Concordia Financial Group (YC3) Risk Analysis

Until six months after the effective date of the joint share transfer, any of Bank of Yokohama's or Higashi-Nippon Bank's shareholders, directors, audit & supervisory board members or liquidators as of the effective date of the joint share transfer may bring a court action to nullify the joint share transfer. Concordia Financial's shareholders, directors, audit & supervisory board members or liquidators may also bring a court action to nullify the joint share transfer until six months after the effective date of the joint share transfer. A court may nullify the joint share transfer if it finds that a material procedural defect occurred in connection with the joint share transfer. If any court action challenging the validity of the joint share transfer is brought, the price or liquidity of Concordia Financial's shares may be adversely affected, regardless of the merits of the claim. Moreover, if such a court action is successful and a court enters a final and binding judgment, Concordia Financial would be liquidated and Concordia Financial's shareholders at the time of such judgment will receive shares of common stock of Bank of Yokohama and/or Higashi-Nippon Bank.

The success of the joint share transfer will depend, in part, on Concordia Financial's ability to realize the anticipated growth opportunities, synergies and cost savings from integrating the operations of Bank of Yokohama and Higashi-Nippon Bank. The business integration agreement calls for an ongoing integration process, including replacing the core system used by Higashi-Nippon Bank with that used by Bank of Yokohama and unifying creditor classifications of Bank of Yokohama and Higashi-Nippon Bank. Concordia Financial faces significant challenges relating to integrating the operations of Bank of Yokohama and Higashi-Nippon Bank, including the following: -   effectively integrating the respective organizations, key management, employees and other personnel, business cultures, procedures and operations of Bank of Yokohama and Higashi-Nippon Bank;-   identifying and streamlining redundant operations and assets, and combining the product and service offerings effectively and quickly;-   allocating resources effectively to areas and activities that present substantial potential synergies identified as a result of the joint share transfer;-   smoothly transitioning relevant operations to a common information technology system; and -   developing and implementing uniform accounting policies, internal controls and procedures, disclosure controls and procedures and other governance policies and standards. If Concordia Financial is not able to successfully manage the integration process, take advantage of the anticipated synergies, and create an integrated business, the anticipated benefits of the joint share transfer and subsequent integration may not be realized fully or at all or may take longer to realize than expected.

The articles of incorporation, share handling regulations and regulations of the board of directors, as well as the Companies Act, govern the affairs of Concordia Financial. Legal principles relating to such matters as the validity of corporate actions, directors' and officers' fiduciary duties and shareholders' rights may be different from those that would apply if Concordia Financial were a non-Japanese company. Shareholders' rights under Japanese law may not be as extensive as shareholders' rights under the laws of other countries or jurisdictions within the United States. You may have more difficulty in asserting your rights as a shareholder than you would as a shareholder of a corporation organized in another jurisdiction.

Pursuant to the Companies Act and certain related legislation, the articles of incorporation of Concordia Financial provide that 100 shares of Concordia Financial common stock constitute one unit. Holders of shares that constitute less than one unit do not have voting rights under the Companies Act, which imposes other significant restrictions and limitations on such holders. The transferability of such shares is also significantly limited. Under the unit share system, holders of shares constituting less than one unit have the right to require the issuer to purchase their shares.

Stock prices on Japanese stock exchanges are determined on a real-time basis by the equilibrium between bids and offers. These exchanges are order-driven markets without specialists or market makers to guide price formation. To prevent excessive volatility, these exchanges set daily upward and downward price fluctuation limits for each listed stock based on the previous day's closing price. Although transactions on a given Japanese stock exchange may continue at the upward or downward price limit, if the price limit is reached on a particular trading day, no transactions on such exchange may take place outside these limits. Consequently, an investor wishing to sell shares on a Japanese stock exchange at a price outside of the relevant daily limit may be unable to complete the sale through that exchange on that particular trading day.

Concordia Financial is a joint stock company incorporated under the laws of Japan. All of Concordia Financial's directors, senior management and audit & supervisory board members are expected to reside outside the United States. It may not be possible, therefore, for U.S. investors to effect service of process within the United States upon these persons. Furthermore, most of the assets of Concordia Financial and these persons are located in Japan and elsewhere outside the United States. It may not be possible, therefore, for U.S. investors to enforce, against Concordia Financial or these persons, judgments obtained in the U.S. courts predicated upon the civil liability provisions of the federal securities laws of the United States. Concordia Financial believes that there is doubt as to the enforceability in Japan, in original actions or in actions to enforce judgments of U.S. courts, of claims predicated solely upon the federal securities laws of the United States.