FY2009 Kobe City IR Seminar Presentation

Transcription

1 KOBE City FY2009 Kobe City IR Seminar Presentation - FY2008 Results - AA (Stable)

2 Table Contents ~ Table Contents P 1 Status Four Fiscal Indicators P 12 Overview Kobe City Social Infrastructure Kobe City The Benefits Opening Kobe Airport P 3 P 4 P 5 Kobe Medical Industry Development Project P 6 Post-quake Administrative Fiscal Reform Achievements Primary Balance Trends Management Reform Extra-governmental Organization P 14 P 16 P 18 General Account Results FY2008 Special Account Results FY2008 Public Enterprise Account Results FY2008 P 9 P 10 P 11 Improved Credit Rating Financial Ranking Funding Plans P 20 P 22 Appendix City Tax Revenue Expenditure Appendix1 Fiscal Indicators Each City Appendix2 System Local Authority Bonds in Japan Appendix3 Tax-Exemption for interest on transfer Appendix4 Local authority bonds 1

3 1.Overview Kobe City Fukui To Yonago Totori Maizuru To Nagoya Kobe Osaka Airport Kyoto Otsu To Yokkaichi To Fukuyama Okayama Shodo Isl Akashi Strait Kobe Airport Osaka Nara Naruto Strait Osaka Bay Kansai Int l Airport Awaji Isl Wakayama To Matsuyama To Kawanoe Tokushima 2

4 Overview Kobe City ~ Overview L Area km 2 6 th Ranking among all 12 designated cities* Industry A good balance light, heavy high-tech industries Breakdown Manufactured Goods Shipments (2007) Population 153.6mln 5 th (As June FY2009) GDP(Nominal) 6.02trn yen 7 th (FY2006) Kobe City Average 12 Designated Cities Food Beverage Petroleum, coal, iron steel General Machinery Transportation Electrical Information Equipment Machinery communication Ors electronics equipment Sea Imports / Exports Number Establishments (10 thouss) trn yen 3 rd (2007) 72,788 6 th (2006) Record High Population Figures Kobe City Nationwide FY1995 FY1996 FY1997 FY1998 FY1999 FY2000 FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 (10 thouss) 13,000 12,900 12,800 12,700 12,600 12,500 12,400 12,300 12,200 12,100 12, (%) Traditional Traditional food food brewing brewing industry industry Assembled Assembled high high tech tech health health care care industry industry Expansion Expansion port port led led to to growth growth in in heavy heavy industry industry Growth Growth chemical chemical clothing clothing industry industry *The 12 cities reporting ir statistics : Sapporo, Sendai, Chiba, Kawasaki, Yokohama, Nagoya, Kyoto, Osaka, Kobe, Hiroshima, Kitakyushu, Fukuoka 3

5 Social Infrastructure Kobe City ~ Well Well established established transportation transportation social social infrastructure infrastructure (such (such as as waterworks) waterworks) Post-earthquake Post-earthquake restoration restoration reconstruction reconstruction is is close close to to completion completion Companies Companies are are attracted attracted to to convenient convenient industrial industrial premises premises located located in in waterfront waterfront inl inl areas areas Extension Extension Hanshin Hanshin Expressway Expressway Project Project is is in in progress* progress* The Kobe City Transportation Network Air Kobe Airport Links 5 domestic cities Railway Toll Road Sea Shinkansen (Bullet Train) Railway System Expressway Networks Port Kobe Japan Railways, private railways, subways new transportation system allow access in out city Expressway networks such as Hanshin, Sanyo, Chugoku, Kobe Awaji Naruto Opened in 1868, Port Kobe operates as a gateway to around 130 countries approx.500 ports The Social Infrastructure Kobe City Sewerage Systems Water works Parks Education (Statistics as FY2007) Rate flush toilet service 99.7% Public sewerage system 98.5% (National Average 83.7% 71.7% ) Distribution rate 99.8% (National Average 97.1%) Park area per capita 16.7m 2 ( Ranked 1 st among all designated cities) Total 607 schools, including 20 Universities (Ranked 2 nd among all designated cities) * The expansion Hanshin Expressway is currently being assessed in terms urban planning environmental impact Details such as operation, construction method, fiscal burden is to be decided 4

6 The Benefits Opening Kobe Airport ~ The The opening opening Kobe Kobe Airport Airport stimulated stimulated enterprise enterprise attraction attraction greatly, greatly, city city became became increasingly increasingly convenient convenient Kobe Airport 2.74mln visitors (as FY2006) FY2008:2.58mln visitors Opened in February 2006, recognized as highly convenient Shinkansen FY2007:2.77mln 2.55mln passengers (FY2005) (Bullet Train) passengers The fastest bullet trains all stop at Shin Kobe, station was used by a record number passengers in fiscal 2007 Port Kobe 2.26mln TEU (FY2005) FY2008:2.56mln TEU Rapidly restoring competitiveness port following 140 th anniversary its opening Attracting Attracting Businesses Businesses Achieved a 50ha sell f industrial premises within 3 years (Fiscal ) Number companies in each location Before airport opening Present Port Isl (2nd Stage) Medical Industry Development Techno Logistic Park * Port Isl 2 nd stage includes 135 companies in Medical Industry Development Project * Current number comprises companies launched as October 2009 Or Or Positive Positive Effects Effects The world s fastest super computer is to be installed in Kobe, a city known for excellence convenience as an education research environment In April 2007, 3 new universities were opened on Port Isl, students numbering around 8,000 are now gared on Port Isl Influence on tourism FY2005 FY2008 Hotel occupancy rate 68.4% 75.1% Number Tourists 27.3mln 28.61mln 5

7 Kobe Medical Industry Development Project ~ We We have have created created an an advanced advanced medical medical technology technology development development complex complex on on Port Port Isl. Isl. In In cooperation cooperation with with industrial, industrial, academic academic government government organizations, organizations, we we aim aim to to have have largest largest Bio Bio Cluster Cluster in in Japan Japan to to accumulate accumulate world s world s top top tier tier research research institutions institutions medical-related medical-related companies. companies. Goal:Accumulate 200 medical-related companies by end 2010 Future:Create a medical cluster in City consisting 500 companies (1) Research development medical devices (2) Support clinical research trials medicines (3) Clinical application regenerative medicines Build a new key industry Increase tax revenue employment Improve healthcare stards 6

8 Medical Industry Development Project Progress ~ Research Research Institutions Institutions 11 institutions such as The Institute Biomedical Research Innovation, Translational Research Informatics center make up core Medical Industry Development Project on Port Isl. The following facilities have recently been established: Hyogo University Health Sciences, Kobe Gakuin University Faculty Pharmaceutical Sciences, Konan University s Frontier Institute Biomolecular Engineering Research, Faculty Innovative Research in Science Technology. Also, a Kobe University research institution will be in service from Next Next Generation Generation Super Super Computer Computer The fastest Super Computer in world, created by RIKEN, is being constructed on Port Isl, with partial operation commencing in The Super Computer will be used in many different fields, including; life sciences, nanotechnology, manufacturing, aerospace, space engineering, disaster prevention, nuclear power geo-environmental sciences. Kobe was chosen from 15 sites nationwide owing to excellent; accessibility, education research environments Source: RIKEN Number medicalrelated companies (As 7 th Oct 2009) 158 Researchers employees Approx. 3,000 <Medicine> Daiichi Sankyo, Asubio Pharmaceuticals, Eisai KAN Research Institue, Boehringer Ingelheim Japan, Carna Bioscience <Medical Devices> Panasonic Electric Works, GE Healthcare Japan, Siemens Japan, Sysmex, Fukuda Denshi Mitsubishi Heavy Industry <Regenerative Medicine> Olympus, Terumo, ArBlast <Healthcare> Nichii Gakkan, Noevir, Fujicco, REVE21 7

9 2.Account Results Administrative Fiscal Reform View City from Ikari Mountain 8

10 General Account Results FY2008 ~ Despite Despite difficult difficult economic economic situation, situation, Independent Independent Revenue Revenue Ratio Ratio was was improved improved by by increase increase in in tax tax revenue revenue for for 4 consecutive consecutive years years [Revenue] City Tax Revenue made strong advances with increase in Individual Tax (+1.4bn yen) Property Tax (+1.1bn yen) exceeding decrease in Corporation Tax ( 0.4bn yen). [Expenditure] Matory Spending Ratio was almost unchanged with decrease Payroll fset by increase Public Assistance Total Amount JPY717.9bn Includes JPY0.5bn refinance bonds City bond 40.9 Revenue Revenue Total Amount JPY716.2bn 40.3 Includes JPY2.5bn refinance bonds Total Amount JPY752.7bn 83.3 Includes JPY13.7bn refinance bonds Total Amount JPY711.8bn Expenditure Expenditure Total Amount JPY704.8bn Breakdown ors (264.6bn) Money drawn JPY93.6bn Loan 59.1bn Cost properties etc111.9bn Total Amount JPY752.7bn 600 Granted form Govenment Ors Tax Grants to Local Govenment Or Revenue Investment 62 Debt Expenditure Includes earlyredemption high-yield bonds JPY0.5bn Includes earlyredemption high-yield bonds JPY2.6bn Includes earlyredemption high-yield bonds JPY13.7bn City Tax Changes from FY07 to FY08 City tax increased by JPY2bn y-o-y Independent Revenue 60.8% 58.9% FY % FY2008 FY2009 (Budget) Public Assisstance Payroll Matory 53.2% Spending 53.7% 53.4% FY2007 FY2008 FY2009 (Budget) 9

11 Special Account Results FY2008 ~ 6 6 accounts accounts including including Airport Airport Business Business were were in in surplus, surplus, all all or or businesses businesses were were balanced balanced Public Public Debt Debt Servicing Servicing four four insurance insurance accounts accounts make make up up 90% 90% total total expenditure/transfers expenditure/transfers to to General General Account Account Name Special Account Expenditure FY2009 Budget Transferred to General Account Expenditure FY2008 Result Transferred to General Account Expenditure FY2007 Result Transferred to General Account Public Debt Servicing 4,023 1,276 3,807 1,129 4,494 1,124 National health insurance 1, , , Healthcare for elderly , Care insurance Geriatric care for latter-stage elderly Market Business Meat center Workers' benefit Agricultural insurance Benefit/support for farless families/widows L acquisition for future development Parking business Rural community sewerage Seacoast environment maintenance Urban area redevelopment City-provided housing Airport maintenance Total 7,401 1,909 7,226 1,728 9,007 1,695 (JPY100mln) Account Criteria Airport Maintenance Business <Operation> Maintenance Kobe Airport <Results> Although ling fees decreased due to partial suspension Skymark s Haneda flights (one flight per day suspended in June, two flights per day suspended in July) JAL Kagoshima flights (suspended since February), cost reduction ensured a prit 1.73mn yen <H1 FY2009 occupancy rate Kobe Airport > Total : 70.7% (FY2007:67.0% FY2008:67.8%) By line : New-Chitose 73.5%, Haneda 71.4%, Kumamoto 44.5% Naha 67.6%, Ishigaki 69.1% In addition to General Accounts 17 Special Accounts 8 Public Enterprise Accounts have been set up. *There are 7 Public Enterprise Accounts since FY2009 Special Accounts are established under Local Autonomy Law in order to meet need for accounting for specific revenues expenditures (those aside from general revenues expenditures under General Accounts) for purpose carrying out specific business or orwise financing specific expenses with specific revenue Public Enterprise Accounts are for business that are managed by independent prit systems (excluding general account expenditures), which report in business accounting stards under Local Public Enterprise Law 10

12 Public Enterprise Account Results FY2008 ~ 7 accounts accounts in in surplus surplus due due to to cost cost reductions reductions Improvements Improvements were were made made in in deficit deficit accounts accounts Hospital Hospital Service Service Rapid Rapid Transit Transit Railway Railway Hospital Service Account <Operation> Operating Kobe City Medical Center General Hospital West Hospital Became a local incorporated administrative agency on April 2009, splitting from City s organization <Results> Management improvements, including increase unit price medical consultations cost reduction materials, resulted as a surplus for first time in 5 years Aiming to balance results under New Corporate Mid Term Plan (valid until 2013) Rapid Transit Railway Account <Operation> Operating Seishin Yamate-line (since 1987) Kaigan-line (since July 2001) <Results> Increase passengers capex reduction improved both lines results (Seishin Yamate-line:4 consecutive years, Kaigan-line: from its opening) Steady surplus Seishin Yamate-line exceeded deficit relatively new Kaigan-line, mainly due to ir capital cost burden, refore total results have improved. Account Operation FY2009 P/L (Budget) FY2008 P/L (Result) FY2007 P/L (Result) Sewage System Account Sewage disposals Port Harbor Account Urban Development Account Management operation Port Kobe Development allotment sales reresidential real estate Hospital Service Account Operation civilian hospitals Automotive Business Account City bus services Rapid Transit Railway Account Subway services Water works Account Waterworks Industrial Waterworks Account Waterworks for companies Total Municipal Subway Kaigan-line Yumekamome Municipal Subways Results FY2007 result FY2008 result Seishi Yamate Seishin Yamate -line -line +JPY3.8bn +JPY5.1bn Kaigan-line Kaigan-line JPY6.8bn JPY6.5bn (JPY100mln) 11

13 Status Four Fiscal Indicators ~ Kobe Kobe City s City s Fiscal Fiscal Indicators st st well well below below Early Early Warning Limit Limit Real Real Deficit Deficit Ratio Ratio (General (General Account Account / / Consolidated) Consolidated) General Accounts have remained in line with existing balance ratio Local public enterprises negative net worth are included in Consolidated real deficit ratio Not applicable for both General Accounts / Consolidated (No Deficit) Account Operations Deficit/ Surplus General Account Includes housing, airport +2 Special Accounts Nursing-care insurance etc +30 Sewage System Account Sewage disposals +186 Port Harbor Account Urban Development Account Management operation Port Kobe Development allotment sales residential real estates Hospital Service Account Operation civilian hospitals 28 Automotive public enterprise account City bus services (JPY100mln) Rapid Transit Railway Account Subway services - 12 Waterworks Account Waterworks +66 Industrial Waterworks Account Waterworks for companies +8 Since Waterworks, Port Harbor Account surplus exceeds Hospital Service / Automotive Public Enterprise Account deficit, no consolidated negative net worth is recognized Decline in outsting city bonds Debt Service Ratio contributed to better Urban Planning Tax was appropriated for debt expenditure deductions from FY2007 Transferred to Informed & Consult Status (Below18%) FY2006 FY2007 FY years Average (%) FY FY2006 Real Real Debt Debt Payment Payment Ratio Ratio By reducing outsting city bonds, in line with our Fiscal Reform Plan, Real Debt Payment Ratio had strongly improved! ( 2% year-on-year) Continuous Improvement in Real Debt Payment Ratio FY2007 FY FY2009 FY2010 FY2011 FY2012 Old calculation New calculation FY2013 FY

14 Four Fiscal Indicators Consultation System ~ Under new Law Relating to Fiscal Consolidation Local Governments, four indicators give a broader faster insight local governments fiscal conditions To secure fiscal soundness, local governments with Real Deficit Ratios over 18% require prior approval from Ministry Internal Affairs Communication Fiscal Indicators Definition Early Warning Limit Real Deficit Ratio Ratio deficit (including general account) to local government s stard fiscal scale Prefectures: 3.75% Municipalities: % (Subject to fiscal size) Reconstruction Limit Prefectures: 5% Municipalities: 20% Consolidated Real Deficit Ratio Consolidated deficit all accounts to local government's stard fiscal scale Prefectures: 8.75% Municipalities: % (Subject to fiscal size) Prefectures: 15% Municipalities: 30% Real Debt Payment Ratio Future Burden Ratio Debt payments by general revenue to local government's stard fiscal scale Outsting debt (including future burdens public enterprises, government affiliates) to local government's stard fiscal scale Consultation System for Issuing Bonds 25% 25% Prefectures/designated cities: 400% Municipalities: 350% Above 25%: Limited Issuance with Approval Bonds/Loans issuance by local governments with Real Deficit Ratios over 25%, are limited or rejected by MIC (Ministry Internal Affairs Communication) subject to certain projects Above 18%: Issuance with Approval Bonds/Loans issuance by local governments with Real Deficit Ratios over 18%, are required to submit Debt Management Plan to be approved under general rules Below 18% : Inform Consult Status Bonds/Loans issuance by local governments below 18% Real Deficit Ratio are expected to obtain consent under general rules from MIC. However, y are also able to issue bonds without consent, given prior report to Assembly 13

15 Status Four Fiscal Indicators ~ Public Enterprises 18.3% Debt Burden 1.7% Future burden for Local Government Retirement Benefits 7.0% Indemnity 1.2% Bonds Outsting 71.8% Future Future Burden Burden Ratio Ratio 176.6% (Well under Early Warning Limit 400%) Breakdown Future burden Bonds outsting will decrease Reasons behind future burden ratio being lower than current Debt Service Ratio (current debt outsting / annual revenue) Bonds related to earthquake restoration are covered by tax reimbursed from government (Therefore financial strength indicator ratio recurring prit are deteriorating) Major public enterprises, such as waterworks port harbor account have performed well Under administrative fiscal reform guidelines, reorganization affiliated entities were implemented Public Enterprise Burden (JPYbn) Market business 1.2 Port Harbor 74.9 Meat center 3.8 Urban Development 0 Parking business 0.8 Hospitals 11 Rural community sewerage 12 Automotives 0.8 Seacoast Rapid Transit environment 2.6 Railway maintenance 69.6 Urban area redevelopment 76.1 Waterworks 0.2 Sewerage 63.5 Total *Tax grant revenues will be deducted from total in actual future burden Compensation Burden for losses Third Sector (JPYbn) Roads Corporation 0 L Development Public Corporation University Foreign Studies Foundation for Biomedical Research Innovation Zaitaku Care Institute Housing Supply Corporation Since FY1997, primary balance has continued to be positive se administrative fiscal reform implementations are reflected in fiscal indicators Kobe New Transit 0.6 Air Terminal 0.3 Kobe Rapid Transit Railway Social Welfare Promotion Association 0.9 Port Terminal Corporation Total 18.3 *Multiplying outsting amount compensation for each organization by multiple determined by each financial statement *Additionally, compensation burden for directed credit program is JPY2.7bn 14

16 Post-quake Administrative Fiscal Reform Achievements ~ Three-Year Urgent Plan for Kobe City to Improve its Financial Status (FY ) Renewed Plan for Improving Administration Finance (FY ) Budget deficit per fiscal year: Improved by around JPY216bn Headcount: Reduced by 2,185 Implementation Administrative Policy (FY2004-FY2010) Reduce outsting balance City bonds Reduce headcount Assessment administrative operations outsource certain operations to private sectors Management reforms universities public enterprises FY2004-Present FY2004-Present Outsting Balance City Bonds: Reduced JPY553.4bn Headcount(including organizations):reduced by 2,837 Budget deficit per fiscal year: Improved by around JPY64bn Post-quake Post-quake Administrative Administrative Fiscal Fiscal Reform Reform Achievements Achievements (FY1996-FY2009) (FY1996-FY2009) Budget Budget deficit deficit per per fiscal fiscal year year Improved Improved by by around around JPY280bn JPY280bn Headcount Headcount Reduced Reduced by by 5,022 5,022 Outsting Outsting Balance Balance City City Bonds Bonds Reduced Reduced by by JPY553.4bn JPY553.4bn Steadily carrying out out furr furr reforms targeted towards FY

17 Acceleration Furr Reform ~ Furr Reduction outsting City Bonds ahead reform plan In In past past 6 6 years years (FY ) (FY ) outsting outsting balance balance City City Bonds Bonds has has been been reduced reduced by by JPY553.4bn JPY553.4bn Initial Initial target target reducing reducing JPY500bn JPY500bn City City bonds bonds was was accomplished accomplished two two years years ahead ahead schedule schedule *Bond fund savings exempted from total outsting bonds On On top top reform reform target target JPY500bn, JPY500bn, furr furr reduction reduction approx. approx. JPY100bn JPY100bn was was accomplished accomplished (JPYbn) 1,600 1,400 1,200 1,000 1,501 1,477 1,447 In FY2006, City bonds related to Hanshin-Awaji earthquake recovery fund lending had been redeemed. Thus, outsting balance bonds had significantly declined by JPY345.6bn 1, Approx. JPY1trn earthquake 500 related bonds 400 were issued 300 1, Outsting Balance City bonds related to earthquake damage Impact earthquake has been gradually decreasing 893 Approx (Modified Budget) Amount reduced (FY) 16

18 Primary Balance Trends ~ We We carefully carefully manage manage new new borrowings borrowings in in order order to to keep keep Primary Primary Balance Balance in in surplus surplus (Surplus (Surplus for for consecutive consecutive years years since since 1997) 1997) We We maintain maintain our our ranking ranking as as one one best best designated designated cities cities in in terms terms Primary Primary Balance Balance dependence dependence on on bonds bonds Primary Balance is difference between expenditure (excl. debt interest/redemption payment) revenue (excl. newly issued debt). This is one fiscal indicators. A surplus in Primary Balance shows that 1 year revenue covers 1 year expenditure, thus leaving no burden for next generation (JPYbn) Trend in Primary Balance Trend in Primary Balance Primary Balance constantly in surplus since FY1997 Based on General Accounts After budget FY1999, issuance unsubsidized general public works bonds to local government-financed businesses was suspended. This in turn reduces public investment leads to a reduction in outsting balance city bonds <Indicator comparison with or designated cities> Actual Debt Payment Ratio (3-years average) Primary Balance/ Stard fiscal size (Based on General Accounts) Outsting debt/ number civilian (Based on General Accounts) Dependence on bond issuance (Based on General Accounts) Ratio (%) Rank 14 th 12 th Ratio (%) Rank 1 st 1 st Amount outsting (thouss yen) Rank 9 th 9 th Ratio (%) Rank 2 nd 2 nd Ranked among 17 cities in 2007, 18 cities in

19 Steady Reduction Outsting Bonds ~ Outsting Outsting debt debt all all accounts accounts steadily steadily reducing reducing after after peak peak FY2002 FY2002 Outsting Debts Trends (All Accounts) (JPYbn) 3,500 3,000 2, ,179 1, , , Business account Special account General account ,000 1,170 1,141 1,117 1,091 1, , ,000 1,586 1,578 1,551 1, ,120 1,084 1,050 1,017 1,

20 Management Reform Extra-Governmental Organization ~ After earthquake, we worked on reforming extra-governmental organizations succeeded in reducing number organizations in deficit Radical reform to accommodate social environment changes was effected, 18 organizations were abolished through merger abolition Kobe Extra-Governmental Organization Reform Committee was established reform plans have been started Achievements <Introducing External Evaluation> Established Extra-governmental Organization Evaluating Committee in Nov 2002 <Realignment Organization> Conducted mergers abolished organizations by privatizing or reviewing business based on external evaluation Kaijo Access Co., Ltd FY 1995 FY 2008 Organizations in deficit Total number organizations Kobe Minorino Corporation <Operation> Marine transportation between Kobe Airport Kansai International Airport 29 minutes by high-speed ferry <Results> The deficit was greatly improved by an increase in passenger numbers cost reductions, although cost fuel was rising FY2007 JPY265mln FY2008 JPY6mln We aim for balanced results in FY2009 <Passengers> (In thouss) FY2007 FY2008 Passengers <Operation> Production sales Kobe Wine, management recreational sites including Rokkosan Pasture Sea Fishing Park, as well as enhancing agriculture fisheries <Results> Retained earnings increased driven by improvement wine business FY2007 6mln FY mln yen Exping sales channel through internet etc. <Bottle Sales> (In thouss) FY2007 FY2008 Sales

21 3.Kobe City Funding Plan Departure from Kobe Airport (Aug 2007) 20

22 Improved Credit Rating Financial Ranking ~ Efforts Efforts in in fiscal fiscal reform reform have have led led to to improvements improvements in in Credit Credit Rating Rating Financial Financial Ranking Ranking In Jan. 2007, we were first to obtain an AA (Stable) Credit Rating among local governments which issue municipal bonds. Reform Public Enterprise Accounts Extra-Government Organizations, which are observed closely by ratings agencies, will continue. Under newest objective indicator, Financial Ranking, we obtained rank 2. (1: best, 4: worst) Before 2006:op Rating (Unsolicited Rating) AA ー Has a high level debt following Has a high level debt following effects earthquake effects earthquake Rating criteria Changes in R&I Credit Ranking Jan 2007:Rating upon Request AA(stable) AA(stable) The City s fiscal position is The City s fiscal position is showing visible improvement showing visible improvement May 2009:Regular Rating Affirmed AA(stable) AA(stable) Financial positions have Financial positions have favorably recovered favorably recovered Fiscal Balance/Debt Levels Economic Strength Status Public Enterprises Course Fiscal Policy Debt level is recovering to a level comparable to that or designated cities financial balance is eminently good Projects such as Medical Industry Development Project are working successfully so far while adapting to changes in industrial environment, thus independent revenue ratio has recovered to average level all designated cities Public Enterprise Accounts are kept in surplus. Close attention shall be paid to collection funds Under leadership mayor Tatsuo Yada, who has stated his commitment to maintaining primary balance surplus has made known his strong determination to reduce outsting municipal debt, R&I believes Kobe City will continue to improve city s financial condition while it implements economic measures 21

23 Improved Credit Rating Financial Ranking (cont.) ~ Improvement Financial Rankings New Financial Rankings give a subjective assessment a municipality s finances based on ir results, while rating agencies include quantitative factors, such as interviews with senior leaders. The New Financial Ranking, which was first introduced in Dec.2008, exped factors evaluated to include public enterprises Joint Third Sectors Old Rank New Rank Notch Kobe City Ⅳ 2 +2 Sapporo City Ⅱ 2 - Sendai City Ⅱ 2 - Chiba City Ⅲ 4 1 Tokyo Metropolitan Government Ⅰ 1 - Kawasaki City Ⅱ 1 +1 Yokohama City Ⅰ 1 - Nagoya City Ⅱ 2 - Kyoto City Ⅲ 4 1 Osaka City Ⅴ 4 +1 Hiroshima City Ⅲ 4 1 Kitakyushu City Ⅳ 4 - Fukuoka City Ⅳ 4 - Kobe City is only city which improved its Financial Ranking by 2 notches from Sep 2005 to Jan 2009 (among all prefectures, only Nagano Prefecture improved by 2 notches) R&I Rating Information Report published in August Through its Administrative Fiscal Reform, Kobe City outplays its peers. Credit improved promptly its current level is by no means inferior to rating AA. Through a series well-planned administrative fiscal reforms which City initiated aggressively, its primary balance has been kept in black since FY1997 its fiscal balance such as adjusted single fiscal year balance ratio is well above average all prefectures designated cities. The debt repayment period is 7.8 years, which is almost same as average designated cities (7.6 years) on an Ordinary Account basis. Under leadership mayor Tatsuo Yada, who has stated his commitment to maintaining primary balance surplus has made known his strong determination to reduce outsting municipal debt, R&I believes Kobe City will probably continue to improve City s financial condition at earlier pace than or designated cities while it implements economic measures. R&I expects Kobe City to continue to improve ir financial condition steadily. Debt Repayment Period (substantial debt outsting/solvency) Criteria which is used in financial evaluation by Ministry Finance in ratings R&I FY2003 Results FY2009 Results Kobe City Financial improvement has been proved by objective criterion 22

24 Funding Plans ~ ~ Kobe City will maintain close dialogue with investors in its funding practice ~ Since Since FY2008 FY2008 all all transactions transactions are are structured structured issued issued through through Syndicated Syndicated Deals Deals To To respond respond to to investor investor dem/communicate with with market market to to achieve achieve fair fair pricing pricing Group Group presentations presentations one-on-one one-on-one meetings meetings held held proactively proactively FY2009 Issuing Schedule Added Unit will be used to increase issue size. Timing is subject to trends in interest rates /or investor dem Plan to issue approx. JPY30bn conventionally JPY24bn highyielding refinance bonds in private placement format FY2008 Issuance Results 20yr bond had used 10bn Added Unit to respond to investor dem increased issue size to 20bn on Apr. Also issued 10yr bond in Jun 30yr bond in Sep We started to issue bonds at par (coupon calculated to three decimal places) from 30yr bond issued in Sep (JPYbn) Apr May Jun Jul Aug Sep Oct Nov Dec Jan Fec Mar Total yr Bond 10 10yr Bond 20 20yr Bond 20 30yr Bond 10 Added Unit 20 Joint Local Gov't Bond Total 120 Tenor Coupon (%) Offer price Issue Amount (JPYbn) Issue Date Pricing Date 5yr th Dec 9 th Dec 10yr th Jun 3 rd Jun 20yr th Apr 17 th Apr 30yr th Sep 11 th Sep 23

25 18m tall statue Gigantor built in Shin Nagata, Kobe Completed For any inquiries, please contact: Bond Finance Section, Finance Department, Administration Finance Bureau, Kobe City Phone: Kano-cho, Chuo-ku, Kobe City (C)HIKARIPURO/KOBE TETSUJIN PROJECT 有馬温泉

26 Appendix City Tax Revenue Expenditure ~ 330 (JPYbn) 300 City Tax Revenue (JPYbn) Expenditure By Items Break down FY2007 FY2008 Change Inhabitant Tax (Individual) Inhabitant Tax (Corporations) (0.4) Property Tax City Planning Tax Increase for consecutive years (93.6%) Or (0.5) (93.2%) Total (93.3%) (95.5%) (93.4%) (93.8%) (95.4%) (95.2%) (94.2%) (94.4%) (94.2%) 250.6(94.3%) ( )City tax revenue ratio FY FY FY Payroll Public Assistance Debt Expenditure Investment Matory Expense General Account Expenditure FY2007 FY2007 Change (7.0) Payroll (5.6) Public Assistane Debt Expenditure Total (1.8) (Budget) Appendix General Account (Budget) *Debt expenditure in FY2005 does not include redemption amount City bonds (JPY300bn) relating to investment/loan to recovery fund H21 Budget (FY)

27 Appendix Fiscal Indicators Each City ~ Ordinary Balance Ratio Consolidated Real Financial Capability Index Real Debt Payment Ratio Future Burden Ratio Deficit Ratio 3 year Average 3 year Average,( ) shows change from last FY ( ) shows change from last FY Hamamatsu City 86.1 Niigata City 88.0 Saitama City 88.3 Shizuoka City 90.9 Fukuoka City 93.1 Okayama City 93.6 Kawasaki City 94.2 Sakai City 94.6 Yokohama City 94.7 Hiroshima City 96.2 Chiba City 96.3 Sendai City 96.7 Nagoya City 96.8 Kyoto City 97.0 Kobe City 97.3 Sapporo City 99.0 Osaka City 99.2 Kitakyushu City 99.5 Average 94.5 Kawasaki City 1.08 Nagoya City Saitama City Chiba City Yokohama City Osaka City Hamamatsu City Shizuoka City Sendai City Fukuoka City Sakai City Hiroshima City Okayama City Kyoto City Kobe City Niigata City Kitakyushu City Sapporo City Average 0.87 Kobe City single year Sapporo City - Sendai City - Niigata City - Saitama City - Chiba City - Kawasaki City - Yokohama City - Shizuoka City - Hamamatsu City - Nagoya City - Osaka City - Sakai City - Kobe City - Hiroshima City - Kitakyushu City - Fukuoka City - Kyoto City 8.63 Average - Sakai City Saitama City Kitakyushu City Osaka City 6.9( 0.2) 7.9( 0.4) 8.0(+1.7) 10.7( 1.1) Sapporo City 10.8(±0.0) Niigata City Kyoto City Sendai City Shizuoka City Hamamatsu City Nagoya City Kobe City Kawasaki City Hiroshima City 11.2( 0.3) 12.0( 0.9) 12.2( 1.4) 12.2(+1.0) 12.8( 0.1) 13.5( 0.6) 15.1( 2.0) 15.6( 0.7) 15.6( 0.5) Okayama City 17.6( - ) Fukuoka City Chiba City Yokohama City Weighted Average 17.8( 0.6) 20.1(+0.5) 20.2( 0.4) 13.8( 0.4) Kobe City single year 14.3 Saitama City Sakai City Hamamatsu City Shizuoka City Kawasaki City Niigata City Sapporo City 60.6( 11.5) 81.1(+10.4) 89.9( 34.4) 116.7(+8.5) 133.9( 13.4) 136.2( 0.8) 147.2( 9.7) Okayama City 154.0( - ) Sendai City Kitakyushu City Kobe City Nagoya City Kyoto City Osaka City Fukuoka City Hiroshima City Yokohama City Chiba City Weighted Average 169.8(+10.4) 171.8(+7.9) 176.6( 0.9) 224.9( 5.5) 240.0(+5.4) 245.7( 18.1) 254.0( 5.6) 256.4(+0.6) 261.1( 31.6) 309.6( 2.0) 198.4( 10.3) Appendix-2

28 System Local Authority Bonds (LAB) in Japan Mechanism Principal & Interest (P&I) (P&I) repayment assured Securing financial resources for repayment P&I Obtain local tax revenue based on right taxation Budget expenditure for public bonds (for P&I repayment) as a part annual expenditure in budget proposals Obtain a level local allocation taxes enough to match annual expenditure including expenditure for public bonds with revenue Include a part LAB P&I repayment fund into stard financial needs in calculation local allocation taxes The national government secures financial resources for repayment LAB P&I Bond issuance permission system as a prompt corrective action Restriction issuance on local authorities with real debt expenditure ratio 18% Restriction issuance on local authorities with deficit The system aims to avoid problems in repayment LAB P&I by each local government authority Action to take if real deficit exceeds a prescribed level=financial Reconstruction Financial reconstruction under state control Consultation with consent national government is required on it Annual budget must be adjusted in accordance with reconstruction plan Repayment is assured because national government will be involved in budget-making Appedix-3

29 Tax-Exemption for interest on transfer local authority bonds Outline Outline tax-exemption for for interest interest on on LAB LAB payable to to non-residents, etc. etc. The following revisions are applicable to interest on transfer LAB payable after January 1, For interest on transfer LAB payable to non-residents or foreign legal entities, income tax or corporate tax shall not be imposed if application tax-exemption application submitted for withholding exemption as in case transfer national bonds Preferential measures shall be prescribed for those already submitted application tax-exemption for interest on transfer national bonds y should automatically obtain tax-exemption for interest on transfer LAB under certain conditions Transfer local authority Bonds A new system transfer LAB: By book-entry increase/reduction balance into ledger transfer account in transfer institution or account management institution (completely paperless), such bonds shall be treated as transfer LAB As for general bond transfer system, Japan Securities Depository Center shall be transfer institution system starts on January 10, 2006 As for new issuance transfer bonds transfer outsting bonds to transfer bonds, consent issuers for transfer institutions are required. However, almost all prefectural governments, ordinance-designated cities municipal governments, who issued bonds, have already given consent Appedix-4