Note 2-44

44 Under the Law Concerning the Special Cases of Mergers of Municipalities (former law), a special merger bond is established relating to the financing of merger of municipalities in terms of the following: 1) Swift establishment of unity of municipalities and construction of public facilities for equal development; 2) Strengthening of the solidarity of area residents and development of the districts of the former municipalities. To facilitate the accumulation of funds for this purpose, for those funds deemed particularly necessary, local bonds may be appropriated for this purpose for a period up to 10 fiscal years, and a portion of funds for repayment of principal and interest will be included in the standard fiscal demand amount. In addition, if, after 10 fiscal years from the mergers (formerly five years), it is assumed that merger has not taken place, the amount of ordinary allocation tax calculated every year will be guaranteed (during the five fiscal years following the 10 fiscal years, increases will be reduced gradually). Further, in a transitional measure established in the 2004 amendment, municipalities that have made application for mergers by the end of March 2005 and have merged by the end of March 2006 will be applicable under the Law Concerning the Special Cases of Mergers of Municipalities.