Itochu Corporation has worked in partnership with eGuarantee Inc. (head office: Shibuya, Tokyo; President & Chief Executive OfficerMasanori Eto; hereafter referred to as "eGuarantee") established a new limited liability company, Credit Creation One, expanding profits through receipt of dividends and partial acceptance of risks by investment in silent partnership with company. In combination with this, the 100% Itochu Corporation-owned subsidiary, Itochu Capital Securities Ltd. (head office: Chiyoda, Tokyo; President Masanori Omori; hereafter referred to as "Itochu Capital Securities") and eGuarantee will begin from July 2008 to handle credit default swaps (CDS). These initiatives are the first of their kind in Japan.

1. The Significance of Handling CDS

CDS, which Itochu Capital Securities and eGuarantee will begin to offer for the first time in Japan, are aimed at companies, particularly small to mid-sized ones, without external credit ratings, disregarding the scale of the company. With this initiative, the whole of the Itochu Group intends to contribute to the reinvigoration of the Japanese economy by providing hedges against corporate credit risks.

2. The Credit Creation One Limited Liability Company Scheme

eGuarantee will transfer credit risks accepted from customers through contracts of guarantee and CDS contracts to Itochu Capital Securities by concluding CDS contracts with Itochu Capital Securities. Itochu Capital Securities accepts risks even from itself through CDS contracts, and forms CDS contracts with the limited liability company Credit Creation One to transfer the CDS contracts made with eGuarantee to Credit Creation One. The limited liability company Credit Creation One concludes discretionary investment contracts with TAKMA Capital Corporation (formerly Fisco Asset Management; head office: Chiyoda, Tokyo; Representative Director Takahiro Fujino; hereafter referred to as “TAKMA Capital”) and TAKMA Capital makes investment decisions and such forth in regards to the CDS contracts made with Credit Creation One. The intention is for Credit Creation One to reach the ¥20 billion scale on a risk acceptance balance basis. Under this scheme, the Itochu Group will accept CDS contracts with the full utilization of the credit risk evaluation model based on corporate assessment by the external investigative institution of TAKMA Capital, and the accumulated knowledge of guarantee services of eGuarantee.

3. Investment Period and Amount of Capital Subscribed to Credit Creation One

The total capital subscription will be ¥800 million (¥410 million from eGuarantee, ¥390 million from Itochu Corporation), with the investment period being reckoned from three to four years.

• * For reference: On CDS
  CDS (Credit Default Swaps) is a form of derivatives trading allowing the hedging of financial claims, bonds payable and various other credit risks. Those who wish to hedge credit risks make payments so that they can receive guarantees against damages in the event of a default.

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