#1Shizuoka Prefecture Investor Presentation October 2008#2Table of Contents 1. Overview of Shizuoka 3. Fiscal Position (1) Population and Economic Scale 3 (1) Fiscal Budget 7 (2) Industrial and Economic Status 4 (2) Fiscal Position (Revenues) 8 (3) Fiscal Position (Expenditures) 9 2. Operations of the Prefectural Government (4) Medium-term Fiscal Outlook 10 (1) NPM Vision for the Prefectural 5 Government and Industry (2) Building a Transportation Infrastructure 6 4. Bond Issuances (1) Prefectural Bond Issuance Plan 11 (2) Management of Prefectural Bonds 12. 2#31-(1) Population and Economic Scale Home to 3% of National Population and Economy Mt. Fuji (Thousands) 1,. Overview of Shizuoka Population Shizuoka Prefecture 4,000 3,800 3,738 3,767 3,792 3,801 3,671 3,575 3,600- 3,447 3,400-3,309 3,200 3,000 1975 1980 1985 1990 1995 2000 2005 2007 (Year) Shizuoka City Income per Resident (Yen thousands) (Rank) 3,500 3rd Resident Income Rank 3,400 3 Nagoya 6th 3,300 5 Tokyo 3,344 3,200 7 Osaka 9th 3,227 3,100 9 3,117 3,000 11 1993 1998 2005 (FY) ➤ Population 3.80 million (2007) (Rank in Japan: 10) Shizuoka Area 7329.15 km² (2007) (Rank in Japan: 12) Pacific Pref. Ocean Gross Production ¥16,415.1 bn (FY2005) (Rank in Japan: 10) Income per resident ¥3,344,000 (FY2005) (Rank in Japan: 3) 3#4Area (ha) 140 124 120 100 1-(2) Industrial and Economic Status 1,. Overview of Shizuoka Shizuoka Prefecture A prefecture with one of Japan's strongest economic foundations: a manufacture-driven prefecture which drives the national economy Corporate Industrial Locations (No.) (No.) 14 140 120 100 Area -Locations Total Revenue from Manufactured Products (based on shipments) ◆¥18,234.7 billion Rank: 3rd in Japan (2006) Well-balanced industrial composition Rank 1 %% 80 80 60 Rank 3 60 Other Rank 3 40 40 Rank 1 IT/telecom 20 Rank 1 Rank 1 20 equipment 22.3% 20 Rank 7 30.8% 0 0 ¥18, 2002 2003 2004 2005 2006 2007 4.0% Transportation equipment ◇ Number of newly settled foreign companies Pulp, paper Rank 1 234.7 bn Rank 2 5.0% Rank 3 (1989 2006 accumulated total) 5.6% 10.6% Foods Rank 8 Segment National Shizuoka Share Rank 6.7% 7.2% 7.8% Electrical devices Rank 2 Total 32,284 1,126 3.5% 8th Beverages, tobacco, fodder Rank 1 Foreign Company 235 24 10.2% 1st General equipment Rank 7 Chemicals Rank 5 (Area of site acquired more than 1000m², foreign capital ratio more than 50%) Source: Ministry of Economy, Trade and Industry "Survey on Factory Location" ◇ Why companies choose Shizuoka Favorable access (Tomei Express, Shinkansen, key ports) ◇ Shipment of manufactured goods (Units: 100 million yen) Aggregation of related companies (Local corporations with advanced technology) FY Shizuoka 2002 2003 2004 161,851 159,638 166,998 2005 2006 173,227 182,347 Share 6.0% 5.8% 5.9% 5.9% 5.8% Low land prices, warm climate, rich in water resources (Rank) (3rd) (3rd) (3rd) (3rd) (3rd) 4#52. Operations of the Prefectural Government 2-(1) NPM Vision for the Prefectural Government and Industry Aiming to become #1 in governmental reform! Shizuoka Prefecture 152 Rank: 4 (FY2007) Effects of 2007 Efforts -Efficient organizational management~ Residents per municipal employee -Prefectural facilities managed by the private sector- 52.5% % of new designated managers from the private sector -Increase in administrative productivity~ Number of projects in the "one-reform-per-person movement" (for administrative improvement) Rank: 2 (FY2004-2007) 37,350 Rank: 1 (FY2005-2007) Saved ¥3.1 billion in administrative overhead Economic impact of ¥13.5 billion Saved 87,000 hours Shizuoka's New Industrial Clusters ~New Industrial Vision towards "Higher Value-added”- Western Region Aggregation of manufacturers Piano shipments: Rank 1 Transportation equipment shipments: Rank 2 Shizuoka University (Faculty of Engineering), Hamamatsu University School of Medicine, etc. Central Region Well-developed Foods Industry Shipment of manufactured foods :Rank 8 Prefectural university (Faculty of Pharmacology), Shizuoka University (Faculty of Agriculture), etc. Eastern Region Aggregation of pharmaceutical and West medical equipment companies Production of pharmaceuticals: Rank 1 Shizuoka Cancer Center & Research Institute Optical/electronic technology- related companies aggregation project Foods/pharmaceuticals/ chemical product companies aggregation project Advanced health industry aggregation project at the foot of Mt. Fuji Central East Shizuoka Cancer Center LO 5#62. Operations of the Prefectural Government 2-(2) Building a Transportation Infrastructure A Transportation Infrastructure to Support the Next Generation Mr. Fuji Shizuoka Airport Hamamatsu-shi~ ■ Launch planned for March 2009 ■ Expected destinations (as of August 2008) San-en Nanshin Expressway lida-shi, Nagano Pref. Partially opened New Tomei Expressway Domestic: Sapporo, Komatsu, Fukuoka, Kumamoto, Kagoshima, Naha Overseas: Seoul Chubu-Odan Expressway Shizuoka-shi-Saku-shi, Nagano Pref. Partial opening planned for 2017 A Tomei Expressway Tokaido Shinkansen Shizuoka Prefecture Izu Jukan Expressway Numazu-shi-Shimoda-shi ■Partially opened Tagonoura Port Main port for Higashi Suruga Bayside Industrial District Fujikawa Bridge (Courtesy of central NEXCO) Shared role with Tomei Expwy Emergency transportation route in times of disaster Partial opening planned for 2012 Omaezaki Port International container terminal Regular container routes: 4 Southeast Asia, China, Korea Achieved 50,000 TEU in handled containers in only 4 years Lowest harbor charge in Japan Port of Shimizu International container terminal Regular container routes: 24 N. America, Europe, Southeast Asia, etc. Handled over 500,000 TEU of containers for 4 consecutive years: 7th in Japan Port entry/exit and cargo handling fully supported 24 hours a day, 365 days per year Lowest harbor charge in Japan 6#73-(1) Fiscal Budget Shizuoka Prefecture has a general account, 14 special accounts, and 5 corporate accounts The budget for the general account amounts to ¥1,129.8 billion 3. Fiscal Position Shizuoka Prefecture Summary of Shizuoka's Corporate Initial FY2008 Budget Accounts Beginning Category of FY2008 Beginning of FY2007 (Units: Yen millions, %) Growth (Units: Yen millions) 107,031 Change Rate General Account 1,129,800 1,139,500 (9,700) (0.9) Special Accounts Mandatory Exp 627,588 624,043 3,545 0.6 438,339 Investment Exp General 208,046 211,386 (3,340) (1.6) Special Accounts 438,339 379,680 58,659 15.4 Account 1,129,800 Corporate Accounts 107,031 108,107 (1,076) (1.0) Total 1,675,170 1,627,287 47,883 2.9 7#83. Fiscal Position 3-(2) Fiscal Position (Revenues) Prefectural tax increased for the 5th consecutive year, and accounted for 49.6% of total revenue in the FY2007 financial report Issuance of prefectural bonds has been kept to a minimum since FY2000 (100 million yen) General Account Revenues 15,000 10,000 19.6% 5,000 14,448 (%) 60 50.9% 49.6% 11,298 11,428 40 40 32.0% Prefectural tax increased for the 5th consecutive year Shizuoka Prefecture Other Prefectural Bonds (extraordinary) Prefectural Bonds (ordinary) | Prefectural Tax Prefectural Tax (% of total) 5,750 20 5,669 Prefectural Bonds (% of total) 11.5% 12.5% Prefectural bond issuances kept to a minimum (since FY2000) 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 (FY) *Initial budget used for FY2008 8#93-(3) Fiscal Position (Expenditures) Expenditures have decreased after peaking out in FY1998 3. Fiscal Position Investment expenses have decreased after peaking out in FY1996 Mandatory expenses have plateaued at 53-56% of total expenditures since FY2002 General Account Expenditures 15,000 10,000 5,000 0 39.7% 37.6% 4,964 Shizuoka Prefecture (%) Mandatory expenses 60 54.9%55.6% have plateaued 11,298 11,324 Other Mandatory 40 Expenses 18.6% 18.1% 20 20 Investment Expenses -Investment Expenses (% of total) - Mandatory Expenses (% of total) 2,106 2,051 0 Investments remain suppressed 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 *Initial budget used for FY2008 9#103-(4) Medium-term Fiscal Outlook (%) 96 3. Fiscal Position Shizuoka Prefecture Promoting reforms since FY2000 based on the 3 financial health indicators 3 indicators of fiscal health 1) Current account ratio < 90% 2) Limit bond issuance restriction ratio to 15% 3) Prefectural bond balance < \2 trillion 1) Current account ratio: significantly impacted by national policies (fiscal flexibility) (flow indicator) (stock indicator) 2) Bond issuance restriction ratio (LHS): maintain target range 3) Prefectural bond balance (RHS): maintain target range (balance excludes extraordinary bonds) 17% 93.6 93.7 94.0 93.2 15% Target Level 91.9 (100 mm yen) 25,000 <Medium-term outlook> Target Level 20,000 90 00 87.3 93.0 93.3 93.5 13% 90.8 90.9 11% <Medium-term outlook> 9% 15,000 10,000 5,000 84 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 7% 0 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 Actual Forecasts Prefectural Bonds (extraordinary bonds) Issuance Restriction Ratio (Actual) *Extraordinary bonds: Regional bonds issued in place of local tax grants, in response to the lack of national funding since FY2001. Redemption of principal and interest in later years to be covered by tax grants 10 O Prefectural Bonds (excl. extraordinary bonds) Issuance Restriction Ratio (Forecast)#114-(1) Prefectural Bond Issuance Plan Funds raised mainly from publicly issued bonds FY2008 Public Bond Issuance Plan: ¥220 billion (Individual: ¥160 billion; Joint: ¥60 billion) 4. Bond Issuances Shizuoka Prefecture (Units: 100 million yen) (100 million yen) 2,500 Issuance May~ Oct Nov Mar Total Joint 10-year 5-year 20-year 30-year Month Sep 30-year 20-year bonds bonds 2,000 1,500 1,000 Individual Issuances Publicly Issued Bonds 5-year 100 100 100 300 10-year 300 200 200 100 800 20-year 200 100 300 30-year 200 200 Subtotal 1,600 Joint Issuances (10-year) 600 (¥5 billion per month) 500 Total 2,200 (82.0%) Other 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Total 484 2,684 (FY) 11#124-(2) Management of Prefectural Bonds Appropriate Sinking Fund Accumulation Rule Lump-sum payment at maturity =accumulation of 3.7% (1/27th) of total prefectural bond issuance after 3-year deferral period *No borrowings from sinking fund to date 4. Bond Issuances Shizuoka Prefecture (100 million yen) Sinking Fund Balance (Lump Sum) 2,500 2,000 1,500 2,109 2,155 1,832 1,641 1,442 1,226 1,047 869 1,000 644 328 500 Credit Ratings (Coverage initiated on 9/6/2007) Moody's Investors Service Rating and Investment Information, Inc. (R&I) 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 * FY2008 figure is a forecasted figure (FY) Aa1 / Stable (Foreign denominated: Aaa) Comments Shizuoka's administrative and fiscal operations are believed to be strong. The prefecture commenced New Public Management (NPM) at an early stage and has been promoting improvement efforts by all personnel in the "one-reform-per- person movement" for almost 10 years. Shizuoka is currently implementing reforms based on the "focused reform plan." AA+ / Stable Shizuoka achieved a AA+ rating based on a high evaluation of the solid economic foundation and steady progress in restoring fiscal health based on the "focused reform plan" 12#13Contact: Thank you Shizuoka Prefecture Fiscal Policy Office, General Affairs Div., Shizuoka Pref. 9-6 Outemachi, Aoi-ku, Shizuoka-shi, Shizuoka Pref. 420-8601 TEL: 054-221-2034 FAX: 054-221-2750 E-mail: [email protected] URL (Shizuoka Prefecture IR Website): http://www.pref.shizuoka p/a foreign/english/index.html#14Fiscal Conditions at Shizuoka Prefecture 富国有徳 創知協働 しずおかの挑戦。 October 2008 Shizuoka Prefecture#15<Fiscal Position> Table of Contents FY2007 General Account: Revenues FY2007 General Account: Expenditures (Analytical Breakdown) General Account: Trends in Reported Revenues General Account: Trends in Reported Expenditures General Account: Trends in Reported Income FY2007: Status of Special Account FY2007: Status of Public Service Account FY2007 General Account: Revenue Budget 1 2345 6 7 8 FY2008 General Account: Expenditure Budget (Analytical Breakdown) 9 <Fiscal Consolidation> Medium-term Fiscal Outlook 10-11 Trends in Fiscal Standards (Ordinary Account) 12-13 <Prefectural Bonds> Trends in Prefectural Bond Balance, Prefectural Bond Issuances and Bond Expenditul Issuance Trends of Publicly Issued Shizuoka Prefectural Bonds 14 15 Sinking Fund Accumulation Status 16#16Category FY2007 General Account: Revenues FY2007 FY2006 Change % Growth (Units: Yen millions, %) % of Total FY2007 FY2006 Reported Revenues 1,142,810 1,134,236 8,574 0.8 100.0 100.0 Prefectural Tax 566,905 488,150 78,755 16.1 49.6 43.0 Local Consumption Tax Settlements 77,616 78,767 -1,151 -1.5 6.8 6.9 Local Transfer Tax 3,230 69,539 -66,309 -95.4 0.3 6.1 Special Local Grants 4,443 1,751 2,692 153.7 0.4 0.2 Local Allocation Tax 127,970 144,224 -16,254 -11.3 11.2 12.7 Special Grants for Traffic Safety 1,461 1,764 -303 -17.2 0.1 0.2 Contributions 6,618 8,168 -1,550 -19.0 0.5 0.7 Usage Fees and Commissions 17,633 20,217 -2,584 -12.8 1.5 1.8 National Treasury Disbursements 117,732 127,449 -9,717 -7.6 10.3 11.2 Asset-based Revenues 3,349 3,028 321 10.6 0.3 0.3 Donations 297 127 170 133.9 0.0 0.0 Transfer Money 28,003 17,060 10,943 64.1 2.5 1.5 Carry-forwards 12,110 11,371 739 6.5 1.1 1.0 Miscellaneous Revenues 32,985 37,186 -4,201 -11.3 2.9 3.3 Prefectural Bonds 142,458 125,435 17,023 13.6 12.5 11.1 - 1 -#17FY2007 General Account: Expenditures (Analytical Breakdown) (Units: Yen millions, %) % of Total Category FY2007 FY2006 Change % Growth FY2007 FY2006 Reported Expenditures 1,132,400 1,122,126 10,274 0.9 100.0 100.0 Personnel Expense 393,205 392,264 941 0.2 34.8 34.9 Social Aid Expense 65,943 62,657 3,286 5.2 5.8 5.6 Bond Expense 158,786 157,926 860 0.5 14.0 14.1 Disaster Recovery Expense 3,650 3,716 -66 -1.8 0.3 0.3 Total 621,584 616,563 5,021 0.8 54.9 54.9 Investment Expenses 210,575 218,602 -8,027 -3.7 18.6 19.5 Public/Direct 100,604 111,392 -10,788 -9.7 8.9 9.9 Standalone 109,971 107,210 2,761 2.6 9.7 9.6 Other Expenses 300,241 286,961 13,280 4.6 26.5 25.6 Total 510,816 505,563 5,253 1.0 45.1 45.1 Mandatory Expenses Other - 2-#18General Account: Trends in Reported Revenues (Units: 100 million yen, %) FY FY Category 5989 1990 1991 19 FY FY 1992 FY 1993 FY FY FY FY FY FY FY FY 1994 1995 1996 1997 1998 1999 2000 2001 FY FY FY FY FY FY FY 2002 2003 2004 2005 2006 2007 2008 Prefectural Tax 4,506 5,026 5,257 4,942 4.495 4,534 4,630 4,742 5,060 4,733 4,492 4,804 4,676 4,176 4,254 4,377 4,565 4,882 5,669 5,750 % of total 47.0 47.5 48.0 42.8 36.2 35.3 34.9 35.4 38.5 32.8 32.0 35.0 33.9 34.1 35.9 37.5 40.3 43.0 49.6 50.9 Local Allocation Tax 911 977 708 882 927 1,002 1,131 1,224 1,270 1,311 1,970 2,141 2,070 2,050 1,918 1,652 1,691 1,442 1,280 1,122 % of total 9.5 9.2 6.5 7.6 7.5 7.8 8.5 9.2 9.7 9.1 14.0 15.6 15.0 16.7 16.2 14.1 14.9 12.7 11.2 9.9 National Treasury Disbursements 1,671 1,765 1,907 2,149 2,465 2,425 2,245 2,178 2,136 2,429 2,333 2,225 2,311 2,061 1,901 1,805 1,543 1,274 1,177 1,186 % of total 17.4 16.7 17.4 18.6 19.9 18.9 16.9 16.3 16.2 16.8 16.6 16.2 16.8 16.8 16.0 15.5 13.6 11.2 10.3 10.5 Prefectural Bonds 688 780 905 1,390 2,126 2,190 2,605 2,563 2,192 2,793 2,209 1,804 2,102 1,941 1,862 1,676 1,348 1,254 1,425 1,303 Ordinary Bonds 688 780 905 1,390 2,126 2,190 2,605 2,563 2,192 2,793 2,209 1,804 1,930 1,524 1,125 1,150 945 890 1,096 903 Special Bonds - - - - 172 417 737 526 403 364 329 400 % of total 7.2 7.4 8.2 12.0 17.1 17.0 19.6 19.1 16.7 19.3 15.7 13.2 15.2 15.9 15.7 14.4 11.9 11.1 12.5 11.5 Other 1,806 2,035 2,184 2,191 2,390 2,704 2,673 2,683 2,493 3,182 3,057 2,740 2,637 2,008 1,921 2,162 2,179 2,490 1,877 1,937 % of total 18.9 19.2 19.9 19.0 19.3 21.0 20.1 20.0 18.9 22.0 21.7 20.0 19.1 16.5 16.2 18.5 19.3 22.0 16.4 17.1 Total 9,582 10,583 10,961 11,554 12,403 12,855 13,284 13,390 13,151 14,448 14,061 13,714 13,796 12,236 11,856 11,672 11,326 11,342 11,428 11,298 *Initial budget used for FY2008. *Special Bonds included in Prefectural Bonds refer to Extraordinary Fiscal Measure Bonds and Non-interest-bearing NTT loans. -3-#19General Account: Trends in Reported Expenditures (Units: 100 million yen, %) FY FY Category 1989 1990 590 1991 1992 1993 FY FY FY FY $7 1998 1999 Mandatory Expenses % of Total Personnel Expense 45.7 44.0 44.6 42.9 3,139 3,344 3,524 3,581 % of Total 33.3 32.3 32.7 31.4 30.0 29.7 FY FY 1994 1995 1996 1997 4,305 4,557 4,811 4,891 5,337 5,388 5,196 5,512 5,839 6,010 6,193 6,492 6,558 6,420 6,258 6,293 6,205 6,165 6,216 6,276 43.6 42.4 39.7 41.7 44.9 42.0 44.4 47.9 48.1 53.0 53.5 54.5 55.3 54.9 54.9 55.6 3,673 3,769 3,808 29.1 FY FY FY FY FY FY FY FY FY 2000 2001 2002 2003 2004 2005 2006 2007 2008 3,953 4,076 4,078 4,100 4,045 4,099 4,042 3,903 3,900 3,907 3,923 3,932 3,889 29.9 31.4 28.5 29.4 29.9 30.1 33.4 33.4 33.8 34.9 34.9 34.8 34.4 Social Aid Expense 263 281 303 327 309 332 % of Total 2.8 2.7 2.8 2.9 2.5 2.6 2.7 2.8 Bond Expense 821 806 823 842 1,231 1,186 955 357 366 391 3.0 2.9 1,127 1,304 1,393 1,551 1,846 1,792 412 439 546 591 609 537 568 3.2 4.0 4.3 5.0 4.6 4.9 5.0 1,684 1,727 1,735 1,651 1,579 564 626 659 685 5.6 5.8 6.1 1,588 1,613 % of Total 8.7 7.8 7.6 7.4 10.1 9.3 7.3 8.5 10.0 Disaster Restoration Expense 82 126 161 141 124 101 76 66 69 68 % of Total 0.9 1.2 1.5 1.2 1.0 0.8 0.6 0.5 0.5 128 9.7 11.1 13.6 13.1 13.9 14.7 15.0 14.7 14.1 14.0 14.3 127 103 55 76 95 85 91 90 90 83 0.9 0.7 0.6 0.7 0.8 Investment Expenses 3,091 3,398 3,359 3,800 4,086 4,301 4,885 4,964 % of Total 32.8 32.8 31.1 33.3 33.4 33.9 Public/Direct 1,553 % of Total Standalone % of Total Other % of Total Total 37.3 2,293 2,112 17.5 16.0 2,592 2,852 19.8 21.6 3,024 2,729 37.6 34.4 34.1 4,461 4,883 4,350 31.2 1,894 2,294 2,185 14.6 16.0 15.7 2,567 2,589 2,165 19.8 18.1 15.5 2,686 3,413 3,381 1,595 1,730 1,995 2,146 2,091 16.5 15.4 16.0 17.5 17.5 16.5 1,538 1,803 1,629 1,805 1,940 2,210 16.3 17.4 15.1 15.8 15.9 17.4 2,026 2,408 2,617 2,707 2,823 3,001 21.5 23.2 24.3 23.8 23.0 23.7 23.0 20.7 20.7 23.9 24.4 23.5 24.8 21.0 22.8 23.2 24.4 25.6 26.5 26.3 0.4 3,873 3,694 3,146 2,771 2,577 2,278 2,186 2,106 2,051 28.6 27.1 26.0 23.7 22.3 20.3 19.5 18.6 18.1 1,994 1,909 1,748 1,495 1,373 1,195 1,114 1,006 882 14.7 14.0 14.5 12.8 11.9 10.7 9.9 8.9 7.8 1,879 1,785 1,398 1,276 1,204 1,083 1,072 1,100 1,169 13.9 13.1 11.5 10.9 10.4 9.6 9.6 9.7 10.3 3,176 3,376 2,543 2,664 2,683 2,729 2,870 3,002 2,971 0.8 0.7 0.3 33 37 37 89 0.3 0.8 9,422 10,363 10,787 11,398 12,246 12,690 13,105 13,205 12,986 14,306 13,924 13,541 13,628 12,109 11,693| 11,553 11,212 11,221 11,324 11,298 *Initial budget used for FY2008. *Reported figures in each fiscal year include carry-over from the previous fiscal year and exclude amounts carried forward to the next fiscal year. - 4-#20General Account: Trends in Reported Income (Units: Yen millions) Category FY 1989 FY 1990 FY 1991 FY 1992 FY 1993 FY 1994 FY 1995 FY 1996 FY 1997 FY 1998 FY 1999 FY 2000 FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 Revenues 958,195 1,058,297 1,096,056 1,155,439 1,240,340 1,285,540 1,328,366 1,339,048 1,315,139 1,444,842 1,406,128 1,371,440 1,379,608 1,223,657 1,185,625 1,167,232 1,132,589 1,134,236 1,142,810 Expenditures Nominal Income 942,247 1,036,277 1,078,734 1,139,815 1,224,568 1,268,955 1,310,548 1,320,512 1,298,554 1,430,580 1,392,396 1,354,067 1,362,832 1,210,947 1,169,287 1,155,328 1,121,218 1,122,126 1,132,400 15,948 22,020 17,322 15,624 15,772 16,585 17,818 18,536 16,585 14,262 13,732 17,373 16,776 12,710 16,338 11,904 11,371 12,110 10,410 (Revenues Expenditures) Real Income 7,106 6,948 6,087 5,582 4,909 5,030 4,823 4,701 3,998 4,099 4,108 4,928 5,805 5,344 5,961 6,202 5,718 5,862 6,086 *Real Income = Nominal Income - revenues sources which should be carried over to the next fiscal year. -5-#21FY2007: Status of Special Account (Units: Yen millions) Accounting Summary Payment of principal and interest on prefectural bonds and accumulation of funds in the prefectural bond management fund Transfer of collected vehicle and vehicle excise taxes to the general account Loans of necessary funds for the improvement of public facilities in cities and towns within the prefecture 0 Management and operation of prefectural forests 340 Loans such as forestry production advancement funds to promote tree thinning 94 Loans of daily and educational funds for mother-child families, etc. O Provision of annuities to the physically and mentally challenged Loans to support the establishment of SMEs and the strengthening of operational foundations thereof Loans to fund technological investments, etc. in order to improve agricultural operations 170 Loans to promote coastal fishing Maintenance and management of loading equipment and sheds at the Port of Shimizu, etc. Improvement, maintenance, and management of the watershed sewage system 165 Management, repairs, etc. of prefectural residences 0 Goods procurement tasks at the main government building and at local branches Category Revenues Expenditures Difference Bond Management 299,591 299,591 Duty Stamp Collection for 17,243 17,243 0 Vehicle Tax, etc. District Development 7,226 7,226 Support Municipal Forestry 224 224 Forestry Improvement Fund 534 194 Mother-child/Widow Welfare 598 504 Fund Disability Support and 689 689 Mutual Relief SME Promotion Fund 13,881 11,954 1,927 Agriculture Improvement 461 387 74 Fund Coastal Fishing 214 44 Improvement Fund Seaport Development (Port 9,769 9,564 205 of Shimizu, etc.) Watershed Sewage System 15,195 15,027 168 Municipal Residences 9,611 9,446 Goods Procurement 2,263 2,263 Total 377,499 374,356 3,143 -6-#22FY2007: Status of Public Service Account Balance of Payments - Flow (P&L Accounts) Balance of Payments-Stock (Asset Accounts) (Units: Yen millions) Category Revenues Expenditures Net Income Revenues Expenditures Net Income Corporate Bonds Corporate Bond Redemptions Shizuoka Prefectural 29,287 31,804 -2,517 7,353 6,413 8,832 4,446 -1,479 Hospital Operations Shizuoka Cancer Center 22,788 23,391 -603 3,445 621 5,350 4,179 -1,905 Operations Industrial Water Works 5,775 4,858 917 1,876 340 3,407 1,115 -1,531 Water Works 5,867 4,693 1,174 6,868 1,596 9,287 2,518 -2,419 Regional Development 2,722 4,581 -1,859 2,196 0 1,051 1 1,145 Total 66,439 69,327 -2,888 21,738 8,970 27,927 12,259 -6,189 -7-#23FY2007 General Account: Revenue Budget (Units: Yen millions, %) % of Total Category FY2008 Initial Budget FY2007 Initial Budget Difference Growth Rate FY2008 FY2007 Total Expenditures 1,129,800 1,139,500 -9,700 -0.9 100.0 100.0 Prefectural Tax 575,000 560,000 15,000 2.7 50.9 49.1 Local Consumption Tax 72,607 80,033 -7,426 -9.3 6.4 7.0 Settlements Local Transfer Tax 3,100 3,100 0 0.0 0.3 0.3 Special Local Grants 6,200 3,700 2,500 67.6 0.6 0.3 Local Allocation Tax 112,200 129,500 -17,300 -13.4 9.9 11.4 Extraordinary Fiscal 40,000 32,800 7,200 22.0 3.5 2.9 Measure Bonds Other 35,638 42,379 -6,741 -15.9 3.2 3.7 Total 844,745 851,512 -6,767 -0.8 74.8 74.7 National Treasury 118,510 124,051 -5,541 -4.5 10.5 10.9 Disbursements Prefectural Bonds 90,300 94,140 -3,840 -4.1 8.0 8.2 Money Transfers 31,866 25,474 6,392 25.1 2.8 2.3 Other 44,379 44,323 56 0.1 3.9 3.9 Total 285,055 287,988 -2,933 -1.0 25.2 25.3 General Revenue Sources Special Revenue Sources - 8 -#24FY2008 General Account: Expenditure Budget (Analytical Breakdown) (Units: Yen millions, %) % of Total Category FY2008 Initial Budget FY2007 Initial Budget Difference Growth Rate FY2008 FY2007 Total Expenditures 1,129,800 1,139,500 -9,700 -0.9 100.0 100.0 Personnel Expenses 388,900 389,650 -750 -0.2 34.4 34.2 Mandatory Expenses Social Aid Expenses 68,449 66,523 1,926 2.9 6.1 5.8 Bond Expenses 161,294 159,703 1,591 1.0 14.3 14.0 Disaster Recovery Expense 8,945 8,167 778 9.5 0.8 0.7 Total 627,588 624,043 3,545 0.6 55.6 54.7 Statutory Expenses relating to 122,605 127,465 -4,860 -3.8 10.9 11.2 relating to Tax Revenues Expenses and Statutory Expenses Expenses Other than Mandatory Tax Revenues Investment Expenses 208,046 211,386 -3,340 -1.6 18.4 18.6 Public/Direct 88,227 97,889 -9,662 -9.9 7.8 8.6 Standalone 116,845 111,170 5,675 5.1 10.3 9.8 Other Expenses 171,561 176,606 -5,045 -2.9 15.1 15.5 Total 379,607 387,992 -8,385 -2.2 33.5 34.1 - 9 -#25Medium-term Fiscal Outlook (1) Assumptions for Trial Calculations Utilized nominal economic growth rates used in trial calculations by the Cabinet in deliberations by the Council on Fiscal and Economic Policy Fiscal Year Nominal Economic Growth Rate FY2008 2.1% FY2009 FY2010 FY2011 FY2012 2.5% 2.9% 3.3% 3.3% Case 1 Case 2 <Current Scheme> Increase in local allocation tax in line with increased fiscal demand for mandatory expenses, etc. A certain proportion (25%) of the increase in tax revenues excluded from the scope of local tax grant adjustments (reductions) <Fixed Total General Sources of Funds>* · Total general sources of funds (the total of local tax, local tax grants, and extraordinary fiscal measure bonds, etc.) fixed at FY2008 levels going forward, regardless of increases in fiscal demand or tax revenue *Estimate in light of the fact that total general sources of funds have been fixed for 4 consecutive years beginning in FY2005 (2) Objectives for Fiscal Soundness 1) Reduce the current account ratio to 90% or less 2) Limit bond issuance restriction ratio to 15% 3) Upper limit of approximately 2 trillion yen for the balance of outstandins prefectural bonds - 10 -#26(3) Results of Trial Calculations Medium-term Fiscal Outlook Cate- gory FY2008 FY2009 FY2010 FY2011 (Units: 100 million yen) FY2012 Current Account Ratio 93.0% 93.7% 92.2% 91.3% 90.7% Bond Issuance 8.6% 9.2% 9.7% 10.0% 9.9% Restriction Ratio Real Debt 11.9% 13.0% 13.7% 13.7% 12.7% Payment Ratio Note 1 Case 1 Prefectural Bond Balance 18,910 18,513 18,055 17,596 17,102 (Ordinary Bonds) (incl. Extraordinary (21,983) (21,904) (21,352) (20,785) (20,174) Fiscal Measure Bonds) (Ordinary Bonds + Bonds for PFI) Note 2 (19,030) (18,629) (18,165) (17,701) (17,201) Shortfall in -336 -355 -201 -109 -63 Sources of Funds Current Account Ratio 93.0% 93.7% 93.3% 93.5% 94.0% Bond Issuance 8.6% 9.2% 9.8% 10.2% 10.2% Restriction Ratio Real Debt 11.9% 13.0% 13.7% 13.8% 13.0% Payment Ratio Note 1. Case 2 Prefectural Bond Balance 18,910 18,513 18,055 17,596 17,102 (Ordinary Bonds) (incl. Extraordinary (21,983) (21,904) (21,352) (20,785) (20,174) Fiscal Measure Bonds) (Ordinary Bonds + Bonds for PFI) Note 2 (19,030) (18,629) (18,165) (17,701) (17,201) Shortfall in -336 -359 -288 -283 -319 Sources of Funds (Notes) 1. Under the Local Bond Discussion System, authorization required for bond issuances when the real debt payment ratio is 18% or higher. 2. Extraordinary Fiscal Measure Bonds are considered to be "local allocation tax in effect" and are excluded from Prefectural Bond Balance. 3. PFI obligations analogous to bond expenses. -11-#27Trends in Fiscal Indicators (Ordinary Accounts) (Units: %) FY FY FY Category 1989 Rank Shizuoka Fiscal Shizuoka 79.1 Strength Japan 49.6 Index Rank 5 5 Current Shizuoka 66.2 64.3 Account Japan 69.4 68.7 Ratio Bond Issuance Restriction Ratio 1990 1991 80.3 81.6 50.5 50.8 5 13 11 28 7.4 6.9 6.4 Japan 9.6 Rank 9.1 8.8 3126 60 18 48 FY FY 1992 1993 82.2 82.9 50.7 50.2 5 5 69.1 73.0 81.8 5 LO 84.0 5 5 83.2 83.9 87.5 5 69.2 74.3 79.4 83.1 83.9 83.7 88.3 90.5 22 33 30 6.6 9.1 69 6.9 365 24 26 7.2 7.6 9.5 10.0 10.3 10.5 10.7 8.6 66 230 24 39 FY FY FY FY FY FY FY FY FY FY 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 81.1 79.6 77.8 76.7 76.3 72.3 67.7 63.3 62.8 62.4 49.4 48.6 47.9 48.1 48.3 46.1 42.9 40.5 40.6 40.8 5 5 5 5 5 5 96.4 92.2 89.0 90.4 93.2 87.3 87.7 86.6 88.9 91.5 89.1 31 FY 2004 FY 2005 FY 2006 2007 FY 63.7 65.3 69.6 72.9 41.1 42.8 46.4 49.7 38 34 31 8 4 3 3 5 6 6 10 9.8 11.1 11.1 14 23 12.2 11.7 26 33 15 30 *Prefectures ranked in order of fiscal soundness *National figures for indexes and ratios are simple averages of the 47 prefectures. Debt Payment Ratio 6 91.9 90.9 90.8 92.4 92.8 93.6 21 10 13.1 13.4 13.2 12.8 12.6 11.7 10.3 12.2 12.6 12.6 12.5 12.6 12.4 12.3 29 28 27 22 17 10 Real Shizuoka 12.9 12.4 11.6 Japan 14.5 14.4 5 6 7 93.6 9.0 Rank 14 10 【Fiscal Strength Index] An index indicating a municipality's fiscal strength, calculated as the average of Standard Fiscal Revenue (Note 1) divided by Standard Fiscal Demand (Note 2) over the last 3 years. (Note 1) Expected tax revenue under standard conditions in a municipality calculated based on a predetermined method, which serves as a basis for calculating local tax grants. (Note 2) Fiscal demand for reasonable and appropriate municipal administration or facility maintenance calculated based on a predetermined method, which serves as a basis for calculating local tax grants. [Current Account Ratio】 An index indicating the flexibility of a municipality's fiscal structure, calculated as general funds used for ordinary expenses divided by total general funds. 【Bond Issuance Restriction Ratio] An index indicating the degree of burden placed on a municipality as a result of bond expenses, calculated as the average of the ratio of general funds used for repayments of principal and interest on local bonds to standard fiscal scale (Note 3)(excluding amounts included in the cost of disaster restoration, etc. in the calculation of ordinary tax grants and repayments for principal and interest included in operational expense adjustments) over the last 3 years. (Note 3) A figure which indicates the size of general funds from ordinary activities which are ordinarily collected under standard conditions, calculated as the sum of standard fiscal size (standard tax revenues, etc. + ordinary tax grants) and the issuable amount of Extraordinary Fiscal Measure Bonds. 【Real Debt Payment Ratio] An index providing an objective indication of the degree of fiscal burden arising from bond expenses in a municipality, calculated as the average of the ratio of general funds used for effective principal and interest redemption on local bonds (Note 4) to standard fiscal size, etc. (excluding amounts included in the cost of disaster restoration, etc. in the calculation of ordinary tax grants and repayments for principal and interest included in operational expense adjustments) over the last 3 years. (Note 4) Redemption for principal and interest on local government debts + funds from the general account used for the repayment of principal and interest of public corporations. -12-#28Trends in Fiscal Standards (Ordinary Accounts) (Units: %) Category FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 Independently Shizuoka 50.9 47.7 48.7 51.4 53.4 56.4 67.1 Sourced Revenue Japan 47.2 45.6 46.2 48.5 50.9 52.9 Ratio Rank 7 7 8 7 9 8 Shizuoka 36.9 36.5 38.6 41.2 44.0 46.8 50.5 Local Tax Ratio Japan 32.3 30.2 31.0 33.3 35.2 37.9 Rank 7 6 5 5 5 5 Shizuoka 11.5 11.1 13.1 14.2 16.4 18.4 19.4 Corporate Tax Ratio Japan 9.2 8.1 8.9 10.2 11.6 13.4 Rank 6 5 5 5 5 5 【Independently Sourced Revenue Ratio】 An indicator of fiscal independence of a region, calculated as revenue that a prefecture can source on its own as a percentage of total revenue. [Local tax + local consumption tax settlements + contributions + usage fees and commissions + asset-based revenues + donations + transfer money + net asset carry-over (previous FY real income) + miscellaneous revenues] / total revenue 【Local Tax Ratio] Local tax revenue as a percentage of total revenue. [Corporate Tax Ratio] 2 corporate taxes included in local tax (corporate resident's tax and corporate enterprise tax) as a percentage of total revenue. - 13-#29Trends in Prefectural Bond Balance, Prefectural Bond Issuances and Bond Expenditures 1. Total Amounts (General Account) (Units: 100 million yen) Category 9 FY198 FY199 FY199 FY199 FY199 FY199 FY199 FY199 FY199 FY199 FY199 FY200 FY200 FY200 FY200 FY200 FY200 FY200 FY200 FY200 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 Balance of Prefectural Bonds 5,198 5,472 5,861 6,730 7,967 9,396 11,532 13,516 14,963 16,959 18,225 18,790 19,692 20,519 21,184 21,283 21,419 21,505 21,732 21,974 (FY end) *Ordinary Bonds (5,198) (5,472) (5,861) (6,730) (7,967)|(9,396) (11,532) (13,516) (14,963) (16,959) (18,225) (18,790) (19,521) (19,930) (19,858) (19,508) (19,296) (19,045) (18,994) (18,901) *Prefectural Bond Issuances *Ordinary Bonds Bond Expenditures 715 789 905 1,427 2,290 2,191 2,692 2,509 2,108 2,925 2,236 1,702 2,176 1,817 1,776 1,708 1,339 1,261 1,446 1,303 (715) (789) (905) (1,427) (2,290) (2,191) (2,692) (2,509) (2,108) (2,925)|(2,236) (1,702) (1,935) (1,467) (1,039) (1,182) (936) (897) (1,117) (903) (Final budget) 821 839 823 842 1,257 1,186 956 1,132 1,304 1,393 1,551 1,846 1,792 1,692 1,732 1,744 1,654 1,581 1,588 1,613 *Ordinary Bonds refer to prefectural bonds other than Extraordinary Fiscal Measure Bonds and non-interest-bearing NTT loans. *Balance of Prefectural Bonds: Based on financial reporting figures up to FY2007; forecast used for FY2008 *Prefectural Bond Issuances: Authorized amounts used for figures up to FY2005; approved figures used in and after FY2006 2. Balance of Prefectural Bonds Outstanding per Prefectural Resident (Ordinary Account) (Units: Yen thousands) Category 9 98 FY199 2 3 4 5 6 7 FY198 FY199 FY199 FY199 FY199 FY199 FY199 FY199 FY199 FY199 FY199 FY200 FY200 FY200 FY200 FY200 FY200 FY200 FY200 1 8 9 0 1 2 3 4 5 6 Shizuoka National Average 7 151.4 160.3 172.2 196.9 229.6 268.1 326.2 377.6 416.3 466.9 502.0 515.7 538.0 557.8 572.5 581.7 583.2 583.7 590.7 204.1 214.8 228.4 255.4 284.9 315.9 372.3 417.6 457.2 499.2 534.1 550.7 566.5 588.6 610.2 624.0 622.2 622.4 Rank 8 8 8 9 11 13 15 16 15 16 16 14 14 14 15 15 15 15 * Higher rankings given to lower balances among the 47 prefectures. - 14 -#30Issuance Trends of Publicly Issued Shizuoka Prefectural Bonds 1. Trends in Annual Issuances Individual Issuances (Units: 100 million yen) Category FY1989 FY1990 FY1991 FY1992 FY1993 FY1994 FY1995 FY1996 FY1997 FY1998 FY1999 FY2000 FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 | FY2008 200 200 200 200 600 400 400 300 600 800 1,000 900 800 800 200 300 200 300 200 200 5-year 10-year 162 162 162 366 550 500 700 720 750 680 750 680 500 700 20-year 30-year Subtotal 162 162 162 366 550 500 700 720 750 680 750 680 700 900 Joint Issuances 162 162 162 366 550 500 700 720 750 680 750 680 700 900 800 1,000 1,800 1,600 1,600 1,600 400 600 600 600 600 600 1,200 1,600 2,400 2,200 2,200 2,200 Total *FY2008 figures are expected amounts. 2. Recent Issuance Terms FY2006 Year Amount May 10 years 10 years Jun 20 years ¥10 billion ¥10 billion ¥10 billion Coupon 2.0% 2.0% Issue Price ¥99.85 Yield 2.018% FY2007 Year May 10 years ¥99.90 2.012% 10 years Amount ¥10 billion ¥10 billion Coupon 1.77% Issue Price Yield ¥99.92 1.779% 1.93% ¥99.95 1.935% Jun 2.36% ¥99.96 2.362% 20 years ¥10 billion 2.29% ¥99.89 2.298% Jul 5 years ¥20 billion 1.6% ¥99.90 1.621% Jul 5 years ¥10 billion 1.54% ¥100 1.540% Aug 10 years ¥20 billion 2.1% ¥99.95 2.106% Aug 10 years ¥10 billion 1.94% ¥99.96 1.944% Oct 10 years ¥20 billion 1.85% ¥99.95 1.855% Sep 5 years ¥10 billion 1.35% ¥100 1.350% 5 years ¥20 billion 1.39% ¥99.96 1.398% Oct 10 years ¥20 billion 1.85% ¥99.99 1.851% Nov 10 years ¥20 billion 1.91% ¥99.97 1.913% 5 years ¥20 billion 1.30% ¥100 1.300% 20 years ¥20 billion 2.35% ¥99.93 2.355% 10 years ¥20 billion 1.81% ¥99.98 1.812% Nov Mar 10 years ¥10 billion 1.79% ¥99.98 1.792% 20 years ¥10 billion 2.29% ¥99.98 2.291% 30 years Mar FY2008 10 years Term ¥20 billion ¥10 billion 2.63% ¥100 2.630% 1.53% ¥99.95 1.535% May 10 years Jun 10 years 20 years Jul 5 years Aug 10 years Issuance ¥10 billion ¥10 billion ¥20 billion ¥10 billion ¥10 billion Coupon 1.73% 1.91% Issuance Price Yield ¥99.97 1.733% ¥99.94 1.917% 2.35% 1.32% ¥100.00 2.350% ¥99.96 1.328% 1.65% ¥99.98 1.652% -15-#31Accumulatio Sinking Fund Accumulation Status n Rule Lump-sum payment at maturity = Category Balance for Lump-sum Payments (Based on actual redemptions) Publicly Issued Bonds Accumulation of 3.7% (1/27th) of total prefectural bond issuance every year, after 3-year deferral period (Units: 100 million yen) FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 9,731 10,881 12,495 14,309 15,846 17,470 19,110 6,396 6,930 7,580 8,980 10,380 11,860 13,124 Bonds Underwritten by 3,335 3,951 4,915 5,329 5,466 5,610 5,986 Banks, etc. Accumulated Balance 869 1,047 1,226 1,442 1,641 1,832 2,109 -16-