Prospects for Full Repayment of Public Funds

Since the infusion of public funds under Japan's Deposit Insurance Law in 2003, the Resona Group has concentrated its management efforts on implementing reforms to revitalize its activities. Over this period, we have accumulated retained earnings, which are the source of repayments for public funds, and focused its efforts on repayment at an early date. In fiscal 2010, we repaid a total of ¥1,213.5 billion in public funds, and the remainder outstanding declined to ¥871.6 billion, or one-fourth of the peak amount. Moreover, to return a portion of the decrease in dividends on preferred shares that have been repurchased to holders of common stock, we increased the annual dividend on common shares for the year ended March 31, 2011, by 20%, to ¥12 per share. The Resona Group will change the emphasis of its capital policy from" repayment of public funds" to" improvement of common stock shareholder value."

The Amount of Public Funds Outstanding (infusion amount basis)

Policy for Future Repayment of Public Funds

Deposit Insurance Law Preferred Shares

We aim for full repayment within five years through further accumulation of profits (retained earnings). However, the specific timing of future repayments will take into account capital adequacy regulations, etc. and will be executed in an appropriate and flexible manner.

Early Strengthening Law Preferred Shares

The increase in outstanding common shares upon mandatory conversions is expected to be minimal, since almost equivalent shares that could arise from mandatory conversions have already been repurchased from the market and are being held as treasury shares.

Common shares issued under the Deposit Insurance Law

Priority will be given to the repayment of Deposit Insurance Law Preferred Shares; we have no current plans to apply for a secondary offering of these shares.

Resona Capital Restructuring Plan

The Plan aims to transform the Resona Group’s financial base to a common stock focused, easy-to-understand capital structure, and, by presenting a road map toward the full repayment of public funds, improve the quality of capital with an eye to new capital adequacy requirements (Basel III).

Based on this Plan, from January through May of 2011, the following measures were implemented.

(1) Raised funds through a public offering of common shares, etc. (total net proceeds ¥547.7 billion).

(2) Using the proceeds from this issue of common shares (mentioned in (1)) and retained earnings, repurchased a part of the outstanding Deposit Insurance Act Preferred Shares amounting to ¥813.5 billion on an infusion amount basis.

(3) Increased the annual common dividends by 20%, from ¥10 per share to ¥12 per share. As a result of the above measures, together with the repayment in August 2010 of ¥400.0 billion in the Deposit Insurance Act Preferred Shares, the total repayment of public funds during the fiscal year ended March 31, 2011, amounted to ¥1,213.5 billion. Credit rating organizations raised the Group’s credit ratings because of the substantial improvement in the quality of capital as a result of the implementation of the Plan and the Group’s sustained financial soundness.

Outline of the "Resona Capital Restructuring Plan"