Strategic System

Specific Measures

Support for sustainable growth of SMEs

1. Stable supply of funding in accordance with commitment to long-term transactions and fulfilling a safety net role

   • Funding based on relationships of trust with customers

     • The Bank will deepen long-term relationships with customers and supply funds based on these bonds of trust with customers.

   • Fulfilling a safety net role

     • The Bank fulfills its safety net role by providing its SME customers, who are particularly susceptible to economic fluctuations,with stable funding from a long-term perspective.
     • In its role as a government-appointed financial institution, the Bank takes every possible measure to respond to crises such as natural disasters and sharp economic fluctuations.

   • Continuous development of the financial frontier

     • The Bank develops financial services such as ABL and other cutting-edge financial practices to resolve its diverse business challenges and needs.
2. Providing diverse solutions tailored to customers’ life stages

   • Strengthening ability to identify needs and provide solutions

     • The Bank will reinforce its ability to identify various management needs and management issues through initiatives designed to facilitate deep understanding of customers.
     • The Bank will enhance the diversity of its solutions business in response to customers’ needs, such as M&A and business succession, syndicate loans and private placement bonds, derivatives, international operations (overseas expansion, trade finance,etc.), bundled trusts, recovery support and CMS.

   • Utilizing the Group’s comprehensive financial functions

     • The Japan Institute of Commerce, Industry & Economics, Ltd., will be made a subsidiary, and specialized solution functions will be consolidated within this company. The Bank will consider establishing a new subsidiary to run these operations in the future, taking into account the stability and profitability of such operations.
     • Nippon Shoko Lease, Ltd., will be made a subsidiary and its functions reinforced by setting up sales branches, augmenting personnel and products, and strengthening affiliations with other companies.

   • Building strategic relationships with regional financial institutions

     • The Bank will capitalize on the institutions’ strengths and build strategic relationships in risk sharing functions (syndicate loans,guarantees, etc.) and the financial frontier area (ABL, etc.).

   • Deepening strategic alliances

     • The Bank will build relationships with external parties in securitization, IPO, VC, M&A and recovery operations.

   • Strengthening the overseas network

     • The Bank will expand business affiliations with foreign financial institutions in Asia (China, Thailand, Vietnam, etc.).
     • The Bank will strengthen functions at overseas branches to which Bank staff have been dispatched in accordance with business partners’ financing needs.
     • The Bank will actively utilize standby letters of credit (L/C).
3. Comprehensive support to resolve social issues

   • Comprehensive support to resolve social issues confronting SMEs

     • The Bank will continue providing comprehensive support in addressing the social issues confronting SMEs, including environmental problems, the declining birth rate, women’s entry into the workforce and business continuity planning (BCP).

   • Cooperation with countries and local public governments

     • The Bank will strengthen cooperation in carrying out national policy and local public governments’ initiatives.
4. Support for companies in forming networks and cooperating

   • Support for programs of member cooperatives

     • The Bank will continue initiatives aimed at invigorating joint economic businesses and carrying out financial enterprises.
     • The Bank will strengthen ties to SME-affiliated organizations such as Federation of Small Business Associations (example:support for newly established cooperatives and BCP support).

   • Support to strengthen networks of Youth Kai

     • The Bank will work constructively to build networks between social groups promoting interaction between different industries such as Youth Kai* and collaborations between industry, academic institutions and government agencies, as well as ties between regions.

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     Youth Kai are social groups comprised of young businesspeople in different industries that are also Bank customers.

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Augmenting the fund-procurement base

• Maintaining and reinforcing the wholesale procurement base

  • Issuance of Shoko Chukin Bank debentures (subscription bonds) aimed at financial institutions and institutional investors will remain the Bank’s main method of raising funds. The Bank will maintain stable relationships with its business partners and expand its fund-procurement base by attracting new business partners.
  • The Bank will diversify the maturities of subscription bonds (regular issuance of 10 year subscription bonds to better meet investors’ needs).
  • The Bank will flexibly employ consignment sales.

• Reinforcing the retail procurement base

  • The Bank will augment its line-up of retail products.
    • Deposits (such as the new My Harvest time deposit) will be the core of the Bank’s retail products. The Bank will begin to offer new comprehensive accounts combining bonds, time deposits and ordinary deposits.
    • The sale of personal pension insurance and investment trusts will be gradually expanded at branches.(Personal pension insurance is offered at 39 branches as of June 2008. Investment trusts began to be offered at 12 branches in May 2008.)
  • The Bank will expand its retail channels.
    • Start of Internet banking for individuals
    • Expansion of ATM affiliations
    • Augmentation of ATM functions

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Building a sound management base

• Improving the soundness of loans

  • The Bank will focus on support for management improvements and recovery while raising the sophistication of its recovery function by using a wide range of financial methods such as M&A and debt-debt swap (DDS).
  • The Bank will strengthen affiliations with external organizations, such as SME Revitalization Support Councils.

• Strengthening market operations

  • The Bank will expand the scale of investments.
    • Gradually expand the scale by increasing domestic bond positions, among other measures
  • The Bank will diversify the scope of investments.
    • Flexibly select prime investment candidates in line with market environment

• Increasing efficiency of operations

  • The Bank will promote greater efficiency and consolidation.
    • Implement measures to improve efficiency of frequent and high-volume administrative work
  • The Bank will maintain and improve administrative skills.
    • Augment training programs for sales branch employees and part-time employees

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Internal preparations to realize our plan

• Increasing sophistication of internal management positions

  • The Bank will introduce comprehensive risk management to ensure the soundness of capital.
  • The Bank will develop internal controls for financial reporting to ensure that J-SOX compliance is on a par with the standards of listed companies.
  • The Bank will raise sophistication of internal management stance, including Group companies, with the start of consolidated financial reporting.

• Reinforcing internal and external communication (public relations, IR, etc.)

  • The Bank will strengthen activities aimed at establishing CI.
  • The Bank will carry out corporate advertising to raise the Shoko Chukin Bank’s name recognition and enhance its image.
  • The Bank will implement IR (large group meetings, one-on-one meetings) in a timely manner.
  • The Bank will carry on the concept of policy evaluation and publicize the process in realizing its corporate philosophy, such as the status of implementing the business plan, both externally and internally.

• Branch strategies

  • The Bank will develop its branch strategy based on local needs while maintaining its nationwide branch network.
  • The Bank will systematically renovate existing branches (about 10 branches during the period of the first medium-term business plan).
  • The Bank will gradually revise its branch layout and branch sales systems with the aim of improving CS and ramping up retail sales.

• Establishing a system foundation

  • The Bank will establish a flexible system base capable of developing new products.
  • The Bank will enhance the sophistication of its sales support system.

• Human resource strategies

  • The Bank will reinforce personnel to improve customer service.
    • Increase the number of liaison officers—the point of contact for customers—in sales offices and employees in the retail division
    • Increase the number of employees in the solutions department at the head office
  • The Bank will promote retention and success of employees.
    • Increase mid-career hiring of employees in specialized fields and others
    • Encourage an active role for women in the workplace (expand childrearing support measures)
    • Promote an active role for the elderly in the workplace (increase the number of liaison officers in sales offices and the operations division)
    • Early recruitment of young employees and offering opportunities to take on challenges
  • The Bank will train employees.
    • Improve assessment and solutions consulting skills of liaison officers in sales departments
    • Improve skills in the retail operations area
    • Train personnel in specialized fields

Business Operatinons Policy in Fiscal 2008

• Fiscal 2008 is an extremely important fiscal year for the Shoko Chukin Bank as it makes a new start as a joint-stock company.
  The Bank will steadily address its operations based on its first medium-term business plan as it works to achieve its mission of supporting the sustainable growth of SMEs and raising their corporate value. In addition, the Bank will offer services fine-tuned to meet its customers’ needs and pursue customer satisfaction to demonstrate management’s commitment to treating customers as top priority. The Bank’s operations will be tailored to clearly reflect its priorities in business and management issues.
  As such, the Bank will emphasize the following issues in its initiatives:
• The Bank will work to quickly realize measures laid out in the first medium-term business plan.
• As an independent financial institution, the Bank will strive to augment its fund-procurement base, build a sound management foundation and develop internal systems to realize its mission of supporting the sustainable growth of SMEs and raising corporate value.
• The Bank will steadily address the following three points to ensure a smooth transition to privatization, since it is extremely important that nothing is omitted in preparing for this new status.

（i）Appropriate preparation procedures for transition to private status

As privatization requires the Bank to make various administrative changes, the Bank will scrupulously address issues such as organization name changes, revisions to external contracts and system compliance.

（ii）Development of systems to improve customer service

The Bank will take advantage of the expansion in its scope of operations allowed in the new Shoko Chukin Bank Act, such as the lifting of depositor eligibility restrictions and the new ability to have subsidiaries, and the Group will work together to provide comprehensive services that will please customers.

（iii）Strengthening internal and external communication

The Bank will fulfill its disclosure responsibilities by publicizing its programs as it moves toward privatization in a timely and suitable manner. The Bank will make greater efforts to communicate with employees to quickly disseminate the new Shoko Chukin Bank’s corporate philosophy.

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The Lending Plan in Fiscal 2008

The Bank has set the following numerical targets for its lending.

As in the past, if SME funding needs exceed the lending plan, the Bank provides loans in excess of the plan.

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