September.16.2008

Aozora Bank is reviewing its exposure to Lehman and assessing the level of provisions required. Aozora believes that its net exposure is materially less, and its projected recoveries are greater, than suggested in the Lehman chapter 11 filing and some initial media reports. Aozora Bank currently estimates that its projected exposure could be reduced to less than $25 million. This is less than 6% of the exposure reported in Lehman Brothers Holding Inc.¡Çs (US Holdco) bankruptcy filings and in the initial media reports. Despite the statement in US Holdco bankruptcy petition that Aozora Bank is US Holdcos largest creditor, the reported exposure of $463 million reflects the maximum amount of a contingent guarantee by US Holdco of Lehman Brothers Holding Japan Inc.s (Japan Holdco) obligations to the Bank. Aozora Bank holds a direct claim against US Holdco in the approximate amount of $94 million, at current exchange rates, in addition to its claim against Japan Holdco. The Japanese Financial Services Authority has announced that all assets of Japan Holdco will be required to be retained in Japan to satisfy creditors within Japan such as Aozora Bank. As a result of Aozora Bank¡Çs sophisticated risk management actions, its net exposure is materially less than reported as a consequence of (a) hedging instruments which reduced Aozora Bank¡Çs exposure by $255 million and (b) collateral pledged to Aozora Bank, having an approximate current principal value outstanding of $180 million.Assuming reasonable recoveries against Japan Holdco and market pricing for recoveries against US Holdco, Aozora Bank currently estimates that its projected exposure could be reduced to less than $25 million. As stated above, this is less than 6% of the exposure reported in US Holdco¡Çs bankruptcy filings and in the initial media reports, and less than 1% of Aoozra Banks capital.

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