1. April 2001 An Introduction to Capital Adequacy

2. 2 The material that follows is a presentation of general background information about the Bank’s activities current at the date of the presentation, 3 April 2001. It is information given in summary form and does not purport to be complete. It is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any particular investor. These should be considered, with or without professional advice when deciding if an investment is appropriate. Disclaimer

3. 3 Speaker’s Notes Speaker’s notes for this presentation are attached below each slide.Speaker’s notes for this presentation are attached below each slide. To access them, you may need to save the slides in PowerPoint and view/print in “notes view.”To access them, you may need to save the slides in PowerPoint and view/print in “notes view.”

4. 4 Agenda TheoryTheory –Principles –Treatment of investment in life & funds management businesses PracticePractice –Effect of an increase in Appraisal Value on Capital Adequacy –Effect of accelerated goodwill write-off on Capital Adequacy

5. 5 Principles Capital Adequacy is calculated on stand alone and consolidated basisCapital Adequacy is calculated on stand alone and consolidated basis Consolidated basis excludes life companiesConsolidated basis excludes life companies Assets are risk weightedAssets are risk weighted Two tiers of capitalTwo tiers of capital Regulator requires minimum ratios, market requires higher ratiosRegulator requires minimum ratios, market requires higher ratios

6. 6 Treatment of Life Insurance and Funds Management Businesses Assets and liabilities not consolidatedAssets and liabilities not consolidated NTA for capital adequacy purposes includes acquired VBIFNTA for capital adequacy purposes includes acquired VBIF NTA is deducted from total capitalNTA is deducted from total capital Balance is deducted from Tier 1Balance is deducted from Tier 1

7. 7 Capital Adequacy 30 Jun 00 31 Dec 00 30 Jun 00 31 Dec 00 Total Tier One Capital 9,618 8,914 Total Tier Two Capital 6,097 5,802 Tier One and Tier Two Capital 15,71514,716 Deductions (3,197) (2,278) Total Regulatory Capital 12,51812,438 Risk Weighted Capital Ratios (%) Tier one 7.49 6.71 Tier two 4.75 4.37 Less Deductions (2.49) (1.71) Total 9.75 9.37

8. 8 30 Jun 00 31 Dec 00 30 Jun 00 31 Dec 00 Tier One Capital Total Shareholders’ Equity18,43519,461 Eligible Loan Capital 418 423 Total Shareholders’ Equity and Loan Capital18,85319,884 Less Goodwill(5,905) (6,007) Less Preference shares (86) (39) Less Intangible component of investment in of investment in non-consolidated subsidiaries(2,656)(3,449) non-consolidated subsidiaries(2,656)(3,449) Less Outside equity interests in entities controlled in entities controlled by non-consolidated subsidiaries (588)(1,475) by non-consolidated subsidiaries (588)(1,475) Total Tier One Capital 9,618 8,914 Capital Adequacy Components

9. 9 30 Jun 00 31 Dec 00 30 Jun 00 31 Dec 00 Tier One Capital Total Shareholders’ Equity18,43519,461 Eligible Loan Capital 418 423 Total Shareholders’ Equity and Loan Capital18,85319,884 Less Goodwill(5,905) (6,007) Less Preference shares (86) (39) Less Intangible component of investment in of investment in non-consolidated subsidiaries(2,656)(3,449) non-consolidated subsidiaries(2,656)(3,449) Less Outside equity interests in entities controlled in entities controlled by non-consolidated subsidiaries (588)(1,475) by non-consolidated subsidiaries (588)(1,475) Total Tier One Capital 9,618 8,914 Capital Adequacy Components

10. 10 30 Jun 00 31 Dec 00 30 Jun 00 31 Dec 00 Tier One Capital Total Shareholders’ Equity18,43519,461 Eligible Loan Capital 418 423 Total Shareholders’ Equity and Loan Capital18,85319,884 Less Goodwill(5,905) (6,007) Less Preference shares (86) (39) Less Intangible component of investment in of investment in non-consolidated subsidiaries(2,656)(3,449) non-consolidated subsidiaries(2,656)(3,449) Less Outside equity interests in entities controlled in entities controlled by non-consolidated subsidiaries (588)(1,475) by non-consolidated subsidiaries (588)(1,475) Total Tier One Capital 9,618 8,914 Capital Adequacy Components

11. 11 30 Jun 00 31 Dec 00 30 Jun 00 31 Dec 00 Tier One Capital Total Shareholders’ Equity18,43519,461 Eligible Loan Capital 418 423 Total Shareholders’ Equity and Loan Capital18,85319,884 Less Goodwill(5,905) (6,007) Less Preference shares (86) (39) Less Intangible component of investment in of investment in non-consolidated subsidiaries(2,656)(3,449) non-consolidated subsidiaries(2,656)(3,449) Less Outside equity interests in entities controlled in entities controlled by non-consolidated subsidiaries (588)(1,475) by non-consolidated subsidiaries (588)(1,475) Total Tier One Capital 9,618 8,914 Capital Adequacy Components

12. 12 30 Jun 00 31 Dec 00 30 Jun 00 31 Dec 00 Tier One Capital Total Shareholders’ Equity18,43519,461 Eligible Loan Capital 418 423 Total Shareholders’ Equity and Loan Capital18,85319,884 Less Goodwill(5,905) (6,007) Less Preference shares (86) (39) Less Intangible component of investment in of investment in non-consolidated subsidiaries(2,656)(3,449) non-consolidated subsidiaries(2,656)(3,449) Less Outside equity interests in entities controlled in entities controlled by non-consolidated subsidiaries (588)(1,475) by non-consolidated subsidiaries (588)(1,475) Total Tier One Capital 9,618 8,914 Capital Adequacy Components

13. 13 30 Jun 00 31 Dec 00 30 Jun 00 31 Dec 00 Tier One Capital Total Shareholders’ Equity18,43519,461 Eligible Loan Capital 418 423 Total Shareholders’ Equity and Loan Capital18,85319,884 Less Goodwill(5,905) (6,007) Less Preference shares (86) (39) Less Intangible component of investment in of investment in non-consolidated subsidiaries(2,656)(3,449) non-consolidated subsidiaries(2,656)(3,449) Less Outside equity interests in entities controlled in entities controlled by non-consolidated subsidiaries (588)(1,475) by non-consolidated subsidiaries (588)(1,475) Total Tier One Capital 9,618 8,914 Capital Adequacy Components

14. 14 Treatment of Investments in Life and Funds Management Businesses Embedded Value Future New Business Appraisal Value Value Business in Force Shareholder NTA Value Future New Business Shareholder NTA Self Generated Business in Force Acquired Business in Force Deducted from Total Capital Less External Debt Capital Adequacy Components Intangible Component of Investment in Non-Consolidated Subs Deducted from Tier 1 Capital Value Future New Business

15. 15 30 Jun 00 31 Dec 00 30 Jun 00 31 Dec 00 Tier Two Capital General Provisions for bad and doubtful debts 1,358 1,412 FITB related to general provision (420) (420) Dated note and bond issues 5,120 4,771 Preference shares 39 39 Total Tier Two Capital 6,097 5,802 Capital Adequacy Components

16. 16 30 Jun 00 31 Dec 00 30 Jun 00 31 Dec 00 Tier Two Capital General Provisions for bad and doubtful debts 1,358 1,412 FITB related to general provision (420) (420) Dated note and bond issues 5,120 4,771 Preference shares 39 39 Total Tier Two Capital 6,097 5,802 Capital Adequacy Components

17. 17 30 Jun 00 31 Dec 00 30 Jun 00 31 Dec 00 Tier Two Capital General Provisions for bad and doubtful debts 1,358 1,412 FITB related to general provision (420) (420) Dated note and bond issues 5,120 4,771 Preference shares 39 39 Total Tier Two Capital 6,097 5,802 Capital Adequacy Components

18. 18 30 Jun 00 31 Dec 00 30 Jun 00 31 Dec 00 Tier Two Capital General Provisions for bad and doubtful debts 1,358 1,412 FITB related to general provision (420) (420) Dated note and bond issues 5,120 4,771 Preference shares 39 39 Total Tier Two Capital 6,097 5,802 Capital Adequacy Components

19. 19 Capital Adequacy 30 Jun 00 31 Dec 00 30 Jun 00 31 Dec 00 Total Tier One Capital 9,618 8,914 Total Tier Two Capital 6,097 5,802 Tier One and Tier Two Capital 15,71514,716 Deductions (3,197) (2,278) Total Regulatory Capital 12,51812,438 Deductions for life insurance and funds management companies: Tier one 2,656 3,449 Total capital 3,197 2,278 Total 5,853 5,727

20. 20 Capital Adequacy Effect of Increase in Appraisal Value Appraisal Value Value Business in Force Shareholder NTA Value Future New Business Capital Adequacy Components Increase Shareholder Equity Increases Increase Deducted from Total Capital No Change Less External Debt Value Future New Business Shareholder NTA Self Generated Business in Force Acquired Business in Force Intangible Component of Investment in Non-Con Subs Deducted from Tier 1 Capital Deduction increases Increase

21. 21 Capital Adequacy Effect of Accelerated Goodwill Write-off Shareholders’ Equity Less: Goodwill Other Additions/Adjustments Tier 1 Capital Other Additions/Adjustments Tier 1 Capital Shareholders’ Equity$300Less: Goodwill$300

22. 22 Summary Capital adequacy calculated as per usual, except no consolidation of life insurance and funds management companiesCapital adequacy calculated as per usual, except no consolidation of life insurance and funds management companies Value of life insurance and funds management companies deducted from capital baseValue of life insurance and funds management companies deducted from capital base –NTA from total capital –Balance from Tier 1

23. April 2001 An Introduction to Capital Adequacy