Aozora Bank, Ltd. Securities Code 8304

Transcription

1 TRANSLATION Aozora Bank, Ltd. Securities Code 8304 The Convocation Notice for the 81 st FY Ordinary General Meeting of Shareholders Contents Notice on Exercise of Voting Rights 1 The Convocation Notice for the 81 st FY Ordinary General Meeting of Shareholders 3 Reference Material for The General meeting of Shareholders 6 Attached Documents of The Convocation Notice 16 Business Report 16 The Consolidated Financial Statements 39 The Nonconsolidated Financial Statements 42 Date & Time June 26, 2014(Thursday) 10:00a.m. Venue Diamond Room on the 2 nd Floor of Hotel Grand Palace 11, Iidabashi 1chome, Chiyodaku, Tokyo ( Please refer to map on the last page ) Audit Reports 45 Proposals for Resolution: Proposal No.1 Appointment of Eight Directors Proposal No.2 Appointment of One Audit & Supervisory Board Member Proposal No.3 Appointment of One Alternate Audit & Supervisory Board Member Proposal No.4 Payment of Retirement Allowance to Resigning Directors (Non Fulltime Director and Outside Directors) Proposal No.5 Lump sum Payment to Fulltime Directors due to Abolition of the Officer Retirement Allowance Program Proposal No.6 Lump sum Payment to Outside Directors and Audit & Supervisory Board Members due to Abolition of the Officer Retirement Allowance Program Proposal No.7 Determination of Remuneration Amount and Details of Equity Compensation Type Stock Options for Fulltime Directors

2 Notice on Exercise of Voting Rights The following 3 methods may be used to exercise your voting rights. Attend the Shareholder s Meeting Please present the Exercise of Voting Rights Form at the reception desk. Date & Time: Place: June 26, 2014 (Thursday) 10:00 AM (reception opens at 9:00 AM) Diamond Room on the 2 nd Floor of Hotel Grand Palace 11 Iidabashi 1Chome, ChiyodaKu, Tokyo (Please refer to map on the last page) Exercise Your Voting Right in Writing Please write your vote of approval or disapproval on the enclosed Exercise of Voting Rights Form and return the form to us by mail. You do not need a stamp, the mail is prepaid. Valid Date: June 25, 2014 (Wednesday) Must Be Received No Later Than 5:15 PM Exercise Your Voting Right via the Internet Access the website dedicated to Exercise of Voting Rights ( from a PC, smartphone or cell phone, input the Voting Right Exercise Code and Password provided in the enclosed Exercise of Voting Rights Form and register whether you agree or disagree according to the instructions displayed on the screen. Valid Date: June 25, 2014 (Wednesday) No Later Than 5:15 PM ** You may also use the barcode reader feature of your cell phone to access the Exercise of Voting Rights website by reading the QR Code R shown on the right. (The QR code is a registered trademark of Denso Wave) 1

3 Exercise Voting Rights by Proxy In the event you are not able to attend the shareholder s meeting, you may designate one other shareholder with voting rights as proxy. However, please note that a document certifying delegated authority as well as the Exercise of Voting Rights Form must be presented at the reception desk. Some of the documents for the General Meeting of Shareholders are disclosed on the Internet. Pursuant to laws and regulations and the provision of Article 24 of the Articles of Incorporation, the Notes to the Consolidated Financial Statements and Notes to the Nonconsolidated Financial Statements are disclosed on the Company s website ( and therefore not included in the notice and attached material. Notice for Revision of Reference Material, Business Report, Consolidated Financial Statements and the Nonconsolidated Financial Statements Please note that in the event any revisions are necessary to the Reference Materials for the General Meeting of Shareholders, the Business Report, the Consolidated Financial Statements and the Nonconsolidated Financial Statements, we will inform you of such revision on the Company s website ( Duplication of Exercising Voting Rights in Writing & the Internet or Other Means. If you exercise your voting right both in writing and via the Internet or other means, the exercise made via the Internet or other means shall prevail. Duplication of Exercising Voting Rights via the Internet If you exercise your voting right more than once via the Internet or other means, the last exercise made shall prevail. The Electronic Platform for Executing Voting Rights Nominee shareholders (including standing proxy) of trust banks, etc. who registered beforehand to use the electronic platform operated by ICJ Inc. (Joint corporation established by TSE, etc.) shall be able to exercise their voting rights through electromagnetic form at our bank's General Meeting of Shareholders. Please refer to Procedure to Exercise the Voting Rights via the Internet on the 5 page for Exercise Voting Rights via the Internet or other means. 2

4 TRANSLATION Securities Code 8304 June 11, 2014 The Convocation Notice for the 81 st FY Ordinary General Meeting of Shareholders Dear Shareholders, Shinsuke Baba President, Representative Director Aozora Bank, Ltd. 31, Kudanminami 1chome, Chiyodaku, Tokyo You are cordially invited to attend Aozora Bank, Ltd. s 81 st FY Ordinary General Meeting of Shareholders as described below. If you are unable to attend the meeting, you may exercise your voting right in writing via the Internet or other means. We will ask for your cooperation in exercising your voting right by no later than 5:15 p.m. on June 25th (Wed) 2014, in consideration of the following Reference Material for the 81 st FY Ordinary General Meeting of Shareholders If you choose to exercise your voting right in writing Please write your vote of approval or disapproval on the enclosed Exercise of Voting Rights Form and return the form to us by mail. If you choose to exercise your voting right via the Internet or other means If you choose to exercise your voting right via the Internet or other means, please read through the following Procedure to Exercise the Voting Right via the Internet. Thank you. Best Regards, 1. Date & Time Thursday, June 26, 2014 at 10:00 AM 2. Place Diamond Room on the 2 nd floor of Hotel Grand Palace 11, Iidabashi 1chome, Chiyodaku, Tokyo 3

5 3. Purpose of the meeting Reports 1. Business Report, Consolidated Financial Statements and Reports of Audit Results of Consolidated Financial Statements by the Accounting Auditor and the Audit & Supervisory Board for the 81 st FY (from April 1, 2013 to March 31, 2014) 2. Reports on the Financial Statements for the 81 st FY (from April 1, 2013 to March 31, 2014) Proposals for Resolution: Proposal No.1: Appointment of Eight Directors Proposal No.2: Appointment of One Audit & Supervisory Board Member Proposal No.3: Appointment of One Alternate Audit & Supervisory Board Member Proposal No.4: Payment of Retirement Allowance to Resigning Directors (Non Fulltime Director and Outside Directors) Proposal No.5: Lump sum Payment to Fulltime Directors due to Abolition of the Officer Retirement Allowance Program Proposal No.6: Lump sum Payment to Outside Directors and Audit & Supervisory Board Members due to Abolition of the Officer Retirement Allowance Program Proposal No.7: Determination of Remuneration Amount and Details of Equity Compensation Type Stock Options for Fulltime Directors End ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ For those attending, please present the enclosed Exercise of Voting Rights Form at the reception desk upon arrival at the meeting. In case of a substitution, please present a document that proves the delegated authority at the reception desk as well as Exercise of Voting Rights Form [Under the Articles of Incorporation, only one (1) other shareholder with the voting right is entitled to attend the General Meeting of Shareholders]. Pursuant to laws and regulations and the provision of Article 24 of the Articles of Incorporation, the Notes to the Consolidated Financial Statements and Notes to the Nonconsolidated Financial Statements are disclosed on the Company s website ( and therefore not included in the notice and attached material. Note that the Consolidated Financial Statements and Nonconsolidated Financial Statements audited by the Audit & Supervisory Board Member or the accounting auditor is included in the attached documents indicated in the convocation and also provides the Notes to the Consolidated Financial Statements and Notes to the Nonconsolidated Financial Statements disclosed on the Company s website. Please note that, in the event of any necessary revision to the Reference Materials for the General Meetings of Shareholders, the Business Report, the Consolidated Financial Statements and the Nonconsolidated Financial Statements, we will inform you of such revision on the Company s website ( 4

6 Procedure to Exercise the Voting Right via the Internet If you decide to exercise your voting right via the Internet or other means, please note the following; 1.Exercise of the voting right via the Internet is possible only on the following website dedicated to exercise of the voting right designated by Aozora Bank. You can also exercise your voting right via the Internet from a cell phone. URL of the website dedicated to exercise of the voting right You can also access the website from a cell phone and read the QR Code R shown on the right. Please consult your cell phone s operating manual for detailed operating procedures. (QR Code is a registered trade mark of the DENSO WAVE INCORPORATED.) 2.When you choose to exercise your voting right via the Internet or other means, use the Voting Right Exercise Code and the Password shown on the Exercise of Voting Rights Form, and register whether you agree or disagree with the agenda items following the instructions displayed on the screen. 3.If you exercise your voting right both in writing and via the Internet or other means, the exercise made via the Internet or other means shall prevail. 4.If you exercise your voting right more than once via the Internet or other means, the last exercise made shall prevail. 5. Shareholders may bear a fee from an Internet connection provider for access and a communication fee (such as telephone charges). System Environment to Exercise the Voting Right via the Internet You will need the following system environment to use the website to exercise your voting right: 1 Access to the Internet. 2 If you decide to exercise your voting right from a PC, you need to have Microsoft R Internet Explorer 6.0 or higher versions as your Internet browser software. You also need to be able to use the above Internet browser software as your hardware environment. 3 If you decide to exercise your voting right from a cell phone, you need to be able to use 128bitSSL communications (encrypted communication) from your cell phone model. (To ensure security, exercise of the voting right can only be made from models compatible with 128bitSSL communications. Cell phone models without this compatibility cannot be used. Exercising voting rights using mobile phones with full browser functions, including smart phones, is possible. However, please note that it is not possible with all mobile phone models.). (Microsoft is a registered trade mark of the Microsoft Corporation of the U.S. in the U.S. and other countries.) Questions about Exercise of the Voting Right via the Internet If you have any questions about the exercise of your voting right via the Internet, please contact the following manager of register of shareholders. Manager of Register of Shareholders: Web Support, Stock Transfer Agency Department, Sumitomo Mitsui Trust Bank, Limited. Hotline (9:00AM9:00PM) Other inquires (9:00AM5:00PM, except Saturdays, Sundays, and Holidays) The electronic platform for executing voting rights In addition to above mentioned executing voting rights via the Internet, nominee shareholders (including standing proxy) of trust banks, etc. who registered beforehand to use the electronic platform operated by ICJ Inc. (Joint corporation established by TSE, etc.) shall be able to exercise their voting rights through electromagnetic form at our bank's General Meeting of Shareholders. 5

7 Reference Material for the General Meeting of Shareholders Proposals and Reference Proposal No.1: Appointment of Eight Directors At the close of this Ordinary General Meeting of Shareholders, the term of office of all eight (8) directors shall expire. This is to propose, therefore, eight (8) directors be elected. Candidates are shown below. Candidates for Directors Candidate No. 1 2 Name (Date of Birth) Makoto Fukuda (June 27, 1945) Shinsuke Baba (August 23, 1954) Mar Apr June 1995 July 1998 July 1999 July 2000 June 2002 June 2013 Mar Apr Aug Apr Apr June 2004 Sep May 2006 Apr May 2007 June 2008 Nov June 2009 Sep Brief Personal History, Positions, Areas of Responsibility and Concurrent Major Posts Bachelor of Law, The University of Tokyo Ministry of Finance (MOF) Director of Insurance Business Division, Banks Bureau, MOF President of Accounting Center and Finance Research Institute DirectorGeneral of Finance Planning Bureau, MOF Deputy President of Agriculture Forestry and Fisheries Finance Corporation Deputy Chairman and Senior Managing Director of Regional Banks Association of Japan External Director, Rakuten Life Insurance Co., Ltd. (present) Chairman and Director, Aozora Bank, Ltd. (present) BA in Economics, The University of Tokyo The Nippon Credit Bank, Ltd (changed name to Aozora Bank, Ltd. in January 2001) General Manager of Cross Border Business Division General Manager of Investment Banking Division General Manager of Structured Credit and Investment Division Senior General Manager, General Manager of Structured Credit and Investment Division Executive Officer, Head of Corporate Banking Group Executive Officer, Head of Corporate Banking Group and concurrently General Manager of Capital Markets Division Senior Managing Executive Officer, Head of Investment Banking Group, concurrently Acting Head of Corporate Banking Group and concurrently General Manager of Capital Markets Division Senior Managing Executive Officer, Head of Investment Banking Group Senior Managing Executive Officer, Head of Corporate Banking Group and Head of Investment Banking Group Executive Officer and Deputy President Deputy President and Representative Director President and Representative Director (present) Type and pertype number of Bank s shares Owned by Candidate Common Stock 12,646 Common Stock 149,927 6

8 3 4 Masaki Tanabe (January 25, 1957) Shunsuke Takeda (September 30, 1941) Mar Apr Apr June 1995 June 1996 Apr July 1999 Aug Aug Mar Nov Sep June 2013 Mar Apr Sep Mar Nov Sep June 1993 May 1997 Sep Apr June 2002 June 2003 Feb June 2007 June 2010 Oct BA in Economics, Hitotsubashi University The Nippon Credit Bank, Ltd (changed name to Aozora Bank, Ltd. in January 2001) Senior Manager of International Business Planning Division Head of Risk Management Department, Treasury Planning Division Senior Manager of Treasury Planning Division Deputy General Manager of Treasury Planning Division Deputy General Manager of Treasury Division General Manager of Treasury Planning Division General Manager of Financial Management Division Executive Officer and Deputy Chief Financial Officer Senior Managing Executive Officer and Chief Financial Officer Senior Managing Executive Officer, Chief Financial Officer and Director Deputy President, Chief Financial Officer and Representative Director (present) Bachelor of Law, The University of Tokyo Joined the Nippon Kangyo Bank, Ltd. (currently Mizuho Bank, Ltd.) Joined Orient Leasing Co., Ltd. (currently Orix Corporation) GM of International Capital Markets Department GM of International Administration Department and International Account Services Department GM of Treasury Department Director and GM of Treasury Department Managing Director and Chief Financial Officer (CFO) Senior Managing Director and CFO Deputy President and CFO Member of the Board Member of the Board, Director of Fuji Fire and Marine Insurance Co., Ltd. Director, Deputy President and CFO of Orix Corporation Director, Vice Chairman and CFO Senior Advisor Director, Aozora Bank, Ltd. (present) Chairman and Representative Executive Officer, Daikyo Incorporated Advisor, Orix Corporation (present) Chairman, Nippon Professional Baseball Organization Common stock 78,522 Common Stock 44,561 7

9 5 6 Hiroyuki Mizuta (November 30, 1949) New candidate Ippei Murakami (March 3, 1945) Mar Apr Nov June 2006 June 2007 Oct May 2009 June 2010 June 2011 June 2013 Mar Apr June 1995 June 2000 July 2001 June 2004 June 2005 June 2006 June 2007 Oct Apr June 2011 Mar Faculty of Literature, The University of Tokyo Kyowa Bank (currently Resona Bank, Limited) President and Representative Director, The Kinki Osaka Bank, Ltd. Director, President and Representative Executive Officer of Resona Holdings President and Representative Director, Resona Bank, Limited Executive Officer, Group Strategy Dept., Resona Holdings (In charge of Corporate Management of Resona Bank, Limited) President, The Resona Foundation for Small and Medium Enterprise Promotion Resigned from President of Resona Bank, Limited and Executive Officer of Resona Holdings Outside Director of Nippon Dentsu Co., Ltd. (present) and Nippon Television City Corporation Representative Director and Chairman of Nippon Television City Corporation (present) Director, Aozora Bank, Ltd. (present) BA in Economics, Kwansei Gakuin University Nisshin Flour Milling Inc. Director (Planning and Finance) Managing Director Nisshin Seifun Group Inc.(Group holding company) Managing Director (Finance and Accounting) Managing Director (Finance and Accounting, Corporate Planning [deputy]) Managing Director (Finance and Accounting, Corporate Planning) Managing Director (Corporate Planning) Senior Managing Director (Corporate Planning) Nisshin Seifun Group President Director and Senior Consultant Special Advisor (present) Humanities Master s Course, Kwansei Gakuin University Common Stock 12,646 8

10 7 8 New candidate Tomonori Ito (January 9, 1957) New candidate Takeo Saito (August 31, 1958) Mar Apr June 1984 Mar Mar Aug June 1998 Apr May 2012 Oct July 2013 Mar Apr Oct Sep Apr Dec July 2010 July 2013 BA in Economics, The University of Tokyo Bank of Tokyo, Ltd. (currently Bank of TokyoMitsubishi UFJ, Ltd.) MBA, Harvard Business School Vice President of Investment Banking Group, Bank of Tokyo Trust Company, New York Union Bank of Switzerland, Tokyo Branch (currently UBS) General Manager of Tokyo Branch and Head of Investment Banking, Union Bank of Switzerland Head of Investment Banking and Managing Director, UBS Securities Japan Co., Ltd. Visiting Professor, Graduate School of International Corporate Strategy, Hitotsubashi University External Board Member of PARCO CO., LTD. (present) Professor, Graduate School of International Corporate Strategy, Hitotsubashi University (present) External Corporate Auditor, AIN PHARMACIEZ INC. (present) BA in Law, The University of Tokyo The Nippon Credit Bank, Ltd. (changed name to Aozora Bank, Ltd. in January 2001) General Manager of Credit Products Division General Manager of Fund Investment Division General Manager of Treasury Investment Division Deputy Head of Financial Markets Group and General Manager of Treasury Investment Division Executive Officer and Head of Financial Markets Group Managing Executive Officer and Head of Financial Markets Group (present) (Note) 1. Messrs. Shunsuke Takeda, Hiroyuki Mizuta, Ippei Murakami, and Tomonori Ito meet the conditions of outside directors, and also meet the conditions of independent directors based on the rules of Tokyo Stock Exchange. 2. Mr. Shunsuke Takeda is qualified as a candidate for a outside director because he has substantial experience, achievements and expertise in executive management of financial institutions and business corporations, and his position as a Director is independent from the daytoday management responsibilities for the Bank s business operations. He will have served the Bank as a outside director for 7 years at this Annual General Meeting of Shareholders. 3. ORIX Corporation, of which Candidate Mr. Shunsuke Takeda was a Director, engages in various business activities including those in the same line of business as ours. We, at the same time, have dealings with the company, extending loans, etc. 4. The Bank has dealings, extending loans, etc., with Daikyo Incorporated, of which Candidate Mr. Shunsuke Takeda was Chairman and Representative Executive Officer. 5. Mr. Hiroyuki Mizuta is qualified as a candidate for a outside director because he has substantial experience, achievements and expertise in executive management of banks and business corporations, and his position is independent from the daytoday management responsibilities of the operations and activities of the Bank. He will have served the Bank as a outside director for 1 year at this Annual General Meeting of Shareholders. Common Stock 33,059 9

11 6. Mr. Ippei Murakami is qualified as a candidate for an outside director because he has substantial experience, achievements and expertise in executive management of a business corporation, and his position is independent from the daytoday management responsibilities of the operations and activities of the Bank. 7. Mr. Tomonori Ito is qualified as a candidate for an outside director because he has substantial experience and achievements in domestic and overseas financial institutions and expertise as an professor of a graduate school, and his position is independent from the daytoday management responsibilities of the operations and activities of the Bank. 8. Except for the abovementioned items 3 and 4, there is no particular common interests between each candidate and the Bank. 9. The Bank has contracts with Messrs. Shunsuke Takeda and Hiroyuki Mizuta, to the effect that, if these outside directors are without knowledge and are not grossly negligent in performing the duties of outside directors, the liabilities of the outside directors under Article 423 (1) of the Companies Act shall be limited to the amount stipulated by Article 425(1) of the Companies Act in accordance with the provisions of Article 427 (1) of the Companies Act. When these candidates assume the offices of outside directors with the adoption of the proposal, the said contracts shall continue to be effective. 10. Messrs. Ippei Murakami and Tomonori Ito are candidates for outside director. The Bank is to enter into contracts with them to the effect that, if this outside director is without knowledge and is not grossly negligence in performing the duties of an outside director, the liabilities of the outside director under Article 423(1) of the Companies Act shall be limited to the amount stipulated by Article 425(1) of the Companies Act in accordance with the provisions of Article 427(1) of the Companies Act. 11. The above Type and pertype number of Bank s shares Owned by Candidate states the sum of the shares held directly by the candidate and includes shares held through the Executive Stock Ownership Plan (ESOP). (Fractional shares are rounded off.) Proposal No. 2: Appointment of One Audit & Supervisory Board Member At the close of this Ordinary General Meeting of Shareholders, the term of office of one (1) Audit & Supervisory Board Member shall expire. This is to propose, therefore, one (1) Audit & Supervisory Board Member be elected at the meeting, with the consent of the Audit & Supervisory Board. Candidate is shown below. Candidate for Audit & Supervisory Board Member Name (Date of Birth) Shinichi Fujihira (September 7, 1955) Mar Apr Feb July 1993 Nov Feb Dec Apr Aug Sep June 2010 Brief Personal History, Positions and Concurrent major posts BA in Social Sciences, University of Tsukuba The Nippon Credit Bank, Ltd (changed name to Aozora Bank, Ltd. in January 2001) Manager of Business Planning II, Business Planning Division Senior Counsellor, Internal Regulations Division Senior Counsellor, Business Planning Division I Deputy General Manager, Debenture & Deposit Division Deputy General Manager, Corporate Planning Division Deputy General Manager, Corporate Planning Division General Manager, Compliance Division General Manager, Legal & Compliance Division Standing Corporate Auditor (present) (Note) 1. There is no particular common interests between the candidate and the Bank. 2. The above Type and pertype number of Bank s shares Owned by Candidate states the sum of the shares held directly by the candidate and includes shares held through the Executive Stock Ownership Plan (ESOP). (Fractional shares are rounded off.) 10 Type and pertype number of Bank s shares Owned by Candidate Common Stock 37,780

12 Proposal No. 3: Appointment of One Alternate Audit & Supervisory Board Member In order to prepare for a vacancy in the number of Audit & Supervisory Board Members fixed by laws, it is proposed to appoint one (1) alternate Audit & Supervisory Board Member, with the consent of Audit & Supervisory Board. Candidate is shown below. Candidate for Alternate Audit & Supervisory Board Member Name (Date of Birth) Tomiaki Nagase (May 12, 1935) (Note) Mar Apr Nov June June 1980 June 1984 June 1990 July 1995 Brief Personal History, Positions and Concurrent major posts B.A. Economics, Gakushuin University Fuji Bank Ltd., Tokyo (currently Mizuho Bank, Ltd.) Senior Operations Officer, Asian Development Bank KAO Corporation, Tokyo Harvard Business School, Advanced Management Program Director, KAO Corporation, Tokyo Managing Director, KAO Corporation, Tokyo Senior Managing Director, KAO Corporation, Tokyo Senior Vice President and Representative Director, COO AMWAY Japan Ltd. Supreme Advisor to the President, AMWAY Japan Ltd. Nov Mr. Tomiaki Nagase is the candidate for alternate external Audit & Supervisory Board Member. 2. Mr. Tomiaki Nagase is qualified for the conditions as an external Audit & Supervisory Board Member and is the candidate for alternate external Audit & Supervisory Board Member because he is a corporate manager with abundant experience, achievements and expertise. 3. There is no particular common interests between the candidate and the Bank. 4. When Mr. Tomiaki Nagase assumes the office of external Audit & Supervisory Board Member, the Bank is to enter into a contract with him to the effect that, if he is without knowledge and is not grossly negligent in performing the duties of external Audit & Supervisory Board Member, the liabilities of the external Audit & Supervisory Board Member under Article 423 (1) of the Companies Act shall be limited to the amount stipulated by Article425(1) of the Companies Act in accordance with the provisions of Article 427 (1) of the Companies Act. Type and pertype number of Bank s shares Owned by Candidate 11

13 Proposal No.4: Payment of Retirement Allowance to Resigning Directors (Non Fulltime Director and Outside Directors) Since non fulltime director Mr. Yuji Shirakawa, outside director Mr. Kiyoshi Tsugawa and outside director Mr. Louis J. Forster will each retire from their director positions due to the expiration of their terms as directors, Aozora Bank proposes the payment of a retirement allowance deemed appropriate in accordance with the Bank s internal regulations. The specific amounts are shown below. The payment schedule, payment method and other details regarding the payment of this retirement allowance for the directors shall be entrusted to the Board of Directors. The retiring directors service histories at the Bank as well as the proposed amounts of their respective director retirement allowances are shown below. Non Fulltime Director and Outside Directors Name History of Service Amount Yuji Shirakawa June 2009 Director and Chairman Sep Director 59,300 thousand yen June 2013 Director (Non Fulltime) Kiyoshi Tsugawa June 2004 Outside Director 33,100 thousand yen Louis J. Forster June 2011 Outside Director 3,100 thousand yen Proposal No.5: Lump sum Payment to Fulltime Directors due to Abolition of the Officer Retirement Allowance Program As a result of the reform of the remuneration structure for officers, which is part of the reform of the entire remuneration system for Bank officers, the Board of Directors resolved on May 27, 2014 to approve the abolition of the current retirement allowance program which applies to Directors and Audit & Supervisory Board Members ( Officer Retirement Allowance Program ) with effect from the closing of this General Shareholders Meeting. Due to the abolition of the Officer Retirement Allowance Program, Aozora Bank plans to make provision for the payment of a lump sum amount equivalent to the retirement allowance that would have otherwise been paid in accordance with the Bank s internal regulations to three fulltime directors, Mr. Makoto Fukuda, Mr. Shinsuke Baba and Mr. Masaki Tanabe, to cover their periods of directorship up to the closing of this General Shareholders Meeting, and reward their contributions and service to the Bank for these periods. These directors will be reelected to their director positions if Proposal No.1 is approved in its original form at this General Shareholders Meeting. The aggregate amount of the lump sum payments to these fulltime directors shall be 180,600 thousand yen. The specific payment amount, payment schedule, payment method and other details for these fulltime directors shall be entrusted to the Board of Directors. The actual payment shall not be made until after their respective retirements as directors of the Bank. The service histories of the fulltime directors eligible for the above lump sum payments of retirement allowance due to the abolition of the Officer Retirement Allowance Program are as shown below. Fulltime Directors Name Makoto Fukuda Shinsuke Baba Masaki Tanabe History of Service June 2013 Director and Chairman (present) June 2009 Deputy President and Representative Director Sep President and Representative Director (present) Sep Director June 2013 Deputy President and Representative Director (present) 12

14 Proposal No.6: Lump sum Payment to Outside Directors and Audit & Supervisory Board Members due to Abolition of the Officer Retirement Allowance Program Due to the abolition of the Officer Retirement Allowance Program which was resolved by the Board of Directors on May 27, 2014, to take effect from the closing of this General Shareholders Meeting, Aozora Bank plans to make provision for the payment of a lump sum amount equivalent to the retirement allowance that would have otherwise been paid in accordance with the Bank s internal regulations to Mr. Shunsuke Takeda, Mr. Hiroyuki Mizuta, Mr. Shinichi Fujihira, Mr. Mitch R. Fulscher and Mr. Akira Tachimoto, to cover their periods of directorship up to the closing of this General Shareholders Meeting and reward their contributions and service to the Bank. Outside directors Mr. Shunsuke Takeda and Mr. Hiroyuki Mizuta will be reelected to their director positions if Proposal No.1 is approved in its original form at this General Shareholders Meeting, and Mr. Shinichi Fujihira will be reelected if Proposal No.2 is approved in its original form in addition to Mr. Akira Tachimoto and Mr. Mitch R. Fulscher, who are currently Audit & Supervisory Board Members. The specific amounts of each lump sum payment are shown below. The payment schedule, payment method and other details for the payments for these directors shall be entrusted to the Board of Directors, and the payments to Audit & Supervisory Board M ember shall be determined through discussion amongst all Audit & Supervisory Board Members of the Bank. The actual payment of the respective lump sum amount shall not be made until after their retirement from their respective positions at the Bank. The service histories of each of the outside directors and Audit & Supervisory Board Members eligible for the lump sum payment of retirement allowance due to abolition of the Officer Retirement Allowance Program are shown below. Outside Directors and Audit & Supervisory Board Members Name History of Service Amount Shunsuke Takeda June 2007 Outside Director (present) 22,800 thousand yen Hiroyuki Mizuta June 2013 Outside Director (present) 3,100 thousand yen Shinichi Fujihira June 2010 Standing Audit & Supervisory Board Member (present) 39,800 thousand yen Mitch R. Fulscher June 2004 Outside Audit & Supervisory Board Member (present) 36,000 thousand yen Akira Tachimoto June 2004 Outside Audit & Supervisory Board Member (present) 36,000 thousand yen 13

15 Proposal No.7: Determination of Remuneration Amount and Details of Equity Compensation Type Stock Options for Fulltime Directors The Bank plans to introduce equity compensation type stock options for fulltime directors in order for them to share the risks and benefits of stock price fluctuations together with our shareholders and be further motivated to enhance the corporate value and stock price of Aozora from both a midterm and a longterm perspective. Under this proposal, stock options will be granted to fulltime directors to replace the Officer Retirement Allowance Program. Although the sum of 600 million yen was approved as the maximum amount of annual base remuneration for directors (including fulltime directors and outside directors) at the 73rd General Shareholders Meeting on June 23, 2006, we plan to grant equity compensation type stock options of up to 150 million yen per year to fulltime directors in addition to their current base remuneration. The proposed stock options are equity compensation type stock options under which fulltime directors may receive common shares of Aozora Bank by exercising the stock options that they hold at an exercise price of one yen per common share. The Bank has determined the details of stock options after comprehensively considering various factors, such as the contribution of fulltime directors to the Bank, and we believe that the details are appropriate. Currently, the Bank has three fulltime directors. If Proposal No.1 is approved in its original form, we will have four fulltime directors upon the closing of this General Shareholders Meeting. In consideration of the roles of outside directors and Audit & Supervisory Board Members, we have decided not to grant them stock options, and from now on will only offer base remuneration. Details of the stock options proposed as compensation to fulltime directors are explained below. (1) Number of Stock Options The number of stock options that may be allotted to fulltime directors within any one (1) fiscal year commencing after the date of the annual General Shareholders Meeting shall not exceed a total of 7,500 units. (2) Class and Number of Shares to be Delivered upon Exercise The class of share to be issued or transferred upon the exercise of these stock options shall be Aozora common shares, and the number of common shares to be issued or transferred per unit of stock options (hereinafter the Number of Underlying Shares ) is 100. If the Bank judges that it is appropriate to change the Number of Underlying Shares due to merger, corporate splits, stock dividends (allotment of shares without contribution), stock splits or consolidation of stocks (reverse stock split), or any comparable transaction, the Bank may make an adjustment to the Number of Underlying Shares that the Bank considers necessary. (3) Amounts to be Paidin at Grant of Stock Options (the Issue Price ) The Issue Price of stock options is determined by the Board of Directors based on the fair value calculated on the day of allocation of stock options by using fair valuation models such as the BlackScholes Formula. At the allocation of the stock options to directors, a director s claim to compensation from the Bank will be offset by the amount to be paidin as the Issue Price instead of the director actually making payments to the Bank. (4) Amount of Assets to be Contributed upon Exercise of Stock Options The amount of assets contributed upon the exercise of each stock option shall be calculated by multiplying the exercise price of one yen per share by the number of shares granted through exercise of the stock options. 14

16 (5) Time Period in which the Stock Options are Exercisable The time period in which the stock options are exercisable, which is limited to a maximum period of 30 years, shall be determined by the Board of Directors immediately following the allotment date of the stock option. (6) Major Conditions for the Exercise of Stock Options The holder of the stock options may only exercise the granted stock options once during the tenday period following the day on which the holder ceases to be a director of the Bank as long as such exercise occurs within the period stated in (5). (7) Restrictions on Acquisition of a Transferred Stock Option The acquisition of stock options through transfer shall require approval through a resolution of the Board of Directors. (8) Determination of Details of Stock Options Other matters pertaining to the conditions of stock options, including conditions for allocation, shall be determined by the Board of Directors. End Note that the Board of Directors have resolved to pay a yearend common share dividend of 4.50 yen per share for the 81 st FY (4 th quarter). As a result, the fullyear dividend per common share for the 81 st FY is yen. 15

17 (Attached Documents) Business Report Fiscal Year 2013 (April 1, 2013 March 31, 2014) 1. Current Status of the Bank (1) Business Developments and Results of the Corporate Group [Financial and Economic Environment] In FY2013, the Japanese economy continued its moderate recovery, mainly due to the effects of the government s economic measures, as well as the Bank of Japan s quantitative and qualitative monetary easing. In the US, business sentiment continued to improve gradually, mainly reflecting a recovery in capital expenditures and personal consumption. The unsecured call (overnight) rate remained below the 0.1% level throughout the year, as the Bank of Japan continued its quantitative and qualitative monetary easing. Longterm domestic interest rates (10year government bond yield), which increased from the 0.5% range in early April 2013 to the mid0.9% range towards the middle of the year, gradually decreased to the 0.6% range towards the end of the fiscal year due to stabilized supply and demand in the market. Longterm US interest rates (10year US Treasury yield), which increased sharply from the 1.8% range in early April 2013 to the 3% range towards the middle of the year due to expectations of tapering of its quantitative easing policy by the Fed, gradually decreased to the high 2% range in the second half of the fiscal year, resulting in decreased volatility. The yen, which had been trading at around 93 yen to the dollar in early April 2013, traded weaker in the 105 yen range towards the end of December in anticipation of the government s economic measures and the Bank of Japan s monetary policy, only to be at around 102 yen to the dollar towards the end of the fiscal year. The Nikkei Stock Average (of 225 selected issues) recovered from the low 12,000 yen level in early April 2013 to the 16,000 yen level towards the end of December, mainly due to the depreciation of the yen and anticipation of economic recovery. Towards the end of the fiscal year, however, it decreased to the 14,000 yen level against the backdrop of such factors as heightened geopolitical risk and uncertainty with regard to emerging economies, mainly China. [Main Business Activities of the Corporate Group] The Group consists of the Bank and 17 consolidated subsidiaries, and provides a variety of financial services, such as securities and trust services, in addition to our primary banking business. The other main services include loan collection servicing provided by the subsidiaries. [Business Developments and Results of the Corporate Group] The Bank has steadily implemented its Aozora Bank s Comprehensive Recapitalization Plan that was announced in August 2012, and in addition to the start of installment repayments of public funds, we have increased our dividend payout ratio as part of our commitment to our return to shareholders. We announced Aozora Bank s Business Model in February 2013, and amid significant changes in our shareholder composition, we formed a new management framework the following June to begin our new phase. The Bank s business model describes our 4 Focuses as retail banking focusing on senior individual customers, proactive approach to SME and other corporate customers, collaboration with regional financial institutions, and advanced services in specialty finance areas, and we intend to take full advantage of our strengths in these areas to expand our business franchise. In November 2013, we announced our Asian Business Strategy, which is designed to support our efforts of further developing our business model. 16

18 In addition to commencing quarterly dividend payments from FY2013, we introduced a special benefit plan for shareholders. The results of Aozora Group for FY2013 are as follows. Total assets were 4,805.4 billion yen as of March 31, 2014, a decrease of billion yen compared to March 31, Loans were 2,643.5 billion yen, a decrease of 76.2 billion yen from March 31, 2013, reflecting the reduction of less profitable, shortterm loans towards the end of the fiscal year, as well as the Bank s sharp focus on balancing risk and return throughout the year. Securities decreased by billion yen from March 31, 2013 to 1,168.6 billion yen. JGBs and foreign bonds were reduced, while ETFs, including U.S. dollar denominated ETFs, were increased for the purpose of portfolio diversification. Total liabilities decreased billion yen to 4,289.4 billion yen as compared to March 31, Total deposits and negotiable certificates of deposit decreased 29.2 billion yen to 3,009.7 billion yen, while debentures increased 28.1 billion yen to billion yen. Funding from retail customers was 2,046.2 billion yen, a decrease of 27.4 billion yen from March 31, 2013, while the percentage of retail funding to total core funding was stable at 63.8%. Net assets were billion yen, representing a decrease of 19.8 billion yen in comparison with March 31, This change mainly reflected the repayment of public funds through a super preferred dividend made from other capital surplus based on the comprehensive recapitalization plan. Net assets per common share were yen, as compared to yen per common share as of March 31, In FY2013, Aozora reported consolidated net income of 42.3 billion yen, an increase of 1.7 billion yen, or 4.4% year on year. This result included growth in earnings primarily from the sale of financial products to our mass affluent retail customers, the sale of derivativerelated products to our corporate and financial institution customers, as well as favorable gains from investments in limited partnerships. Net revenue was 80.6 billion yen, a year on year decrease of 3.8 billion yen, or 4.6%. This decline was mainly due to a year on year decrease in gains on bond transactions of 13.7 billion yen, reflecting risk reduction measures taken by the Bank, including to its U.S. Treasury bond positions, in the first six months of FY2013. While not included in net revenue, the Bank recorded gains on the sale of domestic equity ETFs of 5.2 billion yen, which brought total businessrelated net revenue to 85.8 billion yen. Net interest income was 43.6 billion yen, a decrease of 2.2 billion yen, or 5.0% year on year. The Bank s net interest margin increased 2 bps to 1.09%. Contributing to this result was a reduction in funding costs of 9 bps, while the Bank managed a decline of only 7 bps in the yield on total investments. Net fees and commissions were 12.5 billion yen, an increase of 2.5 billion yen, or 25.1% year on year, and net trading revenues were 9.7 billion yen, an increase of 3.5 billion yen, or 57.4%, both increases reflecting growth in earnings mainly related to the sale of financial products. Net other ordinary income, excluding gains/losses on bond transactions, increased 6.1 billion yen, or 76.2%, to 14.1 billion yen, reflecting favorable gains from investments in limited partnerships. Gains/losses on bond transactions were a gain of 0.4 billion yen, a decrease of 13.7 billion yen, or 96.9%, as a result of the risk reduction measures described above. General and administrative expenses increased 0.6 billion yen, or 1.6%, to 39.3 billion yen, as a result of an increase in expenses related to business development, including retail business. The OHR, general and administrative expenses as a percentage of net revenue, was 48.8%. The OHR based on businessrelated revenue, including gains on the sale of domestic equity ETFs, was 45.8%, which reflected the ongoing priority assigned to efficient operations. As a result of the above factors, consolidated business profit was 41.2 billion yen, a decrease of 4.4 billion yen, or 9.8%. 17

19 Creditrelated expenses were a net expense of 2.2 billion yen, compared with a net expense of 2.3 billion yen in FY2012. This result included recoveries of claims writtenoff in previous fiscal years, as well as the Bank s conservative allocation of reserves. The ratio of creditrelated expenses to total loans remained low at 0.09%, the same level as the previous year. The ratio of loan loss reserves to total loans remained high at 2.44%. Ordinary profit was 52.1 billion yen, an increase of 11.1 billion yen, or 27.0%, mainly the result of gains on the sale of domestic equity ETFs, as well as gains from the sale of overseas investments recorded in the first quarter of FY2013. Net income before income taxes was 52.1 billion yen, an increase of 11.2 billion yen, or 27.6% year on year. A net tax expense (the sum of corporation tax, resident tax, business tax and deferred income taxes) of 9.8 billion yen was recognized in FY2013, compared with a net expense of 0.2 billion yen in FY2012. The period for the estimation of future taxable income for the calculation of deferred tax assets was changed from 3 years to 5 years during the first quarter of FY2013. In calculating deferred tax assets, the Bank continued its conservative estimation of future taxable income and future deductible temporary differences in consideration of the uncertainty of such estimations. As a result of the above factors, consolidated net income was 42.3 billion yen, an increase of 1.7 billion yen, or 4.4% year on year. Net income per share (basic) was yen, as compared to yen per share (basic) in FY2012. For this fiscal year the Bank has decided to pay a total dividend per common share of yen. As the Bank has started a dividend payment on a quarterly basis this year, the fourth quarter dividend will be 4.50 yen. The Bank has also decided a total annual dividend of 9 yen per 4 th preferred share (2.25 yen for the fourth quarter) and yen per 5 th preferred share (1.674 yen for the fourth quarter). In addition, the Bank plans to pay the super preferred dividend of billion yen on 5 th preferred shares from Other Capital Surplus, representing an installment of public funds. The Bank has classified its Group s business operations into four business groups based upon the nature of the customers served and products offered: Retail & Business Banking Group ( RBBG ), Corporate Banking Group ( CBG ), Specialty Finance Group ( SFG ) and Financial Markets Group ( FMG ), and has designated these business groups as operating segments and reportable segments. Profit / loss by segment for the year, which is calculated as net revenue minus general and administrative expenses by each segment, was: a profit of 6.8 billion yen (2.9 billion yen, for the previous year) for RBBG, a profit of 6.5 billion yen (7.3 billion yen) for CBG, a profit of 23.1 billion yen (16.4 billion yen) for SFG and a profit of 4.5 billion yen (19.1 billion yen) for FMG. In April 2014, the Institutional Banking Group was established as a new business group by consolidating CBG and the Business Banking Group, the latter split from RBBG to form a more appropriately designed organization for the 4 Focuses in Aozora Bank s Business Model. This change will enable the Bank to reinforce the Bank s competitive power by sharing marketing skills for institutional banking. 18

20 (Reference) Summary of consolidated revenue and expenses (JPY 100 million) FY2012 FY2013 Change Net revenue (38) Net interest income (22) Net fees and commissions Net trading revenue Gains/losses on bond transactions (137) Net other ordinary income excluding gains/losses on bond transactions General and administrative expenses (387) (393) (6) Business profit (44) Creditrelated expenses (23) (22) 0 Gains/losses on stock transactions Other (23) 8 31 Ordinary profit Extraordinary profit (2) (0) 1 Income before income taxes and minority interests Total income taxes (2) (98) (95) Minority interest in net income (0) (0) 0 Net income Net revenue = (Interest incomeinterest expenses)+(fees and commissions income Fees and commissions expenses)+(trading incometrading expenses)+(other ordinary incomeother ordinary expenses) 2 Business profit = Net revenuegeneral and administrative expenses 3 Regardless of nature of accounts, revenue or income is shown as positive and expenses or losses are shown as a negative amount in the table above. 19