BRAC Bank Limited

FINANCIAL INSTITUTIONS

CREDIT OPINION8 September 2021

Update

RATINGS

BRAC Bank LimitedDomicile Bangladesh

Long Term CRR Ba3

Type LT Counterparty RiskRating - Fgn Curr

Outlook Not Assigned

Long Term Debt Not Assigned

Long Term Deposit Ba3

Type LT Bank Deposits - FgnCurr

Outlook Stable

Please see the ratings section at the end of this reportfor more information. The ratings and outlook shownreflect information as of the publication date.

Contacts

Joyce Ong [email protected]

Tengfu Li [email protected]

Chong Jun (CJ) Wong +65.6311.2616Associate [email protected]

Graeme Knowd [email protected]

BRAC Bank LimitedUpdate following change of outlook to stable

SummaryOn 26 August 2021, we affirmed BRAC Bank Limited's (BRAC Bank) Ba3 long-term depositand issuer ratings and changed the bank's rating outlook to stable from negative.

BRAC Bank's long-term deposit and issuer ratings of Ba3 include a one-notch uplift from thebank's b1 Baseline Credit Assessment (BCA). The rating uplift is based on our assumption ofa moderate probability of support from the Government of Bangladesh (Ba3 stable), takinginto consideration the bank's small market share, as well as the government's propensity andability to support the banking system.

BRAC Bank's b1 BCA reflects the bank's better-than-peer asset quality, although it isdeteriorating because of the coronavirus pandemic; moderate profitability and goodcapitalization; strong funding structure; and good liquidity.

Exhibit 1

Rating Scorecard - Key financial ratios

3.8% 10.6% 0.9% 8.1% 33.4%

0%

5%

10%

15%

20%

25%

30%

35%

40%

0%

2%

4%

6%

8%

10%

12%

14%

Asset Risk:Problem Loans/

Gross Loans

Capital:Tangible Common

Equity/Risk-WeightedAssets

Profitability:Net Income/

Tangible Assets

Funding Structure:Market Funds/

Tangible BankingAssets

Liquid Resources:Liquid BankingAssets/TangibleBanking Assets

Solvency Factors (LHS) Liquidity Factors (RHS)

BRAC Bank (BCA: b1) Median b1-rated banks

So

lve

ncy F

acto

rs

Liq

uid

ity F

acto

rs

Source: Moody's Financial Metrics

This document has been prepared for the use of Mahbub Hossain and is protected by law. It may not be copied, transferred or disseminated unlessauthorized under a contract with Moody's or otherwise authorized in writing by Moody's.

http://www.surveygizmo.com/s3/1133212/Rate-this-research?pubid=PBC_1301025

https://www.moodys.com/credit-ratings/BRAC-Bank-Limited-credit-rating-821492030

https://www.moodys.com/credit-ratings/Bangladesh-Government-of-credit-rating-806356877

MOODY'S INVESTORS SERVICE FINANCIAL INSTITUTIONS

Credit strengths

» Strong funding and liquidity, supported by its sizable distribution network

» Good core capital ratio, the highest among the Bangladeshi banks we rate

Credit challenges

» Rising asset risk because of the disruptions caused by the pandemic

OutlookThe stable outlook on BRAC Bank's ratings reflects our expectation that Bangladesh's robust economic growth and the pandemic-related forbearance measures that eased debt repayment burden of affected borrowers will limit the bank's asset-quality deteriorationand support its solvency over the next 12-18 months.

Factors that could lead to an upgradeBRAC Bank's long-term ratings are unlikely to be upgraded because they are at the same level as Bangladesh's sovereign rating.

Factors that could lead to a downgradeWe could downgrade the bank's long-term ratings if its credit fundamentals deteriorate, such that the nonperforming loan (NPL) ratioexceeds 5.0%; profitability declines, such that its return on assets declines below 0.8%; or capital declines significantly. A significantdeterioration in the bank's funding and liquidity will also strain the ratings.

Key indicators

Exhibit 2

BRAC Bank Limited (Consolidated Financials) [1]

12-202 12-192 12-182 12-172 12-162 CAGR/Avg.3

Total Assets (BDT Million) 445,562.5 405,068.5 349,375.0 299,268.1 260,308.9 14.44

Total Assets (USD Million) 5,257.4 4,771.4 4,164.2 3,598.1 3,311.8 12.24

Tangible Common Equity (BDT Million) 40,740.6 37,631.6 32,373.9 24,606.4 20,023.3 19.44

Tangible Common Equity (USD Million) 480.7 443.3 385.9 295.8 254.7 17.24

Problem Loans / Gross Loans (%) 3.4 4.4 3.6 4.1 5.1 4.15

Tangible Common Equity / Risk Weighted Assets (%) 10.6 12.0 11.6 10.1 9.3 10.76

Problem Loans / (Tangible Common Equity + Loan Loss Reserve) (%) 17.8 24.8 21.0 25.1 32.1 24.25

Net Interest Margin (%) 4.4 5.5 5.5 5.7 6.1 5.55

PPI / Average RWA (%) 2.4 3.0 3.6 4.1 4.2 3.56

Net Income / Tangible Assets (%) 0.9 1.1 1.6 1.8 1.6 1.45

Cost / Income Ratio (%) 71.5 67.8 64.2 60.1 57.2 64.25

Market Funds / Tangible Banking Assets (%) 8.1 9.7 12.3 13.7 14.4 11.75

Liquid Banking Assets / Tangible Banking Assets (%) 33.4 29.1 27.4 27.1 24.7 28.45

Gross Loans / Due to Customers (%) 82.0 89.6 95.9 98.0 102.6 93.65

[1] All figures and ratios are adjusted using Moody's standard adjustments. [2] Basel III - fully loaded or transitional phase-in; LOCAL GAAP. [3] May include rounding differences because ofthe scale of reported amounts. [4] Compound annual growth rate (%) based on the periods for the latest accounting regime. [5] Simple average of periods for the latest accounting regime.[6] Simple average of Basel III periods.Sources: Moody's Investors Service and company filings

ProfileBRAC Bank Limited (BRAC Bank) was established in 2001 as a private commercial bank based in Bangladesh, listed on both the DhakaStock Exchange and the Chittagong Stock Exchange in 2007. The lender has developed a competitive advantage in the small andmedium-sized enterprise (SME) segment and has established a strong domestic presence, supported by 187 branches, 552 agentbanking outlets and 375 ATMs as of the end of June 2021.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page onwww.moodys.com for the most updated credit rating action information and rating history.

2 8 September 2021 BRAC Bank Limited: Update following change of outlook to stable



Moreover, the bank is a market leader in the mobile financial services industry with its subsidiary, bKash Limited (bKash), whichprovides electronic payment and remittance services.

As of the end of June 2021, the bank was majority owned by BRAC (46.5%), which is the world's largest nongovernmental organization(NGO) in terms of employees and supports various social and environmental causes. BRAC is also one of the pioneers of microfinance,and its expertise provides BRAC Bank with a competitive advantage in the SME segment. As a result of its ownership by a nonprofitNGO, BRAC Bank is less susceptible to corporate governance issues faced by other private commercial banks that are owned bycorporate entities or individuals.

As of the end of June 2021, SMEs accounted for 50% of total loans, followed by corporates (31%) and consumer loans (19%).

Detailed credit considerationsAsset quality will remain above peers' despite deterioration caused by the pandemicProblem loans will increase moderately in the next 12-18 months, in line with the industry, because of the pandemic-induceddisruptions, but BRAC's asset quality will likely remain better than its peers'.

While BRAC Bank's standalone NPL ratio increased to 3.7% as of the end of June 2021 from 2.9% as of year-end 2020 after theblanket moratoriums ended on 31 December 2020, the current NPL ratio is comparable with the pre-pandemic levels (Exhibit 3) andremains low among the banks in Bangladesh that we rate. Its gross NPL increased 31% in the first six months of 2021 because of higherslippages of its consumer and corporate loans.

The asset quality of its SME portfolio remained benign despite stress from the pandemic, reflective of the bank's robust underwritingand risk management of its SME portfolio. The NPL ratio in the SME book increased only marginally to 2.2% as of the end of June 2021from 1.7% as of year-end 2020, lower than that in its consumer and corporate loans — the NPL ratio in the consumer and corporateloan book increased to 3.1% and 6.6%, respectively, as of the end of June 2021 from 1.8% and 5.8% as of year-end 2020.

While the ongoing pandemic will weaken the debt repayment capacity of BRAC's borrowers, the less risky nature of BRAC's SMEborrowers, as evident from its historically low SME NPL ratio, will mitigate the asset risks to some extent. Most of its SME borrowersoperate essential services focusing on the domestic market in Bangladesh and are less susceptible to demand disruptions. At the sametime, BRAC Bank's strong physical presence, with 456 dedicated SME offices spanning across various locations in Bangladesh, hasallowed more effective monitoring of and collections from its SME borrowers. The high share of SME loans also renders the bank lessvulnerable to single-party concentration risks compared with its Bangladeshi peers. At the same time, pandemic-related regulatoryforbearance measures will help the bank avert any asset quality cliff in the next 12-18 months.

Following the expiration of the blanket moratorium, the central bank has allowed banks to amend payment terms and extend paymenttenors of eligible performing loans, with most of these amended terms likely to end by year-end 2022.

Performing loans with modified payment terms constituted 5.5% of gross loans as of the end of June 2021, with 4.6% coming fromloans restructured on pandemic-related forbearance measures and 0.7% from rescheduled loans.1 These loans will be classified asperforming as long as borrowers service their loans based on the relaxed payment terms.




Exhibit 3

BRAC Bank's NPL ratio increased in the second quarter after the moratorium endedProblem loans as a percentage of gross loans

5.1%

4.1%

3.6%

4.4%

3.4%3.6%

3.8%

0%

1%

2%

3%

4%

5%

6%

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2016 2017 2018 2019 2020 Jun-20 Jun-21

Problam loans - left axis Rescheduled loans - left axis Problem loan ratio - right axis

[1] Rescheduled loans are loans that are restructured and classified as performing.[2] The NPL ratio does not include rescheduled loans.[3] Jun-20 and Jun-21 data are unconsolidated.Source: Moody’s Investors Service

Loan loss buffers remained robust at 116% of NPLs as of the end of June 2021, although down from 140% as of year-end 2020 becauseof the increase in NPLs in H1 2021. We expect the bank to maintain adequate loan loss coverage.

The assigned b2 Asset Risk score takes into account the above considerations.

Capitalization will remain above peers'The bank's reported Common Equity Tier 1 (CET1) capital ratio was largely stable at 13.7% as of the end of June 2021, compared with13.9% as of year-end 2020, highest among its peers we rate.

The bank's Moody's-adjusted TCE/adjusted risk-weighted assets2 (TCE ratio) under Basel III capital norms of 10.6% as of year-end 2020remains well above the asset-weighted average of 8.5% for its peers in Bangladesh that we rate.

We expect capital to hover at this level as loan growth keeps pace with internal capital generation. We also expect BRAC to continueto pursue a relatively conservative dividend payout policy, which will support its capital retention. In 2021, the bank approved payout of15% of its capital as dividends, with 10% in the form of cash and 5% in the form of stock.

The b2 Capital score reflects the above considerations.

Profitability will remain moderateBRAC's profitability will remain moderate in the next 12-18 months as improvements in net interest margin will be offset by highcredit costs. Although its annualized ROA in H1 2021 improved to 1.8% as the bank reduced its deposit costs rapidly in the six months,provision expenses will likely remain high at levels similar to those in 2020 because of the pandemic-induced disruptions.

BRAC's provision expense will remain high. Its loan loss provision as a percentage of average gross loans increased to 0.9% as of year-end 2020 from 0.4% as of year-end 2019, as the bank set aside additional provisions in anticipation of increase in problem loansbecause of pandemic-induced disruption.

BRAC Bank's interest rate spread has traditionally been among the highest in the industry, supported by the high proportion of loans tothe higher-yielding SME segment. However, this advantage was curtailed by the lending rate cap of 9% imposed by Bangladesh Banksince 1 April 2020 and weak credit demand in H2 2020, which led to market lending rates falling even below 9%.

The bank's weighted-average lending rate declined to 8.0% as of 31 July 2021 from 12.7% as of 31 March 2020. Nevertheless, the bankwas able to maintain a relatively robust interest rate spread because of its good access to low-cost deposits. Its weighted-averagedeposit rate decreased to 2.1% as of 31 July 2021 from 5.3% as of 31 March 2020. As a result, although its interest rate spread declinedto 5.9% as of 31 July 2021 from 7.4% as of 31 March 2020, it remained well above the average of 3.4% for private sector banks in




Bangladesh. We expect the interest rate spread and net interest margin to remain above those of its peers and stabilize at the currentlevel in the next 12-18 months.

BRAC Bank's subsidiary bKash has been making losses and will continue to spend heavily on marketing, promotions and ITinfrastructure to expand its market share in the mobile payment market. It will take time for bKash to start making profit from its heavyinvestments. As a result, BRAC Bank's consolidated operating expenses will remain high, straining its profitability. In H1 2021, the bank'sconsolidated cost-to-income ratio moderated to 66% from 77% in the year-earlier period, but remained higher than its rated peers'average of 54%.

Exhibit 4

BRAC Bank's cost-to-income ratio remained higher than peers'Total operating expenses as a percentage of total operating income

0%

10%

20%

30%

40%

50%

60%

70%

80%

NCC EBL CBL MBL SIBL DBBL BRAC

Jun-20 Jun-21

Data for H1 2021 is unaudited.Source: Moody’s Investors Service

The Profitability score of b2 reflects the above considerations.

Improved funding and liquidity, backed by an established domestic franchiseWe expect BRAC Bank to retain its funding competitiveness in the next 12-18 months, supported by its established domestic franchise.BRAC Bank is primarily funded by deposits, which constituted 75% of the bank's tangible assets as of year-end 2020, up from 73% ayear earlier. BRAC Bank's loan-to-deposit ratio decreased to 82% as of year-end 2020 from 90% as of year-end 2019, helped by mutedloan growth and good deposit growth. Customer deposits increased by 13%, while gross loans increased by only 3.4% in 2020.

The bank's domestic franchise is supported by a sizable network of branches and ATMs, a leading mobile platform (bKash) and agrowing agent banking network. As a result, the bank has strong access to current and savings accounts, which tend to be stickier thanterm deposits and borrowings. Its current and savings accounts as a percentage of total customer deposits were 60% as of year-end2020.

The bank's funding profile has been improving over the years, with market funds as a percentage of tangible banking assets decliningto 8.1% as of year-end 2020 from 9.7% as of year-end 2019 and 12.3% as of year-end 2018 because of lower reliance on interbankborrowings and a growing deposit base. At the same time, 92% of the bank's market funds as of year-end 2020 were from stablesources such as the central bank and multilateral institutions like International Finance Corporation (Aaa stable), up from 53% asof year-end 2019. BRAC Bank also obtains concessional funding from the local central bank, which is disbursed to eligible domesticexporters and SMEs, and accounted for 65% of BRAC Bank's total market funds as of year-end 2020.



https://www.moodys.com/credit-ratings/International-Finance-Corporation-credit-rating-2391


Exhibit 5

BRAC Bank's market funds comprised mainly borrowings from Bangladesh Bank and international finance organizations

Borrowings from Bangladesh Bank65%

Borrowings from international finance organizations27%

Other interbank borrowings8%

Source: Moody's Investors Service

The adjusted Funding score of ba2 reflects BRAC Bank's good deposit franchise, as well as the stable funding provided by the localcentral bank and multilateral institutions.

BRAC Bank maintains a robust liquidity buffer. The bank's liquid assets, excluding bKash customers' mobile wallets held in trustaccounts, were 22.7% of tangible assets as of year-end 2020, improving slightly from 21.0% as of year-end 2019. On a consolidatedbasis, BRAC Bank's liquid assets as a percentage of tangible assets improved to 33.4% as of year-end 2020 from 29.1% as of year-end2019. The Liquid Resources score of b2 reflects our expectation that the bank's liquidity will remain stable as the central bank will likelycontinue its liquidity support measures to banks during the pandemic.

BRAC Bank’s BCA is based on Bangladesh's Weak- Macro ProfileBRAC Bank operates mainly in Bangladesh, which has a Weak- Macro Profile.

Bangladesh has a moderately diversified economy, which is largely driven by exports from the Readymade Garments (RMG) sector. Thecountry's history of steady growth is underpinned by large remittance inflow and the role of local microfinance institutions, which havepromoted financial inclusion that offsets the low level of per capita income. The government’s financial position has also been stablebecause it has consistently received concessional financing from the International Monetary Fund to offset the impact of weak revenueand finance its fiscal deficits. The country is moderately susceptible to event risk because of its deeply polarized domestic politics.

The country’s banking system is characterized by high credit concentration and a high degree of market fragmentation. The state-owned banks together accounted for around 18.5% of the advances in the system as of the end of December 2020, and there is afair degree of competition among private commercial banks. In addition, the persistent weakness in underwriting standards and thegrowing trend of regulatory forbearance will lead to further deterioration in credit conditions.




Environmental, social and governance considerationsIn line with our general view of the banking sector, BRAC Bank has low exposure to environmental risks (see our environmental risksheat map for further information) and moderate exposure to social risks (see our social risks heat map for further information).

The rapid and widening spread of the pandemic, the deteriorating global economic outlook, falling oil prices and asset price declinesare creating a severe and extensive credit shock across many sectors, regions and markets. The Bangladeshi banking system hasbeen one of the sectors weakened by the shock, especially given the persistent weaknesses in underwriting standards and high creditconcentrations in large domestic corporates. We regard the pandemic as a social risk under our environmental, social and governance(ESG) framework, given the substantial implications for public health and safety.

Governance is highly relevant for BRAC Bank, as it is to all participants in the banking industry. Corporate governance weaknesses canlead to a deterioration in a bank’s credit quality, while governance strengths can benefit its credit profile. Governance risks are largelyinternal rather than externally driven. We do not have any particular concern around BRAC Bank's governance, as the bank has anappropriate risk management framework commensurate with its risk appetite. Nonetheless, corporate governance remains a key creditconsideration and requires ongoing monitoring.

Support and structural considerationsGovernment support considerationsBRAC Bank's Ba3 long-term foreign- and local-currency deposits and issuer ratings include a one-notch uplift from the bank's b1 BCA,based on our assumption of a moderate probability of government support. Our support assumption is based on the bank's smallmarket share, but balanced by the government's willingness and ability to support the bank.

Counterparty Risk (CR) AssessmentCR Assessments are opinions of how counterparty obligations are likely to be treated if a bank fails and are distinct from debt anddeposit ratings in that they consider only the risk of default rather than both the likelihood of default and the expected financial loss,and apply to counterparty obligations and contractual commitments rather than debt or deposit instruments. The CR Assessment isan opinion of the counterparty risk related to a bank's covered bonds, contractual performance obligations (servicing), derivatives (forexample, swaps), letters of credit, guarantees and liquidity facilities.

BRAC Bank’s CR Assessment is positioned at Ba3(cr)/NP(cr)The CR Assessment, before government support, is positioned one notch above BRAC Bank's Adjusted BCA of b1. We then assigngovernment support assumptions, in line with our support assumptions on deposits and senior unsecured debt. Such assignmentsreflect our view that any support provided by governmental authorities to a bank, which benefits senior unsecured debt or deposits,is very likely to benefit operating activities and obligations reflected by the CR Assessments as well. Such a view is consistent with ourbelief that governments are likely to maintain the banks' operations as a going concern to reduce contagion and preserve the banks'critical functions.

Counterparty Risk Ratings (CRRs)CRRs are opinions of the ability of entities to honor the uncollateralized portion of non-debt counterparty financial liabilities (CRRliabilities) and also reflect the expected financial losses in the event that such liabilities are not honored. CRR liabilities typicallyrelate to transactions with unrelated parties. Examples of CRR liabilities include the uncollateralized portion of payables arising fromderivatives transactions and the uncollateralized portion of liabilities under sale and repurchase agreements. CRRs are not applicable tofunding commitments or other obligations associated with covered bonds, letters of credit, guarantees, servicer and trustee obligations,and other similar obligations that arise from a bank performing its essential operating functions.

BRAC Bank’s local- and foreign-currency CRRs are positioned at Ba3/NPBangladesh is a nonoperational resolution regime. For nonoperational resolution regime countries, the starting point for the CRRs isone notch above the bank's Adjusted BCA, to which we then typically add the same notches of government support as applied to theCR Assessment.



https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1280897




Methodology and scorecardAbout Moody's Bank ScorecardOur scorecard is designed to capture, express and explain in summary form our Rating Committee's judgment. When read inconjunction with our research, a fulsome presentation of our judgment is expressed. As a result, the output of our scorecard maysignificantly differ from that suggested by raw data alone (though it has been calibrated to avoid the frequent need for strongdivergence). The scorecard output and the individual scores are discussed in rating committees and may be adjusted up or down toreflect conditions specific to each rated entity.

Rating methodology and scorecard factors

Exhibit 6

BRAC Bank Limited

Macro FactorsWeighted Macro Profile Weak - 100%

Factor HistoricRatio

InitialScore

ExpectedTrend

Assigned Score Key driver #1 Key driver #2

SolvencyAsset RiskProblem Loans / Gross Loans 3.8% b2 ↔ b2

CapitalTangible Common Equity / Risk Weighted Assets(Basel III - transitional phase-in)

10.6% b3 ↔ b2 Expected trend

ProfitabilityNet Income / Tangible Assets 0.9% b2 ↔ b2

Combined Solvency Score b2 b2LiquidityFunding StructureMarket Funds / Tangible Banking Assets 8.1% ba3 ↔ ba2 Deposit quality

Liquid ResourcesLiquid Banking Assets / Tangible Banking Assets 33.4% b1 ↔ b2 Expected trend

Combined Liquidity Score ba3 ba3Financial Profile b1Qualitative Adjustments Adjustment

Business Diversification 0Opacity and Complexity 0Corporate Behavior 0

Total Qualitative Adjustments 0Sovereign or Affiliate constraint Ba3BCA Scorecard-indicated Outcome - Range ba3 - b2Assigned BCA b1Affiliate Support notching 0Adjusted BCA b1

Instrument Class Loss GivenFailure notching

Additionalnotching

Preliminary RatingAssessment

GovernmentSupport notching

Local CurrencyRating

ForeignCurrency

RatingCounterparty Risk Rating 1 0 ba3 0 Ba3 Ba3Counterparty Risk Assessment 1 0 ba3 (cr) 0 Ba3(cr)Deposits 0 0 b1 1 Ba3 Ba3Senior unsecured bank debt 0 0 b1 1 Ba3 Ba3[1] Where dashes are shown for a particular factor (or sub-factor), the score is based on non-public information.Source: Moody’s Investors Service




Ratings

Exhibit 7

Category Moody's RatingBRAC BANK LIMITED

Outlook StableCounterparty Risk Rating Ba3/NPBank Deposits Ba3/NPBaseline Credit Assessment b1Adjusted Baseline Credit Assessment b1Counterparty Risk Assessment Ba3(cr)/NP(cr)Issuer Rating Ba3ST Issuer Rating NP

Source: Moody's Investors Service

Endnotes1 Rescheduled loans refer to NPLs that were classified as performing after the Bangladesh Bank granted approvals for banks to amend the payment terms

and interest rates. This is a case-by-case restructuring done outside of the pandemic-related payment tenor extension schemes.

2 Bangladesh government securities are adjusted with 100% risk weight per our methodology.




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This document is intendedto be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, yourepresent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly orindirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as tothe creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’sOverseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a NationallyRecognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by anentity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registeredwith the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferredstock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and servicesrendered by it fees ranging from JPY125,000 to approximately JPY550,000,000.MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

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