Appendix. Emission. Emission Reduction. Resale Agreement JCF. JGRF (Joint. (Voluntary CDM/JI. cooperative) Payment. stock.

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1 December 1, 2004 Launching the Japan GHG Fund and Japan Carbon Finance, Ltd. --Public and Private Sectors Join Forces in Establishing the First GHG Fund in Asia-- 1. The Japan GHG Fund (JGRF) was established today with an endowment of million US dollars from a total of 31 Japanese private companies, the Japan Bank for International Cooperation (JBIC) and the Development Bank of Japan (DBJ). Prior to this event, seven major contributors to the JGRF also established Japan Carbon Finance, Ltd. (JCF), which has an initial capital of 87.5 million yen, on November 25, with Mr. Hiromu Tanaka serving as President and its head office located in Chiyoda-ku, Tokyo. 2. The objectives of the JGRF are to purchase emission reduction credits ( Units (ERUs), Certified s (CERs), Assigned Amount Units (AAUs), and Verified s (VERs)) generated from projects that reduce greenhouse gas (GHG) emissions and are implemented in developing countries and Eastern Europe, etc. and to allocate them among the contributors. The mechanism adopted for purchasing emission reduction credits is that JCF purchases them first and sells them to the JGRF. (See the schematic flow chart below.) 3. The Kyoto Protocol, which is expected to enter into force in February 2005, imposed on Japan a legally binding target of reducing GHG emissions by 6 percent from their level in the base year (in principle, 1990). On the contrary, GHG emissions in Japan rose about 8 percent from their 1990 level in Although the domestic industry has been making a consistent effort to reduce GHG emissions, with Nippon Keidanren taking the lead by setting out the Keidanren Voluntary Action Plan on the Environment, there is limited headroom for further reductions of domestic GHG emissions because Japan has already achieved high energy efficiency. It is for this reason that the Kyoto Mechanisms, which are a cost-effective scheme and will contribute to sustainable development

2 in developing countries, have received attention as an efficacious alternative in reducing GHG emissions. The JGRF is the first fund established in Asia for the specific purpose of reducing GHG emissions by utilizing the Kyoto Mechanisms, and it will help fulfill the GHG emission commitment under the Kyoto Protocol as well as targets laid down by the Japanese industry s Voluntary Action Plan. 4. Projects utilizing the Clean Development Mechanism (CDM) and Joint Implementation (JI), two of the key components of the Kyoto Mechanisms, are considered effective tools in reducing GHG emissions. However, they involve substantial risks that are attributable to the following factors: (1) since CDM and JI projects are undertaken in developing countries and Eastern Europe, etc., they are subject to various country risks; and 2 there is significant uncertainty in institutional arrangements because they are opening up a new field. Thus the JGRF invests in 30 to 40 projects to diversify risks through the JCF. JBIC has participated in the JGRF in its capacity as an official financial institution, making use of its financing function for overseas projects, its close ties developed with host countries through its overseas network of offices and implementation of overseas projects, and its knowhow acquired through participation in the Carbon Fund created by the World Bank. The Development Bank of Japan has also participated in the JGRF to provide support by drawing on its network of development finance institutions and its knowhow on environmental measures and managing funds. Finally, effective use will be made of the practical knowhow private companies possess in reducing GHG emissions. 5. While the primary objective of the JGRF is to purchase emission reduction credits, the JGRF does not limit its activities solely to this operation. Instead, the JGRF will get involved in the development stage of CDM and JI projects so as to reduce GHG emissions by shouldering the costs of procedures required for acquiring certification of emission reductions, which it plans to purchase as effective credits under the Kyoto Protocol, and by providing advice in the project preparation stage. Through these operations, the JGRF will contribute to the sustainable development of developing countries.

3 Appendix Outline of the Japan GHG Fund Name: Japan GHG Fund (JGRF) Organizational Form: Voluntary cooperative Fund Size: million US dollars Contributors: See attached List 1 Duration: Through December 31, 2014 Outline of Japan Carbon Finance, Ltd. Name: Japan Carbon Finance, Ltd. (JCF) Organizational Form: Joint stock company Initial Capital: 87.5 million yen Contributors: See attached List 2 Executives: Mr. Hiromu Tanaka (President), Mr. Haruhisa Kawashita (Executive managing director), Mr. Fumiji Ototake, Mr. Shun Kurimoto, Mr. Jiro Tomizawa, Mr. Ichiro Keida Countries Covered: Developing countries, Eastern Europe, etc. Projects Covered: Projects that reduce GHG emissions Purchase Resale Agreement JCF Agreement JGRF (Joint (Voluntary CDM/JI stock cooperative) Payment company ) Payment Project Special Board Advisory Credits Credits Board Underlying Using network of JBIC and DBJ Management Policy Finance for project funding Special Advisory Board Project Cooperation with international Monitoring organizations and development institutions Cooperative Agreement Payment Credits Contributor Japanese private company JBIC DBJ $141.5M JBIC DBJ JBIC

4 For further information: Mr. Isone Corporate Planning Department Japan Carbon Finance, Ltd. Tel:

5 List 1 Contributors to the JGRF

6 List 2 Contributors of the JCF \