NANTO BANK

Annual Report 2002 Year ended March 31, 2002 Head Office 16, Hashimoto-cho, Nara City, Nara 630-8677, Japan Phone : (0742) 22-1131 URL : http://www.nantobank.co.jp/

Securities & International Division (Tokyo) 12-5, Kyobashi 1-chome, Chuo-ku, Tokyo 104-0031, Japan Phone : (03) 3535-1238 Fax : (03) 3535-1239 SWIFT Address : NANT JP JT e-mail Address : [email protected]

Securities & International Division (Nara) 16, Hashimoto-cho, Nara City, Nara 630-8677, Japan Phone : (0742) 27-1560 Fax : (0742) 26-1734 SWIFT Address : NANT JP JT NAR e-mail Address : [email protected]

Hong Kong Representative Office Suite 3008, 30/F., Two Exchange Square, 8 Connaught Place, Central, Hong Kong, China Phone : 852-2868-9932 Fax : 852-2530-1583 e-mail Address : [email protected]

Contents 1 Financial Highlights 2 Message from the Management 4 Business Performance Details of Our Initiatives 5 Achieving a Healthier Asset Position 6 Risk Management 7 Review of Operations 8 Board of Directors and Corporate Auditors Corporate Data 9 Consolidated Balance Sheets 10 Consolidated Statements of Operations Consolidated Statements of Stockholders’ Equity 11 Consolidated Statements of Cash Flows 12 Notes to Consolidated Financial Statements 23 Report of Independent Public Accountants 24 Capital Management 25 Supplemental Data (Non-Consolidated) 28 Nanto Bank Group Outline of Consolidated Subsidiaries 29 Organization Financial Highlights (Consolidated Four-Year Summary) The Nanto Bank, Ltd. and Consolidated Subsidiaries Years ended March 31

Thousands of Millions of yen U.S. dollars 2002 2001 2000 1999 2002 For the year: Total income ¥ 96,293 ¥ 110,930 ¥ 117,616 ¥ 126,209 $ 722,649 Total expenses 142,937 106,145 116,060 154,817 1,072,697 Income (loss) before income taxes (46,644) 4,785 1,556 (28,608) (350,048) Net income (loss) (27,709) 2,235 1,090 (19,037) (207,947) At year-end: Total assets 4,093,107 4,037,667 3,872,822 3,948,706 30,717,500 Loans and bills discounted 2,344,783 2,402,218 2,466,772 2,566,789 17,596,870 Securities 1,349,295 1,311,914 1,120,835 923,700 10,126,041 Deposits and negotiable certificates of deposit 3,667,841 3,627,709 3,516,847 3,409,644 27,526,011 Total liabilities 3,925,710 3,839,754 3,691,391 3,767,419 29,461,238 Minority interest 4,255 3,556 2,690 2,270 31,932 Total stockholders’ equity 163,141 194,356 178,741 179,016 1,224,322 Common stock 27,586 26,962 26,925 26,925 207,024

Yen U.S. dollars Per share data: Net income (loss) ¥(102.76) ¥ 8.30 ¥ 4.05 ¥ (70.77) $(0.77) Stockholders’ equity 597.99 721.11 663.67 664.69 4.48 Capital adequacy ratio (%) 9.04 10.16 9.53 9.12

Note: U.S. dollar amounts are included solely for the convenience of readers and are calculated at the exchange rate of ¥133.25 to US$1.00, the rate prevailing on March 31, 2002.

Net income (loss) Total assets Total stockholders’ (Billions of yen) (Billions of yen) equity (Billions of yen)

2.2 4,037 4,093 194.3 3,948 3,872 179.0 178.7

163.1

1.0

-19.0

-27.7 1999 2000 2001 2002 19992000 2001 2002 19992000 2001 2002

1 Message from the Management

Michitaka Sakamoto, Chairman (left); Hiromune Nishiguchi, President

losses under strict credit classification standards. Our Mission and Challenges Regrettably, these measures resulted in a net loss, but Japan continues to suffer from asset deflation and a stag- this was merely a one-time result based on a strict estima- nant economy, and the stock market remains weak. The tion of the downside risk factors in the local economy, economy of Nara Prefecture also faces ongoing difficulties. which was faced with structural adjustments and deflation- As a regional bank, our role is to support our clients and ary pressure: it was also a result of our sound and conserva- create a rich and vibrant local community. Our mission and tive accounting practices. corporate policy is to provide banking services that con- By removing as many factors as possible that are detri- tribute to the development of the regional economy. mental to profitability, we will further improve our finan- The financial environment, however, is undergoing radi- cial soundness and transparency and ensure a steady cal change, with a large number of business integrations and recovery. industrial restructuring, as well as the ending of unlimited A bank’s capital ratio is a strong indicator of its business insurance guarantees on long-term bank deposits in April soundness. We have managed to secure a consolidated capi- 2002. As competition in the financial sector continues to tal ratio of 9.04%, after the above-mentioned bad debt dis- intensify, financial institutions face the urgent necessity of posal, including write-offs, and this is far above the 4% early disposal of bad debts and prompt write-down of secu- requirement by domestic standards. rities holdings. At Nanto Bank, we have set about tackling these issues Improving Profitability speedily and with firm resolve. Our sound financial position To enhance the confidence and loyalty of customers amid will enable us to continue providing high-quality financial these difficult circumstances, we must not only reinforce services and remain “the bank of choice” for customers in our financial soundness but also ensure sustainable profits. the region. In line with this goal, we are striving to imple- We are reconstructing our business operations by imple- ment our Medium-Term Management Plan “Get 21.” menting the initiatives in our Medium-Term Management Plan, “Get 21,” thereby providing a rapid recovery of Improving Financial Soundness profitability. To further reinforce our financial base, during fiscal 2001, This reconstruction will be achieved on the basis of the we wrote down securities under strict impairment account- following three courses of action. ing standards and increased provisions for possible loan 2 The first is to reinforce our financial management capa- Active Information Disclosure bilities. In the local retailing business, which is our area of specialty, we will focus our efforts on promoting personal To maintain our position as the bank of choice in the area, loans and business loans. we undertake proactive information disclosure through our The second step is to reconstruct our strategic business publications and website, thereby enhancing our manage- foothold. To expand our business foundations, we will open ment transparency. new offices in Osaka and Kyoto, two cities with large corpo- During this fiscal year, we held meetings at four loca- rate markets that have close ties with Nara Prefecture. We tions both inside and outside the prefecture, where we were will upgrade our branches, and will strive for greater effi- able to meet our customers directly and explain our manage- ciency by merging some branches and closing others while ment policies and business performance. maintaining quality service. So that our customers may feel secure in their transac- The third step is to improve efficiency. Through the tions with the Bank, we will carry out increased disclosure introduction of a new operating system in March this year, of information to the local community and interested par- we began conducting business process reengineering (BPR), ties and continue to deepen our communication with them. through which we will centralize and streamline our clerical operations and be able to cut back the number of personnel. Growth in Tandem with the Local Community To improve management efficiency, we will work on reduc- To ensure our growth, we need to maintain strong ties with ing personnel and non-personnel expenses, while continu- the local region. As the designated official financial institu- ing to actively invest in essential areas such as information tion for the local governments of Nara Prefecture and 47 technology. local municipalities, the Bank strives to serve the local com- munity through the provision of loans to local public enti- The Success of Our Customers Means the Growth ties and the acceptance of public bonds. The Bank actively of Our Business Support for Local Businesses supports local welfare activities, including the donation of welfare vehicles and scholarship grants. In February this Without the growth of local businesses and the establish- year, we also acquired ISO 14001 certification for our con- ment of new venture enterprises, there would be no growth tributions to the development of a recycling-oriented society in local demand or employment, and no regional develop- and environmental conservation. ment. We are therefore reviewing the Bank’s organization to create a system that actively meets the needs of a wide vari- Looking Ahead ety of businesses, ranging from venture businesses at their founding stage to established businesses that are in their Since its founding in 1934, the Nanto Bank Group, which growth phase or have reached maturity. At our branches and consists of Nanto Bank and its ten subsidiaries, has oper- specialist sections including the Venture Business Support ated according to the principles of sound management and Division — established at our head office — we have highly support for regional development. We will continue to focus experienced staff who provide comprehensive support, our energies on providing high-quality financial services in including consulting services, financing, and support for order to maintain our status as the bank of choice in the direct fund procurement through the issuance of corporate area. We look forward to your continued support and bonds. patronage. Understanding our customers’ business enthusiasm, we will continue to offer strong support and reliable services.

Rating and Pricing

To ensure our customers’ success and thereby secure the Michitaka Sakamoto growth of our business, and at the same time to fulfill our Chairman responsibilities as the supplier of funds, we must do our utmost to reduce risk and guarantee adequate profits. Measures designed to achieve this include the introduction of a customer credit rating system as well as setting interest Hiromune Nishiguchi rates according to those credit ratings (pricing). In order to President rate and classify customers, we conduct quantitative and qualitative analyses of each customer’s financial position. Pricing is based on these ratings. We hope to gain adequate support from our customers to continue these policies.

3 Business Performance

Overview of Major Accounts Despite a steady growth in personal loans, total loans The management and staff of the Nanto Bank and the Nanto declined by ¥57.4 billion to ¥2,344.7 billion (US$17,596.8 Bank Group companies have directed their efforts towards million) at the end of the term, owing to weak corporate promoting the interests of the local community. We have demand for funds. attempted to expand our business foundations and reinforce Regarding securities, we paid careful attention to the mar- our management structure, implementing stricter accounting ket trends to ensure efficient management. As a result, secu- standards in preparation for possible future risks. As a con- rities increased by ¥37.3 billion during the term to ¥1,349.2 sequence, we have achieved the business results described billion (US$10,126.0 million) at the end of the fiscal year. below. Earnings Summary Ahead of the ending of the system of unlimited guarantees We wrote down securities under strict impairment account- on bank time deposits from April 2002, deposits increased by ing procedures and increased the reserves for possible loan ¥40.1 billion during the term to ¥3,667.8 billion (US$27,526.0 losses after application of more rigorous bad loan classifica- million) at the end of the term, mainly due to an increase in tions. In consequence, we posted a loss before tax of ¥46.6 personal deposits as a result of our careful response to our billion (US$350.0 million) and a net loss of ¥27.7 billion customers’ needs for stable fund procurement. (US$207.9 million).

Details of Our Initiatives

Reinforcing Sales Capabilities in Retail Banking ❚ Support for venture businesses Field We established our Venture Business Support Division and ❚ Active promotion of personal loans launched the Nanto Venture Business Integrated Support System to provide strong support for businesses that exhibit growth The Bank actively promotes personal loans through a system potential, originality and the spirit of innovation. Support is pro- where customers can receive consultation advice on Saturdays and vided in the fields of managerial consulting, investment, and Sundays at its Housing Loan Centers, which offer advice on mort- financing. gage loans and receive applications for them, and its Kurashi no From the stage of their founding, the Bank supports venture Sodan Kan, where customers can receive advice on loans, asset companies in many different fields, notably information technol- management, taxes and other matters. Due to these efforts, the bal- ogy and biotechnology. ance of personal loans rose ¥55.8 billion over the previous term. ❚ Support for overseas business operations ❚ Expansion of salary payment transfers and pension transactions An increasing number of small and medium-sized enterprises are To strengthen our ties with customers, we have been working to aiming to expand their business operations overseas. To support allow them to take better advantage of our salary payment transfer these businesses, we launched an Asian Business Support Team in and pension transaction services. As of March 31, 2002, a total of March 2002. The team provides comprehensive support, including 420,000 customers were using these services, and this figure is individual research on overseas businesses, advice tailored to local steadily growing year by year. conditions, and practical assistance with negotiations and con- Strengthening Corporate Banking Sales Capabilities tracts for entry into foreign markets. ❚ ❚ Promotion of business loans Helping companies with financial improvement The Bank has focused its energies on promoting business loans in To assist local firms striving for managerial improvement during the locality. We set up a Corporate Banking Supervisory Section this prolonged economic slump, we set up a Corporate Finance within our head office to provide strong support for our branches Support Team in October 2001. In collaboration with certified in Nara Prefecture to respond appropriately to customer needs. public accountants, licensed tax accountants and small and With the establishment of our Corporate Banking Office for medium-sized business management consultants, we assist busi- areas outside Nara Prefecture where there is high demand for busi- ness managers with the planning, implementation and manage- ness funds, we now have four sales offices engaged in expanding ment of their business revitalization plans. corporate transactions. Our efforts have gained the support of pre- Expanding Service Channels mium companies outside Nara Prefecture, and new transactions and the overall balance are both constantly increasing. In order to respond promptly and accurately to the needs of We will continue to strengthen our sales capabilities. our customer, we are expanding our service channels. This initiative includes expanding our Internet banking services, and increasing the number of in-branch and off-branch ATMs as well as those installed in convenience stores. 4 ❚ The number of ATMs at convenience stores through which ❚ Expanded range of consultation services our services can be accessed has increased to 50 To enhance our consultation services, we have added lifestyle We have entered a strategic business alliance with E-net to make financial consultation service centers under the name of Kurashi our services more convenient by arranging for them to be accessed no Sodan Kan, and Housing Loan Centers to the over-the-counter via ATMs installed in convenience stores. In June 2002, our ser- services already available at our branches. vices were made available at 29 additional convenience-store ATMs in Nara Prefecture, bringing the total to 50 convenience Kurashi no Sodan Kan stores in the prefecture. There are now about 4,000 convenience This facility offers a range of free consultation services for stores all over Japan with ATMs via which customers can access concerns such as funds for housing and children’s education our services or those of companies with which we have tie-ups. and retirement planning. Here, tax accountants will provide ❚ Internet banking tax advice, and public consultants on health insurance and We provide Internet banking services so that customers can make employee compensation will provide advice concerning transactions at any time or place, inside or outside the home. pensions. ❚ Online loan applications Housing Loan Centers It is now possible to apply directly for loans on our website. This service is available 24 hours a day, 365 days a year. Our three Housing Loan Centers act as outlets for receiving mortgage loan applications and providing advice on mort- gage loans.

Achieving a Healthier Asset Position

Write-Down of Securities Credit Rating Agency on our long-term preferential debts. According to the rules on fair value accounting of financial This means there is a very high probability of our meeting products, securities shall be written down in the following our obligations, and it shows that our reliability is highly cases: regarded. (1) where the market value at the end of the year has Disposal of Bad Debts decreased 50% or more for the acquisition cost, or To ensure the strength of our assets, we have made an effort (2) where the market value at the end of the year has to prevent the occurrence of bad debts and have allowed ade- decreased 30% or more but less than 50%, and is not quate write-offs or provisions based on strict asset self- expected to recover to the acquisition cost within one year. assessment. To ensure our financial soundness, we have applied a In fiscal 2001, we implemented provisions to ensure more severe estimation of the potential for a market value soundness by preventing the deterioration of future assets, recovery. Under our more stringent rules, we write down all including a decline in collateral value. securities whose value has declined 30% or more. This prin- ciple reduces the negative impact of stock price fluctuations Loans Disclosed under the Financial Reconstruction on profits, and enables us to secure stable profits. Law Capital Ratio In compliance with the Financial Reconstruction Law, which relates to emergency measures for the rehabilitation of finan- Even after applying stringent accounting standards, and cial functions, we assessed our assets, classifying loans and writing down the value of securities, the capital ratio of other assets on the basis of debtors’ financial position and Nanto Bank was 9.04% on a consolidated basis, far exceed- management conditions, and disclosed these results. ing the minimum domestic standard of 4%. Our Tier 1 capi- According to the Financial Reconstruction Law standards, tal ratio, based only on such items as capital funds and the Bank registered a total of ¥184.5 billion (US$1,384.6 mil- surplus funds, was high, at 8.41%. We are striving to rein- lion) in bad debts as of March 31, 2002: of these, 80.2% were force our financial position through the accumulation of covered by reserves and collateral or guarantees. good assets and a stronger capital base. Our Credit Rating Bankrupt and Doubtful Assets Quasi-Bankrupt Assets ¥123.8 billion A bank’s credit rating is the result of an appraisal of its ¥26.4 billion (5.1%) (1.0%) Substandard Loans deposits and corporate or other bonds with respect to its ¥34.2 billion ability to repay principal and interest. The rating is made by (1.4%) Normal Assets a third-party credit rating institution and is represented in ¥2,241.9 billion simple symbols. We enjoy an A+ rating from the Japan (92.3%)

5 Risk Management

The Bank has clearly set forth its management policy with the imposition of a ¥10 million insurance cap on long-term bank respect to all categories of risk, and has put in place an orga- deposits. nizational system and a full set of regulations to ensure the Operational Risk Management appropriate management of risk under all circumstances. For the purpose of retaining the trust of our customers, we organize Credit Risk Management training sessions and on-site guidance at branch offices to ensure that clerical operations are carried out accurately and in strict accor- To ensure the continued soundness of the Bank’s loan assets, we dance with established procedures. Moreover, we are automating as carry out credit risk management through a credit screening system much clerical work as possible to raise the level of accuracy and that is independent of marketing operations. Through strict self- increase efficiency. assessment of assets and the application of an in-house customer The Inspection Division carries out strict inspections of clerical credit rating system, the Bank is able to ascertain the credit risk of work, as well as giving guidance to clerical staff in the avoidance of each borrower. This allows us to carry out fine-tuned pricing by set- error. ting interest rates on an individual basis according to the borrower’s credit risk. This system maximizes earnings by reducing the risk of Systems Risk Management losses. In addition to duplicating its online systems equipment and commu- The Bank also efficiently employs a loan portfolio management nications network, the Bank has drawn up contingency plans to deal system featuring analyses of borrowers by industrial category and with major natural disasters, and all data is stored in backup servers credit rating group, statistical methods to estimate credit risk, and and at a special Backup Storage Center. This system ensures that the real estate security assessment. Bank can quickly resume operations even in the event that there is a Market Risk Management serious malfunction of the computer system or that the system goes offline. We have provided a system for the effective management of market The Bank enforces operations according to strict rules to mini- risk by clearly separating spheres of authority of the front office and mize the possibility of unauthorized access to the computer system back office, and by establishing the ALM Office to serve as a middle or the leakage of information. office. We are utilizing a number of methods to achieve a more accu- Regular inspections of our computer system are also conducted rate grasp of the quantitative risk amounts, including the Basis Point by outside experts so as to reduce risk to a minimum. Value and Value at Risk methods. The ALM Committee sets risk limits for each market once every Legal Risk Management six months, and Bank staff endeavor to secure sufficient earnings The Legal Affairs Office, within the General Affairs Division, pro- while remaining within these risk limits. The ALM Committee also vides centralized guidance and management of legal issues to reduce examines the balance of risk and earnings for the Bank’s operations the risk associated with such issues and avoids their occurrence. in each market, and discusses methods of controlling risk. (For further details, see also the Compliance section.)

Liquidity Risk Management Reputation Risk Management The ALM Office takes the lead in exercising overall supervision Recognizing that damage to a bank’s reputation as a result of over fund supply, including drawing up and revising fund supply unfounded rumors or perceptions would have a serious impact on plans on a monthly basis. Moreover, a three-level risk management its business performance, the management of the Nanto Bank system is applied, depending on the tightness or slackness of fund strives to maintain the Bank’s excellent reputation through the fre- supply. The Bank’s liquidity risk management system is designed to quent disclosure of information and the pursuit of a corporate cul- facilitate flexible response to changes in the risk situation following ture characterized by a high degree of transparency.

Risk Management Structure External Auditing Board of Directors Board of Corporate Auditors Emergency Council Managing Directors’ Committee

General Managers’ Committee Adherence to Rules and Regulations Operating Systems Compliance Committees ALM Committee Head Office Deputy General Managers’ Committee Committee Committee Operational Risk Risk Categories Credit Risk Market Risk Liquidity Risk Administrative Systems Risk Legal Risk Reputational Risk Risk Supervising Division General Planning Division ALM & Risk Management Division Operating Operation General Affairs General Planning Main Division Asset Assessment Administration Systems Division Division/ Division in Charge Division Administration Division/ Securities & International Division Operating Legal Affairs General Business Supporting Credit Analysis Division/ Securities & Division Credit Supervision Division Administration Division Division International Division Division

Operation Head Office Divisions/Branches/Consolidated Subsidiaries

Auditing Inspection Division

6 Review of Operations

Compliance Environmental Activities In order to enhance our compliance, we have drawn up Concern about the environment has been on the rise in Action Guidelines and a Compliance Handbook setting forth recent years in response to global warming, growing atmos- clear guidelines and standards that must be followed by the pheric pollution, and the problem of waste disposal. Thus, staff of the Nanto Bank. effecting a changeover from the present “throwaway society” Specifically, to make these matters known, we distributed to a recycling-oriented society, and finding other ways in copies of our Action Guidelines and Compliance Handbook which human activities can exist harmoniously side-by-side to all staff, and drafted a compliance program under which with the natural environment, have become themes of vital one member of staff in each division, office, or branch of the importance. The Nanto Bank has given a high priority to bank is designated as compliance officer. devising an appropriate response to these issues, and is mak- In order to improve the soundness of our management, ing continuing efforts to reduce the environmental load. we are making efforts to foster a corporate culture that puts emphasis on compliance. We are aiming to make the Nanto Acquisition of ISO 14001 Environmental Bank a financial institution trusted by its investors, share- Management Systems Certification holders and customers. On February 22, 2002 the Bank obtained “ISO 14001” envi- ronmental management systems certification for the head Responses to the Imposition of a 10 Million office in Hashimoto-cho and the Administrative Center in Yen Cap on Fixed-Term Deposit Insurance Minami-Kyobate-cho, both in Nara City. These two sites The Deposit Insurance System have a combined staff of approximately 1,000. With effect from April 1, 2002 holders of long-term deposits with financial institutions that have suffered business failure Contributions to Environmental Preservation will be compensated by the Deposit Insurance Corporation Following on from our successful acquisition of ISO 14001 only up to a maximum of ¥10 million of principal, plus the certification, the Bank will not only continue to promote interest accrued on that principal. Each deposit holder will energy conservation and waste volume reduction at its be compensated only for one account with any specific finan- offices, but will also contribute to environmental preserva- cial institution. The guarantee cap is to be extended to cur- tion through the provision of preferential loans (1% lower rent deposits and ordinary deposits from April 2003. Because interest rate) for the purchase of low-pollution private-use of these factors, the financial soundness of a particular bank cars, and other financial products and services such as will be of much greater significance to individual deposit socially responsible funds. We will also hold environmental holders than has traditionally been the case in Japan. awareness seminars to raise and issue environmental reports. Response of Nanto Bank We have taken the following steps to reassure our deposit holders regarding the financial health of the Bank. 1. Frequent disclosure of management information The Bank will conduct proactive disclosure of corporate information via special explanatory meetings, publication of detailed corporate guides in accordance with the Banking Law, and publication of information on the Bank’s website. 2. Establishment of special counters to provide explanations to customers of the nature and significance of the change in the deposit insurance system We have set up special counters in all branches, where cus- tomers can receive explanations of the changes in the deposit insurance system as well as advice on the investment of their assets.

7 Board of Directors and Corporate Auditors

Michitaka Sakamoto Hiromune Nishiguchi Takahiko Sakamoto Chairman President Senior Managing Director

Shinzo Koyama Shuji Azuma Yoshifumi Nakai Yasuo Ueno Managing Director Managing Director Managing Director and Managing Director General Manager

Chairman Managing Director Directors and General Managers Munehisa Kiguchi Michitaka Sakamoto Shinzo Koyama Yuji Shinozaki (Public Institutions Division) (Credit Supervision Division) President Managing Director Toshio Onishi Hiromune Nishiguchi Shuji Azuma Tadashi Kasei (General Affairs Division) (Head Office) Standing Corporate Auditor Senior Managing Director Managing Director and Yasuo Horiuchi Takashi Nakanishi Takahiko Sakamoto General Manager (Tokyo Branch and Tokyo Yoshifumi Nakai Liaison Office) Corporate Auditors (Osaka Branch) Tadatsugu Yorita Takashi Namaritani Managing Director (Inspection Division) Shoichiro Ohta Yasuo Ueno Yoshihiro Takatsuka Kazuo Taniguchi (Personnel Division) Masamichi Kunitomo Takaji Okumura (General Planning Division) Corporate Data (As of March 31, 2002)

Corporate Data Major Stockholders Number of Shares Percentage Authorized Shares : 640,000,000 (thousands) (%) Outstanding Shares : 272,863,860 The Bank of Tokyo-Mitsubishi, Ltd...... 13,466 4.93 Stated Capital : ¥27,586 million The Nanto Bank Employees’ Shareholders Association .... 9,175 3.36 Number of Stockholders : 13,841 Sumitomo Mitsui Banking Co...... 7,224 2.64 Date of Incorporation : June 1934 Mori Seiki Co., Ltd...... 6,766 2.47 Domestic Network : 135 offices The Meiji Mutual Life Insurance Co...... 5,430 1.99 Overseas Network : 1 representative office Sumitomo Mutual Life Insurance Co...... 5,420 1.98 Number of Employees : 2,887 Nippon Life Insurance Co...... 5,418 1.98 Ordinary Stockholders’ Meeting : The Tokio Marine and Fire Insurance Co., Ltd...... 4,957 1.81 June 27, 2002 Shigeki Kitamura ...... 4,937 1.80 Stock Listings : The Dai-ichi Mutual Life Insurance Co...... 4,070 1.49 Tokyo Stock Exchange Total ...... 66,867 24.50 Osaka Securities Exchange

8 Consolidated Balance Sheets

The Nanto Bank, Ltd. and Consolidated Subsidiaries As of March 31, 2002 and 2001

Thousands of Millions of yen U.S. dollars 2002 2001 2002

ASSETS Cash and due from banks ...... ¥ 110,266 ¥ 56,475 $ 827,512 Call loans and bills bought ...... 91,582 133,024 687,294 Commercial paper and other debt purchased ...... 296 301 2,221 Trading account securities ...... 2,425 1,083 18,198 Money held in trust ...... 47,000 50,000 352,720 Securities (Notes 6, 18) ...... 1,349,295 1,311,914 10,126,041 Loans and bills discounted (Note 7) ...... 2,344,783 2,402,218 17,596,870 Foreign exchanges ...... 1,274 1,601 9,560 Other assets (Note 8) ...... 29,951 31,752 224,772 Premises and equipment (Note 9) ...... 66,849 67,434 501,681 Deferred tax assets (Note 10) ...... 69,225 46,439 519,512 Customers’ liabilities for acceptances and guarantees (Note 16) ... 58,574 64,506 439,579 Reserve for possible loan losses (Note 11)...... (78,416) (129,083) (588,487) Total assets ...... ¥4,093,107 ¥4,037,667 $30,717,500

LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS’ EQUITY Liabilities: Deposits and negotiable certificates of deposit (Notes 12, 18) ... ¥3,667,841 ¥3,627,709 $27,526,011 Call money and bills sold...... 45,258 5,571 339,647 Borrowed money (Note 18) ...... 15,652 16,743 117,463 Foreign exchanges ...... 95 122 712 Convertible bonds (Note 13) ...... 13,680 14,925 102,664 Other liabilities (Note 14) ...... 112,319 95,474 842,919 Liabilities for severance and retirement benefits (Note 15)...... 10,243 12,203 76,870 Reserve for residual losses on loans sold ...... 2,043 2,497 15,332 Acceptances and guarantees (Note 16) ...... 58,574 64,506 439,579 Total liabilities ...... 3,925,710 3,839,754 29,461,238 Minority interest ...... 4,255 3,556 31,932 Stockholders’ equity (Note 17): Common stock; Authorized 640,000 thousand shares and issued 272,863 thousand shares...... 27,586 26,962 207,024 Capital surplus ...... 17,159 16,539 128,772 Retained earnings...... 107,129 136,187 803,969 Net unrealized gains on securities available for sale, net of taxes...... 11,284 14,668 84,682 Less treasury stock ...... (18) (1) (135) Total stockholders’ equity ...... 163,141 194,356 1,224,322 Total liabilities, minority interest and stockholders’ equity ... ¥4,093,107 ¥4,037,667 $30,717,500 See notes to consolidated financial statements.

9 Consolidated Statements of Operations The Nanto Bank, Ltd. and Consolidated Subsidiaries Years ended March 31, 2002 and 2001

Thousands of Millions of yen U.S. dollars 2002 2001 2002 Income: Interest income: Interest on loans and discounts ...... ¥ 49,123 ¥ 52,761 $ 368,652 Interest and dividends on securities ...... 22,244 23,746 166,934 Other interest income ...... 165 487 1,238 Fees and commissions ...... 16,186 16,195 121,470 Gains on sales and redemption of bonds ...... 5,440 5,029 40,825 Other income ...... 3,134 12,711 23,519 Total income ...... 96,293 110,930 722,649 Expenses: Interest expense: Interest on deposits ...... 5,150 7,989 38,649 Interest on borrowing and rediscounts ...... 883 1,264 6,626 Interest on convertible bonds ...... 142 46 1,065 Other interest expense ...... 3,976 4,200 29,838 Fees and commissions ...... 9,512 9,563 71,384 Losses on sales and redemption of bonds ...... 14,396 1,330 108,037 General and administrative expenses ...... 46,722 47,073 350,634 Other expenses (Note 20) ...... 62,153 34,677 466,439 Total expenses...... 142,937 106,145 1,072,697 Income (loss) before income taxes...... (46,644) 4,785 (350,048) Income taxes—current ...... 729 2,345 5,470 deferred ...... (20,364) (654) (152,825) Minority interest ...... 699 859 5,245 Net income (loss)...... ¥(27,709) ¥ 2,235 $ (207,947)

Yen U.S. dollars Per share of common stock: Net income (loss) ...... ¥(102.76) ¥8.30 $(0.77) Net income—diluted...... — 8.02 — Information for the year ended March 31, 2002 is not disclosed due to the net loss for the year. Dividends ...... 5.00 5.00 0.03

Consolidated Statements of Stockholders’ Equity The Nanto Bank, Ltd. and Consolidated Subsidiaries Years ended March 31, 2002 and 2001

Millions of yen Number of Net unrealized shares of gains on securities common stock Common Capital Retained available for sale, Treasury (thousands) stock surplus earnings net of taxes stock Balance at March 31, 2000 ...... 269,325 ¥26,925 ¥16,501 ¥135,317 ¥ — ¥ (2) Increase in common stock on conversion of convertible bonds...... 201 37 37 ——— Cash dividends...... ———(1,346) —— Bonuses to directors and statutory auditors ...... ———(20) —— Thousands of U.S. dollars Net income ...... ———2,235 —— Net unrealized Adoption of new accounting gains on securities standard for financial instruments ... ————14,668 — Common Capital Retained available for sale, Treasury Treasury stock ...... ———— —1 stock surplus earnings net of taxes stock Balance at March 31, 2001 ...... 269,526 26,962 16,539 136,187 14,668 (1) $202,341 $124,120 $1,022,041 $110,078 $ (7) Increase in common stock on conversion of convertible bonds...... 3,337 624 620 — — — 4,682 4,652 — — — Cash dividends...... — — — (1,347) — — — — (10,108) — — Net income (loss) ...... — — — (27,709) — — — — (207,947) — — Decrease in net unrealized gains on securities available for sale, net of taxes ... — — — — (3,384) — — — — (25,395) — Treasury stock ...... — — — — — (17) — — — — (127) Balance at March 31, 2002 ...... 272,863 ¥27,586 ¥17,159 ¥107,129 ¥11,284 ¥(18) $207,024 $128,772 $ 803,969 $ 84,682 $(135)

See notes to consolidated financial statements. 10 Consolidated Statements of Cash Flows The Nanto Bank, Ltd. and Consolidated Subsidiaries Years ended March 31, 2002 and 2001

Thousands of Millions of yen U.S. dollars 2002 2001 2002 Cash flows from operating activities: Income (loss) before income taxes ...... ¥(46,644) ¥ 4,785 $ (350,048) Depreciation ...... 8,544 8,485 64,120 Decrease in reserve for possible loan losses ...... (50,667) (3,649) (380,240) Decrease in reserve for retirement allowances ...... — (12,641) — Increase (decrease) in liabilities for severance and retirement benefits.... (1,960) 12,203 (14,709) Increase (decrease) in reserve for possible loan losses ...... (453) 174 (3,399) Interest income ...... (71,532) (76,995) (536,825) Interest expense ...... 10,152 13,500 76,187 Investment securities losses (gains) ...... 17,809 (4,240) 133,651 Loss (gains) on money held in trust ...... 570 (74) 4,277 Foreign exchanges gains ...... (14,847) (11,975) (111,422) Losses on sales of premises ...... 640 305 4,803 Net decrease in due from banks ...... 1 34,708 7 Net decrease in loans ...... 57,434 64,554 431,024 Net increase in deposits ...... 107,335 42,662 805,515 Net increase (decrease) in negotiable certificates of deposit ...... (67,203) 68,200 (504,337) Net decrease (increase) in call loans and bills bought ...... 41,446 (88,877) 311,039 Net increase (decrease) in call money and bills sold ...... 39,686 (369) 297,831 Net decrease in borrowed money...... (1,090) (4,948) (8,180) Net decrease (increase) in foreign exchanges (assets) ...... 327 (488) 2,454 Net increase (decrease) in foreign exchanges (liabilities)...... (27) 15 (202) Net increase in payables under securities lending transactions...... 9,746 19,995 73,140 Interest received ...... 76,743 77,098 575,932 Interest paid...... (11,465) (15,977) (86,041) Other ...... 10,019 14,016 75,189 Sub-total...... 114,567 140,465 859,789 Income taxes paid ...... (581) (2,390) (4,360) Net cash provided by operating activities ...... 113,985 138,075 855,422

Cash flows from investing activities: Purchases of investment securities ...... (900,883) (755,342) (6,760,848) Proceeds from sales of investment securities...... 490,557 423,685 3,681,478 Proceeds from maturities of investment securities...... 357,670 177,724 2,684,202 Increase in money held in trust...... (478) (1,452) (3,587) Decrease in money held in trust...... 2,907 1,570 21,816 Purchases of premises and equipment ...... (10,423) (8,919) (78,221) Proceeds from sales of premises and equipment...... 1,823 466 13,681 Net cash used in investing activities...... (58,825) (162,266) (441,463)

Cash flows from financing activities: Proceeds from issue of convertible bonds...... — 14,687 — Dividends paid ...... (1,347) (1,346) (10,108) Dividends paid by subsidiaries to minority stockholders...... 0 (0) 0 Net cash provided by (used in) financing activities ...... (1,347) 13,340 (10,108)

Effect of exchange rate changes on cash and cash equivalents...... (20) 24 (150)

Net increase (decrease) in cash and cash equivalents ...... 53,792 (10,825) 403,692 Cash and cash equivalents at beginning of fiscal years ...... 55,414 66,240 415,864 Cash and cash equivalents at end of fiscal years...... ¥109,207 ¥ 55,414 $ 819,564 See notes to consolidated financial statements.

11 Notes to Consolidated Financial Statements The Nanto Bank, Ltd. and Consolidated Subsidiaries

1. BASIS OF PRESENTATION d) Trading account securities The Nanto Bank, Ltd.(the “Bank”) and its consolidated Prior to April 1, 2000, trading account securities of the subsidiaries (together the “Companies”) maintain their Companies were valued at the lower of cost or market. official accounting records in Japanese yen and in accor- For the year ended March 31, 2001, listed trading dance with the provisions set forth in the Japanese account securities, are stated at fair market value. Selling Commercial Code and accounting principles and practices cost is calculated based on the moving average method. generally accepted in Japan (“Japanese GAAP”). Certain e) Securities accounting principles and practices generally accepted in Prior to April 1, 2000, securities of the Companies were Japan are different from International Accounting valued at the lower of cost or market. Standards and standards in other countries in certain Effective April 1, 2000, the Companies adopted the respects as to application and disclosure requirements. new Japanese accounting standard for financial instru- Accordingly, the accompanying consolidated financial ments (“Opinion Concerning Establishment of statements are intended for use by those who are Accounting Standard for Financial Instruments” issued by informed about Japanese accounting principles and the Business Accounting Council on January 22, 1999). practices. Upon applying the new accounting standard, the The accompanying consolidated financial statements Companies were required to examine the intent of holding have been restructured and translated into English (with each security and classify those securities as (a) securities some expanded descriptions and the inclusion of state- held for trading purposes (hereafter, “trading securities”), ments of stockholders’ equity) from the consolidated (b) debt securities intended to be held to maturity (here- financial statements of the Companies prepared in accor- after, “held-to-maturity debt securities”), (c) equity secu- dance with Japanese GAAP. Some supplementary infor- rities issued by subsidiaries and affiliates, and (d) all mation included in the statutory Japanese language other securities that are not classified in any of the above consolidated financial statements, but not required for fair categories (hereafter, “available-for-sale securities”) presentation is not presented in the accompanying finan- Trading securities are stated at fair market value. Gains cial statements. and losses realized on disposal and unrealized gains and As permitted by the Securities and Exchange Law of losses from market value fluctuations are recognized as Japan, amounts less than one million yen have been omit- gains or losses in the period of the change. Held-to- ted. As a result, the totals shown in the financial state- maturity debt securities are stated at amortized cost. ments do not necessarily agree with the sum of the Equity securities issued by subsidiaries and affiliates individual amounts. which are not consolidated or accounted for using the The translation of the Japanese yen amounts into U.S. equity method are stated at moving-average cost. dollars is included solely for the convenience of the read- Available-for-sale securities with available fair market val- ers, using the prevailing exchange rate at March 31, 2002, ues are stated at fair market value. Unrealized gains and which was ¥133.25 to US$1.00. The convenience transla- unrealized losses on these securities are reported, net of tions should not be construed as representations that the applicable income taxes, as a separate component of stock- Japanese yen amounts have been, could have been, or holders’ equity. Realized gains and losses on sale of such could in the future be, converted into U.S. dollars at this securities are computed using moving-average cost based or any other rate of exchange. on carrying value at March 31, 2000, or later date of purchase. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Debt securities with no available fair market value are a) Principles of consolidation stated at amortized cost, net of the amount considered not The consolidated financial statements include the collectible. Other securities with no available fair market accounts of the Bank and all ten of its subsidiaries. The value are stated at moving-average cost. Bank has no affiliates, over which it has the ability to If the market value of held-to-maturity debt securities, exercise significant influence over operating and financial equity securities issued by unconsolidated subsidiaries policies of the investees. and affiliates, and available-for-sale securities, declines All consolidated subsidiaries have fiscal years ending significantly, such securities are stated at fair market on March 31. value and the difference between fair market value and All significant intercompany accounts, transactions and the carrying amount is recognized as loss in the period of unrealized profits on transactions are eliminated. the decline. If the fair market value of equity securities b) Cash and cash equivalents issued by unconsolidated subsidiaries and affiliates not on In preparing the consolidated statement of cash flows, the equity method is not readily available, such securities cash and cash equivalents represent cash and deposits should be written down to net asset value with a corre- with the Bank of Japan. sponding charge in the income statement in the event net asset value declines significantly. In these cases, such fair c) Finance leases market value or the net asset value will be the carrying Finance leases which do not transfer ownership are amount of the securities at the beginning of the next year. accounted for in the same manner as operating leases As a result of adopting the new accounting standard for under Japanese GAAP. financial instruments, income before income taxes 12 increased by ¥10,392 million for the year ended March 31, evaluation of the customer’s overall financial condition. 2001. For other loans, the reserve for possible loan losses is f ) Derivatives and hedge accounting provided based on the Bank’s actual rate of loan losses in Derivative transactions are carried at fair value. The new the past. accounting standard for financial instruments, effective For claims on “bankrupt borrowers” and “effectively from the year ended March 31, 2001, requires companies bankrupt borrowers,” the amount exceeding the estimated to state derivative financial instruments at fair value and value of collateral and guarantees, is deducted, as deemed to recognize changes in the fair value as gains or losses uncollectible directly from those claims. At March 31, unless derivative financial instruments are used for hedg- 2002, the deducted amount is ¥65,478 million ing purposes. (US$491,392 thousand). If derivative financial instruments are used as hedges Reserve for possible loan losses of consolidated sub- and meet certain hedging criteria, the Companies defer sidiaries is provided for general claims by the amount recognition of gains or losses resulting from changes in deemed necessary based on the historical loan-loss ratio, fair value of derivative financial instruments until the and for doubtful claims by the amount deemed uncol- related losses or gains on the hedged items are recognized. lectible based on respective assessments. The Bank uses the hedge-accounting technique of i) Severance and retirement benefits “macro-hedging” which utilizes derivatives to comprehen- Liabilities for severance and retirement benefits, which sively control the interest rate risks attendant with are provided for the future pension payments to employ- numerous financial assets and liabilities, such as loans ees, are recorded, based on the projected benefit obligation and deposits. Macro-hedging is a form of risk management and the estimated pension plan assets at the end of the based on the risk adjustment approach provided for in the current fiscal year. Prior service costs and actuarial gains Provisional Treatment for Accounting and Auditing for or losses are amortized mainly as follows: Application of Accounting Standards for Financial Prior service costs are charged to profit/loss at the time Instruments in the Banking Industry (contained in Report of occurrence, and actuarial gains and losses are recog- No. 15 of the Japanese Institute of Certified Public nized in expenses in equal amounts from the following fis- Accountants’ Industry Audit Committee). The Bank cal year on the straight-line method over ten years, which applies deferred hedging to account for unrealized gains or is within the average remaining service period of the cur- losses arising from the derivatives mentioned above. rent employees. Loans, deposits and other interest bearing assets and At March 31, 2000, retirement allowances were pro- liabilities as a whole shall be recognized as the hedged vided in the amounts payable if eligible employees were to portfolio. voluntarily retire on the balance sheet date. Subsidiaries Derivatives as the hedging instruments shall effectively provide for retirement allowances in an amount equiva- reduce the interest rate exposure of the hedged portfolio. lent to 40% of payments due if eligible employees were to Eligibility for hedging instruments shall be to effectively voluntarily retire on the balance sheet date. The reduce the interest rate exposure of the hedged portfolio. Companies recognized pension expense when, and to the g) Premises and equipment extent, payments were made to the pension plans. Depreciation for premises and equipment of the Bank is Effective April 1, 2000, the Companies adopted the computed by the declining-balance method. new accounting standard, “Opinion on Setting Accounting The estimated useful lives of major items are as Standard for Employees’ Severance and Pension Benefits,” follows: issued by the Business Accounting Deliberation Council Buildings ...... 6 to 50 years on June 16, 1998 (the “New Accounting Standard”). Equipment ...... 3 to 20 years Under the New Accounting Standard, the liabilities As leased assets of consolidated subsidiaries, the and expenses for severance and retirement benefits are straight-line method is applied for the duration of the determined based on the amounts actuarially calculated lease term. Depreciation of other assets is principally pro- using certain assumptions. vided on the declining balance method over the estimated The Companies provided for employees’ severance and useful lives of the respective assets. retirement benefits at March 31, 2002 and 2001 based on the estimated amounts of projected benefit obligation and h) Reserve for possible loan losses the fair value of the plan assets. The reserve for possible loan losses is provided according The excess of the projected benefit obligation over the to predetermined standards for write-offs and provisions, total of the fair value of pension assets as of April 1, 2000 as follows: and the liabilities for severance and retirement benefits For loans to insolvent customers who are undergoing recorded as of April 1, 2000 (the “net transition obliga- bankruptcy or other special liquidation or in a similar tion”) amounted to ¥10,864 million, of which ¥10,849 financial condition, the reserve for possible loan losses is million was recognized as an expense as a result of the provided based on the amount of claims net of the contribution of investment securities worth ¥10,849 mil- expected amount of recoveries from collateral and guaran- lion to the employees’ retirement benefit trust. The tees net of the deducted amount mentioned below. remaining amount was also recognized in expenses at For the unsecured and unguaranteed portions of loans March 31, 2001. to customers not presently in the above circumstances, As a result of the adoption of the new accounting stan- but for which there is a high probability of so becoming, dard, in the year ended March 31, 2001, severance and the reserve for possible loan losses is provided for esti- retirement benefit expenses increased by ¥10,163 million mated unrecoverable amounts determined after an and, including the gain on securities contributed to the 13 employees’ retirement benefit trust, income before income consolidated balance sheet date in the net amount. taxes decreased by ¥4,216 million, compared with what (b) The difference of the initial and final exchange cash would have been recorded under the previous accounting flows by currency, which are the reflection of the differ- standard. ence in the yield between the currencies, are assumed as j) Reserve for residual losses on loans sold interest and are accounted for on an accrual basis on the The reserve for residual losses on loans sold to the consolidated balance sheet and the consolidated statement Cooperative Credit Purchasing Company, Limited, is pro- of operations. vided for in an amount estimated for possible future losses Financial swap transactions are foreign exchange trans- based on management’s evaluation of real estate securing actions that are contracted for the purpose of lending or such loans. borrowing funds in different currencies. These transactions consist of spot foreign exchange either k) Income taxes bought or sold and forward foreign exchange either Deferred income taxes are recorded to reflect tax effects bought or sold. The spot foreign exchange bought or sold of temporary differences between the carrying amounts is the swap transaction for borrowing or lending the prin- of assets and liabilities for tax and financial reporting cipal equivalent of the fund. The forward foreign purposes. exchange bought or sold is the swap transaction of the for- The asset and liability approach is used to recognize eign currency equivalent including the principal and cor- deferred tax assets and liabilities for the expected future responding interest to be paid or received, the amount and tax consequences of temporary differences between the due date of which, are predetermined. carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax 4. SEGMENT INFORMATION purposes. (1) Segment information by type of business l) Reclassifications Although some subsidiaries conduct such businesses as Certain prior year amounts have been reclassified to con- leasing and credit guarantees, the relative size of these form to the 2002 presentation. These changes had no businesses is small. Therefore, segment information by impact on previously reported results of operations or type of business is not required to be disclosed. stockholders’ equity. (2) Segment information by geographical area 3. ADDITIONAL INFORMATION Since the Bank has no overseas branches or subsidiaries, no segment information by geographical area is required (1) Accounting standards for foreign currency to be disclosed. transactions Formerly, the Bank applied “the accounting standards for (3) Income from international operations foreign currency transactions in the banking industry” Thousands of introduced in 1990. From this fiscal year, the Bank Millions of yen U.S. dollars 2002 2002 applies the revised accounting standards for foreign cur- Income from international rency transactions (“Opinion Concerning Revision of operations (A) ...... ¥12,203 $ 91,579 Accounting Standard for Foreign Currency Transactions” Consolidated operating issued by Business Accounting Deliberation Council on income (B) ...... 96,110 721,275 October 22, 1999) with the exception of when (A) / (B) ...... 12.69% 12.69% “Temporary Treatment of Accounting and Auditing Income from international operations as of March 31, Concerning Accounting for Foreign Currency 2001, accounts for less than 10% of consolidated operat- Transactions in Banking Industry” ( JICPA Industry ing income. Audit Committee Report No. 20) is applied. Income from international operations consists of oper- In order to hedge the risk arising from fluctuation of ating income on foreign currency-denominated transac- exchange rates for securities denominated in foreign cur- tions in Japan, yen-denominated trade-related rency, the Bank applies fair value hedge accounting to the transactions, non-resident transactions, and Japan off- securities other than debt securities. shore market account transactions. Pursuant to the JICPA Industry Audit Committee Report No. 20, the above accounting is applied on the con- ditions that the hedged security is specified in advance and that enough on-balance (actual) or off-balance (for- ward) liability exposure exists to cover the loss of the hedged security. This change had no significant impact on the consoli- dated financial statements. Financial swap transactions are accounted for pursuant to the JICPA Industry Audit Committee Report No. 20 as follows: (a) Initial exchange cash flows are assumed as principal of claim and debt and are reported on the consolidated bal- ance sheet at the exchange rate prevailing at the

14 5. STATEMENTS OF CASH FLOWS The reconciliations of cash and due from banks in the consolidated balance sheets and cash and cash equivalents in the consolidated statements of cash flows as of March 31, 2002 and 2001 are as follows: Thousands of Millions of yen U.S. dollars 2002 2001 2002 Cash and due from banks on the consolidated balance sheets ...... ¥110,266 ¥56,475 $827,512 Current due from banks ...... (475) (462) (3,564) Time deposits...... (550) (550) (4,127) Other due from banks...... (33) (47) (247) Cash and cash equivalents on the consolidated statements of cash flows...... ¥109,207 ¥55,414 $819,564

6. SECURITIES (1) At March 31, 2002 and 2001, information on trading account securities and securities with available market prices, is as follows: (a) Trading securities Thousands of Millions of yen U.S. dollars 2002 2001 2002 Book value (fair market value) ...... ¥2,425 ¥1,083 $18,198 Amount of net unrealized gains or losses included in the statement of operations ...... 1 — 7 (b) Held-to-maturity debt securities Not applicable (c) Available-for-sale securities with available fair market values Millions of yen At March 31, 2002 Acquisition cost Book value Difference Unrealized gains Unrealized losses Stocks...... ¥ 85,285 ¥ 89,643 ¥ 4,357 ¥ 9,483 ¥ 5,126 Bonds Japanese government bonds...... 527,864 537,008 9,143 9,233 90 Japanese local government bonds ...... 204,918 210,055 5,136 5,479 343 Japanese corporate bonds...... 258,766 262,017 3,250 3,723 473 Other ...... 237,721 235,199 (2,522) 2,648 5,170 Total...... ¥1,314,557 ¥1,333,924 ¥19,366 ¥30,569 ¥11,203

Millions of yen At March 31, 2001 Acquisition cost Book value Difference Unrealized gains Unrealized losses Stocks...... ¥ 96,122 ¥ 103,453 ¥ 7,331 ¥16,577 ¥ 9,246 Bonds Japanese government bonds...... 501,508 512,197 10,688 10,724 36 Japanese local government bonds ...... 161,045 168,083 7,038 7,072 34 Japanese corporate bonds...... 221,929 227,377 5,448 5,546 98 Other ...... 165,800 160,468 (5,331) 4,992 10,324 Total...... ¥1,146,407 ¥1,171,581 ¥25,174 ¥44,913 ¥19,739

Thousands of U.S. dollars At March 31, 2002 Acquisition cost Book value Difference Unrealized gains Unrealized losses Stocks...... $ 640,037 $ 672,742 $ 32,697 $ 71,166 $38,469 Bonds Japanese government bonds...... 3,961,455 4,030,078 68,615 69,290 675 Japanese local government bonds ...... 1,537,846 1,576,397 38,544 41,118 2,574 Japanese corporate bonds...... 1,941,958 1,966,356 24,390 27,939 3,549 Other ...... 1,784,022 1,765,095 (18,926) 19,872 38,799 Total...... $9,865,343 $10,010,686 $145,335 $229,410 $84,075

Notes: 1. Market value is calculated using market prices at the fiscal year end. 2. Unrealized gains (losses) represent differences between book values and acquisition costs. 3. Available-for-sale securities with available fair market values in the amount of ¥23,309 million at March 31, 2002 were revalued under impairment accounting. Impairment accounting is totally applied for securities whose market values have decreased 50% or more for the acquisition cost at the end of the year, or have decreased 30% or more but less than 50% at the end of the year, and whose market values are not expected to recover to the acquisition cost within one year.

15 (2) The following tables summarize book values of securities with no available fair values as of March 31, 2002 and 2001: (a) Held-to-maturity debt securities Thousands of Millions of yen U.S. dollars 2002 2001 2002 Non-listed domestic debt securities ...... ¥3,339 ¥2,983 $25,058 (b) Available-for-sale securities Thousands of Millions of yen U.S. dollars 2002 2001 2002 Non-listed stocks ...... ¥1,415 ¥ 1,926 $10,619 Non-listed foreign stocks ...... 9,579 9,579 71,887 Security investment trust ...... — 124,171 — (3) Available-for-sale securities with maturities and held-to-maturity debt securities mature as follows: Millions of yen As of March 31, 2002 1 year or less 1 to 5 years 5 to 10 years Over 10 years Bonds Japanese government bonds...... ¥ 93,220 ¥344,999 ¥ 87,789 ¥10,999 Japanese local government bonds ...... 20,387 141,258 48,410 — Japanese corporate bonds ...... 28,528 194,134 42,451 1,280 Other ...... 12,055 130,608 58,124 19,193 Total ...... ¥154,191 ¥811,000 ¥236,774 ¥31,473

Millions of yen As of March 31, 2001 1 year or less 1 to 5 years 5 to 10 years Over 10 years Bonds Japanese government bonds...... ¥ 97,937 ¥303,865 ¥110,395 ¥ — Japanese local government bonds ...... 18,026 108,355 41,701 — Japanese corporate bonds ...... 30,663 162,948 36,560 1,287 Other ...... 4,826 47,577 64,805 23,374 Total ...... ¥151,453 ¥622,746 ¥253,462 ¥24,662

Thousands of U.S. dollars As of March 31, 2002 1 year or less 1 to 5 years 5 to 10 years Over 10 years Bonds Japanese government bonds...... $ 699,587 $2,589,110 $ 658,829 $ 82,544 Japanese local government bonds ...... 152,998 1,060,097 363,302 — Japanese corporate bonds ...... 214,093 1,456,915 318,581 9,606 Other ...... 90,469 980,172 436,202 144,037 Total ...... $1,157,155 $6,086,303 $1,776,915 $236,195

(4) Held-to-maturity debt securities sold in the years ended March 31, 2002 and 2001: Not applicable (5) Available-for-sale securities sold during the years ended March 31, 2002 and 2001: Millions of yen Thousands of U.S. dollars 2002 2001 2002 Sales Gains Losses Sales Gains Losses Sales Gains Losses amount on sales on sales amount on sales on sales amount on sales on sales Available-for-sale securities ...... ¥484,413 ¥6,784 ¥667 ¥414,984 ¥9,569 ¥829 $3,635,369 $50,911 $5,005

16 7. LOANS AND BILLS DISCOUNTED Significant components of the Companies’ deferred tax Loans and bills discounted as of March 31, 2002 and 2001 assets and liabilities as of March 31, 2002 and 2001 were were as follows: as follows: Thousands of Thousands of Millions of yen U.S. dollars Millions of yen U.S. dollars 2002 2001 2002 2002 2001 2002 Loans on bills...... ¥ 312,837 ¥ 364,374 $ 2,347,744 Deferred tax assets: Loans on deeds...... 1,553,479 1,545,271 11,658,378 Excess bad debt expenses... ¥51,881 ¥43,593 $389,350 Overdrafts ...... 412,731 417,976 3,097,418 Retirement benefits...... 4,563 5,234 34,243 Bills discounted...... 65,734 74,595 493,313 Depreciation...... 1,483 1,220 11,129 Total ...... ¥2,344,783 ¥2,402,218 $17,596,870 Write-down of land ...... 3,729 3,727 27,984 Valuation loss on securities...... 9,914 — 74,401 8. OTHER ASSETS Deficit brought forward The composition of other assets at March 31, 2002 and for taxation purposes... 3,089 — 23,181 2001 were as follows: Other ...... 2,637 3,160 19,789 Thousands of Total deferred tax assets .... 77,300 56,936 580,112 Millions of yen U.S. dollars Deferred tax liabilities: 2002 2001 2002 Net unrealized gains on Accrued income ...... ¥11,016 ¥10,150 $ 82,671 securities available for Other...... 18,934 21,601 142,093 sale, net of taxes ...... 8,075 10,497 60,600 Total ...... ¥29,951 ¥31,752 $224,772 Net deferred tax assets...... ¥69,225 ¥46,439 $519,512

9. PREMISES AND EQUIPMENT 11. LOAN LOSS PROVISIONS The composition of premises and equipment at March 31, Loan loss provisions at March 31, 2002 and 2001, were as 2002 and 2001 were as follows: follows: Thousands of Thousands of Millions of yen U.S. dollars Millions of yen U.S. dollars 2002 2001 2002 2002 2001 2002 Land...... ¥ 28,071 ¥ 27,890 $ 210,664 General provision...... ¥38,189 ¥ 27,848 $286,596 Buildings...... 33,364 33,189 250,386 Specific provision...... 40,226 101,234 301,883 Equipment and others...... 74,449 75,028 558,716 Total ...... ¥78,416 ¥129,083 $588,487 Total ...... 135,886 136,108 1,019,782 Less: 12. DEPOSITS Accumulated depreciation ...... 69,037 68,673 518,101 The composition of deposits outstanding at March 31, Net book value...... ¥ 66,849 ¥ 67,434 $ 501,681 2002 and 2001 were as follows: Thousands of 10. INCOME TAXES Millions of yen U.S. dollars The Companies are subject to a number of taxes based on 2002 2001 2002 income, which, in the aggregate, indicate a statutory rate Current deposits...... ¥ 81,140 ¥ 76,318 $ 608,930 in Japan of approximately 41.7% for the year ended Ordinary deposits ...... 1,265,911 936,038 9,500,270 March 31, 2001. Liquid savings deposits..... 50,588 56,470 379,647 The following table summarizes the significant differ- Deposits at notice...... 12,690 15,871 95,234 ences between the statutory tax rate and the Companies’ Time deposits ...... 2,182,114 2,413,509 16,376,090 Negotiable certificates effective tax rates for financial statement purposes for the of deposits ...... 2,596 69,800 19,482 year ended March 31, 2001. Other deposits...... 72,799 59,702 546,333 2001 Total ...... ¥3,667,841 ¥3,627,709 $27,526,011 Statutory tax rate ...... 41.7% Non-deductible expenses ...... 1.7 Non-taxable dividend income ...... (8.4) Per capita inhabitant tax ...... 1.2 Other ...... (0.9) Effective tax rate...... 35.3% Information for the year ended March 31, 2002 is not dis- closed due to the loss before income taxes for the year.

17 13. CONVERTIBLE BONDS Details of convertible bonds are as follows: Millions of yen Previous year-end Current year-end Repayment Issue date balance balance Interest rate Security date 1st unsecured December 8, 2000 ¥14,925 ¥13,680 1.00% None March 31, 2003 convertible bonds

Conversion Conversion period price Shares issuable 1st unsecured January 4, 2001 to ¥373 Common stock convertible bonds March 28, 2003

14. OTHER LIABILITIES 15. LIABILITIES FOR SEVERANCE AND RETIREMENT The composition of other liabilities at March 31, 2002 and BENEFITS 2001 was as follows: (1) The liabilities for severance and retirement benefits at Thousands of Millions of yen U.S. dollars March 31, 2002 and 2001 are comprised as follows: 2002 2001 2002 Thousands of Millions of yen U.S. dollars Accrued income taxes ...... ¥ 443 ¥ 295 $ 3,324 Accrued expenses...... 8,374 9,617 62,844 2002 2001 2002 Bond margin transaction Projected benefit obligation... ¥(58,951) ¥(57,253) $(442,409) guarantee deposits...... 57,701 47,955 433,028 Pension assets ...... 38,176 38,995 286,499 Other...... 45,800 37,606 343,714 Unfunded projected benefit Total ...... ¥112,319 ¥95,474 $842,919 obligation...... (20,775) (18,258) (155,909) Unrecognized actuarial net gains ...... 10,532 6,054 79,039 Net amount recorded on the consolidated balance sheets ...... ¥(10,243) ¥(12,203) $ (76,870) Note: These figures include a portion attributable to the government’s employee welfare plan. (2) Included in the consolidated statements of operations for the years ended March 31, 2002 and 2001 are severance and retirement benefit expenses comprised of the following: Thousands of Millions of yen U.S. dollars 2002 2001 2002 Service costs-benefits earned during the year ...... ¥1,843 ¥ 1,961 $13,831 Interest cost on projected benefit obligation...... 1,673 1,669 12,555 Expected return on plan assets ...... (1,215) (1,287) (9,118) Prior service costs ...... (1,392) — (10,446) Amortization of actuarial differences ...... 605 — 4,540 Net transition obligation.... — 10,864 — Other...... 34 — 255 Severance and retirement benefit expenses ...... ¥1,550 ¥13,208 $11,632

18 (3) Bases for calculation of liability for severance and retirement benefits Years ended March 2002 and 2001 Discount rate...... 3.0% Expected rate of return on plan assets ...... 4.0% Method of attributing projected benefits to periods of services ...... Straight-line method Recognition of prior service costs ...... Year of occurrence Amortization of actuarial differences ...... 10 years (Within the average remaining service years of the employees, beginning with the year following that in which the differences arise.) Recognition of net transition obligation on application of new accounting standards...... Year of adoption

16. ACCEPTANCES AND GUARANTEES 18. PLEDGED ASSETS The composition of acceptances and guarantees at March At March 31, 2002 and 2001, securities of ¥177,240 mil- 31, 2002 and 2001 is as follows: lion (US$1,330,131 thousand) and ¥142,345 million, were Thousands of pledged as collateral for deposits and negotiable certifi- Millions of yen U.S. dollars cates of deposit of ¥42,505 million (US$318,986 thou- 2002 2001 2002 sand) and ¥32,071 million, and borrowed money of Letter of credit...... ¥ 1,023 ¥ 1,229 $ 7,677 ¥11,992 million (US$89,996 thousand) and ¥11,770 Guarantees...... 57,550 63,277 431,894 million. Total ...... ¥58,574 ¥64,506 $439,579 Other securities of ¥67,734 million (US$508,322 thou- sand) and ¥44,147 million, were pledged for transaction 17. STOCKHOLDERS’ EQUITY guarantees. Prior to October 1, 2001, under the Banking Law of Japan, an amount equivalent to at least 20% of cash dividends 19. LOAN COMMITMENTS and other cash distributions of unappropriated retained Commitment line contracts on overdrafts and loans are earnings must be appropriated to the earned surplus agreements to lend to customers when they apply for bor- reserve until such reserve equals 100% of common stock. rowing, to the prescribed amount as long as there is no This reserve is not available for dividends but may be violation of any condition established in the contracts. used to reduce a deficit or may be transferred to common The amount of unused commitments at March 31, 2002 stock. is ¥884,456 million (US$6,637,568 thousand), and the The Japanese Commercial Code provides that the entire amount of unused commitments whose original contract issue price of shares must be credited to common stock, terms are within one year or unconditionally cancelable at provided that, by resolution of the Board of Directors, up any time is ¥884,456 million (US$6,637,568 thousand). to one-half of such issue price may be credited to capital Since many of these commitments are expected to surplus so long as the common stock is equal to at least expire without being drawn upon, the total amount of the aggregate par value of the shares issued. unused commitments does not necessarily represent Effective October 1, 2001, pursuant to the Article 18 of actual future cash flow requirements. the amended Banking Law, the earned surplus reserve is Many of these commitments have clauses that allow the appropriated until the total amount of both the earned Bank and consolidated subsidiaries to reject the applica- surplus reserve and the capital surplus equals 100% of tion from customers or reduce the contract amounts in common stock. The excess of the total amount over the case economic conditions change. In addition, the Bank amount of common stock may be transferred to retained and consolidated subsidiaries may request the customers earnings by resolution of stockholders. to pledge collateral such as premises and securities, and take necessary measures such as scrutinizing customers’ financial positions, revising contracts when need arises and securing claims.

19 20. OTHER EXPENSES 22. NON-PERFORMING LOANS Other expenses for the years ended March 31, 2002 and Non-performing loans at March 31, 2002 and 2001 were 2001 were as follows: as follows: Thousands of Thousands of Millions of yen U.S. dollars Millions of yen U.S. dollars 2002 2001 2002 2002 2001 2002 Provision for possible Loans to bankrupt losses on loans...... ¥47,004 ¥20,735 $352,750 companies...... ¥ 12,266 ¥ 28,071 $ 92,052 Other...... 15,149 13,941 113,688 Past due loans...... 137,471 151,312 1,031,677 Total ...... ¥62,153 ¥34,677 $466,439 Loans past due three months or more ...... 1,749 2,360 13,125 Loans with altered 21. FINANCE LEASES lending conditions...... 32,769 20,171 245,921 At March 31, 2002 and 2001, non-capitalized finance Total ...... ¥184,257 ¥201,915 $1,382,791 leases were as follows: Notes: Thousands of 1. Loans to bankrupt companies refers to loans for which there is judged Millions of yen U.S. dollars to be a strong possibility that the principal is unrecoverable and for 2002 2001 2002 which the Bank has received approval not to record accrued interest as Equipment, at cost if income in accordance with the individual notification stipulations of capitalized...... ¥47,438 ¥47,876 $356,007 the Corporation Tax Law, specifically to borrowers in the following categories: Less: Accumulated depreciation... 30,063 30,345 225,613 a. Borrowers that have begun legal reorganization procedures under the Stock Company Rehabilitation and Reorganization Act Net ...... ¥17,374 ¥17,530 $130,386 b. Borrowers that have declared bankruptcy under the Bankruptcy Act c. Borrowers that have entered legal negotiations under the The above “as if capitalized” depreciation is calculated on Composition Act the straight-line method over lease terms. d. Borrowers that have begun clearance proceedings or liquidation pro- Lease payments, excluding financing charges, under ceedings under the Commercial Code of Japan non-capitalized finance leases for the years ended March e. Borrowers that have had their transactions with the Promissory Note Clearinghouse suspended 31, 2002 and 2001 were ¥6,701 million (US$50,288 thou- f. Borrowers that have begun liquidation proceedings equivalent to sand) and ¥7,040 million, respectively. those described in the preceding items under the laws and regula- If the above finance leases had been capitalized, depreci- tions of foreign countries ation of ¥5,553 million (US$41,673 thousand) and ¥5,664 2. Past due loans refers to loans for which the Bank has received approval million and interest of ¥1,031 million (US$7,737 thou- not to record accrued interest as income in accordance with the indi- sand) and ¥1,120 million would have been recorded for vidual notifications stipulations of the Corporation Tax Law, with the following two exceptions: the years ended March 31, 2002 and 2001, respectively. a. Loans to bankrupt companies as described in Note 1, above Obligations under non-capitalized finance leases, b. Loans for which interest is not accrued due to the suspension of excluding the imputed interest portion, at March 31, 2002 interest payments and 2001 were as follows: 3. Loans past due more than three months are defined as loans on which Thousands of interest or principal payments are past due three months or more from Millions of yen U.S. dollars the day after the contracted payment date and are not included in loans 2002 2001 2002 to bankrupt companies or past due loans. Due within one year ...... ¥ 6,041 ¥ 6,228 $ 45,335 4. Loans with altered lending conditions are those loans for which the Due after one year...... 12,834 12,741 96,315 Bank has made certain concessions to borrowers in financial difficul- ties with the objective of restoring the soundness of their operations Total ...... ¥18,875 ¥18,970 $141,651 and thus the recovery of such credit exposure. Concessions include reduced interest rates, the deferral of interest payments, the deferral of principal payments, the forgiveness of debt, the provision of liquid funds, and the acceptance of non-monetary assets in the settlement of claims. Loans with altered lending conditions include the categories “Restructured loans” and “Loans to borrowers receiving special restructuring assistance.”

20 23. DERIVATIVE TRANSACTIONS At March 31, 2002 and 2001, information on derivatives transactions was as follows: (a) Interest rate related transactions Thousands of Millions of yen U.S. dollars Contract value or notional principal amount Maturities Unrealized gain Unrealized gain At March 31, 2002 Total over one year Market value (loss) (loss) Over-the-counter transactions Interest rate swaps: Receive fixed rate/pay floating rate...... ¥10,819 ¥10,819 ¥757 ¥757 $5,681 Receive floating rate/pay fixed rate...... 2,998 2,665 (129) (129) (968) Total ...... ¥627 ¥627 $4,705

Millions of yen Contract value or notional principal amount Maturities Unrealized gain At March 31, 2001 Total over one year Market value (loss) Over-the-counter transactions Interest rate swaps: Receive fixed rate/pay floating rate...... ¥10,108 ¥10,108 ¥728 ¥728 Receive floating rate/pay fixed rate...... 2,973 2,973 (99) (99) Total ...... ¥628 ¥628

Notes: 1. Unrealized gains (losses) are recognized in the consolidated statements of operations. Derivatives which qualify for hedge accounting are not included in the above table. 2. Market values of over-the-counter transactions are based on the discounted cash flow method, option pricing models, etc. (b) Currency related transactions Thousands of Millions of yen U.S. dollars Contract value or notional principal amount Maturities Unrealized gain Unrealized gain At March 31, 2002 Total over one year Market value (loss) (loss) Over-the-counter transactions Currency swaps...... ¥112,059 ¥80,268 ¥(660) ¥(660) $(4,953)

Millions of yen Contract value or notional principal amount Maturities Unrealized gain At March 31, 2001 Total over one year Market value (loss) Over-the-counter transactions Currency swaps...... ¥41,507 ¥27,112 ¥(572) ¥(572)

Notes: 1. Unrealized losses are recognized in the consolidated statements of operations. Derivatives which qualify for hedge accounting and/or which are applicable to Note 3. below are not included in the above table. 2. Market values are based on the discounted cash flow method. 3. In accordance with Tentative Auditing Treatment for the Continued Employment of New Foreign Exchange Accounting Standards in the Banking Industry issued by the JICPA dated April 10, 2000 for the previous year, and Temporary Treatment of Accounting and Auditing Concerning Accounting for Foreign Currency Transactions in Banking Industry issued by the JICPA’s industry audit committee (Report 20) for the current year, the currency swaps, for which gains and losses are periodically allocated, are excluded from the above tables. Contract amounts, market values and unrealized losses on currency swaps, for which gains and losses are periodically allocated, are as follows:

21 Thousands of Millions of yen U.S. dollars Contract value or notional principal Unrealized Unrealized At March 31, 2002 amount Market value gain (loss) gain (loss) Currency swaps...... ¥1,266 ¥(55) ¥(55) $(412)

Millions of yen Contract value or notional principal Unrealized At March 31, 2001 amount Market value gain (loss) Currency swaps...... ¥859 ¥(78) ¥(78)

Other foreign exchange-related transactions such as forward exchange contracts and currency options, for which valuation gains (losses) have been recognized in the consolidated statements of operations are not included in the above table. Notional principal or contract amounts of those foreign exchange-related transactions are as follows: Thousands of Millions of yen U.S. dollars Contract value or Contract value or notional principal notional principal At March 31, 2002 amount amount Forward foreign exchange contracts: Sold ...... ¥1,340 $10,056 Bought...... 974 7,309

Millions of yen Contract value or notional principal At March 31, 2001 amount Forward foreign exchange contracts: Sold ...... ¥1,809 Bought...... 2,275

(c) Stock-related transactions None (d) Bond derivatives None (e) Commodity derivatives None (f) Credit derivative transaction None

22 Report of Independent Public Accountants

To the Shareholders and the Board of Directors of The Nanto Bank, Ltd.:

We have audited the accompanying consolidated balance sheets of The Nanto Bank, Ltd. (a Japanese corporation) and consolidated subsidiaries as of March 31, 2002 and 2001, and the related consolidated statements of operations, stockholders’ equity and cash flows for the years then ended, all 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 The Nanto Bank, Ltd. and subsidiaries as of March 31, 2002 and 2001, and the consolidated results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in Japan (Note 1) applied on a consistent basis during the periods, except as noted in the following paragraph. As explained in Note 2 (e) and (i), The Nanto Bank, Ltd. and subsidiaries prospec- tively adopted new Japanese accounting standards for financial instruments and employees’ retirement benefits in the year ended March 31, 2001. Also, in our opinion, the U.S. dollar amounts in the accompanying consolidated finan- cial statements have been translated from Japanese yen on the basis set forth in Note 1.

Osaka, Japan June 27, 2002

Asahi & Co.

23 Capital Management As of March 31, 2002 and 2001

CONSOLIDATED CAPITAL ADEQUACY RATIO Millions of yen 2002 2001 Tier I: Capital ...... ¥ 155,424 ¥ 182,563 Tax effect amount ...... — — Tier I total (A) ...... 155,424 182,563 Tier II: General provision ...... 11,536 11,954 Subordinate debt ...... — — Tier II total ...... 11,536 11,954 (of which, added to capital) (B) ...... 11,536 11,954 Deduction from capital (internal holdings for other financial institutions’ fund-raising purpose) (C)...... 50 50 Total capital [(A)+(B)–(C)] (D)...... ¥ 166,910 ¥ 194,467 Risk-weighted assets: On-balance sheet risk weighted assets ...... ¥1,830,249 ¥1,897,112 Off-balance sheet risk weighted assets...... 15,652 15,620 Total (E) ...... ¥1,845,902 ¥1,912,733 Capital adequacy ratio (based on domestic standards) (D)/(E)✕100 (%) ...... 9.04% 10.16%

Note: The capital adequacy ratio was calculated on the basis of the formula announced by the Ministry of Finance under Provision 14, Clause 2 of the Banking Law.

NON-CONSOLIDATED CAPITAL ADEQUACY RATIO Millions of yen 2002 2001 Tier I: Capital ...... ¥ 149,285 ¥ 177,343 Tax effect amount ...... — — Tier I total (A) ...... 149,285 177,343 Tier II: General provision ...... 11,467 11,881 Subordinate debt ...... — — Tier II total...... 11,467 11,881 (of which, added to capital) (B) ...... 11,467 11,881 Deduction from capital (internal holdings for other financial institutions’ fund-raising purpose) (C)...... 50 50 Total capital [(A)+(B)–(C)] (D)...... ¥ 160,702 ¥ 189,174 Risk-weighted assets: On-balance sheet risk weighted assets ...... ¥1,819,136 ¥1,885,457 Off-balance sheet risk weighted assets...... 15,652 15,620 Total (E) ...... ¥1,834,788 ¥1,901,078 Capital adequacy ratio (based on domestic standards) (D)/(E)✕100 (%) ...... 8.75% 9.95%

Note: The capital adequacy ratio was calculated on the basis of the formula announced by the Ministry of Finance under Provision 14, Clause 2 of the Banking Law.

24 Supplemental Data (Non-Consolidated)

The Nanto Bank, Ltd. Years ended March 31

The average balance of interest-earning assets and interest-bearing liabilities, interest and yields

DOMESTIC OPERATIONS Millions of yen Average balance Interest Earnings yield 2002 2001 2002 2001 2002 2001 Interest-earning assets...... ¥3,807,768 ¥3,692,865 ¥62,834 ¥70,445 1.65% 1.90% (Note 2)...... [89,234] [50,376] [169] [137] [0.18] [0.27] Loans and bills discounted...... 2,384,382 2,415,132 49,119 52,787 2.06 2.18 Trading account securities...... 1,673 723 2 3 0.12 0.42 Securities ...... 1,238,956 1,134,626 13,478 17,190 1.08 1.51 Call loans and bills bought...... 49,759 70,959 42 286 0.08 0.40 Receivables under resale agreements ...... 36,955 12,937 7 21 0.02 0.16 Deposits with banks...... 755 6,785 0 10 0.03 0.15 Interest-bearing liabilities...... ¥3,641,029 ¥3,521,430 ¥ 7,021 ¥ 9,798 0.19% 0.27% Deposits...... 3,589,873 3,545,878 4,907 7,604 0.13 0.21 Negotiable certificates of deposit...... 75,523 8,306 63 14 0.08 0.16 Call money and bills sold ...... 5,840 4,126 0 2 0.00 0.06 Payables under repurchase agreements...... — — — — — — Commercial paper ...... — — — — — — Borrowed money ...... 0 2,350 0 78 0.09 3.31 Notes: 1. Interest-earning assets are shown after deduction of average non-interest earning deposits with banks (2002, ¥22,645 million; 2001, ¥17,359 million). Interest-bearing liabilities are shown after deduction of the average balance of money held in trust (2002, ¥49,116 million; 2001, ¥49,787 million) and interest (2002, ¥94 million; 2001, ¥138 million). 2. Figures in brackets ([ ]) indicate the average balance of loans and interest between domestic and international operations.

INTERNATIONAL OPERATIONS Millions of yen Average balance Interest Earnings yield 2002 2001 2002 2001 2002 2001 Interest-earning assets...... ¥178,857 ¥110,743 ¥8,979 ¥6,804 5.02% 6.14% Loans and bills discounted...... 2,176 1,286 122 100 5.63 7.79 Trading account securities...... — — — — — — Securities ...... 174,399 107,773 8,762 6,552 5.02 6.07 Call loans and bills bought...... 1,045 503 32 31 3.13 6.23 Receivables under resale agreements ...... — — — — — — Deposits with banks...... — — — — — — Interest-bearing liabilities...... ¥172,070 ¥110,911 ¥3,131 ¥3,548 1.81% 3.19% (Note 2)...... [89,234] [50,376] [169] [137] [0.18] [0.27] Deposits...... 6,885 7,579 184 378 2.67 4.99 Negotiable certificates of deposit...... — — — — — — Call money and bills sold ...... 11,885 5,797 435 351 3.66 6.06 Payables under repurchase agreements...... — — — — — — Commercial paper ...... — — — — — — Borrowed money ...... 11,526 10,404 370 674 3.21 6.48 Notes: 1. Interest-earning assets are shown after deduction of average non-interest earning deposits with banks (2002, ¥31 million; 2001, ¥31 million). 2. Figures in brackets ([ ]) indicate the average balance of borrowings and interest between domestic and international operations. 3. The average balance of foreign currency denominated transactions by domestic branches in international operations in calculated by the daily current method (All foreign-currency denominated transactions are converted into yen based on the middle rate on the transaction date).

TOTAL OF DOMESTIC AND INTERNATIONAL OPERATIONS Millions of yen Average balance Interest Earnings yield 2002 2001 2002 2001 2002 2001 Interest-earning assets...... ¥3,897,391 ¥3,753,232 ¥71,643 ¥77,113 1.83% 2.05% Loans and bills discounted...... 2,386,558 2,416,418 49,242 52,887 2.06 2.18 Trading account securities...... 1,673 723 2 3 0.12 0.42 Securities ...... 1,413,356 1,242,400 22,241 23,742 1.57 1.91 Call loans and bills bought...... 50,805 71,462 75 318 0.14 0.44 Receivables under resale agreements ...... 36,955 12,937 7 21 0.02 0.16 Deposits with banks...... 755 6,785 0 10 0.03 0.15 Interest-bearing liabilities...... ¥3,723,865 ¥3,581,965 ¥9,983 ¥13,210 0.26% 0.36% Deposits...... 3,596,759 3,553,457 5,091 7,982 0.14 0.22 Negotiable certificates of deposit...... 75,523 8,306 63 14 0.08 0.16 Call money and bills sold ...... 17,726 9,923 435 354 2.45 3.56 Payables under repurchase agreements...... — — — — — — Commercial paper ...... — — — — — — Borrowed money ...... 11,527 12,754 370 752 3.21 5.90 Notes: 1. Interest-earning assets are shown after deduction of average non-interest earning deposits with banks (2002, ¥22,677 million; 2001, ¥17,391 million). Interest-bearing liabilities are shown after deduction of the average balance of money held in trust (2002, ¥49,116 million; 2001, ¥49,787 million) and interest (2002, ¥94 million; 2001, ¥138 million). 2. The average balance of loans and interest between domestic and international operations are offset.

25 Breakdown of interest income and interest expenses

DOMESTIC OPERATIONS Millions of yen Volume-related Rate-related Net increase (decrease) increase (decrease) increase (decrease) 2002 2001 2002 2001 2002 2001 Interest income ...... ¥1,896 ¥2,728 ¥(9,507) ¥(14,425) ¥(7,611) ¥(11,696) Loans and bills discounted...... (633) (1,539) (3,034) (1,137) (3,667) (2,676) Trading account securities...... 1 (1) (2) (0) (0) (1) Securities ...... 1,135 2,425 (4,846) (11,658) (3,711) (9,233) Call loans and bills bought...... (18) 245 (226) 33 (244) 279 Receivables under resale agreements ...... 4 21 (18) — (13) 21 Deposits with banks...... (2) 3 (8) 1 (10) 5 Interest expenses ...... ¥ 230 ¥ 262 ¥(3,007) ¥ (1,993) ¥(2,777) ¥ (1,730) Deposits...... 60 202 (2,756) (1,074) (2,696) (871) Negotiable certificates of deposit...... 56 12 (7) 0 49 12 Call money and bills sold ...... (0) (2) (2) 3 (2) 0 Payables under repurchase agreements...... — — — — — — Commercial paper ...... — — — — — — Borrowed money...... (2) (115) (75) 25 (78) (90) Note: Changes caused by interest rate shifts are included in cases where shifts in balances result from both volume and interest rate factors.

INTERNATIONAL OPERATIONS Millions of yen Volume-related Rate-related Net increase (decrease) increase (decrease) increase (decrease) 2002 2001 2002 2001 2002 2001 Interest-earning assets ...... ¥3,419 ¥407 ¥(1,244) ¥ 200 ¥2,174 ¥ 607 Loans and bills discounted...... 50 (95) (27) 36 22 (58) Trading account securities...... — — — — — — Securities ...... 3,347 505 (1,137) 587 2,210 1,092 Call loans and bills bought...... 17 (1) (15) 4 1 3 Receivables under resale agreements ...... — — — — — — Deposits with banks...... — — — (20) — (20) Interest-bearing liabilities ...... ¥1,113 ¥175 ¥(1,530) ¥(613) ¥ (417) ¥(437) Deposits...... (18) (256) (176) 26 (194) (230) Negotiable certificates of deposit...... — — — — — — Call money and bills sold ...... 222 (3) (139) 93 83 89 Payables under repurchase agreements...... — — — — — — Commercial paper ...... — — — — — — Borrowed money...... 36 (48) (340) 120 (304) 72 Note: Changes caused by interest rate shifts are included in cases where shifts in balances result from both volume and interest rate factors.

TOTAL OF DOMESTIC AND INTERNATIONAL OPERATIONS Millions of yen Volume-related Rate-related Net increase (decrease) increase (decrease) increase (decrease) 2002 2001 2002 2001 2002 2001 Interest-earning assets ...... ¥2,650 ¥3,087 ¥(8,119) ¥(14,150) ¥(5,469) ¥(11,062) Loans and bills discounted...... (616) (1,568) (3,029) (1,167) (3,645) (2,735) Trading account securities...... 1 (1) (2) (0) (0) (1) Securities ...... 2,690 3,218 (4,191) (11,358) (1,500) (8,140) Call loans and bills bought...... (30) 270 (212) 11 (242) 282 Receivables under resale agreements ...... 4 21 (18) — (13) 21 Deposits with banks...... (2) 2 (8) (18) (10) (15) Interest-bearing liabilities ...... ¥ 380 ¥ 369 ¥(3,607) ¥ (2,512) ¥(3,226) ¥ (2,143) Deposits...... 61 200 (2,952) (1,302) (2,891) (1,102) Negotiable certificates of deposit...... 56 12 (7) 0 49 12 Call money and bills sold ...... 128 (119) (47) 210 81 90 Payables under repurchase agreements...... — — — — — — Commercial paper ...... — — — — — — Borrowed money...... (39) (249) (342) 231 (382) (18) Note: Changes caused by interest rate shifts are included in cases where shifts in balances result from both volume and interest rate factors.

26 DEPOSITS Time Deposits by Type and Maturity (As of March 31, 2002 and 2001) Thousands of Millions of yen U.S. dollars 3 months 3 months 6 months 1 year 2 years More than 2002 or less to 6 months to 1 year to 2 years to 3 years 3 years Total Total Time deposits ...... ¥520,515 ¥331,956 ¥656,318 ¥234,916 ¥280,880 ¥162,316 ¥2,186,903 $16,412,030 Fixed interest rates ...... 519,444 331,916 655,071 233,406 279,902 162,316 2,182,057 16,375,662 Floating interest rates ...... 71 40 1,246 1,509 978 — 3,847 28,870 2001 Millions of yen Time deposits ...... ¥569,946 ¥388,408 ¥745,140 ¥217,518 ¥250,372 ¥246,870 ¥2,418,256 Fixed interest rates ...... 568,539 388,195 744,693 215,973 248,577 246,870 2,412,850 Floating interest rates ...... 158 212 446 1,544 1,794 — 4,156 Note: Installment time deposits are not included in deposit balances.

LOANS AND BILLS DISCOUNTED Loans and Bills Discounted by Industry (As of March 31, 2002) 2002 Millions of yen Annual Change Manufacturing ...... ¥ 428,323 (18.13%) -3.25% Construction ...... 137,666 (5.83%) -22.25 Wholesale and retailing...... 267,396 (11.32%) -10.47 Banking and insurance...... 141,527 (5.99%) 1.89 Real estate...... 251,365 (10.64%) -6.37 Service...... 239,785 (10.15%) -5.87 Other...... 896,436 (37.94%) 8.25 ¥2,362,498 (100.00%) -1.92 Note: Japan offshore market accounts are not included in these figures.

Loans by Type and Maturity (As of March 31, 2002 and 2001) Thousands of Millions of yen U.S. dollars 1 year 1 year 3 years 5 years More than Unspecified 2002 or less to 3 years to 5 years to 7 years 7 years term Total Total Loans and bills discounted ...... ¥825,397 ¥368,714 ¥250,907 ¥145,378 ¥417,176 ¥355,189 ¥2,362,764 $17,731,812 Floating interest rates ...... 180,007 118,882 67,803 186,963 354,370 Fixed interest rates...... 188,706 132,025 77,574 230,212 819 2001 Millions of yen Loans and bills discounted ...... ¥858,686 ¥400,819 ¥216,936 ¥142,771 ¥368,129 ¥421,589 ¥2,408,932 Floating interest rates ...... 219,220 104,669 67,863 182,380 420,552 Fixed interest rates...... 181,599 112,266 74,908 185,748 1,037 Note: Loans and bills discounted with a maturity period of 1 year or less are not classified by floating and fixed interest rates.

SECURITIES Securities by Type and Maturity (As of March 31, 2002 and 2001) Thousands of Millions of yen U.S. dollars 1 year 1 year 3 years 5 years 7 years More than Unspecified 2002 or less to 3 years to 5 years to 7 years to 10 years 10 years term Total Total Japanese government bonds ...... ¥93,220 ¥129,561 ¥215,437 ¥36,294 ¥51,494 ¥10,999 ¥ — ¥537,008 $4,030,078 Japanese regional bonds ...... 20,387 80,451 60,806 19,574 28,835 — — 210,055 1,576,397 Corporate bonds ...... 28,528 135,894 58,239 25,257 17,193 1,280 — 266,393 1,999,196 Corporate stocks ...... — — — — — — 91,351 91,351 685,560 Other securities ...... 12,055 59,909 70,698 9,037 49,087 19,193 24,797 244,779 1,836,990 Foreign governments and official institutions bonds... 11,465 59,767 65,663 7,576 42,195 19,193 2,509 208,372 1,563,767 Foreign equities ...... ——— ———0 0 0 Securities on loan ...... ——— ———— — — 2001 Millions of yen Japanese government bonds ...... ¥97,937 ¥160,399 ¥143,464 ¥66,808 ¥43,586 ¥ — ¥ — ¥512,197 Japanese regional bonds ...... 18,026 45,297 63,058 25,348 16,353 — — 168,083 Corporate bonds ...... 30,663 90,055 72,893 5,729 30,831 1,287 — 231,460 Corporate stocks ...... — — — — — — 105,671 105,671 Other securities ...... 4,826 10,110 37,466 23,643 41,162 23,374 154,208 294,793 Foreign governments and official institutions bonds... 4,788 9,367 36,283 20,178 36,350 23,374 — 130,343 Foreign equities ...... — — — — — — 0 0 Securities on loan ...... — — — — — — — —

27 Nanto Bank Group

IHead Office and Branches: 113 Banking ISub-Branches: 21 IRepresentative Office: 1 (Hong Kong) Securities ISecurities & International Division Credit Guarantees INanto Credit Guarantee Co., Ltd. Leasing INanto Lease Co., Ltd. Computer Software THE NANTO BANK, LTD. Development and INanto Computer Service Co., Ltd. Services Credit Card INanto DC Card Co., Ltd. Business INanto Card Services Co., Ltd. INanto Estate Co., Ltd. INanto Asset Management Co., Ltd. Other Operations INanto Business Service Co., Ltd. INanto Staff Service Co., Ltd. INanto Investment Management Co., Ltd.

(As of July 1, 2002)

Outline of Consolidated Subsidiaries

Subsidiaries Address Established Capital Direct Indirect Business Line (Millions Holdings Holdings of Yen) of the through Company Subsidiaries

Nanto Credit Guarantee 2-1, Omiya-cho 6-chome, October 9, ¥ 10 3% 69% Credit guarantee Co., Ltd. Nara City, Nara, Japan 1984

Nanto Lease Co., Ltd. 52-1, Omori-cho, December 22, 50 5 65 Leasing Nara City, Nara, Japan 1984

Nanto Computer Service 93-2, Minami-kyobate-cho July 1, 1986 10 5 69 Computer software Co., Ltd. 1-chome, Nara City, development and services Nara, Japan

Nanto DC Card Co., Ltd. 2-1, Omiya-cho 6-chome, October 12, 50 5 71 Credit card business Nara City, Nara, Japan 1990

Nanto Card Services Co., Ltd. 2-1, Omiya-cho 6-chome, December 10, 50 5 71 Credit card business Nara City, Nara, Japan 1990

Nanto Estate Co., Ltd. 16, Hashimoto-cho, November 8, 30 100 — Leasing and management Nara City, Nara, Japan 1969 of real estate

Nanto Asset Management 16, Hashimoto-cho, December 17, 300 100 — Purchase, sale and leasing Co., Ltd. Nara City, Nara, Japan 1998 of real estate

Nanto Business Service 93-2, Minami-kyobate-cho June 1, 10 100 — Centralized processing of Co., Ltd. 1-chome, Nara City, Nara, 1984 clerical operations for the Japan Bank

Nanto Staff Service Co., Ltd. 2-1, Omiya-cho 6-chome, March 18, 20 100 — Dispatch of temporary Nara City, Nara, Japan 1991 staff

Nanto Investment 28, Tsunofuri-cho, November 21, 120 5 68 Investment advisory Management Co., Ltd. Nara City, Nara, Japan 1986 service

28 Organization

STOCKHOLDERS’ MEETING HEAD OFFICE BOARD OF DIRECTORS I General Secretariat I General Planning Division� I Asset Assessment Administration Division I ALM & Risk Management Division MANAGING DIRECTORS’ I General Business Division COMMITTEE I Direct Call Center I Corporate Banking Division I Venture Business Support Division I Chairman I Hong Kong Representative Office I President I Public Institutions Division I Senior Managing Director I Credit Analysis Division I Managing Directors I Housing Loan Center • DOMESTIC I Credit Supervision Division OFFICES I Directors I Securities & International Division I Nara Office BOARD OF CORPORATE AUDITORS I Operating Administration Division I Head Office Operations & Data Processing Center I Standing Corporate Auditor I Branch Operations & Data Processing Center I Loan Document Center ICorporate Auditors I Operating Systems Division I Inspection Division I Board of Corporate Auditors’ Bureau I Personnel Division I General Affairs Division I Legal Affairs Division I Tokyo Liaison Office

(As of July 1, 2002)

29 THE NANTO BANK, LTD. 16, Hashimoto-cho, Nara City, Nara 630-8677, Japan Phone : (0742) 22-1131

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