money held in trust calculated in accordance with the following methods: 1. The fair market value of listed securities is calculated mainly using the closing prices on the Tokyo Stock Exchange at the consolidated balance sheet date. 2. Values of non-listed stocks are calculated using the Japan Securities Dealers Association’s ﬁgures for securities traded over the counter.

F-71 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

35. Derivative Transactions

(1) Interest Rate Transactions Millions of yen Contract amount Net valuated March 31, 2001 Total Over one year Market value gains (losses) Listed transactions: Futures contracts: Sold ...... ¥ 59,123 ¥ — ¥ (431) ¥ (431) Bought ...... 262,802 — 2,151 2,151 Options: Sold ...... 2,029,981 — 825 655 Bought ...... 622,669 — 519 258 Unlisted transactions: Forward rate agreement: Sold ...... 1,039,613 10,000 344 344 Bought ...... 1,629,713 — (1,589) (1,589) Swaps: Receivable fixed rate/Payable floating rate ...... 43,061,905 25,195,263 755,835 755,835 Receivable floating rate/Payable fixed rate ...... 40,592,544 24,860,084 (773,704) (773,704) Receivable floating rate/Payable floating rate, etc...... 2,160,512 769,755 (17,494) (17,494) Others: Sold ...... 3,267,592 2,954,530 23,119 (6,253) Bought ...... 2,444,194 2,191,101 27,933 19,066 Total ...... ¥ / ¥ / ¥ (30,380) ¥ (21,161)

F-72 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Millions of U.S. dollars Contract amount Net valuated Over one Market gains March 31, 2001 Total year value (losses) Listed transactions: Futures contracts: Sold ...... $ 477 $ — $ (3) $ (3) Bought ...... 2,121 — 17 17 Options: Sold ...... 16,384 — 6 5 Bought ...... 5,025 — 4 2 Unlisted transactions: Forward rate agreement: Sold ...... 8,390 80 2 2 Bought ...... 13,153 — (12) (12) Swaps: Receivable fixed rate/Payable floating rate ...... 347,553 203,351 6,100 6,100 Receivable floating rate/Payable fixed rate ...... 327,623 200,646 (6,244) (6,244) Receivable floating rate/Payable floating rate, etc. . . . 17,437 6,212 (141) (141) Others: Sold ...... 26,372 23,846 186 (50) Bought ...... 19,727 17,684 225 153 Total ...... $ / $ / $ (245) $ (170)

Notes: 1. The above transactions are valuated by market value and the valuated gains (losses) are accounted for in the consolidated statements of income. Derivative transactions to which hedge accounting method was applied are not included in the ﬁgures above. 2. Market value of transactions listed on exchange is calculated mainly using the closing prices on the Tokyo International Financial Futures Exchange and others. Market value of OTC transactions is calculated mainly using discounted present value and option pricing models. 3. Others consists of cap, ﬂoor and swaption transactions.

(2) Currency Derivatives Millions of Yen Net Contract amount valuated Over one Market gains March 31, 2001 Total year value (losses) Unlisted transactions: Currency swaps ...... ¥4,309,192 ¥3,169,586 ¥ 1,482 ¥ 1,482 Total ...... ¥ / ¥ / ¥1,482 ¥ 1,482

F-73 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Millions of U.S. dollars Contract amount Over Market Net valuated March 31, 2001 Total one year Value gains (losses) Unlisted transactions: Currency swaps ...... $34,779 $25,581 $11 $11 Total ...... $ / $ / $11 $11

Notes: 1. The above transactions are valuated by market value and the valuated gains (losses) are accounted for in the consolidated statements of income. 2. Market value is calculated mainly discounted present value. 3. Currency swaps whose proﬁt and loss are recognized on accrual basis based on ‘Temporary Treatment of Auditing on Continuous Adoption of the Accounting Standard for Foreign Currency Transactions in Banking Industry’ (published by JICPA, April 2000) are excluded from the previous table.

The contract amount to currency swaps which are recognized on accrual basis are as follows:

Millions of yen Contract Market Net valuated March 31, 2001 amount value gains (losses) Unlisted transactions: Currency swaps ...... ¥1,833,414 ¥(69,269) ¥(69,269)

Millions of U.S. Dollars Contract Market Net valuated March 31, 2001 amount value gains (losses) Unlisted transactions: Currency swaps ...... $ 14,797 $ (559) $ (559)

4. Forward foreign exchange and currency options which are of the following types are not included in the figures above: 1) Those that are revaluated at year-end and the revaluated gains (losses) are accounted for in the consolidated statements of income. 2) Those that were allotted to financial assets/liabilities by foreign currency and whose market values are already reflected in the amount of the financial assets/liabilities on the consolidated balance sheets. 3) Those that were allotted to financial assets/liabilities by foreign currency and the financial assets/liabilities that are allotted to are eliminated in the process of consolidation.

F-74 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The contract amount of currency and foreign exchange related transactions which are revaluated at the consolidated balance sheet date are as follows:

Millions of Millions of yen U.S. dollars Contract Contract March 31, 2001 amount amount Unlisted transactions: Forward foreign exchange contracts: Sold ...... ¥4,296,653 $34,678 Bought ...... 5,633,384 45,467 Currency options: Sold ...... 694,904 5,608 Bought ...... 689,497 5,564

(3) Bond Derivatives Millions of yen Contract amount Over Market Net valuated March 31, 2001 Total one year Value gains (losses) Listed transactions: Futures contracts: Sold ...... ¥ 188 — ¥ (6) ¥ (6) Bought ...... 23,066 — 112 112 Total ...... ¥ / ¥/ ¥106 ¥106

Millions of U.S. dollars Contract amount Over Market Net valuated March 31, 2001 Total one year Value gains (losses) Listed transactions: Futures contracts: Sold ...... $ 1 — $ (0) $ (0) Bought ...... 186 — 0 0 Total ...... $ / $/ $ 0 $ 0

F-75 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(4) Credit Derivative Transactions Millions of yen Contract amount Over Market Net valuated March 31, 2001 Total one year Value gains (losses) Unlisted transactions: Others: Sold ...... ¥147 — ¥(4) ¥(4) Bought ...... 147 — 6 6 Total ...... ¥ / ¥ / ¥2 ¥2

Millions of U.S. dollars Contract amount Over Market Net valuated March 31, 2001 Total one year Value gains (losses) Unlisted transactions: Others: Sold ...... $ 1 — $(0) $(0) Bought ...... 1 — 0 0 Total ...... $ / $ / $0 $0

F-76 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Appendix) Previous Year’s Information on Derivative Transactions

Outstanding derivative ﬁnancial instruments as of March 31, 2000, were as follows:

(1) Interest Rate-Related Transactions

Millions of yen Unrealized Contract amount Market gains March 31, 2000 Total Over one year Value (losses) Listed transactions: Futures contracts: Sold ...... ¥ 9,784,429 ¥ 670,310 ¥9,765,752 ¥ 18,677 Bought ...... 5,657,962 249,452 5,651,207 (6,754) Options: Sold Call ...... 13,776,338 — Option premiums ...... 3,441 556 2,884 Put...... 12,329,538 — Option premiums ...... 2,609 1,786 822 Bought Call ...... 6,025,776 — Option premiums ...... 1,059 407 (652) Put...... 5,323,445 — Option premiums ...... 1,720 1,581 (139) Unlisted transactions: Swaps: Receivable fixed rate/Payable floating rate ...... 34,478,328 15,236,759 573,908 573,908 Receivable floating rate/Payable fixed rate ...... 24,638,127 8,588,126 (267,975) (267,975) Receivable floating rate/Payable floating rate, etc...... 25,024 17,796 (135) (135) Others: Sold ...... 609,287 599,271 Option premiums ...... 2,688 1,148 1,539 Bought ...... 123,982 113,966 Option premiums ...... 1,429 827 (603) Total ...... ¥ / ¥ / ¥ / ¥321,572

Notes: 1. Market values The market values listed represent the closing prices on the Tokyo International Financial Futures Exchange and other exchanges at the consolidated balance sheet date. The market values of unlisted transactions are calculated by using mainly the discounted present value or option pricing model. 2. Option premiums shown in this table are accounted for on the consolidated balance sheets. 3. ‘‘Others’’ consists of cap, ﬂoor and swaption transactions. 4. The market value and unrealized gains (losses) on interest swap transaction at March 31, 2000, include ¥343,651 million of accrued swap interest that was stated in the consolidated statements of income.

F-77 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

5. Details of interest rate swap notional amounts according to time to maturity are as follows:

Millions of yen More than one year to March 31, 2000 One year or less three years Over three years Total Receivable fixed rate/Payable floating rate ...... ¥19,241,568 ¥12,494,950 ¥2,741,809 ¥34,478,328 Receivable floating rate/Payable fixed rate ...... 16,050,001 5,586,090 3,002,035 24,638,127 Receivable floating rate/Payable floating rate, etc. . . 7,227 4,350 13,446 25,024

6. Derivative ﬁnancial products transactions that are included in the trading account are not shown above because those transactions were valued at their fair market prices and evaluation gains (losses) was included in the consolidated statements of income.

Contract amount included in the trading account are as follows:

Millions of yen Contract March 31, 2000 amount Market value Listed transactions: Futures contracts: Sold ...... ¥ 422,513 ¥ 422,244 Bought ...... 585,857 583,533 Options: Sold Call ...... 1,891,590 Option premiums ...... 260 23 Put...... 2,560,186 Option premiums ...... 446 231 Bought Call ...... 736,133 Option premiums ...... 173 27 Put...... 1,332,250 Option premiums ...... 279 126 Unlisted transactions: Forward rate agreements: Sold ...... 678,521 678,458 Bought ...... 1,324,902 1,325,226 Swaps: Receivable fixed rate/Payable floating rate ...... 34,706,694 385,949 Receivable floating rate/Payable fixed rate ...... 32,590,848 (506,149) Receivable floating rate/Payable floating rate, etc...... 1,636,745 (13,467) Others: Sold ...... 3,411,883 Option premiums ...... 9,329 21,935 Bought ...... 3,077,923 Option premiums ...... 4,886 58,646

F-78 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(2) Currency and Foreign Exchange-Related Transactions Millions of yen Contract amount Market Unrealized March 31, 2000 Total Over one year value gains (losses) Unlisted transactions: Currency swaps: ¥2,779,199 ¥1,179,058 ¥(54,273) ¥(54,273) U.S. dollar ...... 1,866,061 935,342 (43,375) (43,375) Others ...... 913,137 243,715 (10,897) (10,897)

Notes: 1. Market values The market values are calculated by using discounted present value. 2. The market value or unrealized loss for currency swap transactions at March 31, 2000, includes ¥6,647 million (losses) of accrued swap interest that was stated in the consolidated statements of income. 3. Derivative ﬁnancial products transactions that are included in the trading account are not shown above because those transactions were valued at their fair market prices and evaluation gains (losses) was included in the consolidated statements of income.

Contract amount included in the trading account is as follows:

Millions of yen Contract March 31, 2000 amount Market value Unlisted transactions: Currency swaps: ¥3,887,543 ¥ (5,539) U.S. dollar ...... 2,599,267 (15,018) German mark ...... 554,556 (2,833) Others ...... 733,720 12,312 4. Forward foreign exchange contracts, currency options and other currency-related derivative ﬁnancial instruments are not shown here because they were revalued at the consolidated balance sheet date and their gains (losses) were included in the consolidated statements of income, or because they are reﬂected on the consolidated balance sheets as foreign currency denominated monetary assets and liabilities.

F-79 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Contract amount of currency and foreign exchange related derivative ﬁnancial instruments revalued at the consolidated balance sheet date are as follows:

Millions of yen March 31, 2000 Contract amount Listed transactions: Currency futures: Sold ...... ¥ 356 Bought ...... 20 Unlisted transactions: Forward foreign exchange contracts: Sold ...... ¥2,185,551 Bought ...... 3,697,674 Currency options: Sold Call ...... 188,930 Option premiums ...... 4,105 Put...... 170,453 Option premiums ...... 3,600 Bought Call ...... 156,601 Option premiums ...... 2,368 Put...... 178,950 Option premiums ...... 4,473

(3) Equity-Related Transactions Millions of yen Contract amount Market Unrealized March 31, 2000 Total Over one year value gains (losses) Unlisted transactions: Options: Sold ...... Call ...... ¥ 198 ¥ — Option premiums ...... 1 ¥ 0 ¥ 1 Put...... — — Option premiums ...... — — Bought ...... Call ...... 198 — Option premiums ...... 1 0 (0) Put...... — — Option premiums ...... — — Equity-related swaps ...... 897,438 — (18,554) (18,554) Total ...... ¥ / ¥ / ¥ / ¥(18,554)

Notes: 1. Market values Market values are calculated by using the pricing method, based on the closing prices on the Tokyo Stock Exchange at the consolidated balance sheet date.

F-80 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

2. Option premiums shown in this table are accounted for on the consolidated balance sheets. 3. Derivative ﬁnancial products transactions that are included in trading account are not shown here because those transactions were valued at their fair market prices and evaluation gains (losses) was included in the consolidated statements of income.

Contract amount included in trading account is as follows:

Millions of yen Contract March 31, 2000 amount Market value Listed transactions: Stock index futures contracts: Sold ...... ¥ 1,536 ¥1,530 Bought ...... 101 101 Stock index options: Sold ...... Call ...... 11,740 Option premiums ...... 36 37 Put...... 21,880 Option premiums ...... 26 31 Bought ...... Call ...... 4,578 Option premiums ...... 53 97 Put...... 1,902 Option Premiums ...... 53 30

(4) Bond-Related Transactions Millions of Yen Contract amount Over Unrealized March 31, 2000 Total one year Market value gains (losses) Listed transactions: Futures contracts: Sold ...... ¥74,904 ¥ — ¥76,182 ¥(1,277) Bought ...... — — — — Total ...... ¥ / ¥ / ¥ / ¥(1,277) Notes: 1. The market values listed represent the closing prices on the Tokyo Stock Exchange and other exchanges at the consolidated balance sheet date. 2. Derivative ﬁnancial products transactions that are included in the trading account are not shown above because those transactions were valued at their fair market prices and evaluation gains (losses) was included in the consolidated statements of income.

F-81 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Contract amount included in the trading account is as follows: Millions of yen Contract March 31, 2000 amount Market value Listed transactions: Futures contracts: Sold ...... ¥28,726 ¥28,818 Bought ...... 35,094 35,147 Futures options: Sold Call ...... 838 Option premiums ...... 5 2 Put...... 8,580 Option premiums ...... 11 7 Bought Call ...... 4,477 Option premiums ...... 16 11 Put...... 37,370 Option premiums ...... 90 14 Unlisted transactions: Options: Sold Call ...... — Option premiums ...... — — Put...... 21,670 Option premiums ...... 251 118 Bought Call ...... 29,272 Option premiums ...... 167 106 Put...... 7,837 Option premiums ...... 51 14

F-82 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

36. Segment Information

(1) Business segment information Some of the consolidated subsidiaries are engaged in securities, trust, leasing and other businesses in addition to the commercial banking business. As those activities are not deemed material, business segment information has not been disclosed.

(2) Geographic segment information Millions of yen Asia and Interarea Consolidated Year ended March 31, 2001 Domestic Americas Europe Oceania Subtotal elimination total Operating income Customers ...... ¥ 1,410,422 ¥ 164,903 ¥ 47,571 ¥ 100,284 ¥ 1,723,182 ¥ — ¥ 1,723,182 Intersegment ...... 111,842 111,432 17,058 38,530 278,864 (278,864) — Total ...... 1,522,264 276,336 64,630 138,815 2,002,047 (278,864) 1,723,182 Operating expenses ...... 1,347,019 259,322 74,385 133,426 1,814,154 (274,848) 1,539,306 Operating proﬁt ...... ¥ 175,245 ¥ 17,013 ¥ (9,755) ¥ 5,388 ¥ 187,892 ¥ (4,016) ¥ 183,876 Millions of U.S. dollars ...... $ 1,414 $ 137 $ (78) $ 43 $ 1,516 $ (32) $ 1,484 Assets ...... ¥47,434,438 ¥2,322,229 ¥1,279,831 ¥2,920,478 ¥53,956,977 ¥(2,107,290) ¥51,849,687 Millions of U.S. dollars ...... $ 382,844 $ 18,742 $ 10,329 $ 23,571 $ 435,488 $ (17,007) $ 418,480

Millions of yen Asia and Interarea Consolidated Year ended March 31, 2000 Domestic Americas Europe Oceania Subtotal elimination total Operating income Customers ...... ¥ 1,808,407 ¥ 129,272 ¥ 90,029 ¥ 119,786 ¥ 2,147,495 ¥ — ¥ 2,147,495 Intersegment ...... 77,421 23,014 21,863 15,752 138,052 (138,052) — Total ...... 1,885,829 152,286 111,893 135,539 2,285,548 (138,052) 2,147,495 Operating expenses ...... 1,772,018 143,625 109,852 122,775 2,148,272 (137,274) 2,010,998 Operating proﬁt ...... ¥ 113,810 ¥ 8,661 ¥ 2,040 ¥ 12,764 ¥ 137,276 ¥ (778) ¥ 136,497 Assets ...... ¥44,745,840 ¥2,319,292 ¥1,062,201 ¥3,070,871 ¥51,198,205 ¥(2,702,596) ¥48,495,608

F-83 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(c) As shown in Notes to consolidated financial statements, accounting standard for financial instruments was applied from the fiscal year ended March 31, 2001, and the method to evaluate securities and derivatives and the method of hedge accounting were changed. Consequently, operating profit increased by ¥35,427 million ($285 million) in Japan, by ¥572 million ($4 million) in Americas, and by ¥31 million ($0 million) in Europe, and by ¥114 million ($0 million) in Asia and Oceania, compared with prior accounting method. Effective April 1, 2000, income and expenses relating to derivative transactions that meet the criteria for hedge accounting are presented net by account, which has been changed from prior accounting that presented net by transaction. As a result, operating income and expenses decreased by ¥132,394 million ($1,068 million) in Japan, by ¥4,340 million ($35 million) in Americas, by ¥14,269 million ($115 million) in Europe, and by ¥4,580 million ($36 million) in Asia and Oceania for 2001 compared with the prior accounting method. (d) As shown in Notes to consolidated financial statements, enterprise tax other than relating to pre- tax income was included in operating expenses. Effective April 1, 2000, the Special ordinance concerning taxation standard for enterprise taxes in relation to banks in the Tokyo Metropolis (Tokyo Metropolis Ordinance 145 of April 1, 2000) was enacted, and the enterprise tax in Tokyo, which was not included in operating expenses for prior period, was included in operating expenses in Japan by the amount of ¥8,733 million ($70 million) for 2001.

Operating income or expenses represent total income or expenses excluding Gains or losses on dispositions of premises and equipment, Collection of written-off claims, Transfer to (from) Other reserves, Gains on exemption of obligation, Losses on disposal of loans at a subsidiary and Amortization of unrecognized net transition obligation for employee retirement beneﬁt.

(3) Operating income from overseas operations Millions of Millions of yen U.S. dollars 2001 2000 2001 (i) Operating income from overseas operations ...... ¥ 312,760 ¥ 339,087 $ 2,524 (ii) Consolidated operating income ...... 1,723,182 2,147,495 13,907 (i)/(ii) ...... 18.2%15.7%18.2%

From ﬁscal 1999, operating income from overseas operations is listed in place of operating income from international operations to express foreign trading activities more correctly. Operating income from overseas operations comprises transactions at the Bank’s over-seas branches and income from overseas consolidated subsidiaries. The composition of this substantial volume of transactions is not broken down by counterparty and, therefore, data by region and country have not been included.

37. Subsequent Events The Bank merged with The Sumitomo Bank, Limited and transferred its assets, liabilities, all the claims and obligations and employees to The Sumitomo Bank, Limited as of April 1, 2001.

F-84 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sakura Bank, Limited and Subsidiaries)

CENTURY OTA SHOWA & CO. Deloitte Touche Tohmatsu ERNST & YOUNG INTERNATIONAL

Independent Certiﬁed Public Accountants’ Report

To the Board of Directors of Sumitomo Mitsui Banking Corporation

We have examined the consolidated balance sheets of The Sakura Bank, Limited and consolidated subsidiaries as of March 31, 2001 and 2000, and the related consolidated statements of income, retained earnings and cash ﬂows for the years then ended, all expressed in Japanese yen. The Sakura Bank, Limited was merged with the Sumitomo Bank, Limited as of April 1, 2001, to form Sumitomo Mitsui Banking Corporation. Our examinations were made in accordance with auditing standards, procedures and practices generally accepted and applied in Japan and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.

In our opinion, the consolidated financial statements referred to above present fairly the financial position of The Sakura Bank, Limited and consolidated subsidiaries as of March 31, 2001 and 2000, and the results of their operations and cash flows for the years then ended, in conformity with accounting principles and practices generally accepted in Japan applied on a consistent basis.

As described in Note 1 to the consolidated financial statements, The Sakura Bank, Limited and consolidated subsidiaries have adopted new accounting standards for financial instruments, employee retirement benefit and revised accounting standard for foreign currency translation, in the preparation of their consolidated financial statements for the year ended March 31, 2001.

Our examination also comprehended the translation of Japanese yen amounts into U.S. dollar amounts and, in our opinion, such translation has been made in conformity with the basis stated in Note 1. Such U.S. dollar amounts are presented solely for the convenience of readers outside Japan.

As described in Note 37 to the consolidated ﬁnancial statements, The Sakura Bank, Limited and The Sumitomo Bank, Limited have completed merger on April 1, 2001.

Century Ota Showa & Co. Tohmatsu & Co.

Tokyo, Japan June 28, 2001

See Note 1 to the consolidated ﬁnancial statements which explains the basis of preparing the consolidated ﬁnancial statements of The Sakura Bank, Limited and consolidated subsidiaries under Japanese accounting principles and practices.

F-85 (THIS PAGE INTENTIONALLY LEFT BLANK)

F-86 SUMITOMO MITSUI BANKING CORPORATION (The Sakura Bank, Limited) UNAUDITED NONCONSOLIDATED BALANCE SHEETS (Supplemental Information) MARCH 31, 2001 and 2000

Millions of U.S. Millions of yen dollars 2001 2000 2001 ASSETS Cash and due from banks ...... ¥ 2,730,973 ¥ 2,095,204 $ 22,041 Call loans and bills bought ...... 86,437 197,492 697 Commercial paper and other debt purchased ...... 3,097 640 25 Trading assets ...... 565,596 1,104,111 4,564 Money held in trust ...... 22,208 72,381 179 Securities ...... 10,199,669 6,911,602 82,321 Loans and bills discounted ...... 30,575,498 31,939,952 246,775 Foreign exchanges ...... 262,590 316,149 2,119 Other assets ...... 992,360 1,156,771 8,009 Premises and equipment ...... 286,354 317,774 2,311 Deferred tax assets ...... 524,199 583,559 4,230 Customers’ liabilities for acceptances and guarantees ...... 2,637,631 2,524,300 21,288 Reserve for possible loan losses ...... (424,799) (660,454) (3,428) Total assets ...... ¥48,461,818 ¥46,559,485 $391,136 LIABILITIES AND STOCKHOLDERS’ EQUITY LIABILITIES Deposits ...... ¥33,534,079 ¥33,342,655 $270,654 Call money and bills sold ...... 4,600,490 2,558,919 37,130 Commercial paper ...... 1,136,800 451,000 9,175 Trading liabilities ...... 172,176 161,238 1,389 Borrowed money ...... 1,596,797 1,953,529 12,887 Foreign exchanges ...... 38,368 30,218 309 Bonds ...... 470,000 270,000 3,793 Convertible bonds ...... — 95 — Other liabilities ...... 1,885,491 2,856,182 15,217 Reserve for employee retirement beneﬁt ...... 14,054 32,099 113 Reserve for possible losses on loans sold ...... 67,163 94,853 542 Other reserves ...... 9 9 0 Deferred tax liabilities for land revaluation ...... 27,524 32,092 222 Acceptances and guarantees ...... 2,637,631 2,524,300 21,288 Total liabilities ...... ¥46,180,587 ¥44,307,196 $372,724 Stockholders’ equity Capital stock: Common stock ...... ¥ 640,129 ¥ 639,934 $ 5,166 Preferred stock ...... 402,577 402,772 3,249 Capital surplus ...... 899,521 899,521 7,260 Earned surplus reserve ...... 131,261 124,120 1,059 Land revaluation excess ...... 42,690 48,908 344 Retained earnings ...... 165,051 137,032 1,332 Total stockholders’ equity ...... ¥ 2,281,230 ¥ 2,252,289 $ 18,411 Total liabilities and stockholders’ equity ...... ¥48,461,818 ¥46,559,485 $391,136

Notes: 1. Translation into U.S. dollars has been made on the basis of ¥123.90 to US$1.00, the effective exchange rate at March 31, 2001. 2. Amounts less than one million have been omitted.

F-87 SUMITOMO MITSUI BANKING CORPORATION (The Sakura Bank, Limited) UNAUDITED NONCONSOLIDATED STATEMENTS OF INCOME (Supplemental Information) YEARS ENDED MARCH 31, 2001 and 2000

Millions of U.S. Millions of yen dollars 2001 2000 2001 Income Interest income: Interest on loans and discounts ...... ¥ 733,568 ¥ 729,354 $ 5,920 Interest and dividends on securities ...... 130,003 111,654 1,049 Other interest income ...... 152,935 497,809 1,234 Fees and commissions ...... 111,790 102,556 902 Trading proﬁts ...... 20,776 8,498 167 Other operating income ...... 49,455 57,954 399 Other income ...... 243,304 423,100 1,963 Total income ...... ¥1,441,834 ¥1,930,928 $11,637 Expenses Interest expenses: Interest on deposits ...... ¥ 239,280 ¥ 166,591 $ 1,931 Interest on borrowings, bonds and rediscounts ...... 97,255 81,685 784 Other interest expenses ...... 81,409 482,863 657 Fees and commissions ...... 42,512 42,441 343 Trading losses ...... — 412 — Other operating expenses ...... 7,810 24,231 63 General and administrative expenses ...... 380,520 430,417 3,071 Transfer to reserve for possible loan losses ...... (43,728) 155,208 (352) Other expenses ...... 497,715 393,004 4,017 Transfer to other reserves ...... — 0 — Total expenses ...... ¥1,302,774 ¥1,776,858 $10,514 Income before income taxes ...... ¥ 139,060 ¥ 154,069 $ 1,122 Income taxes: Current ...... ¥ 1,767 ¥ 3,986 $ 14 Deferred ...... 55,131 92,965 444 Net income ...... ¥ 82,160 ¥ 57,117 $ 663

Yen U.S. dollars Per share of common stock: Net income ...... ¥ 17.28 ¥ 11.24 $ 0.13 Net income—diluted ...... 17.24 — 0.13

F-88 (THIS PAGE INTENTIONALLY LEFT BLANK)

F-89 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries CONSOLIDATED BALANCE SHEETS MARCH 31, 2001 and 2000

Millions of U.S. dollars Millions of yen (Note 1) 2001 2000 2001 Assets Cash and due from banks (Note 9) ...... ¥ 868,132 ¥ 1,323,157 $ 7,007 Deposits with banks (Notes 9, 30) ...... 3,755,464 2,642,560 30,310 Call loans and bills bought ...... 139,189 252,075 1,123 Receivables under resale agreements ...... 2,905,306 — 23,449 Commercial paper and other debt purchased (Notes 9, 30) ...... 168,497 178,331 1,360 Trading assets (Notes 3, 4, 9, 30) ...... 1,913,404 1,745,425 15,443 Money held in trust (Note 30) ...... 52,912 109,039 427 Securities (Notes 4, 9, 30) ...... 16,845,970 8,968,853 135,964 Loans and bills discounted (Notes 5, 9) ...... 32,630,388 32,940,880 263,361 Foreign exchanges ...... 470,092 362,889 3,794 Other assets (Notes 4, 6, 9, 27) ...... 4,297,808 2,425,278 34,688 Premises and equipment (Notes 7, 9) ...... 683,833 680,334 5,519 Lease assets (Note 8) ...... 827,134 823,859 6,676 Deferred tax assets ...... 598,280 704,881 4,829 Goodwill ...... 6,224 — 50 Customers’ liabilities for acceptances and guarantees (Note 16) ...... 1,987,164 1,560,437 16,038 Reserve for possible loan losses ...... (756,830) (950,499) (6,108) Total assets ...... ¥67,392,974 ¥53,767,504 $543,930 Liabilities, minority interests and stockholders’ equity Liabilities Deposits (Notes 9, 10) ...... ¥38,071,013 ¥35,231,324 $307,272 Call money and bills sold (Note 9) ...... 5,332,877 2,745,132 43,042 Payables under repurchase agreements (Note 9) ...... 5,262,187 — 42,471 Commercial paper ...... 594,456 192,507 4,798 Trading liabilities (Notes 9, 11) ...... 1,068,607 952,649 8,625 Borrowed money (Notes 9, 12) ...... 2,322,477 2,518,700 18,745 Foreign exchanges ...... 213,813 163,951 1,726 Bonds (Note 13) ...... 2,061,693 1,566,242 16,640 Convertible bonds (Note 14) ...... 101,106 101,106 816 Pledged money for securities lending transactions ...... 4,607,098 3,288,365 37,184 Other liabilities (Note 15) ...... 3,116,359 2,782,112 25,152 Reserve for employee retirement beneﬁt (Note 27) ...... 7,972 49,715 64 Reserve for possible losses on loans sold ...... 74,639 116,240 602 Other reserves ...... 8 8 0 Deferred tax liabilities ...... 24,271 3,585 196 Deferred tax liabilities for land revaluation (Note 17) ...... 103,401 111,692 835 Acceptances and guarantees (Notes 9, 16) ...... 1,987,164 1,560,437 16,038 Total liabilities ...... ¥64,949,149 ¥51,383,774 $524,206 Minority interests (Note 18) ...... ¥ 606,673 ¥ 579,371 $ 4,896 Stockholders’ equity (Note 19) ...... Preferred stock, no par value; authorized 970,000 thousand shares and issued 167,000 thousand shares in 2001 and 2000 ...... ¥ 250,500 ¥ 250,500 $ 2,022 Common stock, par value ¥50; authorized 7,500,000 thousand shares and issued 3,141,062 thousand shares in 2001 and 2000 ...... 502,348 502,348 4,054 Capital surplus ...... 643,080 643,080 5,190 Land revaluation excess (Note 17) ...... 167,613 168,119 1,353 Retained earnings ...... 319,924 253,573 2,582 Foreign currency translation adjustments ...... (32,171) — (259) Treasury stock ...... (4) (16) 0 Parent bank stock held by subsidiaries ...... (14,140) (13,247) (114) Total stockholders’ equity ...... ¥ 1,837,151 ¥ 1,804,358 $ 14,828 Total liabilities, minority interests and stockholders’ equity ...... ¥67,392,974 ¥53,767,504 $543,930

See accompanying notes to consolidated ﬁnancial statements.

F-90 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME YEARS ENDED MARCH 31, 2001, 2000 and 1999

Millions of U.S. dollars Millions of yen (Note 1) 2001 2000 1999 2001 Income Interest income: Interest on loans and discounts ...... ¥ 858,927 ¥ 844,865 ¥1,044,429 $ 6,932 Interest and dividends on securities ...... 193,828 162,129 185,039 1,564 Interest on receivables under resale agreements ...... 10,861 — — 88 Other interest income ...... 264,438 521,036 475,792 2,134 Fees and commissions (Note 20) ...... 202,836 182,637 212,090 1,637 Trading proﬁts (Note 21) ...... 84,376 69,760 107,402 681 Other operating income (Note 22) ...... 552,060 589,638 615,925 4,456 Other income (Note 23) ...... 560,256 643,550 188,119 4,522 Total income ...... ¥2,727,586 ¥3,013,618 ¥2,828,799 $22,014 Expenses Interest expenses: Interest on deposits ...... ¥ 397,616 ¥ 288,363 ¥ 537,301 $ 3,209 Interest on borrowings and rediscounts ...... 74,574 79,239 118,313 602 Interest on payables under repurchase agreements ...... 22,224 — — 179 Other interest expenses ...... 180,092 506,712 393,401 1,454 Fees and commissions (Note 20) ...... 33,918 36,775 33,634 274 Trading losses (Note 21) ...... 2,146 22,853 81,847 17 Other operating expenses (Note 24) ...... 505,193 510,433 466,419 4,077 General and administrative expenses (Note 27) ...... 450,268 466,140 523,937 3,634 Transfer to reserve for possible loan losses ...... 32,103 245,182 654,245 259 Other expenses (Note 25) ...... 755,978 641,414 778,729 6,102 Total expenses ...... ¥2,454,118 ¥2,797,115 ¥3,587,829 $19,807 Income (loss) before income taxes and minority interests ...... ¥ 273,468 ¥ 216,503 ¥ (759,030) $ 2,207 Income taxes (Note 26): Current ...... ¥ 57,439 ¥ 50,794 ¥ 43,048 $ 463 Deferred ...... 128,327 96,387 (231,468) 1,036 ¥ 185,766 ¥ 147,182 ¥ (188,419) $ 1,499 Minority interests in net income ...... 4,231 7,444 1,721 34 Net income (loss) ...... ¥ 83,469 ¥ 61,875 ¥ (568,889) $ 674

U.S. dollars Yen (Note 1) 2001 2000 1999 2001 Per share data: Net income (loss) ...... ¥ 25.50 ¥ 18.61 ¥ (181.48) $ 0.21 Net income—diluted ...... 24.93 18.17 — 0.20 Declared dividends on common stock ...... 6.00 6.00 6.00 0.05 Declared dividends on preferred stock (ﬁrst series type I) . . . 10.50 10.50 0.03 0.08 Declared dividends on preferred stock (second series type I) ...... 28.50 28.50 0.08 0.23

See accompanying notes to consolidated ﬁnancial statements.

F-91 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY YEARS ENDED MARCH 31, 2001, 2000 AND 1999 Millions of yen Foreign Earned Land currency Preferred Common Capital surplus revaluation Retained translation stock stock surplus reserve excess earnings adjustments Deduction* Total Balance at March 31, 1998 ...... ¥ — ¥502,348 ¥392,580 ¥ 94,595 ¥ — ¥ 682,075 ¥ — ¥ (5) ¥1,671,593 Preferred stock issued ...... 250,500 — 250,500 — — — — — 501,000 Reclassiﬁcation (Notes 17 and 19) ..... — — — (94,595) 165,289 94,595 — — 165,289 Increase due to change of consolidation policy ...... — — — — — 24,170 — — 24,170 Cash dividends paid ...... — — — — — (22,772) — — (22,772) Net income ...... — — — — — (568,889) — — (568,889) Change of treasury stock and parent bank stock held by subsidiaries ...... — — — — — — — (13,267) (13,267) Balance at March 31, 1999 ...... ¥250,500 ¥502,348 ¥643,080 ¥ — ¥165,289 ¥ 209,178 ¥ — ¥(13,272) ¥1,757,123 Transfer from land revaluation excess to retained earnings ...... — — — — (3,152) 3,152 — — — Change of effective tax rates and others ...... — — — — 5,983 — — — 5,983 Cash dividends paid ...... — — — — — (20,633) — — (20,633) Net income ...... — — — — — 61,875 — — 61,875 Change of treasury stock and parent bank stock held by subsidiaries ...... — — — — — — — 9 9 Balance at March 31, 2000 ...... ¥250,500 ¥502,348 ¥643,080 ¥ — ¥168,119 ¥ 253,573 ¥ — ¥(13,263) ¥1,804,358 Transfer from land revaluation excess to retained earnings ...... — ———(5,281) 5,281 ——— Change of effective tax rates and others ...... — ———4,775 — ——4,775 Cash dividends paid ...... — ——— — (22,399) ——(22,399) Net income ...... — ——— —83,469 ——83,469 Adoption of revised accounting standard for foreign currency translation ...... — ——— — —(32,171) — (32,171) Change of treasury stock and parent bank stock held by subsidiaries ...... — ——— — — — (880) (880) Balance at March 31, 2001 ...... ¥250,500 ¥502,348 ¥643,080 ¥ — ¥167,613 ¥ 319,924 ¥(32,171) ¥ 14,144 ¥1,837,151

Millions of U.S. dollars (Note 1) Foreign Earned Land currency Preferred Common Capital surplus revaluation Retained translation stock stock surplus reserve excess earnings adjustments Deduction* Total Balance at March 31, 2000 ...... $ 2,022 $ 4,054 $ 5,190 $ — $ 1,357 $ 2,047 $ — $ (107) $ 14,563 Transfer from land revaluation excess to retained earnings ...... ——— (42) 42 ——— Change of effective tax rates and others ...... — ——— 38 — ——38 Cash dividends paid ...... — ——— — (181) ——(181) Net income ...... — ——— — 674 ——674 Adoption of revised accounting standard for foreign currency translation ...... — ——— — — (259) — (259) Change of treasury stock and parent bank stock held by subsidiaries ...... — ——— — — — (7) (7) Balance at March 31, 2001 ...... $ 2,022 $ 4,054 $ 5,190 $ — $ 1,353 $ 2,582 $ (259) $ (114) $ 14,828

* Deduction includes treasury stock and parent bank stock held by subsidiaries.

F-92 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED MARCH 31, 2001 and 2000

Millions of U.S. dollars Millions of yen (Note 1) 2001 2002 2001 Cash flows from operating activities Income before income taxes and minority interests ...... ¥ 273,468 ¥ 216,503 $ 2,207 Depreciation of premises and equipment ...... 26,140 24,070 211 Depreciation of lease assets ...... 268,700 272,031 2,169 Amortization of goodwill ...... 1,571 1 13 Net (income) loss from nonconsolidated entities accounted for by the equity method ...... (36,479) 35,549 (294) Net change in reserve for possible loan losses ...... (192,154) (315,850) (1,551) Net change in reserve for possible losses on loans sold ...... (41,600) (23,545) (336) Net change in reserve for employee retirement benefit ...... (46,355) (2,715) (374) Interest income ...... (1,328,056) (1,528,031) (10,719) Interest expenses ...... 674,508 874,315 5,444 Net gains on securities ...... (418,493) (508,327) (3,378) Net (income) loss from money held in trust ...... (268) 760 (2) Net exchange (gains) losses ...... (103,436) 73,864 (835) Net losses from disposition of premises and equipment ...... 15,097 8,306 122 Net losses from disposition of lease assets ...... 3,575 33,342 29 Gain on sale of business operation ...... — (8,000) — Loss from additional payment for pension liabilities ...... — 21,460 — Net change in trading assets ...... (303,615) 826,416 (2,451) Net change in trading liabilities ...... 433,148 (351,166) 3,496 Net change in loans and bills discounted ...... 350,155 2,514,357 2,826 Net change in deposits ...... 2,687,498 271,528 21,691 Net change in negotiable certificates of deposit ...... 154,263 1,061,647 1,245 Net change in borrowed money (excluding subordinated debt) ...... (203,229) (200,617) (1,640) Net change in deposits with banks ...... (1,087,125) (1,875,746) (8,774) Net change in call loans and receivables under resale agreements ...... (2,576,375) 235,178 (20,794) Net change in pledged money for securities borrowing transactions .... (652,884) 137,396 (5,269) Net change in call money and payables under repurchase agreements . . . 3,166,244 (615,238) 25,555 Net change in commercial paper ...... 401,621 (321,851) 3,241 Net change in pledged money for securities lending transactions ...... 1,318,733 1,154,362 10,643 Net change in foreign exchanges (assets) ...... (107,134) 30,430 (865) Net change in foreign exchanges (liabilities) ...... 49,833 22,124 402 Net change in bonds (excluding subordinated bonds) ...... 478,453 524,910 3,862 Interest received ...... 1,211,640 1,430,203 9,779 Interest paid ...... (837,803) (894,663) (6,762) Other, net ...... 25,236 (429,627) 204 Subtotal ...... ¥ 3,604,878 ¥ 2,693,381 $ 29,095 Additional payment for pension liabilities ...... — (21,578) — Income taxes paid ...... (47,172) (41,659) (381)

F-93 Millions of U.S. dollars Millions of yen (Note 1) 2001 2002 2001 Net cash provided by operating activities ...... ¥ 3,557,706 ¥ 2,630,143 $ 28,714 Cash flows from investing activities Purchases of securities ...... ¥(28,751,233) ¥(38,223,957) $(232,052) Proceeds from sale of securities ...... 12,151,611 29,463,927 98,076 Proceeds from maturity of securities ...... 12,930,322 6,821,306 104,361 Purchases of money held in trust ...... (91,300) (59,516) (737) Proceeds from sale of money held in trust ...... 148,488 34,750 1,198 Purchases of premises and equipment ...... (49,183) (36,175) (397) Proceeds from sale of premises and equipment ...... 21,260 11,365 172 Purchase of lease assets ...... (314,383) (325,621) (2,537) Proceeds from sale of lease assets ...... 35,590 16,304 287 Proceeds from sale of business operation ...... — 8,000 — Proceeds from sale of subsidiaries ...... 5,083 — 41 Net cash used in investing activities ...... ¥ (3,913,743) ¥ (2,289,615) $ (31,588) Cash flows from financing activities Proceeds from issuance of subordinated debt ...... ¥ 10,000 ¥ 5,000 $ 81 Repayment of subordinated debt ...... (52,000) (47,000) (420) Proceeds from issuance of subordinated bonds, convertible bonds and notes ...... 104,500 149,150 843 Repayment of subordinated bonds, convertible bonds and notes . . (143,550) (23,000) (1,159) Dividends paid ...... (22,406) (20,640) (181) Dividends paid to minority stockholders ...... (192) (333) (1) Purchases of treasury stock ...... (541) (714) (4) Proceeds from sale of treasury stock ...... 548 717 5 Net cash (used in) provided by financing activities ...... ¥ (103,642) ¥ 63,179 $ (836) Effects of exchange rate changes on cash and due from banks . . ¥ 2,525 ¥ (9,226) $ 20 Net change in cash and due from banks ...... ¥ (457,154) ¥ 394,481 $ (3,690) Cash and due from banks at beginning of year ...... ¥ 1,323,157 ¥ 928,701 $ 10,680 Change in cash and due from banks due to newly consolidated subsidiaries ...... 2,129 — 17 Decrease of cash and due from banks caused from exception of consolidation ...... — (25) — Cash and due from banks at end of year ...... ¥ 868,132 ¥ 1,323,157 $ 7,007

See accompanying notes to consolidated ﬁnancial statements.

F-94 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries CONSOLIDATED STATEMENT OF CASH FLOWS YEAR ENDED MARCH 31, 1999

Millions of yen 1999 Cash flows from operating activities Net loss ...... ¥ (568,889) Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization ...... 299,820 Transfer to reserve for possible loan losses ...... 654,245 Write-off of loans ...... 369,481 Losses on sale of loans and loans sold ...... 179,204 Securities gains, net ...... (87,778) Deferred income taxes ...... (237,489) Minority interests in net income ...... 1,721 Net change in trading assets and liabilities ...... 150,384 Net change in accrual and other, net ...... 539,138 Net cash provided by operating activities ...... ¥ 1,299,837 Cash flows from investing activities Net change in deposits with banks ...... ¥1,608,594 Net change in call loans ...... 587,175 Net change in commercial paper and other debt purchased ...... 55,801 Net change in money held in trust ...... 131,564 Net change in loans and bills discounted ...... 1,748,431 Proceeds from sale of securities ...... 7,290,157 Proceeds from maturity of securities ...... 654,920 Purchases of securities ...... (7,229,552) Purchases of premises and equipment ...... (64,249) Purchases of lease assets ...... (278,528) Other, net ...... 218,901 Net cash provided by investing activities ...... ¥ 4,723,214 Cash flows from financing activities Net change in deposits ...... ¥(4,246,208) Net change in call money ...... (1,442,174) Net change in commercial paper and borrowed money ...... (1,891,537) Proceeds from issuance of preferred stock ...... 501,000 Proceeds from issuance of subordinated debt ...... 150,829 Proceeds from issuance of preferred securities ...... 340,000 Dividends paid ...... (22,772) Other, net ...... (101,110) Net cash used in financing activities ...... ¥(6,711,972) Effect of increase in consolidated subsidiaries ...... ¥ 2,699 Effects of exchange rate changes on cash and due from banks ...... ¥ (44,549) Net change in cash and due from banks ...... ¥ (730,771) Cash and due from banks at beginning of year ...... ¥ 1,576,972 Cash and due from banks at end of year ...... ¥ 846,201

See accompanying notes to consolidated ﬁnancial statements.

F-95 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2001, 2000 and 1999

1. Basis of Financial Statements Sumitomo Mitsui Banking Corporation (formerly The Sumitomo Bank, Limited) (the ‘‘Bank’’), a Japanese corporation, maintains its records and prepares its ﬁnancial statements in Japanese yen.

The Bank and its consolidated domestic subsidiaries maintain their accounts and records in accordance with accounting principles and prevailing practices generally accepted in Japan, which are different from accounting and disclosure requirements of international accounting standards.

The accounts of overseas consolidated subsidiaries are based on their accounting records maintained in conformity with generally accepted accounting principles and the practices prevailing in the respective countries of domicile.

In preparing the accompanying consolidated financial statements, certain reclassifications have been made in the consolidated financial statements issued domestically in order to present them in a form which is more familiar to readers outside Japan. The consolidated statements of stockholders’ equity for 2001, 2000 and 1999 have been prepared for the purpose of inclusion in the accompanying consolidated financial statements, although such statements were not required for domestic purposes and were not filed with the regulatory authorities.

Amounts less than one million yen have been omitted. As a result, the totals in Japanese yen shown in the ﬁnancial statements do not necessarily agree with the sum of the individual amounts.

For the convenience of the readers, the accompanying U.S. dollar ﬁnancial statements have been translated from Japanese yen, as a matter of arithmetical computation only, at the rate of ¥123.90 to US$1, the exchange rate prevailing at March 31, 2001. The translations should not be construed as a representation that Japanese yen have been or could have been converted into U.S. dollars at that rate.

2. Signiﬁcant Accounting Policies

(1) Consolidation The consolidated financial statements include the accounts of the Bank and its significant subsidiaries. All significant intercompany balances and transactions have been eliminated.

Effective April 1, 1998, a new accounting standard on consolidated ﬁnancial statements (the ‘‘New Standard’’) has been adopted in Japan. The New Standard requires a company to consolidate any subsidiaries of which the company substantially controls the operations, even if it is not a majority owned subsidiary. Control exists where the company has (a) the power to appoint or remove the majority of the numbers of the board of directors or equivalent governing body; or (b) the power to cast the majority votes at meetings of the board of directors or equivalent governing body, etc.

The consolidated financial statements include the accounts of consolidated subsidiaries, of which the fiscal year-ends on or after December 31. In case that these subsidiaries have a significant transaction during the period from their fiscal year-end to March 31, the Bank makes an adjustment to the consolidated financial statements to be comprehensive.

F-96 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Goodwill on The Sumitomo Credit Service Company, Ltd. is amortized using the straight-line method over ﬁve years. Goodwill on the other entities is charged or credited to income directly.

Investments in major afﬁliates are accounted for by the equity method. Net income (loss) from such investments were ¥36,479 million ($294 million) recorded as other income and ¥(35,549) million recorded as other expense for 2001 and 2000, respectively.

(2) Statements of cash ﬂows For the purposes of the consolidated statements of cash ﬂows, cash and cash equivalents represent cash and due from banks.

Starting from ﬁscal 1999, the deﬁnition of due from banks has been changed to include all non-interest bearing deposits.

The Bank prepared the 2001 and 2000 consolidated statements of cash ﬂows as required by and in accordance with the ‘‘Standards for Preparation of Consolidated Cash Flow Statements, etc.,’’ effective from the year ended March 31, 2000.

The 1999 consolidated statement of cash flows, which was voluntarily prepared for the purpose of inclusion in the consolidated financial statements in a form familiar to readers outside Japan, has not been restated. One of the significant differences between the consolidated statements of cash flows in 2001 and 2000 and in 1999 is the use of pretax income in 2001 and 2000 instead of net income in 1999.

Additionally, some of the classification of activities, such as loans (previously classified as investing) and deposits (previously classified as financing), were changed to operating activities.

(3) Trading assets and liabilities Financial instruments, such as derivatives and trading securities, which are held for the short term in anticipation of market gains, are recorded at fair value. Such gains and losses are included in trading proﬁts or losses on the consolidated statements of income.

Trading assets and liabilities are accounted for based on trading date.

(4) Securities Prior to April 1, 2000, securities, including stocks, corporate bonds, and Japanese national and local government bonds, were stated at moving-average cost.

Securities included in money held in trust were also recorded at moving-average cost.

Investments in nonconsolidated subsidiaries and afﬁliates that are not accounted for by the equity method are carried at cost using the moving-average method.

F-97 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Securities excluding those classified as trading securities, held-to-maturity or investments in nonconsolidated subsidiaries and affiliates are defined as other securities. Debt securities in other securities are carried at amortized cost using the moving-average method. Equity securities in other securities are carried at cost using the moving-average method.

Securities held by the consolidated overseas subsidiaries are carried at cost (amortized cost) using primarily the speciﬁc identiﬁcation method.

Securities included in money held in trust are carried in the same manner.

(5) Derivative transactions Derivative transactions, excluding those classiﬁed as trading derivatives, are carried at fair value, though some consolidated overseas subsidiaries account for derivative transactions in accordance with local accounting standards.

(6) Hedge accounting In accordance with the Industry Audit Committee Report No. 15 ‘‘Temporary Treatment for Accounting and Auditing of Application of Accounting Standard for Financial Instruments in Banking Industry’’ issued by JICPA in 2000, the Bank applies hedge accounting, abiding by the following requirements: (i) Loans, deposits and other interest-bearing assets and liabilities as a whole shall be recognized as the hedged portfolio. (ii) Derivatives as hedging instruments shall effectively reduce the interest rate exposure of the hedged portfolio. (iii) Effectiveness of hedging activities shall be evaluated on a quarterly basis.

Certain derivatives managed by some foreign branches are recorded on a cost basis using the short-cut method for interest rate swaps in view of consistency with the risk management policy.

In accordance with the Industry Audit Committee Report No. 19 ‘‘Temporary Treatment for Accounting and Auditing of Application of Accounting Standard for Financial Instruments in Leasing Industry’’ issued by JICPA in 2000, one of the consolidated domestic subsidiaries in the leasing industry applies a deferred hedge accounting related to portfolio hedge on liabilities. Derivative transactions, such as interest rate swaps, are used in these hedging activities, and the contract amount is ¥564,560 million ($4,557 million), the fair value is ¥(12,688) million ($(102) million) and net unrealized loss is ¥(12,688) million ($(102) million) at March 31, 2001.

Other domestic subsidiaries use the deferred hedge accounting or the short-cut method for interest rate swaps.

Net of deferred unrealized gains and losses from hedging instruments is reported in other liabilities. Deferred unrealized losses and unrealized gains from hedging instruments at March 31, 2001 are ¥668,099 million ($5,392 million) and ¥680,130 million ($5,489 million), respectively.

(7) Nonaccrual loans Loans are generally placed on nonaccrual status when such loans are classiﬁed as Bankrupt and Effectively Bankrupt and Potentially Bankrupt by the self-assessment rule (see (10) Reserve for possible loan losses).

F-98 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(8) Premises and equipment Premises and equipment are generally stated at cost less accumulated depreciation. The Bank computes depreciation for premises using the straight-line method over the estimated useful lives of the respective assets. The depreciation for equipment is computed using the declining-balance method over the estimated useful lives of the respective assets.

Depreciation of premises and equipment owned by consolidated domestic subsidiaries is mainly computed using the declining balance method, while depreciation of those owned by consolidated overseas subsidiaries is mainly computed using the straight-line method over the estimated useful lives of respective assets.

(9) Software costs Capitalized software for internal use is depreciated using the straight-line method over its estimated useful lives (mainly ﬁve years) at the Bank and consolidated domestic subsidiaries, and included in other assets.

(10) Reserve for possible loan losses Reserve for possible loan losses of the Bank and its major consolidated subsidiaries is provided based on the internal rules for write-offs and reserves for loans.

For collateral and/or guaranteed loans of Bankrupt Borrowers and Effectively Bankrupt Borrowers, the Bank recognizes a portion exceeding the appraised value of collateral of and/or the amount deemed collectible from guarantees of those loans as irrecoverable, and writes off the portion. For the years ended March 31, 2001 and 2000, the Bank and the consolidated subsidiaries made such write-offs of ¥887,791 million ($7,165 million) and ¥978,443 million, respectively.

For loans of Bankrupt Borrowers and Effectively Bankrupt Borrowers, the Bank provides speciﬁc reserves. The amounts of the speciﬁc reserves are calculated by deducting the disposal value of collateral and/or the amount deemed collectible from guarantees, from the book balances of those loans which remain after the write-offs.

The Bank also provides speciﬁc reserves for loans of Potentially Bankrupt Borrowers based on the estimated amount of recoveries from the collateral and/or guarantees and other pertinent indicators speciﬁc to the borrowers.

The Bank also provides general reserves for loans of Borrowers Requiring Caution and Normal Borrowers. The ratio of the general reserves is determined based on the Bank’s loan loss experiences and economic conditions.

The Bank provides additional reserve for the loans originated in certain countries based on management’s assessment of economic or political conditions of such countries.

F-99 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(11) Reserve for possible losses on loans sold Reserve for possible losses on loans sold provides for contingent losses arising from decline of market value of underlying collateral for loans sold to the Cooperative Credit Purchasing Company, Limited.

(12) Reserve for employee retirement beneﬁt Under the terms of the Bank’s retirement plan, substantially all employees are entitled to a lump-sum payment at the time of retirement. The amount of reserve for employee retirement beneﬁt is, in general, based on length of service, basic salary at the time of retirement and reason for retirement. Prior to April 1, 2000, the liability for lump-sum payments is stated at the amount which would be required to be paid by the Bank if all eligible employees voluntarily retired at the balance sheet date.

Effective April 1, 2000, a new accounting standard for employee’s severance and retirement benefits was adopted in Japan. Reserve for employee retirement benefit (prepaid pension cost) is recorded based on an actuarial computation, which uses the present value of the projected benefit obligation and pension assets, due to employee’s credited years of services at the balance sheet date. Unrecognized net actuarial gain or loss is amortized from the next fiscal year using the straight-line method over certain years (mainly 10 years) within the average remaining service period of active employees. Unrecognized net obligation from initial application of the new accounting standard of ¥105,290 million ($850 million) is amortized using the straight-line method over five years.

Due to the new accounting standard, Income before income taxes and minority interests for the year ended March 31, 2001, has increased compared with prior accounting method by ¥11,266 million ($91 million).

Prepaid pension cost is reported in Other assets at March 31, 2001.

(13) Translation of foreign currencies

(i) The foreign currency ﬁnancial statements are translated into Japanese yen at the exchange rate prevailing at respective year-ends, except for the stockholders’ equity accounts, which are translated at historical rates. (ii) (a) Foreign currency assets and liabilities of the Bank are translated into Japanese yen at the exchange rate prevailing at the date of the consolidated balance sheets, except for certain special investment accounts as approved by the Japanese regulatory authorities, which are translated at their historical rates.

(b) Foreign currency accounts held by the consolidated subsidiaries are translated into the currency of the subsidiary at the exchange rate prevailing at the respective year-ends.

Effective April 1, 2000, consolidated domestic subsidiaries adopt the revised Accounting Standards for Foreign Currency Transactions’ (issued by the Business Accounting Deliberation Council in October 1999). As

F-100 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) a result, Income before income taxes and minority interests for 2001 has decreased compared with prior accounting method by ¥48 million.

In accordance with the revision of the accounting standard, the presentation of Foreign currency translation adjustments is changed from Assets to Stockholders’ equity and Minority interests. As a result, Assets decreased by ¥32,778 million ($264 million), Stockholders’ equity decreased by ¥32,171 million ($259 million), and Minority interests decreased by ¥607 million ($5 million) at March 31, 2001 compared with prior accounting method.

(14) Lease transactions Financing leases where the ownership of the property is deemed to be transferred to the lessee are capitalized, while other ﬁnancing leases are allowed to be accounted for in the same manner as operating leases.

Lease assets are depreciated using the straight-line method over the lease term with estimated salvage value.

Lease-related income is recognized on a straight-line basis over the full term of the lease, based on the contractual amount of lease fees per month.

(15) Amounts per share Net income (loss) per share is computed by deducting dividends for preferred stock from net income (loss), divided by the weighted average number of shares of common stock, excluding treasury stock and parent bank stock held by subsidiaries, outstanding during each ﬁscal year.

Declared dividends represent the cash dividends declared applicable to respective years, including dividends to be paid after the end of the year.

(16) Reclassiﬁcations Certain prior year’s amounts have been reclassiﬁed in conformity with the 2001 presentation. These changes had no impact on previously reported results of operations or stockholders’ equity.

(17) New accounting standard for ﬁnancial instruments Effective April 1, 2000, a new accounting standard for ﬁnancial instruments was adopted in Japan. Accordingly, the valuation methods of securities and derivatives, excluding those in the trading portfolio, have been changed, and hedge accounting has been adopted. As a result, Income before income taxes and minority interests for 2001 has increased ¥20,738 million ($167 million) compared with the prior accounting method and Income and expenses relating to derivative transactions that meet the criteria for hedge accounting are presented net by account, which represents a change from the prior accounting that presented net by transaction. As a result, income and expenses for 2001 have decreased by ¥493,177 million ($3,980 million) though Income before income taxes and minority interests did not change.

In addition, certain transactions under resale agreements and repurchase agreements are considered as ﬁnancing activities, not as purchasing or selling activities, and reported in Receivables under resale agreements and Payables under repurchase agreements. As a result, the amount of Securities increased by ¥1,610,677 million ($13,000 million) at March 31, 2001 compared with the prior treatment as purchasing or selling activities.

F-101 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

3. Trading Assets

Trading Assets at March 31, 2001 and 2000, consisted of the following:

Millions of Millions of yen U.S. dollars 2001 2000 2001 Trading securities ...... ¥ 247,429 ¥ 301,522 $1,997 Derivatives of trading securities ...... 19 18 0 Derivatives of securities related to trading transactions ...... 18 57 0 Trading-related ﬁnancial derivatives ...... 914,197 591,008 7,379 Other trading assets(1) ...... 751,740 852,817 6,067 ¥1,913,404 ¥1,745,425 $5,443

(1) Other trading assets includes commercial paper and other debt purchased related to trading transactions.

4. Securities

Securities at March 31, 2001 and 2000, consisted of the following:

Millions of Millions of yen U.S. dollars 2001 2000 2001 Japanese government bonds ...... ¥10,691,292 ¥3,488,594 $ 86,290 Japanese local government bonds ...... 322,120 358,977 2,600 Japanese corporate bonds ...... 666,286 714,032 5,378 Japanese stocks(1) ...... 3,042,388 3,396,547 24,555 Other(1) ...... 2,123,883 1,010,700 17,141 ¥16,845,970 ¥8,968,853 $135,964

(1) Japanese stocks and other include investments in nonconsolidated subsidiaries and afﬁliates of ¥197,762 million ($1,596 million) and ¥178,896 million at March 31, 2001 and 2000, respectively.

Securities of ¥1,956,646 million ($15,792 million), which are used for security lending transactions for consumption, are included in the accounts of Securities, Other assets and Trading assets at March 31, 2001.

5. Loans and Bills Discounted

Loans and bills discounted at March 31, 2001 and 2000, consisted of the following: Millions of Millions of yen U.S. dollars 2001 2000 2001 Bills discounted ...... ¥ 474,217 ¥ 448,000 $ 3,827 Loans on notes and deeds ...... 26,332,159 24,414,229 212,528 Overdrafts ...... 5,824,011 8,078,649 47,006 ¥32,630,388 ¥32,940,880 $263,361

F-102 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following summarizes the non-accrual loans of the Bank and consolidated subsidiaries at March 31, 2001 and 2000.

Millions of Millions of yen U.S. dollars 2001 2000 2001 Bankrupt loans ...... ¥ 75,729 ¥ 87,296 $ 611 Non-accrual loans ...... 1,535,566 1,661,933 12,394 Total non-accrual loans ...... ¥1,611,295 ¥1,749,230 $13,005

In addition to the non-accrual loans, the Bank and consolidated subsidiaries also classify loans overdue by three months or longer as substandard loans, and such loan balances at March 31, 2001 and 2000 were ¥49,909 million ($403 million) and ¥79,208 million, respectively.

Restructured loans are loans for which the Bank and the consolidated subsidiaries have adjusted the terms of the loans in favor of borrowers as a means of ﬁnancial assistance. These restructured loans are also classiﬁed as substandard and amounted to ¥128,581 million ($1,038 million) and ¥374,880 million at March 31, 2001 and 2000, respectively.

6. Other Assets Other assets at March 31, 2001 and 2000, consisted of the following:

Millions of Millions of yen U.S. dollars 2001 2000 2001 Accrued income and prepaid expenses ...... ¥ 295,002 ¥ 501,086 $ 2,381 Securities in custody ...... 1,111,612 704,390 8,972 Other ...... 2,891,193 1,219,801 23,335 ¥4,297,808 ¥2,425,278 $34,688

7. Premises and Equipment Premises and equipment at March 31, 2001 and 2000, consisted of the following:

Millions of Millions of yen U.S. dollars 2001 2000 2001 Land(1) ...... ¥ 416,299 ¥ 428,300 $ 3,360 Buildings ...... 286,758 282,938 2,314 Equipment and others ...... 323,721 331,076 2,613 Total ...... ¥1,026,779 ¥1,042,315 $ 8,287 Accumulated depreciation ...... (342,946) (361,980) (2,768) Net book value ...... ¥ 683,833 ¥ 680,334 $ 5,519

(1) Land includes land revaluation excess with related taxes referred to in Note 17.

F-103 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

8. Lease Assets Lease Assets at March 31, 2001 and 2000, were as follows: Millions of Millions of yen U.S. dollars 2001 2000 2001 Equipment and others ...... ¥2,131,697 ¥ 2,148,685 $17,205 Accumulated depreciation ...... (1,304,562) (1,324,826) (10,529) ¥ 827,134 ¥ 823,859 $ 6,676

9. Assets Pledged as Collateral Assets pledged as collateral at March 31, 2001 and 2000, were as follows:

Millions of Millions of yen U.S. dollars 2001 2000 2001 Assets pledged as collateral: Cash and due from banks and Deposits with banks ...... ¥ 60,462 ¥ — $ 488 Commercial paper and other debt purchased ...... — 10,615 — Trading assets ...... 1,143,569 — 9,230 Securities ...... 7,103,992 803,881 57,336 Loans and bills discounted ...... 1,671,141 1,532,634 13,488 Premises and equipment ...... — 471 — Other assets ...... 2,255 — 18 Liabilities corresponding to assets pledged as collateral: Deposits ...... ¥ 699 ¥ 168,240 $ 6 Call money and bills sold ...... 3,944,800 1,495,300 31,839 Payables under repurchase agreements ...... 5,262,187 — 42,471 Trading liabilities ...... 22,740 5,473 184 Borrowed money ...... 107,769 24,354 870 Acceptances and guarantees ...... 42,373 36,303 342

Premises and equipment include surety deposits and intangible of ¥70,478 million ($569 million) and ¥72,244 million at March 31, 2001 and 2000, respectively. Other assets include initial margins of futures markets of ¥17,539 million ($142 million) and ¥7,301 million and pledged money for securities borrowing transactions ¥823,711 million ($6,648 million) and ¥170,826 million at March 31, 2001 and 2000, respectively.

In addition to the assets presented above, the following assets were pledged as collateral for exchange settlements, initial margins of future markets and certain other purposes at March 31, 2001 and 2000:

Millions of Millions of yen U.S. dollars 2001 2000 2001 Cash and due from banks and Deposits with banks ...... ¥ 62,978 ¥ 52,799 $ 508 Trading assets ...... 3,072 — 25 Securities ...... 3,549,337 799,307 28,647 Loans and bills discounted ...... 120,089 — 969 Other assets (Securities in custody) ...... 263,550 26,115 2,127

F-104 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

10. Deposits Deposits at March 31, 2001 and 2000, consisted of the following:

Millions of Millions of yen U.S. dollars 2001 2000 2001 Current deposits ...... ¥ 1,983,588 ¥ 1,750,499 $ 16,010 Savings deposits ...... 8,169,611 7,721,902 65,937 Deposits at notice ...... 6,469,731 4,397,254 52,217 Time deposits ...... 12,290,315 12,666,726 99,195 Other deposits ...... 2,131,815 1,825,681 17,206 Negotiable certiﬁcates of deposit ...... 7,025,950 6,869,258 56,707 ¥38,071,013 ¥35,231,324 $307,272

11. Trading Liabilities Trading liabilities at March 31, 2001 and 2000, consisted of the following:

Millions of Millions of yen U.S. dollars 2001 2000 2001 Trading securities sold for short sales ...... ¥ 14,326 ¥327,165 $ 116 Derivatives of trading securities ...... 0 17 0 Derivatives of securities related to trading transactions ...... 9 26 0 Trading-related ﬁnancial derivatives ...... 1,054,270 625,440 8,509 ¥1,068,607 ¥952,649 $8,625

12. Borrowed Money Borrowed money at March 31, 2001 and 2000, consisted of the following:

Millions of Millions of yen U.S. dollars 2001 2000 2001 Bills rediscounted ...... ¥ 34,817 ¥ 22,027 $ 281 Subordinated debt obligation ...... 642,315 684,151 5,184 Borrowings from the Bank of Japan and other ﬁnancial institutions .... 1,645,344 1,812,521 13,280 ¥2,322,477 ¥2,518,700 $18,745

The repayment schedule within ﬁve years on borrowed money at March 31, 2001, is shown as follows:

Millions of yen One year or less One to two years Two to three years Three to four years Four to ﬁve years ¥1,385,271 ¥311,718 ¥209,824 ¥128,587 ¥185,927

Millions of U.S. dollars One year or less One to two years Two to three years Three to four years Four to ﬁve years $ 11,181 $ 2,516 $ 1,693 $ 1,038 $ 1,501

F-105 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

13. Bonds Bonds included subordinated bonds of ¥1,082,120 million ($8,734 million) and ¥1,067,255 million at March 31, 2001 and 2000, respectively.

The redemption schedule within five years on bonds (including convertible bonds) at March 31, 2001, is shown as follows: Millions of yen One year or less One to two years Two to three years Three to four years Four to five years ¥160,010 ¥66,366 ¥94,965 ¥220,297 ¥525,847 Millions of U.S. dollars One year or less One to two years Two to three years Three to four years Four to five years $ 1,291 $ 536 $ 766 $ 1,778 $ 4,244

14. Convertible Bonds Convertible bonds at March 31, 2001 and 2000, consisted of the following: Millions of Millions of yen U.S. dollars 2001 2000 2001 Convertible bonds payable in U.S. dollars: 31⁄8 due 2004, convertible into common stock at ¥3,606.90 per share . . ¥ 1,106 ¥ 1,106 $ 9 Convertible bonds payable in Japanese yen: 3⁄8%due 2001, convertible into common stock at ¥1,239.00 per share ...... 100,000 100,000 807 ¥101,106 ¥101,106 $816

Convertible bonds payable in Japanese yen (3⁄8%due 2001) (the ‘‘Bonds’’) were mandatorily converted to common stock of the Bank at May 31, 2001. Consequently, common stock and capital surplus increased by ¥50,045 million and ¥49,954 million, respectively, and the number of common shares issued increased by 91,324 thousand. The conversion price of the Bonds was adjusted to ¥1,095 per share in accordance with the terms and conditions of the Bonds at May 31, 2001.

15. Other Liabilities Other liabilities at March 31, 2001 and 2000, consisted of the following: Millions of Millions of yen U.S. dollars 2001 2000 2001 Accrued expenses and unearned income ...... ¥ 216,473 ¥ 283,443 $ 1,747 Income taxes ...... 40,110 17,206 324 Employees’ deposits ...... 41,657 43,832 336 Trading-related accounts payable ...... — 607,318 — Financial derivatives ...... 488,138 — 3,940 Other ...... 2,329,977 1,830,310 18,805 ¥3,116,359 ¥2,782,112 $25,152

F-106 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

16. Acceptances and Guarantees Acceptances and guarantees at March 31, 2001 and 2000, consisted of the following: Millions of Millions of yen U.S. dollars 2001 2000 2001 Acceptances ...... ¥ 19,941 ¥ 19,276 $ 161 Letters of credit ...... 580,140 525,101 4,682 Guarantees ...... 1,387,081 1,016,059 11,195 ¥1,987,164 ¥1,560,437 $16,038

Guarantees and standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. The Bank is obliged to pay the third party upon presentation of a claim that meets the conditions of the commitment. The Bank also issues letters of credit for import transactions in international operations. These contingent liabilities are accounted for in acceptance and guarantees, with a corresponding amount recorded in customers’ liabilities for acceptances and guarantees.

17. Land Revaluation Excess Pursuant to the Enforcement Ordinance for the Law concerning land revaluation (the ‘‘Law’’), effective March 31, 1998, the Bank and one of its domestic banking subsidiaries recorded their own land at fair value at March 31, 1998 and March 31, 1999, respectively. According to the Law, net unrealized gains are reported in a separate component of stockholders’ equity net of applicable income taxes as Land revaluation excess, and the related deferred tax liabilities are reported in liabilities as deferred tax liabilities for land revaluation. According to the Law, the Bank is not permitted to revalue the land at any time, even if the fair value of the land declines. Such unrecorded revaluation losses at March 31, 2001 and 2000, were ¥72,126 million ($582 million) and ¥56,692 million, respectively.

18. Minority Interests SB Treasury Company, L.L.C., a subsidiary of the Bank, issued noncumulative preferred securities, totaling $1.8 billion in February 1998. SB Equity Securities (Cayman), Limited, a subsidiary of the Bank, issued ﬂoating noncumulative preferred securities, totaling ¥340 billion in March 1999. Both subsidiaries are consolidated and the preferred securities are accounted for as minority interests.

19. Stockholders’ Equity Under the Banking Law of Japan, the Bank is required to appropriate as an earned surplus reserve an amount equal to at least 20 percent of cash disbursements in each period until the earned surplus reserve equals 100 percent of the common stock. The capital surplus and earned surplus reserve are not available for distribution as dividends but may be used to reduce a deﬁcit by resolution of the stockholders or may be capitalized by resolution of the Board of Directors. In accordance with a disclosure requirement effective from the year ended March 31, 1999, the earned surplus reserve is included in retained earnings. The Commercial Code of Japan provides that at least one half of the proceeds from shares issued at prices in excess of par value be included in common stock. In conformity therewith, the Bank has divided the paid-in amount of the stock issued upon conversion of bonds and notes into common stock equally between common stock and capital surplus.

F-107 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In accordance with the Law concerning Emergency Measures for the Early Strengthening of the Functions of the Financial System, the Bank issued a series of noncumulative preferred stock in the aggregate amount of ¥501 billion (the ﬁrst issuance of 67 million shares at ¥201 billion and the second issuance of 100 million shares at ¥300 billion). All of the preferred stocks were subscribed by The Resolution and Collection Bank, Limited, on March 30, 1999. The noncumulative preferred stocks are redeemable at the option of the Bank at any time. The initial ¥201 billion in Preferred stock is convertible into common stock of the Bank at any time from May 1, 2002 until February 26, 2009, while the subsequent ¥300 billion in Preferred stock is convertible into common stock of the Bank at any time from August 1, 2005 until February 26, 2009, in each case subject to certain adjustments to the conversion period.

20. Fees and Commissions Fees and commissions for the years ended March 31, 2001 and 2000, consisted of the following:

Millions of Millions of yen U.S. dollars 2001 2000 2001 Fees and commissions (income) ...... ¥202,836 ¥182,637 $1,637 Deposits and loans ...... 24,150 20,013 195 Remittances and transfers ...... 51,091 47,162 412 Securities-related business ...... 6,291 6,639 51 Agency ...... 9,049 8,351 73 Safe deposits ...... 2,771 2,820 22 Guarantees ...... 12,313 12,175 99 Credit card business ...... 66,110 62,499 534 Other ...... 31,058 22,974 251 Fees and commissions (expenses) ...... ¥ 33,918 ¥ 36,775 $ 274 Remittances and transfers ...... 11,873 12,033 96 Other ...... 22,045 24,741 178

21. Trading income Trading income for the years ended March 31, 2001 and 2000, consisted of the following:

Millions of Millions of yen U.S. dollars 2001 2000 2001 Trading profits ...... ¥84,376 ¥69,760 $681 Gains on trading securities ...... 10,358 36,460 84 Gains on securities related to trading transactions ...... 606 — 5 Gains on trading-related financial derivatives ...... 70,436 30,063 568 Other ...... 2,974 3,235 24 Trading losses ...... ¥ 2,146 ¥22,853 $ 17 Losses on trading securities ...... 190 6,839 2 Losses on securities related to trading transactions ...... — 944 — Losses on trading-related financial derivatives ...... 1,166 14,590 9 Other ...... 789 479 6

F-108 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

22. Other Operating Income Other operating income for the years ended March 31, 2001, 2000 and 1999, consisted of the following: Millions of Millions of yen U.S. dollars 2001 2000 1999 2001 Gains on foreign exchange transactions ...... ¥ 4,789 ¥ 27,854 ¥ 11,588 $ 39 Gains on sale of bonds ...... 29,963 38,202 110,753 242 Gains on redemption of bonds ...... — 4,565 3,803 — Lease-related income ...... 482,433 483,612 467,129 3,894 Other ...... 34,873 35,403 22,651 281 ¥552,060 ¥589,638 ¥615,925 $4,456

23. Other Income Other income for the years ended March 31, 2001, 2000 and 1999, consisted of the following:

Millions of U.S. Millions of yen dollars 2001 2000 1999 2001 Gains on sale of stocks and other securities ...... ¥ 475,976 ¥589,185 ¥ 13,265 $3,842 Net income from nonconsolidated entities by equity method ...... 36,479 — — 294 Gains on securities contributed to employee retirement beneﬁt trust ...... 24,006 — — 194 Gains on money held in trust ...... 1,199 1,528 1,716 10 Gains on disposition of premises and equipment ...... 963 1,710 69,168 8 Collection of written-off claims ...... 627 979 2,453 5 Gains on sales of majority interest of the Sumitomo Bank of California and Banca del Gottardo ...... — — 78,440 — Gain on sale of business operation ...... — 8,000 — — Other ...... 21,003 42,146 23,074 169 ¥5560,256 ¥643,550 ¥188,119 $4,522

24. Other Operating Expenses Other operating expenses for the years ended March 31, 2001, 2000 and 1999, consisted of the following: Millions of U.S. Millions of yen dollars 2001 2000 1999 2001 Losses on sale of bonds ...... ¥ 21,835 ¥ 33,793 ¥ 30,654 $ 176 Losses on redemption of bonds ...... 1,192 15,251 8,593 10 Losses on devaluation of bonds ...... 1,640 986 5,661 13 Lease-related expenses ...... 417,847 421,338 402,818 3,372 Other ...... 62,677 39,063 18,691 506 ¥ 505,193 ¥510,433 ¥466,419 $4,077

F-109 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

25. Other Expenses Other expenses for the years ended March 31, 2001, 2000 and 1999, consisted of the following:

Millions of U.S. Millions of yen dollars 2001 2000 1999 2001 Write-off of loans ...... ¥556,661 ¥439,122 ¥369,481 $4,493 Losses on sale of stocks and other securities ...... 39,819 37,071 30,336 321 Losses on devaluation of stocks and other securities ...... 41,172 36,522 33,891 332 Losses on money held in trust ...... 930 2,288 5,253 8 Losses on disposition of premises and equipment ...... 16,060 10,016 7,547 130 Losses on sale of loans to the Cooperative Credit Purchasing Co., Ltd...... 11,388 7,692 60,269 92 Transfer to reserve for possible losses on loans sold ...... 19,409 18,407 79,169 157 Losses on delinquent loans sold ...... 26,761 23,065 105,293 216 Additional contribution to pension fund ...... — 21,460 22,660 — Amortization of unrecognized net transition obligation for employee retirement beneﬁt ...... 21,058 — — 170 Other ...... 22,717 45,767 64,829 183 ¥755,978 ¥641,414 ¥778,729 $6,102

26. Income Taxes Effective April 1, 1998, a new accounting standard for income taxes accounting was adopted in Japan. According to this new standard, income taxes consist of current and deferred corporation, inhabitant and enterprise taxes.

On March 30, 2000, the Tokyo Metropolitan Government passed and established the Special Ordinance Concerning Taxation Standards for Enterprise Taxes in Relation to Banks in the Tokyo Metropolis (Tokyo Metropolitan Ordinance 145 of April 1, 2000). The measure has changed the effective statutory tax rate used by the Bank to calculate deferred tax assets and liabilities from 41.98%in the year ended March 31, 1999, to 39.83%.

As a result of this change, deferred tax assets decreased by ¥34,218 million at March 31, 2000, and an equivalent increased income taxes deferred for the year ended March 31, 2000. Further, as deferred tax liabilities for land revaluation decreased by ¥5,980 million due to this change, land revaluation excess increased by the same amount.

On June 9, 2000, the Osaka Prefecture Government promulgated the Special Ordinance Concerning Taxation Standards for Enterprise Taxes in Relation to Banks in Osaka Prefecture (Osaka Prefectural Ordinance 131 of June 9, 2000), which applies in business years starting on or after April 1, 2001. The effect of this measure is to change the effective statutory tax rate used by the Bank to calculate deferred tax assets and liabilities from 39.83%to 38.05%.

As a result of this change, deferred tax assets decreased by ¥24,802 million ($200 million) at March 31, 2001, and an equivalent increased in income taxes deferred for the year ended March 31, 2001. Further, as deferred tax liabilities for land revaluation decreased by ¥4,795 million ($39 million) due to this change, land revaluation excess increased by the same amount at March 31, 2001.

F-110 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Enterprise taxes other than those relating to income are included in Other expenses. Effective April 1, 2000, the Special Ordinance Concerning Taxation Standard for Enterprise Taxes in Relation to Banks in the Tokyo Metropolis (Tokyo Metropolis Ordinance 145 of April 1, 2000) was enacted, and the enterprise taxes in Tokyo, which were included in Income taxes current for prior periods, are included in Other expenses by the amount of ¥8,100 million ($65 million) for the year ended March 31, 2001.

Signiﬁcant components of deferred tax assets and liabilities at March 31, 2001 and 2000, were as follows:

Millions of Millions of yen U.S. dollars 2001 2000 2001 Deferred tax assets: Reserve for possible loan losses ...... ¥312,336 ¥346,890 $2,521 Write-off of loans ...... 190,414 208,099 1,537 Net operating loss carryforwards ...... 102,585 59,510 828 Reserve for possible losses on loans sold ...... 28,543 46,389 230 Other ...... 80,127 96,989 647 Subtotal ...... ¥714,008 ¥757,879 $5,763 Valuation allowance ...... (40,310) (28,744) (326) Total deferred tax assets ...... ¥673,697 ¥729,135 $5,437 Deferred tax liabilities: Undistributed earnings of subsidiaries ...... ¥ 44,246 — $ 357 Leveraged lease ...... 34,803 18,705 281 Gains on securities contributed to employee retirement beneﬁt trust ...... 9,153 — 74 Other ...... 11,483 9,134 92 Total deferred tax liabilities ...... ¥ 99,687 ¥ 27,839 $ 804 Net deferred tax assets ...... ¥574,009 ¥701,295 $4,633

A reconciliation of the effective income tax rate reﬂected in the accompanying consolidated statements of income to the statutory tax rate for the years ended March 31, 2001 and 2000, was as follows:

2001 2000 Statutory tax rate ...... 39.83%41.98% Deferred tax liabilities for undistributed earnings of subsidiaries ...... 16.77 — Change of tax rate ...... 9.07 15.80 Loss from unconsolidated entities by equity method ...... — 6.89 Other ...... 2.26 3.31 Effective income tax rate ...... 67.93 67.98

27. Employee Retirement Beneﬁt

(1) Outline of retirement benefit The Bank and consolidated subsidiaries in Japan have contributory funded defined benefit pension plans such as contributory pension plans, qualified pension plans and lump-sum severance indemnity plans. They may grant additional benefits in cases where certain requirements are met when employees retire.

F-111 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Bank and a consolidated subsidiary in Japan contributed certain marketable equity securities to an employee retirement beneﬁt trust. Gains on securities contributed to the employee retirement beneﬁt trust of ¥24,006 million ($194 million) is included in Other income.

At March 31, 2001, the Bank and the Bank of Kansai, Ltd., have contributed funded defined benefit pension plans. SB Leasing, Limited and The Sumitomo Credit Service Company, Limited have qualified pension plans. The Bank and most subsidiaries in Japan have severance indemnity plans.

(2) Projected benefit obligation Millions of Millions of yen U.S. dollars March 31 2001 2001 Projected benefit obligation ...... ¥(495,409) $(3,999) Pension assets ...... 410,572 3,314 Unfunded projected benefit obligation ...... ¥ (84,836) $ (685) Unrecognized net transition obligation ...... 85,988 695 Unrecognized actuarial differences ...... 50,585 408 Net amount recorded on the consolidated balance sheet ...... ¥ 51,737 $ 418 Prepaid pension cost (other assets) ...... 59,710 482 Reserve for employee retirement benefit ...... (7,972) (64)

(3) Pension expenses Millions of Millions of yen U.S. dollars Year ended March 31 2001 2001 Service cost ...... ¥ 12,922 $ 104 Interest cost on projected beneﬁt obligation ...... 16,485 133 Expected return on plan assets ...... (15,646) (126) Amortization of net transition obligation ...... 21,058 170 Other ...... 1,533 12 Pension expenses ...... ¥ 36,352 $ 293

(4) Assumptions The principal assumptions used in determining beneﬁt obligation and pension expenses at or for the year ended March 31, 2001, were as follows:

2001 Discount rate ...... 3.5% Expected rate of return on plan assets ...... 1.5%to 5.0% Term to amortize actuarial differences ...... Mainly 10 years Term to amortize net transition obligation ...... 5years

The estimated amount of all retirement beneﬁts to be paid at the future retirement date is allocated equally to each service year using the estimated number of total services years.

F-112 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

28. Lease Transactions

(1) Financing Leases Financing leases without transfer of ownership at March 31, 2001 and 2000, consisted of the following:

(a) Lessee side Millions of yen Millions of U.S. dollars Net Net Acquisition Accumulated book Acquisition Accumulated book March 31, 2001 cost depreciation value cost depreciation value Equipment ...... ¥10,315 ¥3,613 ¥6,701 $83 $29 $54 Other ...... 4 3 0 0 0 0 ¥10,320 ¥3,617 ¥6,702 $83 $29 $54

Millions of yen Net Acquisition Accumulated book March 31, 2000 cost depreciation value Equipment ...... ¥6,321 ¥2,350 ¥3,970 Other ...... — — — ¥6,321 ¥2,350 ¥3,970

Future minimum lease payments excluding interests at March 31, 2001 and 2000, were as follows:

Millions of Millions of yen U.S. dollars 2001 2000 2001 Due within one year ...... ¥1,886 ¥1,144 $15 Due after one year ...... 5,003 2,920 41 ¥6,890 ¥4,064 $56

Total lease expenses for the years ended March 31, 2001 anc 2000, were ¥1,332 million ($11 million) and ¥1,190 million, respectively.

Depreciation expense for the years ended March 31, 2001 and 2000 amounted to ¥1,242 million ($10 million) and ¥1,106 million, respectively. Depreciation is calculated using the straight-line method over the lease term of the respective assets.

The difference between the minimum lease payments and the acquisition costs of the lease assets represents interest expense. The allocation of such interest expense over the lease term is computed using the effective interest method. Interest expense for the years ended March 31, 2001 and 2000 amounted to ¥101 million ($1 million) and ¥78 million, respectively.

F-113 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(b) Lessor side Millions of yen Millions of U.S. dollars Acquisition Accumulated Net book Acquisition Accumulated Net book March 31, 2001 cost depreciation value cost depreciation value Equipment ...... ¥1,873,952 ¥1,179,276 ¥694,675 $15,125 $ 9,518 $5,607 Other ...... 231,447 120,946 110,500 1,868 976 892 ¥2,105,399 ¥1,300,222 ¥805,176 $16,993 $10,494 $6,499

Millions of yen Acquisition Accumulated Net book March 31, 2000 cost depreciation value Equipment ...... ¥1,917,876 ¥1,207,576 ¥710,300 Other ...... 215,680 114,937 100,743 ¥2,133,557 ¥1,322,514 ¥811,043

Future lease payments receivable excluding interest at March 31, 2001 and 2000, were as follows: Millions of Millions of yen U.S. dollars 2001 2000 2001 Due within one year ...... ¥255,827 ¥258,438 $2,065 Due after one year ...... 580,905 586,246 4,688 ¥836,733 ¥844,684 $6,753

Lease income for the years ended March 31, 2001 and 2000, were ¥327,731 million ($2,645 million) and ¥334,157 million, respectively. Depreciation expense for the years ended March 31, 2001 and 2000, amounted to ¥265,216 million ($2,141 million) and ¥270,809 million, respectively. Depreciation is calculated using the straight-line method over the lease term of the respective assets without salvage values. The difference between the minimum lease payments receivable and the acquisition costs of the lease assets represents interest income. The allocation of such interest income over the lease term is computed using the effective interest method. Interest income for the years ended March 31, 2001 and 2000, were ¥63,694 million ($514 million) and ¥63,593 million, respectively. (2) Operating Leases Operating leases at March 31, 2001 and 2000, consisted of the following: (a) Lessee side Future minimum lease payments at March 31, 2001 and 2000, were as follows: Millions of Millions of yen U.S. dollars 2001 2000 2001 Due within one year ...... ¥ 8,031 ¥ 7,758 $ 65 Due after one year ...... 44,184 50,143 356 ¥52,216 ¥57,901 $421

F-114 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(b) Lessor side Future lease payment receivables at March 31, 2001 and 2000, were as follows:

Millions of Millions of yen U.S. dollars 2001 2000 2001 Due within one year ...... ¥ 334 ¥207 $ 3 Due after one year ...... 990 787 8 ¥1,325 ¥994 $11

29. Loan Commitments Commitment line contracts on overdrafts and loans are agreements to lend to customers when they apply for borrowing, to a prescribed amount, as long as there is no violation of any condition established in the contracts. The amount of unused commitments was ¥17,349,040 million ($140,025 million) and the amount of unused commitments whose original contract terms are within one year or unconditionally cancelable at any time was ¥15,538,193 million ($125,409 million) at March 31, 2001. Since many of these commitments are expected to expire without being drawn upon, the total amount of unused commitments does not necessarily represent actual future cash ﬂow requirements.

Many of these commitments have clauses that the Bank and consolidated subsidiaries can reject an application from customers or reduce the contract amounts in case economic conditions are changed, the Bank and consolidated subsidiaries need to secure claims or other events occur. In addition, the Bank and its consolidated subsidiaries request the customers to pledge collateral such as premises and securities at the conclusion of the contracts, and take necessary measures such as grasping customers’ ﬁnancial positions, revision contracts when need arises and securing claims after the conclusion of the contracts.

30. Market Value of Marketable Securities

(1) Securities The market value of marketable securities at March 31, 2001, was as follows:

In addition to Securities in the consolidated balance sheets, trading securities, negotiable certiﬁcates of deposit and commercial paper within Trading assets, negotiable certiﬁcates of deposit in Deposits with banks, and commercial papers and claims on loan trust within Commercial paper and other debt purchased are included in the following amounts:

(a) Securities classified as trading Millions of yen Consolidated balance Gain included in March 31, 2001 sheet amount profit/loss Securities classified as trading ...... ¥998,998 ¥713

Millions of U.S. dollars Consolidated balance Gain included in March 31, 2001 sheet amount proﬁt/loss Securities classiﬁed as trading ...... $8,063 $6

F-115 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(b) Bonds classiﬁed as held-to-maturity with market value Millions of Yen Consolidated Net balance sheet Market unrealized Unrealized Unrealized March 31, 2001 amount value gains (losses) gains losses Japanese government bonds ...... ¥ 114 ¥ 114 ¥ 0 ¥ 0 ¥ 0 Japanese local government bonds ...... — — — — — Japanese corporate bonds ...... — — — — — Other ...... 18,451 18,367 (83) 46 130 Total ...... ¥18,565 ¥18,482 ¥(82) ¥47 ¥130

Millions of U.S. dollars Consolidated Net balance sheet Market unrealized Unrealized Unrealized March 31, 2001 amount value gains (losses) gains losses Japanese government bonds ...... $ 1 $ 1 $0 $0 $0 Japanese local government bonds ...... — — — — — Japanese corporate bonds ...... — — — — — Other ...... 149 148 (1) 0 1 Total ...... $150 $149 $(1) $0 $1 Note: Market value is calculated by using market prices at ﬁscal year-end.

(c) Other securities with market value Millions of Yen Consolidated Net balance sheet unrealized Unrealized Unrealized March 31, 2001 amount Market value gains (losses) gains losses Stocks ...... ¥ 2,738,365 ¥ 2,581,842 ¥(156,523) ¥166,678 ¥323,201 Bonds ...... 11,453,252 11,536,374 83,122 85,908 2,785 Japanese government bonds ...... 10,691,178 10,752,965 61,787 64,163 2,375 Japanese local government bonds ..... 260,232 271,306 11,073 11,077 3 Japanese corporate bonds ...... 501,842 512,103 10,261 10,667 406 Other ...... 1,399,155 1,524,294 125,139 135,120 9,981 Total ...... ¥15,590,773 ¥15,642,511 ¥ 51,738 ¥387,707 ¥335,969

Millions of U.S. dollars Consolidated balance Net sheet Market unrealized Unrealized Unrealized March 31, 2001 amount value gains (losses) gains losses Stocks ...... $ 22,101 $ 20,838 $(1,263) $1,345 $2,608 Bonds ...... 92,440 93,110 670 693 23 Japanese government bonds ...... 86,289 86,787 498 518 20 Japanese local government bonds ...... 2,101 2,190 89 89 0 Japanese corporate bonds ...... 4,050 4,133 83 86 3 Other ...... 11,293 12,303 1,010 1,091 81 Total ...... $125,834 $126,251 $ 417 $3,129 $2,712

Note: Market value is calculated by using the market prices at ﬁscal year-end for bonds and others, and by using the average market price during one month before the ﬁscal year-end for stocks.

F-116 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(d) Bonds sold during ﬁscal 2000 that are classiﬁed as held-to-maturity

There are no corresponding items.

(e) Other securities sold during ﬁscal 2000 Millions of Yen Gains on Losses Year ended March 31, 2001 Sales amount sales on sales Other securities ...... ¥12,148,851 ¥501,662 ¥41,367

Millions of U.S. dollars Gains on Losses Year ended March 31, 2001 Sales amount sales on sales Other securities ...... $ 98,054 $ 4,049 $ 334

(f) Securities with no available market value Millions of U.S. Millions of Yen dollars Consolidated balance Consolidated balance March 31, 2001 sheet amount sheet amount Bonds classiﬁed as held-to-maturity Nonlisted foreign securities ...... 31,163 252 Other ...... 5,091 41 Other securities Nonlisted foreign securities ...... ¥668,428 $5,395 Nonlisted bonds ...... 226,332 1,827 Nonlisted stocks (excluding OTC stocks) ...... ¥112,592 $ 909 Other ...... 224,483 1,812

(g) Change of classiﬁcation of securities There are no corresponding items.

(h) Redemption schedule of other securities with maturities and bonds classiﬁed as held-to-maturity Millions of yen March 31, 2001 1 year or less 1 to 5 years 5 to 10 years Over 10 years Bonds ...... ¥4,829,489 ¥4,668,333 ¥2,178,313 ¥ 3,563 Japanese government bonds ...... 4,676,663 4,248,153 1,766,475 — Japanese local government bonds ...... 22,556 54,354 244,466 563 Japanese corporate bonds ...... 130,269 365,646 167,370 3,000 Other ...... ¥ 445,721 ¥1,079,457 ¥ 148,466 ¥352,019 Total ...... ¥5,275,210 ¥5,747,790 ¥2,326,779 ¥355,582

F-117 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Millions of U.S. dollars 1to5 5to10 March 31, 2001 1 year or less years years Over 10 years Bonds ...... $38,979 $37,678 $17,581 $ 29 Japanese government bonds ...... 37,746 34,287 14,257 — Japanese local government bonds ...... 182 440 1,973 5 Japanese corporate bonds ...... 1,051 2,951 1,351 24 Other ...... $ 3,597 $ 8,713 $ 1,198 $2,841 Total ...... $42,576 $46,391 $18,779 $2,870

(2) Money held in trust

(a) Money held in trust classiﬁed as trading

Millions of yen Consolidated balance Gains included in March 31, 2001 sheet amount proﬁt/loss Money held in trust ...... ¥2,467 —

Millions of U.S. dollars Consolidated balance Gains included in March 31, 2001 sheet amount proﬁt/loss Money held in trust ...... $ 20 —

(b) Money held in trust classiﬁed as held-to-maturity

There are no corresponding items.

Millions of yen Consolidated balance sheet Net unrealized Unrealized Unrealized March 31, 2001 amount Market value gain (losses) gains losses Other money held in trust ...... ¥50,444 ¥46,355 ¥(4,108) ¥317 ¥4,426

Millions of U.S. dollars Consolidated balance sheet Net unrealized Unrealized Unrealized March 31, 2001 amount Market value gain (losses) gains losses Other money held in trust ...... $ 407 $ 374 $ (33) $ 3 $ 36

Note: Market value is calculated by using market prices at the ﬁscal year-end.

F-118 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(3) Net unrealized gains (losses) on other securities and other money held in trust Millions of March 31, 2001 Millions of yen U.S. dollars 2001 2001 Net unrealized gains (losses) ...... ¥47,629 $384 Other securities ...... 51,738 417 Other money held in trust ...... (4,108) (33) (-) Deferred tax liabilities ...... ¥18,371 $148 Net unrealized gains (losses), net of taxes (before following adjustments) ..... ¥29,257 $236 (-) Minority interests ...... ¥ 1,713 $ 14 (+) Parent company’s interest in net unrealized gains (losses) on valuation of other securities held by afﬁliates accounted for by the equity method ...... ¥ 13 $ 0 Net unrealized gains, net of taxes ...... ¥27,557 $222

Note: The above figures were not reflected in the consolidated financial statements.

(Appendix) Previous Year’s Information on Market Value of Marketable Securities

(1) Securities The following table represents market value and unrealized gains or losses on listed securities held by the Bank and the consolidated subsidiaries at March 31, 2000.

Millions of yen Consolidated balance sheet Market Net unrealized Unrealized Unrealized March 31, 2000 amount value gain (losses) gains losses Securities: Japanese bonds ...... ¥ 877,620 ¥ 871,538 ¥ (6,081) ¥ 22,187 ¥ 28,269 Japanese stocks ...... 3,131,298 3,987,659 856,360 1,178,416 322,055 Other ...... 521,933 786,986 265,053 274,936 9,883 Total ...... ¥4,530,852 ¥5,646,185 ¥1,115,332 ¥1,475,540 ¥360,208

Notes: 1. Japanese bonds include national government bonds, local government bonds and corporate bonds. 2. Market values for securities listed on exchanges are the closing prices on the Tokyo Stock Exchange or on other exchanges, or are calculated on the earnings yield of the quotation of over-the-counter issues released by the Securities Dealers Association of Japan.

F-119 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

3. The estimated value of unlisted securities is summarized as follows:

Millions of yen Consolidated balance sheet Market Net unrealized Unrealized Unrealized March 31, 2000 amount value gains (losses) gains losses Securities: Japanese bonds ...... ¥3,169,079 ¥3,174,359 ¥ 5,279 ¥12,030 ¥ 6,750 Japanese stocks ...... 34,181 92,557 58,376 63,839 5,463 Other ...... 66,800 67,264 464 2,331 1,867 Total ...... ¥3,270,060 ¥3,334,181 ¥64,120 ¥78,201 ¥14,081

The estimated market value equivalents of unlisted securities are calculated as follows: Japanese over-the-counter securities: Based on purchase prices released by the Securities Dealers Association of Japan. Public bonds: Based on the earnings yield of the quotation of over-the-counter issues released by the Securities Dealers Association of Japan. Beneﬁcial securities of securities investment trust: Based on the reference price. U.S. over-the-counter securities: Based on NASDAQ purchasing price of the National Association of Securities Dealers. 4. The following represents the book values of major non-marketable securities, which have not been included in the market value information on marketable securities: Millions of yen Consolidated balance sheet March 31, 2000 amount Securities: Japanese bonds ...... ¥514,905 Japanese stocks ...... 231,067 Other ...... 421,966 5. Trading securities, which are accounted for in the trading accounts, are not included in the above amounts because revaluated gains (losses) are accounted for in the consolidated statements of income.

(2) Money held in trust Millions of yen Consolidated balance sheet Net unrealized Unrealized Unrealized March 31, 2000 amount Market value gains (losses) gains losses Money held in trust ...... ¥109,039 ¥108,980 ¥(59) ¥0 ¥59 Notes: 1. Market values for securities listed on exchanges are the closing prices on the Tokyo Stock Exchange or on other exchanges, or are calculated based on the earnings yield of the quotation of over-the- counter issues released by the Securities Dealers Association of Japan. 2. Over-the-counter stocks are valued by the purchase prices released by the Securities Dealers Association of Japan.

F-120 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

31. Derivative Transactions

(1) Interest Rate Derivatives Millions of yen Contract amount Over one Market Net valuated March 31, 2001 Total year value gains (losses) Transactions listed on exchange Interest rate futures: Sold ...... ¥ 1,101,977 ¥ 17,858 ¥ (437) ¥ (437) Bought ...... 5,697,426 485,657 8,991 8,991 Interest rate options: Sold ...... ¥ 248,680 ¥ — ¥ (10) ¥ (10) Bought ...... 109,340 — 6 6 Over-the-counter transactions Forward rate agreements: Sold ...... ¥ 6,884,618 ¥ — ¥ (649) ¥ (649) Bought ...... 1,777,431 — 841 841 Interest rate swaps: ¥135,767,183 ¥83,730,613 ¥ (69,662) ¥ (69,662) Receivable fixed rate/payable floating rate .... 65,115,663 40,064,077 1,573,923 1,573,923 Receivable floating rate/payable fixed rate .... 64,847,289 39,778,519 (1,644,551) (1,644,551) Receivable floating rate/payable floating rate . . 5,165,148 3,359,612 (1,674) (1,674) Swaptions: Sold ...... ¥ 400,466 ¥ 248,801 ¥ (12,247) ¥ (12,247) Bought ...... 326,828 240,727 6,547 6,547 Caps: Sold ...... ¥ 3,207,128 ¥ 2,358,919 ¥ (4,459) ¥ (4,459) Bought ...... 2,107,655 1,535,957 4,673 4,673 Floors: Sold ...... ¥ 151,911 ¥ 140,436 ¥ (2,833) ¥ (2,833) Bought ...... 283,412 230,219 5,098 5,098 Other: Sold ...... ¥ 32,799 ¥ 29,850 ¥ 99 ¥ 99 Bought ...... 141,681 93,760 490 490 Total ...... ¥ (63,553) ¥ (63,553) Transactions listed on exchange Interest rate futures: Sold ...... ¥ 8,894 ¥ 144 ¥ (4) ¥ (4) Bought ...... 45,984 3,920 72 72 Interest rate options: Sold ...... ¥ 2,007 ¥ — ¥ (0) ¥ (0) Bought ...... 882 — 0 0

F-121 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Millions of yen Contract amount Over one Market Net valuated March 31, 2001 Total year value gains (losses) Over-the-counter transactions Forward rate agreements: Sold ...... ¥ 55,566 ¥ — ¥ (5) ¥ (5) Bought ...... 14,346 — 7 7 Interest rate swaps: ¥1,095,780 ¥675,792 ¥ (562) ¥ (562) Receivable fixed rate/payable floating rate ...... 525,550 323,358 12,703 12,703 Receivable floating rate/payable fixed rate ...... 523,384 321,053 (13,273) (13,273) Receivable floating rate/payable floating rate ...... 41,688 27,116 (14) (14) Swaptions: Sold ...... ¥ 3,232 ¥ 2,008 ¥ (99) ¥ (99) Bought ...... 2,638 1,943 53 53 Caps: Sold ...... ¥ 25,885 ¥ 19,039 ¥ (36) ¥ (36) Bought ...... 17,011 12,397 38 38 Floors: Sold ...... ¥ 1,226 ¥ 1,133 ¥ (23) ¥ (23) Bought ...... 2,287 1,858 41 41 Other: Sold ...... ¥ 265 ¥ 241 ¥ 1 ¥ 1 Bought ...... 1,144 757 4 4 Total ...... ¥ (513) ¥ (513)

F-122 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(2) Currency Derivatives Millions of yen Contract amount Over Net valuated March 31, 2001 Total one year Market value gains (losses) Over-the-counter transactions Currency swaps ...... ¥10,574,656 ¥4,808,279 ¥(69,281) ¥(69,281) Forward foreign exchange ...... 787,136 187,702 (13,451) (13,451) Currency options Sold ...... 19,804 6,453 (1,583) (1,583) Bought ...... 22,702 5,554 1,466 1,466 Other ...... — — — — Total ...... ¥(82,850) ¥(82,850)

Millions of U.S. dollars Contract amount Over Net valuated March 31, 2001 Total one year Market value gains (losses) Over-the-counter transactions Currency swaps $ 85,348 $ 38,808 $ (559) $ (559) Forward foreign exchange ...... 6,353 1,515 (109) (109) Currency options ...... Sold ...... 160 52 (13) (13) Bought ...... 183 45 12 12 Other ...... — — — — Total ...... $ (669) $ (669)

Notes: 1. The above transactions are valuated at market value and the valuated gains (losses) are accounted for in the consolidated statements of income. Derivative transactions to which the hedge accounting method is applied are not included in the amounts above. Some consolidated overseas subsidiaries account for currency derivatives in accordance with local accounting standards and such transactions are not included in the figures above, of which their net unrealized gains amount to ¥650 million ($5 million). 2. Market value is calculated mainly using discounted present value. 3. Forward foreign exchange and currency options which are of the following types are not included in the figures above: 1) Those that are revaluated at fiscal year-end and the revaluated gains (losses) are accounted for in the consolidated statement of income. 2) Those that are allotted to financial assets/liabilities by foreign currency and whose market values are already reflected in the amount of the financial assets/liabilities on the consolidated balance sheet. 3) Those that are allotted to financial assets/liabilities by foreign currency and the financial assets/liabilities are eliminated in the process of consolidation.

F-123 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The contract amount of currency derivatives which are revaluated at the consolidated balance sheet date are as follows:

Millions of Millions of yen U.S. dollars March 31, 2001 Contract amount Contract amount Transactions listed on exchange Currency futures: Sold ...... ¥ — $ — Bought ...... — — Currency options: Sold ...... — — Bought ...... — — Over-the-counter transactions: Forward foreign exchange ...... ¥48,193,991 $388,975 Currency options: Sold ...... 1,877,037 15,150 Bought ...... 1,606,427 12,966 Other: Sold ...... — — Bought ...... — —

(3) Stock Derivatives Millions of yen Contract Amount Over one March 31, 2001 Total year Market Value Net valuated Transactions listed on exchange Stock price index futures: Sold ...... ¥ 3,039 — ¥ 137 ¥ 137 Bought ...... — — — — Stock price index options: Sold ...... ¥ — ¥ — ¥ — ¥ — Bought ...... — — —— Over-the-counter transactions Equity options: Sold ...... ¥ — ¥ — ¥ — ¥ — Bought ...... — — — — Stock price index swaps ...... ¥45,202 ¥16,039 ¥ (805) ¥ (805) Other: Sold ...... ¥79,457 ¥61,219 ¥10,685 ¥10,685 Bought ...... 34,947 — (1,072) (1,072) Total ...... ¥ 8,944 ¥ 8,944

F-124 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Millions of U.S. dollars Contract amount Over Net valuated March 31, 2001 Total one year Market value gains (losses) Transactions listed on exchange Stock price index futures: Sold ...... $ 25 $ — $ 1 $ 1 Bought ...... — —— — Stock price index options: Sold ...... $ — $ — $— $— Bought ...... — — — — Over-the-counter transactions Equity options: Sold ...... $ — $ — $— $— Bought ...... — — — — Stock price index swaps ...... $365 $129 $ (6) $ (6) Other: Sold ...... $641 $494 $86 $86 Bought ...... 282 — (9) (9) Total ...... $72 $72

F-125 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(4) Bond Derivatives Millions of yen Contract amount Over one Market Net valuated March 31, 2001 Total year value gains (losses) Transactions listed on exchange Bond futures: Sold ...... ¥ 2,000 ¥ 2,000 ¥ 8 ¥ 8 Bought ...... — — — — Bond future options: Sold ...... ¥ — ¥ — ¥— ¥— Bought ...... — — — — Over-the counter transactions: Bond options: Sold ...... ¥21,981 ¥19,850 ¥ 0 ¥ 0 Bought ...... 25,457 18,562 0 0 Other: Sold ...... ¥ — ¥ — ¥— ¥— Bought ...... — — — — Total ...... ¥ 8 ¥ 8

Millions of U.S. dollars Contract amount Over one Market Net valuated March 31, 2001 Total year value gains (losses) Transactions listed on exchange Bond futures: Sold ...... $ 16 $ 16 $ 0 $ 0 Bought ...... — — — — Bond future options: Sold ...... $ — $ — $— $— Bought ...... — — — — Over-the counter transactions: Bond options: Sold ...... $ 177 $ 160 $ 0 $ 0 Bought ...... 206 150 0 0 Other: Sold ...... $ — $ — $— $— Bought ...... — — — — Total ...... $ 0 $ 0

Note: (1) The above transactions are valuated at market value and the valuated gains (losses) are accounted for in the consolidated statements of income. Derivative transactions to which the hedge accounting method is applied are not included in the amounts above. (2) Market value of transactions listed on exchange is calculated mainly using the closing prices on the Tokyo Stock Exchange. Market value of OTC transactions is calculated mainly using option pricing models.

F-126 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(5) Commodity Derivatives Millions of yen Contract amount Over Net valuated March 31, 2001 Total one year Market Value gains (losses) Over-the-counter transactions Commodity options: Sold ...... ¥2,707 ¥2,707 ¥56 ¥56 Bought ...... 2,707 2,707 (4) (4) Total ...... ¥51 ¥51

Millions of U.S. dollars Contract amount Over Net valuated March 31, 2001 Total one year Market Value gains (losses) Over-the-counter transactions Commodity options: Sold ...... $ 22 $ 22 $ 0 $ 0 Bought ...... 22 22 (0) (0) Total ...... $ 0 $ 0

Notes: 1. The above transactions are valuated at market value and the valuated gains (losses) are accounted for in the consolidated statement of income. Derivative transactions to which the hedge accounting method is applied are not included in the amounts above. 2. Market value is calculated based on factors such as price of the relevant commodity and contract term.

F-127 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(6) Credit Derivative Transactions Millions of yen Contract amount Over Net valuated March 31, 2001 Total one year Market Value gains (losses) Over-the-counter transactions Credit default options: Sold ...... ¥42,389 ¥33,782 ¥ (366) ¥ (366) Bought ...... 55,966 43,746 465 465 Other: Sold ...... ¥32,669 ¥14,500 ¥(8,276) ¥(8,276) Bought ...... 62,942 58,978 7,334 7,334 Total ...... ¥ (842) ¥ (842)

Millions of U.S. dollars Contract amount Over Net valuated March 31, 2001 Total one year Market Value gains (losses) Over-the-counter transactions Credit default options: Sold ...... $ 342 $ 273 $ (3) $ (3) Bought ...... 452 353 4 4 Other: Sold ...... $ 264 $ 117 $ (67) $ (67) Bought ...... 508 476 59 59 Total ...... $ (7) $ (7)

(Appendix) Previous Year’s Information on Derivative Transactions Notes: 1. Contract amount lists notional amount for swaps or contract value for futures, options and other derivatives. Option premiums accounted for in the consolidated balance sheets are denoted by brackets ([ ]). 2. Market value of contracts listed on exchanges are based on the closing prices on the relevant exchanges.

F-128 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(1) Interest Rate Derivatives Millions of yen Contract amount Unrealized Over one Market gains March 31, 2000 Total year value (losses) Transactions listed on exchange Interest rate futures: Sold ...... ¥11,123,048 ¥ 52,429 ¥11,074,094 ¥ 48,953 Bought ...... 10,099,803 — 10,058,766 (41,036) Interest rate options: Sold ...... Call ...... ¥ — ¥ — [—] ¥ — ¥ — Put...... — — [—] — — Bought ...... Call ...... — — [—] — — Put...... — — [—] — — Over-the-counter-transaction Forward rate agreements: Sold ...... ¥ 2,160 ¥ — ¥ 2,111 ¥ 49 Bought ...... 1,506 — 1,510 4 Interest rate swaps: ¥48,250,014 ¥22,256,360 ¥ 125,780 ¥125,780 Receivable fixed rate/payable floating rate ...... 27,361,147 11,051,720 499,210 499,210 Receivable floating rate/payable fixed rate ...... 20,031,787 10,429,396 (372,856) (372,856) Receivable floating rate/payable floating rate ...... 508,746 427,421 (395) (395) Swaptions: Sold Call ...... ¥ 98,150 ¥ 48,200 [3,309] ¥ 956 ¥ 2,353 Put...... 2,546 — [—] (88) 88 Bought ...... Call ...... 19,356 11,356 [266] 156 (110) Put...... 2,546 — [—] (68) (68) Caps: Sold ...... ¥ 76,931 ¥ 32,658 [67] ¥ 493 ¥ (426) Bought ...... 249,635 200,907 [1,913] 1,132 (780) Floors: Sold ...... ¥ 55,026 ¥ 47,088 [1,543] ¥ 2,025 ¥ (481) Bought ...... 2,054 1,031 [5] 10 5 Other: Sold ...... ¥ — ¥ — [—] ¥ — ¥ — Bought ...... — — [—] — — Total ...... ¥134,332

F-129 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Notes: 1. Regarding over-the-counter transactions; market value calculation is based on net present value or option pricing model. 2. A swaption call is defined as a right to carry out an interest rate swap with a floating receivable rate and a fixed payable rate. A swaption put is defined as a right to carry out an interest rate swap with a fixed receivable rate and a floating payable rate. 3. The market value or unrealized gains (losses) for interest rate swaps, excluding trading transactions, includes ¥205,785 million of accrued interest, which has been accounted for in the consolidated statements of income. 4. Derivative transactions, which are classified as trading transactions, are not included in the figures on the previous page because revaluated gains (losses) are accounted for in the consolidated statements of income. Figures on trading transactions are as follows:

F-130 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Millions of yen March 31, 2000 Contract amount Market value Transactions listed on exchange Interest rate futures: Sold ...... ¥ 376,132 ¥ 376,065 Bought ...... 2,993,460 2,993,271 Interest rate options: Sold Call ...... ¥ — [—] ¥ — Put...... — [—] — Bought Call ...... — [—] — Put...... — [—] — Over-the-counter transactions: Forward rate agreements: Sold ...... ¥ 4,459,803 ¥4,459,860 Bought ...... 463,020 462,888 Interest rate swaps: ...... ¥123,131,402 ¥ (5,904) Receivable fixed rate/payable floating rate ...... 62,619,490 705,951 Receivable floating rate/payable fixed rate ...... 56,298,809 (708,757) Receivable floating rate/payable floating rate ...... 3,358,339 (1,964) Swaptions: Sold Call ...... ¥ 125,840 [1,495] ¥ (3,131) Put...... 173,210 [1,623] (2,516) Bought Call ...... 118,000 [2,841] (143) Put...... 143,939 [555] 646 Caps: Sold ...... ¥ 3,262,039 [15,723] ¥ (10,897) Bought ...... 1,834,494 [7,413] 9,546 Floors: Sold ...... ¥ 284,086 [3] ¥ (2,020) Bought ...... 329,676 [1,706] 3,597 Other: Sold ...... ¥ 45,730 [349] ¥ 79 Bought ...... 125,263 [—] (198)

F-131 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(2) Currency Derivatives Millions of yen Contract amount Over Unrealized March 31, 2000 Total one year Market value gains (losses) Over-the-counter transactions Currency Swaps: ¥2,854,232 ¥1,541,624 ¥ (883) ¥ (883) US$ ...... 2,207,137 1,254,151 (2,309) (2,309) £Stg...... 86,458 59,235 1,216 1,216 Euro ...... 5,043 — 15 15 Other ...... 555,592 228,236 193 193 Other: US$ ...... 1,092 — 68 68 Total ...... ¥ (815)

Notes: 1. Market value calculation is based on net present value. 2. The market value or unrealized gains (losses) for currency swaps and other transactions excluding trading transactions, includes ¥6,731 million of accrued interest, which has been accounted for in the consolidated statements of income. 3. Derivative transactions in trading account are not included in the ﬁgures above because revaluated gains (losses) are accounted for in the consolidated statements of income. Contract amounts are as follows: Millions of yen March 31, 2000 Contract Amount Market value Over-the-counter transactions Currency Swaps: ¥9,046,598 ¥(64,124) US$...... 7,919,579 (64,433) Euro ...... 343,486 39 SFr...... 3,171 200 Other ...... 780,360 68 Forward foreign exchange: ...... ¥ 565,868 ¥ 16,132 Currency options: ...... ¥ 5,557 ¥ (1,321)

4. Forward foreign exchange and currency options which are revaluated at the end of ﬁscal year and revaluated gains (losses) are accounted for in the consolidated statements of income are not included in the ﬁgures on the previous page.

F-132 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The contracts so treated are as follows:

Millions of yen Contract March 31, 2000 amount Transactions listed on exchange Currency futures: Sold ...... ¥ — Bought ...... — Currency options: Sold Call ...... ¥ — [—] Put...... — [—] Bought Call ...... — [—] Put...... — [—] Over-the-counter transactions Forward foreign exchange: ¥41,745,624 Currency options: Sold ...... 1,179,988 (14,341) Bought ...... 964,387 (17,199) Other: Sold ...... ¥ — Bought ...... —

F-133 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(3) Stock Derivatives Millions of yen Contract amount Over Unrealized one Market gains March 31, 2000 Total year value (losses) Transactions listed on exchange Stock Price index features: Sold ...... ¥— ¥— ¥— ¥— Bought ...... — — — — Stock price index options: Sold Call ...... ¥— ¥— [—] ¥— ¥— Put ...... — — [—] — — Bought Call ...... — — [—] — — Put ...... — — [—] — — Over-the-counter transactions Equity options: Sold Call ...... ¥— ¥— [—] ¥— ¥— Put ...... — — [—] — — Bought Call ...... — — [—] — — Put ...... — — [—] — — Stock price index swaps: Stock price index receivable/interest ﬂoating rate payable ...... ¥— ¥— ¥— ¥— Stock price index payable/interest ﬂoating rate receivable ...... — — — — Other: Sold ...... — — [—] — — Bought ...... ¥58 — [22] 9 (13) Total ...... ¥(13)

F-134 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note: 1. For over-the-counter transactions, market value calculation is based on net present value or option pricing model. 2. Derivatives transactions, which are classiﬁed as trading transactions, are not included in the ﬁgures on the previous page because revaluated gains (losses) are accounted for in the consolidated statements of income. Figures on trading transactions are as follows: Millions of yen Contract Market March 31, 2000 amount value Transactions listed on exchange Stock price index futures: Sold ...... ¥ — ¥ — Bought ...... 48,554 51,294 Stock price index options: Sold Call ...... ¥ — [—] ¥ — Put...... — [—] — Bought Call ...... 1,858 [49] 67 Put...... — [—] — Over-the-counter transactions Equity options: Sold Call ...... ¥ 74,558 ¥(8,824) Put...... 14,135 95 Bought Call ...... 36,269 1,197 Put...... 22,497 (170) Stock price index swaps ...... ¥126,759 ¥ (905) Other: Sold ...... — [—] — Bought ...... — [—] —

F-135 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(4) Bond Derivatives Millions of yen Contract amount Over Unrealized March 31, 2000 Total one year Market value gains (losses) Transactions listed on exchange Bond futures: Sold ...... ¥416,719 ¥— ¥419,622 ¥(2,902) Bought ...... 47,866 — 48,035 168 Bond futures options: Sold Call ...... ¥ — ¥— [—] ¥ — ¥ — Put...... — — [—] — — Bought Call ...... — — [—] — — Put...... — — [—] — — Over-the-counter transactions Bond options: Sold Call ...... ¥ — ¥— [—] ¥ — ¥ — Put...... — — [—] — — Bought Call ...... — — [—] — — Put...... — — [—] — — Other: Sold Call ...... ¥ — ¥— [—] ¥ — ¥ — Put...... — — [—] — — Bought Call ...... — — [—] — — Put...... — — [—] — — Total ...... ¥(2,734)

F-136 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note: Derivative transactions, which are classiﬁed as trading transactions, were not included in the ﬁgures above because revaluated gains (losses) are accounted for in the consolidated statements of income. Figures on trading transactions are on the following page.

Millions of yen Contract Market March 31, 2000 amount value Transactions listed on exchange Bond futures: Sold ...... ¥6,548 ¥6,575 Bought ...... 4,804 4,862 Bond futures options: Sold Call ...... ¥ — [—] ¥ — Put ...... — [—] — Bought Call ...... — [—] — Put ...... — [—] — Over-the-counter transactions Bond options: Sold Call ...... ¥ — [—] ¥ — Put ...... — [—] — Bought Call ...... — [—] — Put ...... — [—] — Other: Sold ...... ¥ — ¥ — Bought ...... — —

(5) Commodity Derivatives

There are no corresponding items.

(6) Credit Derivative Transactions

All credit derivative transactions other than trading transactions are treated in the same way as guarantees and have been excluded from the following table.

F-137 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The transactions which are classiﬁed as trading transactions are recorded at estimated market value and related gains and losses are included in trading proﬁts or losses on the consolidated statements of income.

The contract amounts of derivative transactions included in trading transactions are as follows:

Millions of yen Contract Market March 31, 2000 amount value Over the counter transactions Sold ...... ¥ 15,828 ¥ (25) Bought ...... 117,465 9,890 Notes: 1. Market value is calculated based on the price of the reference assets or components such as the contract term.

2. ‘‘Sold’’ represents transactions in which the Bank accepts the credit risk, and ‘‘Bought’’ represents transactions in which the Bank transfers the credit risk.

32. Segment Information

(1) Business segment information

Millions of yen Banking Year ended March 31, 2001 business Leasing Other Total Elimination Consolidated I. Operating income (1) External customers ...... ¥ 1,843,146 ¥ 516,850 ¥ 365,998 ¥ 2,725,995 ¥ — ¥ 2,725,995 (2) Intersegment ...... 75,387 4,078 111,435 190,901 (190,901) — Total ...... ¥ 1,918,534 ¥ 520,929 ¥ 477,434 ¥ 2,916,897 ¥ (190,901) ¥ 2,725,995 Operating expenses ...... 1,731,682 500,251 314,034 2,545,968 (130,713) 2,415,254 Operating proﬁt ...... ¥ 186,851 ¥ 20,677 ¥ 163,399 ¥ 370,929 ¥ (60,187) ¥ 310,741 II. Assets ...... ¥66,438,599 ¥1,535,527 ¥4,544,442 ¥72,518,569 ¥(5,125,594) ¥67,392,974 Depreciation ...... 34,981 317,022 8,748 360,752 — 360,752 Capital expenditure ...... 64,749 271,022 10,721 346,493 — 346,493

Millions of yen Banking Year ended March 31, 2000 business Leasing Other Total Elimination Consolidated I. Operating income (1) External customers ...... ¥ 2,208,367 ¥ 522,953 ¥ 271,602 ¥ 3,002,923 ¥ — ¥ 3,002,923 (2) Intersegment ...... 36,596 4,869 99,933 141,398 (141,398) — Total ...... ¥ 2,244,963 ¥ 527,822 ¥ 371,535 ¥ 3,144,322 ¥ (141,398) ¥ 3,002,923 Operating expenses ...... 2,062,769 506,429 332,282 2,901,481 (135,843) 2,765,637 Operating proﬁt ...... ¥ 182,194 ¥ 21,393 ¥ 39,253 ¥ 242,841 ¥ (5,555) ¥ 237,285 II. Assets ...... ¥52,348,529 ¥1,479,808 ¥4,548,267 ¥58,376,605 ¥(4,609,101) ¥53,767,504 Depreciation ...... 45,077 329,348 4,989 379,415 — 379,415 Capital expenditure ...... 33,033 272,749 4,581 310,363 — 310,363

F-138 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Millions of U.S. dollars Banking Year ended March 31, 2001 business Leasing Other Total Elimination Consolidated I. Operating income (1) External customers ...... $ 14,876 $ 4,172 $ 2,954 $ 22,002 $ — $ 22,002 (2) Intersegment ...... 609 32 899 1,540 (1,540) — Total ...... $ 15,485 $ 4,204 $ 3,853 $ 23,542 $ (1,540) $ 22,002 Operating expenses ...... 13,977 4,037 2,534 20,548 (1,054) 19,494 Operating proﬁt ...... $ 1,508 $ 167 $ 1,319 $ 2,994 $ (486) $ 2,508 II. Assets ...... $536,228 $12,393 $36,678 $585,299 $(41,369) $543,930 Depreciation ...... 282 2,559 71 2,912 — 2,912 Capital expenditure ...... 523 2,187 87 2,797 — 2,797

Notes: 1. The business segmentation is determined based on the Bank’s internal administrative purposes. 2. ‘‘Other’’ includes securities, credit card, investment banking, loans and venture capital etc. 3. Impact on application of new accounting standards is as follows: (a) Accounting standard for employee retirement benefit As shown in Notes to consolidated financial statements, accounting standard for retirement benefits was applied from the fiscal year ended March 31, 2001. Consequently, operating profit increased by ¥10,533 million ($85 million) in banking business, decreased by ¥62 million ($1 million) in leasing, and decreased by ¥110 million ($1 million) in other for 2001 compared with prior accounting method. (b) Accounting standard for financial instruments As shown in Notes to consolidated financial statements, accounting standard for financial instruments was applied from the fiscal year ended March 31, 2001, and the method to evaluate securities and derivatives and the method of hedge accounting were changed. Consequently, operating profit increased by ¥21,019 million ($170 million) in banking business, decreased by ¥161 million ($1 million) in leasing and by ¥119 million ($1 million) in other for 2001 compared with prior accounting method. Effective April 1, 2000, income and expenses relating to derivative transactions that met the criteria for hedge accounting were presented net by account, which was changed from prior accounting that presented net by transaction. As a result, operating income and expenses decreased by ¥475,321 million ($3,836 million) in banking business, by ¥5,864 million ($47 million) in leasing, and by ¥11,993 million ($97 million) in other for 2001 compared with prior accounting method. (c) Accounting standard for foreign currency transactions As shown in Notes to consolidated financial statements, domestic consolidated subsidiaries (excluding a domestic banking subsidiary) applied the revised accounting standard for foreign currency transactions from 2001. Consequently, operating profit decreased by ¥40 million in leasing and by ¥7 million in other for 2001 compared with prior accounting method. (d) Taxation standard for enterprise tax As shown in Notes to consolidated financial statements, enterprise tax other than relating to pre- tax income was included in operating expenses. Effective April 1, 2000, the Special ordinance

F-139 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

concerning taxation standard for enterprise taxes in relation to banks in the Tokyo Metropolis (Tokyo Metropolis Ordinance 145 of April 1, 2000) was enacted, and the enterprise tax in Tokyo, which was not included in operating expenses for prior period, was included in operating expenses in banking business by the amount of ¥8,100 million ($65 million) for 2001.

4. Operating income represents total income excluding gains on disposition of premises and equipment, collection of written-off claims, gain on sale of business operation and reversals of other reserves.

Operating expenses represent total expenses excluding losses on disposition of premises and equipment, amortized cost of unrecognized net transition obligation for employee retirement beneﬁt and other extraordinary expenses.

(2) Geographic segment information

Millions of yen The Asia and Year ended March 31, 2001 Japan Americas Europe Oceania Total Elimination Consolidated I. Operating income (1) External customers ...... ¥ 2,075,857 ¥ 354,622 ¥ 168,645 ¥ 126,870 ¥ 2,725,995 ¥ — ¥ 2,725,995 (2) Intersegment ...... 116,616 53,979 63,382 40,438 274,417 (274,417) — Total ...... ¥ 2,192,474 ¥ 408,602 ¥ 232,028 ¥ 167,308 ¥ 3,000,413 ¥ (274,417) ¥ 2,725,995 Operating expenses ...... 2,015,569 249,594 230,040 137,464 2,632,669 (217,414) 2,415,254 Operating proﬁt ...... ¥ 176,904 ¥ 159,007 ¥ 1,988 ¥ 29,843 ¥ 367,744 ¥ (57,002) ¥ 310,741 II. Assets ...... ¥60,600,462 ¥5,051,346 ¥2,575,486 ¥2,300,560 ¥70,527,854 ¥(3,134,879) ¥67,392,974

Millions of yen The Asia and Year ended March 31, 2000 Japan Americas Europe Oceania Total Elimination Consolidated I. Operating income (1) External customers ...... ¥ 2,388,478 ¥ 296,813 ¥ 128,364 ¥ 189,267 ¥ 3,002,923 ¥ — ¥ 3,002,923 (2) Intersegment ...... 86,088 53,410 54,999 28,352 222,851 (222,851) — Total ...... ¥ 2,474,567 ¥ 350,224 ¥ 183,363 ¥ 217,619 ¥ 3,225,775 ¥ (222,851) ¥ 3,002,923 Operating expenses ...... 2,344,476 264,258 168,449 206,969 2,984,153 (218,516) 2,765,637 Operating proﬁt ...... ¥ 130,090 ¥ 85,966 ¥ 14,914 ¥ 10,650 ¥ 241,621 ¥ (4,335) ¥ 237,285 II. Assets ...... ¥49,196,165 ¥4,039,567 ¥1,756,961 ¥2,647,550 ¥57,640,245 ¥(3,872,740) ¥53,767,504

Millions of U.S. dollars The Asia and Year ended March 31, 2001 Japan Americas Europe Oceania Total Elimination Consolidated I. Operating income (1) External customers ...... $ 16,755 $ 2,862 $ 1,361 $ 1,024 $ 22,002 $ — $ 22,002 (2) Intersegment ...... 940 436 512 326 2,214 (2,214) — Total ...... $ 17,695 $ 3,298 $ 1,873 $ 1,350 $ 24,216 $ (2,214) $ 22,002 Operating expenses ...... 16,267 2,015 1,857 1,109 21,248 (1,754) 19,494 Operating proﬁt ...... $ 1,428 $ 1,283 $ 16 $ 241 $ 2,968 $ (460) $ 2,508 II. Assets ...... $ 489,108 $ 40,769 $ 20,787 $ 18,568 $ 569,232 $ (25,302) $ 543,930

F-140 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Notes: 1. The geographic segmentation is decided based on the degrees of following factors: geographic proximity, similarity of economic activities and relationship of business activities among regions. 2. The Americas includes the United States, Brazil and others; Europe includes the United Kingdom, France and others; Asia and Oceania includes Hong Kong, Singapore and others except Japan. 3. (a) Accounting standard for employee retirement benefit As shown in Notes to consolidated financial statements, accounting standard for retirement benefits was applied from the fiscal year ended March 31, 2001. Consequently, operating profit increased by ¥10,360 million ($84 million) in Japan for 2001 compared with prior accounting method. (b) Accounting standard for financial instruments As shown in Notes to consolidated financial statements, accounting standard for financial instruments was applied from the fiscal year ended March 31, 2001, and the method to evaluate securities and derivatives and the method of hedge accounting were changed. Consequently, operating profit increased by ¥22,556 million ($182 million) in Japan, by ¥3,304 million ($27 million) in the Americas, and by ¥731 million ($6 million) in Asia and Oceania and decreased by ¥5,853 million ($47 million) in Europe, for 2001 compared with prior accounting method. Effective April 1, 2000, income and expenses relating to derivative transactions that meet the criteria for hedge accounting are presented net by account, which has been changed from prior accounting that presented net by transaction. As a result, operating income and expenses decreased by ¥220,611 million ($1,781 million) in Japan, by ¥134,827 million ($1,088 million) in the Americas, by ¥58,364 million ($471 million) in Europe, and by ¥79,374 million ($641 million) in Asia and Oceania for 2001 compared with the prior accounting method. (c) Accounting standard for foreign currency transactions As shown in Notes to consolidated financial statements, domestic consolidated subsidiaries (excluding a domestic banking subsidiary) applied the revised accounting standard for foreign currency transactions from 2001. Consequently, operating profit decreased by ¥48 million in Japan for 2001 compared with prior accounting method. (d) Taxation standard for enterprise tax As shown in Notes to consolidated financial statements, enterprise tax other than relating to pre-tax income was included in operating expenses. Effective April 1, 2000, the Special ordinance concerning taxation standard for enterprise taxes in relation to banks in the Tokyo Metropolis (Tokyo Metropolis Ordinance 145 of April 1, 2000) was enacted, and the enterprise tax in Tokyo, which was not included in operating expenses for prior period, was included in operating expenses in Japan by the amount of ¥8,100 million ($65 million) for 2001. 4. Operating income represents total income excluding gains on disposition of premises and equipment, recoveries of written-off claims, gain on sale of business operation and reversals of other reserves. Operating expenses represent total expenses excluding losses on disposition of premises and equipment, amortized cost of unrecognized net transition obligation for employee retirement benefit and other extraordinary expenses.

F-141 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(3) Operating income from overseas operations Millions of Millions of yen U.S. dollars 2001 2000 2001 Operating income from overseas operations(A) ...... ¥ 650,138 ¥ 614,445 $ 5,247 Consolidated operating income(B) ...... 2,725,995 3,002,923 22,002 (A)/(B) ...... 23.9%20.5%23.9%

Note: The above table shows operating income from transactions of the Bank’s overseas branches and overseas consolidated subsidiaries, excluding internal income.

33. Subsequent Event

(1) Appropriations of retained earnings The following appropriations of retained earnings of the Bank at March 31, 2001, were approved by the ordinary general meeting of shareholders held on June 28, 2001.

Millions of Millions of yen U.S. dollars Cash dividends, ¥3.00 per share on common stock ...... ¥9,423 $76 ¥5.25 per share on preferred stock (ﬁrst series type 1) ...... 351 3 ¥14.25 per share on preferred stock (second series type 1) ...... 1,425 12

(2) Merger with The Sakura Bank, Limited On April 1, 2001, The Sumitomo Bank, Limited merged with The Sakura Bank, Limited (‘‘Sakura’’) and succeeded its assets, liabilities, all the claims, obligations and employees, and changed its corporate name to Sumitomo Mitsui Banking Corporation.

Upon the merger; (a) The Bank issued 2,470,846,767 par value common stocks (par value of ¥50 per share) and allotted these common stocks to each of Sakura’s shareholder listed in Sakura’s final shareholders’ registration on the day immediately preceding the appointed date of merger in the ratio of 1 to 0.6 of Sakura’s common stock to the Bank’s common stock. (b) The Bank issued 2,577,000 non-par-value Type VI preferred stocks and allotted these preferred stocks to each share-holder listed in Sakura’s final shareholders’ registration of preferred stock (Series-II) on the day immediately preceding the appointed date of merger in the ratio of 1 to 1 of Sakura’s preferred stock (Series-II) to the Bank’s Type VI preferred stock. (c) The Bank issued 800,000,000 non-par-value Type V preferred stocks and allotted these preferred stocks to each share-holder listed in Sakura’s final shareholders’ registration of preferred stock (Series- III (Type 2)) on the day immediately preceding the appointed date of merger in the ratio of 1 to 1 of Sakura’s preferred stock (Series-III (Type 2)) to the Bank’s Type V preferred stock. (d) The Bank’s preferred stock increased by ¥400,309 million to ¥650,809 million, common stock increased by ¥123,542 million to ¥625,890 million, capital surplus increased by ¥991,326 million to ¥1,634,407 million, earned surplus reserve increased by ¥131,261 million to ¥239,121 million, land revaluation excess increased by ¥42,690 million to ¥209,583 million and retained earnings increased by ¥165,051 million to ¥413,077 million.

F-142 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

34. Parent Company Nonconsolidated Balance Sheets Sumitomo Mitsui Banking Corporation (Formerly the Sumitomo Bank, Limited) March 31, 2001 and 2000 Millions of Millions of yen U.S. dollars 2001 2000 2001 Assets Cash and due from banks ...... ¥ 835,448 ¥ 1,280,533 $ 6,743 Deposits with banks ...... 3,702,608 2,502,386 29,884 Call loans and bills bought ...... 125,531 202,615 1,013 Receivables under resale agreements ...... 2,597,816 — 20,967 Commercial paper and other debt purchased ...... 77,362 84,494 624 Trading assets ...... 1,842,889 1,445,843 14,874 Money held in trust ...... 52,912 108,888 427 Securities ...... 16,860,309 8,982,244 136,080 Loans and bills discounted ...... 31,172,382 31,358,560 251,593 Foreign exchanges ...... 460,908 352,971 3,720 Other assets ...... 3,417,288 1,540,495 27,581 Premises and equipment ...... 585,395 591,187 4,725 Deferred tax assets ...... 550,472 624,585 4,443 Customers’ liabilities for acceptances and guarantees ...... 3,655,396 2,923,570 29,503 Reserve for possible loan losses ...... (671,042) (909,039) (5,416) Total assets ...... ¥65,265,680 ¥51,089,338 $526,761 Liabilities and stockholders’ equity Liabilities Deposits ...... ¥37,195,694 ¥34,229,831 $300,207 Call money and bills sold ...... 5,330,519 2,739,363 43,023 Payables under repurchase agreements ...... 4,857,211 — 39,203 Commercial paper ...... 500,400 110,200 4,039 Trading liabilities ...... 1,008,330 603,424 8,138 Borrowed money ...... 2,388,329 2,461,252 19,276 Foreign exchanges ...... 212,344 165,145 1,714 Bonds ...... 1,000,607 432,343 8,076 Convertible bonds ...... 101,106 101,106 816 Other liabilities ...... 6,923,707 5,173,303 55,881 Reserve for employee retirement beneﬁt ...... — 46,764 — Reserve for possible losses on loans sold ...... 70,809 111,588 572 Other reserves ...... 8 8 0 Deferred tax liabilities for land revaluation ...... 102,506 110,798 827 Acceptances and guarantees ...... 3,655,396 2,923,570 29,503 Total liabilities ...... ¥63,346,972 ¥49,208,701 $511,275 Stockholders’ equity Preferred stock, no par value; authorized 970,000 thousand shares and issued 167,000 thousand shares in 2001 and 2000 ...... ¥ 250,500 ¥ 250,500 $ 2,022 Common stock, par value ¥50 per share; authorized 7,500,000 thousand shares and issued 3,141,062 thousand shares in 2001 and 2000 ...... 502,348 502,348 4,054 Capital surplus ...... 643,080 643,080 5,190 Earned surplus reserve ...... 107,859 103,319 871 Land revaluation excess ...... 166,893 167,379 1,347 Retained earnings ...... 248,026 214,008 2,002 Total stockholders’ equity ...... ¥ 1,918,707 ¥ 1,880,637 $ 15,486 Total liabilities and stockholders’ equity ...... ¥65,265,680 ¥51,089,338 $526,761

Note: Translation into U.S. dollars has been made on the basis of ¥123.90 to US$1, the effective exchange rate at March 31, 2001.

F-143 SUMITOMO MITSUI BANKING CORPORATION (Formerly The Sumitomo Bank, Limited) and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Nonconsolidated Statements of Income Sumitomo Mitsui Banking Corporation (Formerly the Sumitomo Bank, Limited) Years Ended March 31, 2001, 2000, 1999

Millions of Millions of yen U.S. dollars 2001 2000 1999 2001 Income Interest income: Interest on loans and discounts ...... ¥ 778,683 ¥ 766,285 ¥ 971,144 $ 6,285 Interest and dividends on securities ...... 218,173 142,745 175,223 1,761 Interest on receivables under resale agreements ..... 1,614 — — 13 Other interest income ...... 260,699 507,548 499,542 2,104 Fees and commissions ...... 119,990 106,565 104,338 968 Trading proﬁts ...... 74,609 34,227 37,156 602 Other operating income ...... 24,021 61,072 115,264 194 Other income ...... 373,042 565,902 170,659 3,011 Total income ...... ¥1,850,834 ¥2,184,348 ¥2,073,328 $14,938 Expenses Interest expenses: Interest on deposits ...... ¥ 398,203 ¥ 282,160 ¥ 506,237 $ 3,214 Interest on borrowings and rediscounts ...... 118,481 110,299 122,861 956 Interest on payables under repurchase agreements . . . 7,512 — — 61 Other interest expenses ...... 93,500 420,641 413,916 755 Fees and commissions ...... 38,575 37,306 43,159 311 Trading losses ...... — 944 542 — Other operating expenses ...... 49,272 49,091 69,729 398 General and administrative expenses ...... 331,467 350,791 366,369 2,675 Transfer to reserve for possible loan losses ...... 5,653 292,209 566,279 45 Other expenses ...... 674,115 492,402 617,656 5,441 Total expenses ...... ¥1,716,783 ¥2,035,847 ¥2,706,752 $13,856 Income (loss) before income taxes ...... ¥ 134,051 ¥ 148,500 ¥ (633,423) $ 1,082 Income taxes: Current ...... ¥ 7,759 ¥ 6,634 ¥ 20,812 $ 63 Deferred ...... 70,616 93,047 (280,112) 570 Net income (loss) ...... ¥ 55,675 ¥ 48,818 ¥ (374,123) $ 449

U.S. Yen dollars Per share data: Net income (loss) ...... ¥ 16.59 ¥ 14.41 ¥ (119.11) $ 0.13 Net income—diluted ...... 16.25 14.12 — 0.13 Declared dividends on common stock ...... 6.00 6.00 6.00 0.05 Declared dividends on preferred stock (ﬁrst series type I) ...... 10.50 10.50 0.03 0.08 Declared dividends on preferred stock (second series type I) ...... 28.50 28.50 0.08 0.23

F-144 SUMITOMO MITSUI BANKING CORPORATION (Formerly the Sumitomo Bank, Limited) and Subsidiaries

Report of Independent Public Accountants

To The Board of Directors of Sumitomo Mitsui Banking Corporation

We have audited the accompanying consolidated balance sheets of Sumitomo Mitsui Banking Corporation (formerly The Sumitomo Bank, Limited) and subsidiaries as of March 31, 2001 and 2000, and the related consolidated statements of income, stockholders’ equity, and cash ﬂows for each of the three years in the period ended March 31, 2001, expressed in Japanese yen. Our audits were made in accordance with generally accepted auditing standards in Japan and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.

In our opinion, the consolidated financial statements referred to above present fairly the consolidated financial position of Sumitomo Mitsui Banking Corporation and subsidiaries as of March 31, 2001 and 2000, and the consolidated results of their operations and their cash flows for each of the three years in the period ended March 31, 2001 in conformity with accounting principles generally accepted in Japan applied on a consistent basis during the periods, except as noted in the following paragraph.

As explained in Note 2, effective April 1, 2000, Sumitomo Mitsui Banking Corporation and subsidiaries prospectively adopted new Japanese accounting standards for employees’ severance and retirement beneﬁts, ﬁnancial instruments and foreign currency translation.

Also, in our opinion, the U.S. dollar amounts in the accompanying consolidated ﬁnancial statements have been translated from Japanese yen on the basis set forth in Note 1.

As explained in Note 33 (2), The Sumitomo Bank, Limited merged with The Sakura Bank, Limited on April 1, 2001.

Asahi & Co.

Tokyo, Japan June 28, 2001

Statement on Accounting Principles and Auditing Standards This statement is to remind users that accounting principles and auditing standards and their application in practice may vary among nations and therefore could affect, possibly materially, the reported financial position and results of operations. The accompanying financial statements are prepared based on accounting principles generally accepted in Japan, and the auditing standards and their application in practice are those generally accepted in Japan. Accordingly, the accompanying consolidated financial statements and the auditors’ report presented above are for users familiar with Japanese accounting principles, auditing standards and their application in practice.

F-145 (THIS PAGE INTENTIONALLY LEFT BLANK) THE BANK THE BRANCH Sumitomo Mitsui Banking Corporation Sumitomo Mitsui Banking Corporation 1-2, Yurakucho 1-chome, Chiyoda-ku New York Branch Tokyo 100-0006 277 Park Avenue New York, New York 10172

TRUSTEE JPMorgan Chase Bank 450 West 33rd Street New York, New York 10001

PRINCIPAL PAYING AGENT LONDON PAYING AGENT JPMorgan Chase Bank JPMorgan Chase Bank 450 West 33rd Street Trinity Tower New York, New York 10001 9 Thomas More Street, 5th Floor London, E1W 1YT

LEGAL ADVISERS

To the Bank as to Japanese law Yuwa Partners A.I. Bldg., Suite 555 20-5, Ichibancho, Chiyoda-ku Tokyo 107-0062

To the Bank To the Underwriters as to U.S. law as to U.S. law Davis Polk & Wardwell Sullivan & Cromwell Akasaka Twin Tower Otemachi First Square, 5-1, East Tower, 11th Floor Otemachi 1-chome 17-22, Akasaka, 2-chome Chiyoda-ku, Minato-ku, Tokyo 107-0052 Tokyo 100-0004

To the Authorized Adviser as to English Law Linklaters Linklaters & Alliance One Silk Street London EC2Y 8HQ

INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Bank Asahi & Co. 1-2, Tsukudo-cho Shinjuku-ku, Tokyo 162-8551

AUTHORIZED ADVISER

Goldman Sachs Equity Securities (U.K.) Peterborough Court 133 Fleet Street London EC4A 2BB No person has been authorized to give any information or to make any representations other than US$750,000,000 those contained in this offering circular, and, if given Sumitomo Mitsui Banking or made, such information or representations must not be relied upon as having been authorized. This Corporation offering circular does not constitute an offer to sell or New York Branch the solicitation of an offer to buy any securities other than the securities to which it relates or an offer to sell or the solicitation of an offer to buy such 8.00%Subordinated Notes securities in any circumstances in which such offer or due June 15, 2012 solicitation is unlawful. Neither the delivery of this offering circular nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Branch or the Bank since the date hereof or that the information contained herein is correct as of any time subsequent to its date.

TABLE OF CONTENTS Page Available Information ...... 4 Forward Looking Statements ...... 4 Summary Information ...... 5 Risk Factors ...... 8 The Bank ...... 17 Use of Proceeds ...... 18 Principal Stockholders ...... 18 Exchange Rates ...... 18 Non-Consolidated Capitalization ...... 19 Goldman, Sachs & Co. Consolidated Capitalization ...... 21 Note Regarding Unaudited Historical Combined Financial Information ...... 23 Morgan Stanley Selected Non-Consolidated Financial and Other Information ...... 24 Daiwa Securities SMBC Selected Consolidated Financial and Other Information . . . 26 Management’s Discussion and Analysis of Financial Europe Limited Condition and Results of Operations ...... 28 Business ...... 51 UBS Warburg Management and Employees ...... 93 Subsidiaries, Affiliates and Associated Companies ...... 96 The Japanese Banking System ...... 99 Deutsche Bank Securities Supervision and Regulation ...... 101 Description of Notes ...... 113 JPMorgan Taxation ...... 126 Certain ERISA Considerations ...... 130 Japanese Foreign Exchange Law ...... 131 Nomura Securities Underwriting ...... 132 Validity of Notes ...... 135 Credit Suisse First Boston Certified Public Accountants ...... 135 General Information ...... 136 Summary of Significant Differences between Japanese GAAP and U.S. GAAP ...... 138 Annex—Supplemental Financial Information ...... A-1 Index to the Financial Statements ...... F-1