Current Overview of - dbj.jp · 3 Corporate Profile (as of March 31, 2017) Established October 1, 2008 (Former Japan Development Bank: 1951, Former Hokkaido-Tohoku Development Finance

Development Bank of Japan Inc.

September 2017

Current Overview of

1

Overview of DBJ ーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーー P.02

DBJ’s Privatization Process ーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーー P.04

Funding Activities ーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーー P.10

Summary of Financial Data ーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーー P.20

DBJ Sustainability Bond Framework ーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーー P.24

(Appendix) Fourth Medium-term Management Plan ーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーーー P.46

Contents

2

1. OVERVIEW OF DBJ

3

Corporate Profile (as of March 31, 2017)

Established

October 1, 2008(Former Japan Development Bank: 1951,Former Hokkaido-Tohoku Development Finance Public Corporation: 1956,Former Development Bank of Japan: 1999)

Shareholders

100% owned by the government of JapanThe minister of finance has supervisory powers with regard to DBJ’s key matters, such as annual business plan, annual basic policy regarding issuance of bonds and borrowings and amendment of DBJ’s articles of incorporation.

President & CEOMasanori YanagiAny appointment and retention of representative directors become effective only after authorization by the minister of finance of Japan has been granted.

Total assets JPY 16,570.4 billion (consolidated) (USD 147,699 million)*

Basel Ⅲ Common Equity Tier 1 ratio: 17.22% (consolidated, preliminary)

Credit Ratings A1 (Moody's Investors Service, Inc), A (Standard & Poor's Corp.)

OfficesDomestic offices: 19 (head office, 10 branch offices, 8 representative offices)Overseas representative office: 1 (New York)Overseas subsidiaries: 3 (London, Singapore and Beijing)

* USD/JPY=112.19 as of March 31, 2017.

4

2. DBJ’S PRIVATIZATION PROCESS

5

How the DBJ Act was Before

Full privatization of DBJ had been postponed twice and the government was to review the organization of DBJ by the end of March 2015.

Conversion to a joint-stock company Response to the Financial Crisis Response to the Earthquake

“The Government should dispose its holding of DBJ’s share capital within approximately 5-7 years from Oct. 2010.”

Partial Amendment of the DBJ Act (Jun. 2009)

2011The Great East Japan

Earthquake

DBJ Act (Jun. 2007) Revision of the DBJ Act (May 2011)

“The Government shall review its involvement in DBJ by the end of Mar. 2012.”

“According to the progress of the Crisis Response Operations, the government shall inject capital in DBJ until Mar. 2012.”

“The Government should dispose its holding of DBJ’s share capital within approximately 5-7 years from Apr. 2012.”

“The Government should dispose its holding of DBJ’s share capital within approximately 5-7 years from Apr. 2015.”

“The Government shall review its involvement in DBJ by the end of Mar. 2015.”

“According to the progress of the Crisis Response Operations, the government shall inject capital in DBJ until Mar. 2015.”

2008Financial Crisis

6

The Act for Partial Amendment of the DBJ Act

The act for Partial Amendment of the DBJ Act was passed into law on May 13, 2015 by the National Diet of Japan. The new Act states;

1. The full privatization of DBJ still remains as a target but the implementation schedule is not yet decided.2. The government shall hold 1/2 or more of the issued share capital of DBJ until the completion of the Special

Investment Operations(expected to be completed by March 2026).• During this period, DBJ is designated to conduct the Special Investment Operations together with the government.• Through the operations, DBJ provides equity capital to enhance business competitiveness among companies, and

to reinvigorate regional areas.3. After March 2026, FOR AN INDEFINITE PERIOD (until otherwise provided for by law), the government shall hold more

than 1/3 of the issued share capital of DBJ with a view to ensuring a proper conduct by DBJ of the Crisis ResponseOperations.

{ }The government’s holding of the issued share capital of DBJ*

While DBJ engages in the Crisis Response Operations

While DBJ engages in the Special Investment Operations

Mar. 2026 FOR AN INDEFINITE PERIODEnforcement of the new Act

More than 1/3

1/2 or more

Full Privatization

The government is to dispose all of its holding of the share capitalof DBJ as soon as practicable, taking into account the effect onthe attainment of the objectives of DBJ and the market situation.

* Assumed in the figure above is that the obligation to conduct crisis response operations continues beyond FY2025.

7

Capital Markets

Government guarantee

Japa

nese

Gov

ernm

ent

Governmentguarantee

Japa

n Fi

nanc

e C

orpo

ratio

n

Indemnity Cor

pora

te c

lient

s

Long-term loans

Two-step loansLong-term loans Long-term loans

DB

J

Crisis Response Operations

Since the global financial crisis in 2008, DBJ has been conducting Crisis Response Operations. Since 2011, operations related to Earthquake reconstruction have been added.

DBJ has extended a total of JPY 6,130 billion (USD 54.6 billion*) in loans to private companies, of which JPY 2,706 billion (USD 24.1 billion*) is for recovery from the Earthquake.


8

Complement and Encourage private-sector companies

(pump-priming effects, etc.)

Addition（FY2017：¥50 billion）

Special Investment Operations

Special Investment Operations, as a new investment scheme, were established to provide growth capital in a concentrated manner.

As of March 31, 2017, new loans and investments decided by DBJ in respect of Special Investment Operations amounted to about JPY 166.7 billion (USD 1,486 million*).

Capital funds(preferred shares andsubordinated loans)


Budget for FY2017：¥100 billion (USD 891 million)*

Core capital


Monitoring Board

Evaluation, Verification

Japanese Government（industrial investment）

Other financial institutions

(megabanks, regional banks, private funds, etc.)

Enhance risk capital supporting growth

Loans, etc.

Initiatives for Target Companies

• Utilize management resources effectively

• Make management innovationscultivate new businessnew collaboration with

other sectors

• Regional invigoration• Promoting corporate

competitiveness• Development of markets for

growth capital

Political Targets

Capital increase（FY2017：¥50 billion）


9

Current Ratings

Moody’s S&P

DBJ

Government-Guaranteed Bonds A1(Stable)

A+(Stable)

Non-Guaranteed Bonds A1(Stable)

A(Stable)

Euro CPProgramme Ratings P-1 A-1

Reference Moody’s S&P

Japan Japanese Gov. Bonds (JGBs) A1(Stable)

A+(Stable)

10

3. FUNDING ACTIVITIES

11

(InitialPlan)

(RevisedPlan)

USD equiv(billion) (plan) USD equiv

(billion)outstanding

of debtUSD equiv

(billion)2 Gov't. investments and loans 650 1,150 10.2 650 5.7 9,790 87.23 300 800 7.1 300 2.6 4,325 38.54 150 150 1.3 150 1.3 1,680 14.95 200 200 1.7 200 1.7 1,113 9.96 - - - - - 2,673 23.87 Self-funding 660 760 6.7 760 6.7 3,096 27.58 400 500 4.4 500 4.4 1,710 15.29 260 260 2.3 260 2.3 1,386 12.3

10 Miscellaneous 905 805 7.1 905 8.0 - - 11 - - - 100 0.812 Total 2,215 2,715 24.2 2,315 20.6 12,886 114.8

(Unit: JPY billion)FY 2016 FY 2017

Loans from GovernmentGov't. guaranteed domestic bondsGov't. guaranteed international bondsFunding for Crisis Response Operations

Corporate bonds (non-guaranteed)Long-term borrowings

Gov't. guaranteed short-term bonds

Notes: Funding for Crisis Response Operations is available separately from the government and not included in the above plan.

as of March 2017

(InitialPlan)

(RevisedPlan)

USD equiv(billion) (plan) USD equiv

(billion) outstanding USD equiv(billion)

1 Loans and investments 2,215 2,715 24.2 2,315 20.6 14,999 133.6Note:Loans for Crisis Response Operations are not included in the above budget.

(Unit: JPY billion)FY 2016 FY 2017 as of March 2017

Operational and Funding Plans

Operational Plan

Funding Plan


12

JPY74.7%

USD20.9%

EUR3.9%

Other0.5%

Guaranteed Domestic

Bonds36.1%

Corporate Domestic Bonds

32.6%

Guaranteed International

Bonds24.0%

Corporate Euro Bonds7.3%

TargetMaturity(years)

TargetCurrency

Target IssueSize

(USD)

ExpectedRating

(Mdy's/S&P)

FormatOptions Note

5-10 USD,(EUR) 500m- A1/A+144A/RegS

orRegS Only

・Unconditional and irrevocable guarantee bythe government・Tenor must be 5 year or longer

SRIBond 2-7

・Proceeds are allocated to projects /companies tackling social issues(environment etc.)

RegularBond 2-10 ・One of the few issuers of non-guaranteed

paper among Asian SSA names

2-40USD, EUR,GBP, AUD,

NZD20m- ・Customized bonds for investor needs

・Flexible in currency and maturity

RegS Only

250m-USD, EUR

PrivateIssue

Non-G

uaranteed

PublicIssue

Bond Type

GovernmentGuaranteed

A1/A

DBJ’s Funding

Bond issuances in

Domestic market: Approx. 70%

International market: Approx. 30%

DBJ offers a range of products in the International Market

Bonds outstanding: USD 41.5 billion(as of Mar. 2017)

13

Terms of the Guarantee of Japan

The full and punctual payments of principal and interest on the guaranteed bonds are unconditionally and irrevocably guaranteed by the government.

The obligations of the guarantor are absolute and unconditional and shall not be discharged except by complete performance.

The terms applied are generally similar to those of other Japanese government guaranteed issuers, JBIC and JICA.

14

Government-Guaranteed International Bonds Since 1961, DBJ and its predecessors have issued over 100 Japanese Government-guaranteed bonds in the international

markets.

Government-guaranteed bonds have been issued in Euro (Reg S only) or Global (144A & Reg S) formats from the GMTN programme as well as SEC-registered bonds before 2008.

Under the relevant laws, guaranteed bonds must have maturities of five years or longer.

Government-guaranteed bonds issued by DBJ, JBIC and JICA provide an opportunity for “Japan sovereign exposure” in non-JPY currencies through investment.

No. Issue Date Maturity Term Type Amount(mm) Coupon Spread

1 Dec 1, ’09 Dec 1, ’14 5 Euro-Dollar USD 350 3mL+23bp -2 Apr 20, ’10 Apr 20, ’15 5 Euro-Dollar USD 1,000 2.875% MS+27bp3 Mar 15, ’11 Mar 15, ’16 5 Euro-Dollar USD 500 2.750% MS+43bp4 Oct 5, ’11 Oct 5, ’16 5 Global-Dollar USD 1,000 1.625% MS+45bp5 Mar 13, ’12 Mar 13, ’17 5 Euro-Dollar USD 500 1.500% MS+40bp6 Sep 25, ’12 Sep 25, ’19 7 Global-Dollar USD 500 1.625% MS+42bp7 Jan 22, ’13 Jan 22, ’18 5 Global-Dollar USD 1,000 1.000% MS+24bp8 Oct 3, ’13 Oct 3, ’18 5 Euro-Dollar USD 500 1.875% MS+38bp9 Jan 30, ’14 Jan 30, ’19 5 Euro-Dollar USD 500 2.125% MS+36bp10 Sep 19, ’14 Sep 19, ’24 10 Euro-Dollar USD 900 2.875% MS+23bp11 Jan 28, ’15 Jan 28, ’20 5 Euro-Dollar USD 455 3mL+24bp -12 Sep 16, ’15 Sep 16, ’25 10 Global-Dollar USD 1,200 2.750% MS+57bp13 Sep 1, ’16 Sep 1, ’21 5 Global-Dollar USD 550 1.625% MS+55bp14 Sep 1, ’16 Sep 1, ’26 10 Global-Dollar USD 1,100 1.875% MS+56bp15 Sep1, ’17 Sep1, ’22 5 Global-Dollar USD 1,000 2.125% MS+42bp16 Sep1, ’17 Sep1, ’27 10 Global-Dollar USD 800 2.625% MS+59bp

15

Distribution by Investor TypeIssue Details

USD 1,000m 144A/RegS Global Bond due September 2022

Issuer Development Bank of Japan Inc.

Guarantor Japan

Ratings A1/A+(Moody's/S&P)

Issue amounts USD 1,000 million

Pricing date 23rd August 2017

Maturity date 1st September 2022

Coupon 2.125% p.a.

Re-offer spread Mid Swap + 42bps

Re-offer yield 2.236% p.a.

Bookrunners Citi, Daiwa, BNPP, Barclays

25%

39%

21%

13%

2%

Bank

Central Bank / OfficialInstitutionAsset Manager

Insurance and Pension

Others

Distribution by Geographic Region

55%

18%

28%Asia

EMEA

US

16

Issue Details

USD 800m 144A/RegS Global Bond due September 2027


Guarantor Japan

Ratings A1/A+(Moody's/S&P)

Issue amounts USD 800 million

Pricing date 23rd August 2017

Maturity date 1st September 2027

Coupon 2.625% p.a.



Bookrunners Citi, Daiwa, BNPP, Barclays

Distribution by Investor Type


33%

6%19%

39%

3%Bank

Central Bank / OfficialInstitutionAsset Manager

Insurance and Pension

Others

69%16%

15%

Asia

EMEA

US

17

160

517 578

760 777 859

0100200300400500600700800900

1,000

FY2011 FY2012 FY2013 FY2014 FY2015 FY2016

NZDAUDGBPEURUSD

(USD million)

In accordance with the expansion of its international business, DBJ has been increasing its issuance of international bonds without government guarantee.

Planning to issue more than USD 500 million in total, in USD, EUR, GBP, AUD and NZD each fiscal year

Offering a wide variety of options in terms of amount and maturity through both public offering and private placement.

Recent issuance of non-guaranteed international bonds

Recent public issues

Non-Guaranteed International Bonds

* USD/JPY=112.19, EUR/JPY=119.79, GBP/JPY=140.08, AUD/JPY=85.84, NZD/JPY=78.43 as of March 31, 2017.

No. Issue Date Maturity Term Amount (million) Coupon Primary Spread

Green Bond#1 Oct 7, ’14 Oct 6, ’17 3 EUR 250 0.250% MS+12bp

Sustainability Bond#1 Oct 21, ’15 Oct 21, ’19 4 EUR 300 0.375% MS+26bp

Sustainability Bond#2 Oct 19, ’16 Oct 19, ’21 5 USD 500 2.000% MS+80bp

18

Outline of GMTN Programme Outline of Euro CP Programme

Funding Programmes

In addition to the GMTN programme, DBJ set up a euro-commercial paper programme so that it can diversify its funding source and reduce its reliance on its other short-term funding sources.

Arranger: JPMorgan Securities Japan Co., Ltd.

Dealers: Barclays, BNP PARIBAS,BofA Merrill Lynch, Citi, DaiwaGoldman Sachs, HSBC, J.P. MorganMizuho, Morgan Stanley, Nomura

Format: Guaranteed: Global (144A/Reg S)Euro (Reg S only)

Unguaranteed : Euro (Reg S only)

Listing: Euro MTF Market of the Luxembourg Stock Exchange

Arranger: Barclays

Dealers: Barclays, BofA Merrill Lynch, Citi, Nomura

Maximum Amount:

USD 3,000,000,000-

Yield Basis: Discounted, not interest-bearing

Listing: None

ProgrammeRating:

P-1 by Moody’s, A-1 by S&P

19

Non-Guaranteed Domestic Bonds

DBJ is one of the largest debt issuers in the domestic corporate bond market.

We plan to issue domestic corporate bonds (Non-Guaranteed) every quarter (January, April, July, and October); mainly 3 years, 5 years and/or 10 years.

In addition, we issue other terms of domestic corporate bonds based on investor’s appetite and market color.

No.53 No.54 No.55 No.56 No.57 No.58 No.59 No.60 No.61 No.62 No.63(*1)

No.64 No.65 No.66 No.67 No.68

Pricing Date 2015/4 2015/4 2015/7 2015/7 2015/8 2015/10 2015/10 2015/10 2016/1 2016/1 2016/1 2016/4 2016/4 2016/4 2016/7 2016/7

Term 3YR 5YR 3YR 5YR 15YR 3YR 5YR 10YR 3YR 5YR 15YR 3YR 5YR 10YR 3YR 5YR

Amount （billion) JPY 30 JPY 30 JPY 30 JPY 30 JPY 10 JPY 25 JPY 35 JPY 10 JPY 20 JPY 20 JPY 15 JPY 20 JPY 20 JPY 20 JPY 30 JPY 30

Coupon 0.101% 0.182% 0.101% 0.191% 0.842% 0.101% 0.161% 0.501% 0.101% 0.155% 0.542% 0.020% 0.040% 0.090% 0.001% 0.010%

Primary Spread - JGB+8.0bp - JGB+9.0bp JGB+4.0bp - JGB+11.0bp JGB+17.0bp - JGB+14.0bp MS+13.0bp - - - - -

No.69 No.70(*2)

No.71 No.72 No.73(*2) No.74 No.75 No.76(*2)

No.77 No.78 No.79 No.80 No.81 No.82 No.83

Pricing Date 2016/7 2016/10 2016/10 2016/10 2017/1 2017/1 2017/1 2017/4 2017/4 2017/4 2017/4 2017/7 2017/7 2017/7 2017/8

Term 10YR 3YR 5YR 10YR 3YR 5YR 10YR 3YR 5YR 10YR 15YR 3YR 5YR 10YR 30YR

Amount （billion) JPY 20 JPY 20 JPY 20 JPY 20 JPY 20 JPY 20 JPY 20 JPY 30 JPY 30 JPY 20 JPY 10 JPY 20 JPY 20 JPY 20 JPY 10

Coupon 0.060% 0.001% 0.001% 0.075% 0.001% 0.030% 0.200% 0.001% 0.020% 0.225% 0.396% 0.001% 0.030% 0.270% 0.998%

Primary Spread - - - JGB+13.0bp - - JGB+15.0bp - - JGB+16.5bp JGB+10.5bp - - JGB+16.5bp JGB+14bp

*1: No.63 bond is an amortizing bond*2: Issue Price: 100.001

FY2015 FY2016

FY2016 FY2017

20

4. SUMMARY OF FINANCIAL DATA

21

Total Income: JPY 285.6 billion (USD 2.5 billion) Decrease 21.2% from the

previous fiscal year

Net income Attributable to Owners of the Parent: JPY 87.6 billion (USD 0.8 billion) Decrease 32.0% from the

previous fiscal year

Decrease of Interest Income principally reflected decreases in loan margins.

Decrease of Other Income principally reflected decreases in investment profits.

Consolidated Statements of Income


　 USD million*

For the year ended March 31, 2016 2017 2017

1 362.6 285.6 2,545

2 Interest Income 215.3 190.0 1,6933 Fees and Commissions 11.3 13.6 1214 Other Operating Income 9.5 6.3 565 Other Income 126.5 75.6 673

6 175.9 163.2 1,454

7 Interest Expense 106.9 98.0 8738 Fees and Commissions 0.7 0.5 49 Other Operating Expenses 7.4 3.3 29

10 General and Administrative Expenses 46.0 51.1 45511 Other Expenses 14.6 10.0 89

12 186.7 122.4 1,091

13 128.9 87.6 780

JPY billion

Total Income

Total Expenses

Income before Income Taxes

Net Income Attributable to Owners ofthe Parent

22

USD million*

As of March 31, 2016 2017 2017

1 15,907.1 16,570.4 147,699

2 Loans Outstanding 12,952.5 13,039.5 116,226

3 Total Liabilities and Equity 15,907.1 16,570.4 147,699

4 Liabilities 13,022.9 13,584.2 121,082

5 Debentures 3,221.8 3,016.7 26,8896 Borrowed Money 7,892.1 8,472.3 75,5177 Corporate Bonds 1,506.0 1,695.1 15,109

8 Equity 2,884.2 2,986.2 26,617

9 Common Stock 1,000.4 1,000.4 8,91710 Capital Surplus 995.4 945.4 8,42611 Retained Earnings 456.5 513.7 4,578

As of March 31, 2016 2017*

12 17.54% 17.22%* preliminary

Total Assets

Basel ⅢCommon Equity Tier1 Ratio

JPY billion Total outstanding loan: JPY 13,039 billion (USD 116.2 billion)

Increase of 0.67% from the end of March 2016

Basel III Common Equity Tier1 ratio: 17.22% (preliminary)

Decrease of 0.32 points at the end of March 2017, reflecting among other things, increase of investments

The cash dividend payout ratio in FY2016 was 25%.

Consolidated Balance Sheet


23

0.93%

0.77%0.68% 0.64% 0.59% 0.54%

0.00%

0.50%

1.00%

1.50%

2.00%

0

20

40

60

80

100

120

140

160

180

200

Sep 2014 Mar 2015 Sep 2015 Mar 2016 Sep 2016 Mar 2017

Non-performing loans (LHS)

Ratio of non-performing loans (RHS)

(JPY bil l ion)

Non-performing loans (Sept. 2014 – Mar. 2017) Loans by sector Outstanding as of March 31, 2017

Asset Quality & Loans Outstanding by Sector

DBJ has been maintaining a low level of impaired loans.

DBJ’s loan portfolio mainly consists of lending to private sector firms in Japan, focusing on infrastructure business.

Manufacturing19%

Electricity, Gas and Heat Supply

25%

Transport 18%

Real Estate and Goods Rental and Leasing

21%

Wholesale and Retail Trade

6%

Information and Communications

3% Others8%

24

5. DBJ SUSTAINABILITY BOND FRAMEWORK

25

Commitment to Sustainability

DBJ has committed to Sustainability since 1960s

* UNEP Statement by Financial Institutions on the Environment & Sustainable Development

Sustainability Awards

DBJ Green Building Certification (2011~).

The only investor Member of GRESB in Japan (2014~).

— DBJ is inaugurated as an advisory board member (2016~).

DBJ’s investments and loans for environmental projects started in 1960s for antipollution measures.

DBJ has provided more than ¥3 trillion in investments and loans for environmental projects over the past 40 years.

1960s : Started with antipollution measures

2004~ : DBJ Environmentally Rated Loan Program

2011~ : Expansion of green finance

DBJ raises funds from fixed income investors by issuing DBJ Green Bond in FY2014 and Sustainability Bonds since FY2015.

DBJ is the first Japanese bank to sign the UNEP Statement* in 2001.

DBJ Environmentally Rated Loan Program started in 2004.

World’s first incorporation of environmental ratings in financing menus.

2014~ : DBJ SRI Bond issuance (Green / Sustainability Bond)

In 2017, DBJ became the first Japanese issuer to join the Green Bond Principles (GBP).

For further information on DBJ’s environmental contribution activities, please see DBJ’s CSR report available on its website

(http://www.dbj.jp/en/ir/financial/disclosure.html)

2017~ : Progress ofSustainable Management

DBJ establishes a Sustainability Management Office.

DBJ sets the corporate policy on Sustainabilityand publishes the first Integrated Report showing our commitment to the sustainable society.

26

1.Use of Proceeds / 2.Project Evaluation/Selection

DBJ Sustainability Bond is linked exclusively to 5 types of the financings / refinancings (the “Eligible Financings”).

Each rating criteria and selection process apply to 1. 2. and 3. below.

1. DBJ Green Building Certification

2. DBJ Environmentally Rated Loan Program (ERLP)

3. GRESB

4. Renewable Energy

5. Clean Transportation

DBJ Sustainability Bond Framework The framework aligns with the Green Bond Principles 2017 and the Sustainability Bond Guidelines 2017 and the second party opinion

on this framework is provided by Sustainalytics (dated 1 September 2017).

Via investment to DBJ Sustainability Bonds, investors have access to a series of the eligible financings entailing strong sustainability benefits with positive green impacts.

3. Management of Proceeds

The financings to which the net proceeds, or an amount equal to the net proceeds, from the Sustainability Bond, have been allocated, are earmarked separately for our internal management and reporting to bond investors.

DBJ aims to allocate the net proceeds, or an amount equal to the net proceeds, to the Eligible Financings soon after the Sustainability Bond issuance.

4. Monitoring / Reporting

Until full allocation of the net proceeds, or an amount equal to the net proceeds, the followings will be reported annually on the DBJ’s website.

1. Allocation in aggregate to each eligibility criterion, and the number of businesses/assets/projects funded under each eligibility criterion

2. Estimate share of financing or re-financing

3. Amount of unallocated proceeds and the investments in which these proceeds are held.

There will be additional disclosure for each Eligible Financing.

5. External Assurance

Second Party Opinion Provider :

- DNV GL (2014 Green Bond)

- Sustainalytics (2015-2017 Sustainability Bond)

27

Alignment with the DBJ’s Strategy/Objective

DBJ has an aim of conducting business in a manner which resolves the issues of its clients and the larger society and realizes the sustainable development of Japan and the world.

Under the Policy on Sustainability, DBJ pursues and implements the sustainability management by which DBJ realizes both economic and social value.

DBJ incorporates the recognition of the necessity for a sustainable society into its business activities, identifies material sustainability issues in Japan and the world, and encourages and supports the improved ESG performance of the clients.

Sustainability Objectives and Commitments of DBJ

Highlights of Sustainalytics’ Opinion

“DBJ has strong sustainability commitments for achieving a sustainable society while outlining a sustainability strategy through its mission, policies, and management plan. Additionally, the Policy on Sustainability and the current management plan clearly demonstrate its commitments on contributing to positive environmental and social impacts into its stakeholders and society through its financial services such as investment, lending and asset management.”

Sustainalytics is of the opinion that:

“the DBJ Sustainability Bond Framework is aligned with the DBJ’s mission, the Policy on Sustainability as well asthe Fourth Medium-term Management Plan, and DBJ is well positioned to issue a sustainability bond.”

“DBJ is well positioned to issue a Sustainability Bond”

28

Process to Mitigate Environmental and Social risks

DBJ periodically monitors if borrowers comply with applicable regulations and laws (including environmental laws), and if they obtain and maintain governmental permits, approvals, licenses and authorizations.

In respect of structured finance space, in some cases, other lenders and DBJ engage an independent consultant to undertake due diligence on environmental and social aspects. If this is not the case, DBJ assesses the capability and reliability of the borrower in relation to identifying and managing environmental and social risks.

The Sustainability Committee, responsible for considering the incorporation of sustainability and ESG insights into the DBJ’susual business activities, discusses and considers the balance between economic and social value, and maintains communications with stakeholders.

Management of environmental and social risks


“Overall, Sustainalytics does not identify considerable environmental and social risk with respect to lending to sustainably rated companies through the ERLP, GBC, and GRESB programs.”

Sustainalytics is of the opinion that

“DBJ’s general process to consider environmental and social factors in its financing process is sufficient.”

29

Use of Proceeds / Project Selection and Evaluation Financings, falling into the eligibility criteria, meeting the rating criteria (highly-rated), and following each selection process,

are only selected as eligible assets for the DBJ Sustainability Bond.

ScreeningSelectionEvaluation process

Proceeds are only allocated to the Eligible Financings.

Buildings which take out loan are rated on a scale of 1 stars to 5 stars (best).

Allocated ONLY to the buildings rated 3 stars or above.

1. DBJ Green Building Certification (GBC)

Based on the program criteria, companies taking out loans from DBJ through the ERLPare rated on a scale of D to A (best).

Allocated ONLY to the companies rated C or above.

2. DBJ Environmentally Rated Loan Program (ERLP)

"Green Star" is the top performing rating based on the GRESB quadrant model, with otherthree quadrants formerly referred to as "Green Talk", "Green Starter", and "Green Walk".

Allocated to the companies, buildings, real estate properties or REITs rated GRESBGreen Star.

3. GRESB

It includes the capital expenditure (CAPEX) and maintenance and operation expenditure(OPEX) of renewable projects.

Solar, wind, biomass, geothermal, run-of-river hydropower, tidal and wave power.

4. Renewable Energy

It includes the CAPEX and OPEX supporting electric trains and improving the efficientmovement of people and freight.

Electric train installation, rail line extension, and upgrade of railway systems andassets, infrastructure and components etc.

5. Clean Transportation

GBC 3 Stars to 5 Stars

ERLP C to A rating

GRESB Green Star

Renewable Energy Pure Green projects

Clean Transportation Electric trains-related

30

DBJ commits to not knowingly allocating the net proceeds, or an amount equal to the net proceeds, of the Sustainability Bond issuance, to the financing of assets, projects or businesses included in the exclusionary criteria as set out below.

Project Selection and Evaluation (Exclusionary Criteria)

Businesses dedicated to the manufacture or retail sale and distribution of weapons and small arms; orbusinesses dedicated to the production of products and services supporting the manufacture or retail sale ofweapons and small arms

Extraction, refining, or transportation of coal

Ownership or operation of dedicated gambling establishments

Biomass plants designed primarily to consume food stocks

Large-scale hydropower dams

31

Net proceeds, or an amount equal to the net proceeds, from the Sustainability Bond issuance will be held and appropriately tracked in DBJ’s treasury.

Internal management systems allow DBJ to properly track the amount/number of the funds allocated to the Eligible Financings.

Unallocated proceeds will be held in cash and/or a money-market portfolio which will be tracked by DBJ Treasury Department.

Proceeds Management process will not be reviewed or audited by external auditors.

Management of Proceeds and Reporting

Management of Proceeds

Reporting (General Information)

Until full allocation of the net proceeds, or an amount equal to the net proceeds, from the Sustainability Bond issuance, the followings will be reported annually on the DBJ’s website.

Allocation in aggregate to each eligibility criterion, and the number of businesses/assets/projects funded under each eligibility criterion

Estimate share of financing or re-financing

Amount of unallocated proceeds and the investments in which these proceeds are held

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Reporting (cont’d)

Several case studies of projects are also shown on the same page of the DBJ’s website.

Examples of Report on Website: DBJ Sustainability Bond (Date of Issue：2016.10.19)Additional Information Reporting for each eligible asset

Certification vintage Two or three case studies of underlying green

buildings funded by the relevant Sustainability Bond*

Certification vintage Distribution by sector Project summaries and key factors evaluated on

specific green projects undertaken or implemented by clients*

Certification vintage Case studies of underlying REITs, buildings or

real estate properties funded by the relevant Sustainability Bond*

Distribution by sub-sector

Distribution by location

High-level description of selected projects*

Where feasible, quantitative assessment, of expected positive environmental impacts (on an aggregate basis)*

KPI: estimated carbon avoidance

Renewable Energy

Clean Transportation

(DBJ ERLP)

* Subject to confidentiality and prior consents from the clients

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Future Sustainability Bonds are expected to benefit from the latest and robust second party opinion (dated 1 September 2017).

Sustainalytics has been engaged as a second opinion provider.

External Assurance

http://www.dbj.jp/en/ir/credit/sri/index2.html

Previous reports are available on the dedicated page of the DBJ’s website.

Second Party Opinion

http://www.dbj.jp/en/pdf/ir/financial/second_opinion_2017_for_dbj_sustainability_bond.pdf

34

“The DBJ Sustainability Bond advances the following SDG goals and targets”. While not exclusively project-based, “Sustainalytics considers the DBJ Sustainability Bond to be transparent and to create credible

impact.”

Eligible Financings SDGs

A credible and robust assessment of companies’ sustainability performance and impact

3 stars or the above: DBJ can identify the buildings with top environmental performance in Japan

Aligned with the category 13. “Climate Action” of SDGs


C rating or the above: Effective in identifying the environmental leaders


Only Green Star financing: In line with industry best practice

Recognized by the 2017 Green Bond Principles as project categories with clear environmental impact

Aligned with the category 7. “Affordable and Clean Energy” of SDGs

Aligned with the category 9. “Industry, Innovation and Infrastructure” of SDGs

External Assurance (cont’d)

Renewable Energy

Clean Transportation

(DBJ ERLP)


35

DBJ Green Building Certification is acknowledged as an official certification system by GRESB since FY2014, a leading ESG rating system for real estate assets globally.

DBJ Green Building Certification

1. Overview 2. Rating Criteria

100 points

100 points

100 points

Ecology

Assessment centering on: The building’s

environmental features Energy & resource saving,

recycling

Example focal points: Lighting control: effective

use of daylight Adoption of unique

recycling methods Re-use of greywater and

rainwater

Risk Management & Amenities

Assessment centering on: Security & safety of tenant

users Convenience of tenant

users

Example focal points: Aseismic capacity Security control: use of IC

cards Exclusive facilities for

tenants

Community & Partnership

Assessment centering on: Relation with the

surrounding environment Owner & stakeholder

relationship

Example focal points: Tenant & owner

cooperation on energy-saving

Barrier-free design

Innovation

Remarkable Innovative Initiatives ＝ Innovation point

Began in 2011 and has certified227 office buildings, 77 logisticfacilities, 55 commercial facilitiesand 35 residential facilities (as ofMarch 31, 2017).

More than 200 members use the GRESB data in their investment management and engagement process.

36

Loans to the company rated 3stars or above are eligible for use of proceeds of the sustainability bond issued in 2015.

DBJ Green Building Certification (cont’d)

3. Ratings 4. Rating and Monitoring Process

STEP 1: Tentative assessmentFor the purpose of mutual understanding of the goal image(i.e. the certification rank & the score), owners will be askedto conduct a self pre-assessment of the applicable building.

STEP 2: CertificationGiven the tentative assessment, DBJ will conduct its full assessment, which will involve site visits & interviews. Certification ranks will be assigned according to the points scored through the assessment. DBJ’s support will basically take the form of certification plus loans.

STEP 3: Monitoring DBJ periodically monitors the environmental performance.

Rating Assessment

5 Stars Properties with the best class environmental & social awareness

4 Stars Properties with exceptionally high environmental & social awareness

3 Stars Properties with excellentenvironmental & social awareness

2 Stars Properties with highenvironmental & social awareness

1 Stars Properties with satisfactory environmental & social awareness

The GBC scoring sheet/model is revised annually, and theasset owners willing to maintain the rating level assigned ontheir assets are encouraged to increase their environmentalefforts and improve environmental performance.

37

Includes loans for general funding since this program aims to enhance the clients’ various efforts to protect the environment.

DBJ Environmentally Rated Loan Program

Client’s environmental efforts are evaluated from three major aspects by approx. 120 queries.

Criteria are revised annually based on advice provided by external experts.

Points are given as to level of client’s effort on each item. Rating is awarded based on points earned out of 250 points.

1. Overview 2. Rating Criteria

Cumulative outstanding of ERLP increased by 2,860% since 2004

Began in 2004 as the world’s firstattempt to incorporate environmentalratings to financial products.

Cumulative outstanding as of Mar.31,2017: USD 10.2bn (576 cases).*


Environmental management

A Corporate governance

B Risk management

C Social issues

D Identified material aspects

E Key performance indicators (KPIs)

F Disclosure of information

EnvironmentalBusiness activities

G Environment-friendly products and services

H Environmental considerations in manufacturing process

I Environmental considerations in supply chain

J R&D system for next-generation environment-friendly products

K Total assessment

Environmental performance

L Measures addressing global warming

M Measures for effective use of resources

N Measures for water resources

O KPIs for stakeholder engagement

38

Loans to companies rated C or above are eligible for use of proceeds of the sustainability bond.

DBJ Environmentally Rated Loan Program (cont’d)

Client covenants to maintain the level of environmental effort until redemption of a loan. Once the covenant is broken, DBJ will review the rating.

Loans provided through the Environmentally Rated Loan Program contribute to assure sustainable society by accelerating client’s effort to protect environment (especially A and B rated clients which have outstanding commitment).

3. Ratings 4. Rating and Monitoring Process

Score (Points)Rating AssessmentLarge

Enterprises SMEs

160 or above ACompanies with excellent advanced environmental initiatives

140 - 159 BCompanies with advanced environmental initiatives

100 - 139 80 - 139 CCompanies with sufficient environmental initiatives

80 - 99 60 - 79 D

Companies with sufficient environmental initiatives but additional effort to be required

Below 80 60 None Ineligible

Client fills in a preliminary survey

DBJ analyses the survey

DBJ interviews the client

Rating to be awarded

5. Social Impact

39

GRESB (formerly known as “Global Real Estate Sustainability Benchmark”)

1. Overview 2. GRESB Real Estate Members (Investor Members)

GRESB is an industry-driven organization that assesses the ESGperformance of real assets and infrastructure globally.

GRESB’s mission is to enhance and protect shareholder value byassessing and empowering sustainability practices in the realasset sector.

GRESB has Assessments covering: Real Estate, Real EstateDebt and Infrastructure.

The Assessments collect information regarding the sustainabilityperformance of companies, funds and assets, includinginformation on performance indicators, such as energy, GHGemissions, water and waste.

The Assessments are guided by what investors and the industryconsider to be material issues in the sustainability performance ofreal asset investments and are aligned with internationalreporting frameworks such as GRI (Global Reporting Initiative)and PRI (Principles for Responsible Investment).

According to GRESB (as of the end of August 2017), More than 250 members, of which over 60 are pension funds

and their fiduciaries, use GRESB data and analytical tools.

GRESB has assessed over 1,200 property companies and funds,jointly representing more than US$ 2.8 trillion in assets undermanagement, as well as almost 200 infrastructure assets andfunds.

(Source: GRESB,https://gresb.com/, https://gresb.com/about/ , https://gresb.com/gresb-members/,)

40

GRESB (cont’d)

3. Rating Methodology

Items Weight

Management 9%

Policy & Disclosure 9%

Risks & Opportunities 12%

Monitoring & EMS 9%

Performance Indicators 25%

Building Certification 11%

Stakeholder Engagement 25%

The GRESB score is based on a voluntary assessment (on an annual basis).

Seven aspects are scored and the overall GRESB score is assessed on two dimensions: “Management & Policy” (28%, 2017) and “Implementation & Measurement” (72%, 2017). The assessment areas include market practice like LEED and the GBC.

GRESB uses a quadrant model, recognizing those entities that achieve 50 or more points in each dimension as "Green Star“, top sustainability performers (other three were formerly referred to as “Green Talk”, “Green Starter” and “Green Walk" anticlockwise).

Sustainalytics’ Comment: The “Green Star’ label not only identifies top performers, but also recognizes the rated entities for integration of sustainability issues. Sustainalytics is of the opinion that such recognition encourages further disclosure and improvement around performance of these sustainability issues. "

Green Star< GRESB Model>

(Source: “2016 GRESB Snapshot”, https://gresb.com/wp-content/uploads/2017/07/2016_Global_Snapshot.pdf)

< 7 GRESB Aspects>

41

Case Studies of Renewable Energy / Clean Transportation DBJ has strongly supported, through various types of financial instruments, domestic and international projects in renewable

energy sector and clean transportation space.

Sub-sector Solar Solar Onshore Wind Offshore Wind Biomass High-speed rail

Nature Single ProjectDedicated Solar Fund

(Anchor Investor)Project portfolio Single Project Single Project Single Project

Location Japan Japan Japan Netherlands UK France

Project Size Approx. 71MW(Capacity)

Targeted at JPY 75 billion

Approx. 150MW(Capacity)



Approx. 301km(Tours to Bordeaux)

Project Stage Operational Not Disclosed Operational Operational Under Construction(expected COY: 2020) Operational

Website Linkhttp://www.dbj.jp/ja/topics/dbj_news/2013/html/0000014526.html (J)

http://www.dbj.jp/en/topics/dbj_news/2017/files/0000027694_file1.pdf(E)

http://www.dbj.jp/en/topics/dbj_news/2016/files/0000026501_file1.pdf (E)

http://geminiwindpark.nl/e_home.html#n2 (E)

http://www.dbj.jp/pdf/CSR_disclo/2017/02.pdf(p.43)(J)

http://www.dbj.jp/en/topics/dbj_news/2014/html/0000017456.html(E)

Image

Source Sojitz Pacifico Energy Japan Wind Development Gemini Wind Park MGT Teesside Meridiam

High-level description of selected transactions*

* DBJ will not guarantee that the assets as described above will constitute the eligible assets funded by the future Sustainability Bond.

42

3.3%

96.7%

US Offshore

EMEA

49.6%50.4%

SRI Investors*

Non-SRI Investors

Issue Details Distribution by Investor Type


DBJ Inaugural Sustainability Bond (€300m RegS Eurobond due Oct.2019)

DBJ’s inaugural sustainability bond.

The first sustainability bond issued by a Japanese issuer.

The transaction proceeds were used to finance (i) loans to companies that are certified under the DBJ Environmentally Rated Loan Program, or (ii) loans to finance buildings/developments receiving a DBJ Green Building Certification.


Guarantor N/A (Non-guaranteed)

Ratings A1/A(Moody's/S&P)

Issue amounts EUR 300 million

Pricing date 14th October 2015

Maturity date 21st October 2019

Coupon 0.375% p.a



Bookrunners BoAML, MorganStanley,JP Morgan, GS

* An Investor who has an investment portfolio specific for green bonds and/or prefers to make investment on green bonds over regular bonds.

43

12.6%

22.2%

37.2%

28.0% Americas

Asia -ex Japan

EMEA

Japan

Issue Details Distribution by Investor Type


DBJ second Sustainability Bond (USD500m RegS Eurobond due Oct.2021)

DBJ’s first dollar-denominated benchmark sustainability bond.

The transaction proceeds were used to finance (i) loans to companies that are certified under the DBJ Environmentally Rated Loan Program, or (ii) loans to finance buildings/developments receiving a DBJ Green Building Certification.


Guarantor N/A (Non-guaranteed)

Ratings A1/A(Moody's/S&P)

Issue amounts USD 500 million

Pricing date 12th October 2016

Maturity date 19th October 2021

Coupon 2.000% p.a



Bookrunners GS, BoAML, Daiwa, MorganStanley

61.7%

38.3%

SRI Investors*

Non-SRI Investors

* An Investor who has an investment portfolio specific for green bonds and/or prefers to make investment on green bonds over regular bonds.

44

DBJ Green Building Certification – Case Study

KABUKIZA TOWER Features of the Assessment

Location Ginza, Chuo-ku, Tokyo

Initial Certification Date Nov 2012

Site Area 6,996m²

Floor Area 94,097m²

Number of stories 29 stories above ground, 4 stories below ground and 2 roof structures

Construction Completion Feb 2013

Environment-friendly equipment.(e.g. Solar power generation panels, reuse rain water system)

Seismic control for tenants’ business continuity and emergency power generator for tenants' business continuity.

Preservation of a former existing building “Kabukiza” for its cultural and historical consideration.

5 Stars

45

DBJ Environmentally Rated Loan Program – Case Study

Santen Pharmaceutical Co., Ltd. Features of the Assessment

The company has been rated Rank-A (the highest rank) reflecting following activities:

To reflect the stance of ISO 26000, Santen's Values define the “7 Core Subjects of CSR” as important social issues to address in its corporate activities. In line with these subjects, the company engages in dialogue with its stakeholders and considers specific initiatives to address in each of these areas.

In terms of product quality, Santen Pharmaceutical has established its own standards that exceed statutory requirements. The company has adopted water resource measures as an important theme of its environmental activities, as these resources can significantly affect its quality control. Accordingly, the company takes a proactive stance toward conserving water resources through forest preservation activities.

In addition to imposing strict process controls to reduce its percentage of non-conforming products and working to reduce waste, Santen Pharmaceutical has set targets for its final disposal rate that surpass industry levels. The company is also committed to promoting further 3R (reduce, reuse and recycle) activities.

Rank A

Production line for ophthalmic pharmaceuticals

Santen Pharmaceutical Co., Ltd., headquartered in the city of Osaka, has a history reaching back more than 120 years and is Japan’s leading manufacturer of ophthalmic pharmaceuticals.

The company strives to provide superior products and services that help to improve the quality of life of patients around the world.

DBJ provided financing to Santen Pharmaceutical under the DBJ Environmentally Rated Loan Program.

46

(APPENDIX) FOURTH MEDIUM-TERM MANAGEMENT PLAN

47

Basic Policy of the Fourth Medium-term Management Plan (Fourth MTMP)

4th Medium-term Management Plan-Confront Change, Create the Future-

New functions

Spreading globalization to Japan’s regions; providing overseas investment and lending opportunities; bringing solutions to all communities

⇒ Linking regions with the world

Energy Transport Urban development

Business strategy

Financing(including crisis

response)

Investing(including special

investments)

Advisory services

Regional & global

Field (sector)

Functions

Areas

3 infrastructure sectors Industrial sectors Diversifying of funds sources (including

increasing Sustainability Bonds) Improving risk-return management

Financial capital

Matching people and strategyDeveloping better risk-

response capabilityAdopting innovative way to

workStreamlining decision-making

Non-financial capital

Management base strategy

Human capital

Intellectual capital

Relatedcapital

Collaboration with banks &other firms

Improved communication with stakeholders

Input of managerial resources

Business activities

output

DBJ will accelerate its development of new business through collaboration with diverse financial institutions and other firms.

DBJ will strengthen its corporate fundamentals, including non-financial capital, and create both economic and social value.

Providing structured finance, mezzanine finance, and other higher value services

Promoting Long-term investment in infrastructure along with growth investment in private companies

Arrangement and advisory services, plus expanded asset management for infrastructure and private equity

Exploration of new functions to augment investments and loans, advisory services and asset management

Cultivation of innovative fields

New areas

AerospaceCommunications

Healthcare

… and others

Comprehensive management

48

Financial Targets

Although difficult business conditions are on the horizon, we have set the profitability of the Fourth MTMP at a higher level than for the Third MTMP.

Looking ahead to the Fifth MTMP, we aim to build a risk-return portfolio which values both profitability and soundness.

Profitability

Soundness

(Consolidated)

Gross operating income1

Net income

Total assets

ROA2,3

ROE2,3

¥ 160 bn ¥ 171 bn¥ 70 bn ¥ 88 bn

1% 1.1%3% 3.0%

¥ 15 tn ¥ 16.5 tn

16% 17.2%

Target(approx.)(FY 2016)

Actual5(FY 2016)

¥ 190 bn¥ 80 bn

1%3%

¥ 16 tn

>14%

Target(approx.)(FY 2019)

3rd MTMP 4th MTMP

Capital adequacy ratio4

Expense ratio2 28% 30% 35%

¥ 182 bn103 bn

1.1%3.7%

-

-

Actual(ave.2014-16)

26%

1. Excludes credit costs. Target figure for the Third MTMP is adjusted from a post-credit cost basis to a pre-credit cost basis.2. Expense ratio and ROA are compared with gross operating income. ROE is compared with net income.3. Figure for ave. 2014-16 is the arithmetic average of ROA and ROE of each year, respectively.4. Common Equity Tier 1 ratio (based on Basel Ⅲ standards).5. Preliminary figures.

49

Disclaimer

Copyrightⓒ Development Bank of Japan Inc. 2017This material is created by Development Bank of Japan Inc. (DBJ)

This material has been prepared solely for the purposes of consideration and discussion between you and DBJ. This material is not intended as a solicitation or an offer to buy or sell any financial instrument, product, service or investment or for any other transactions. DBJ does not guarantee any feasibility of transactions described herein.

This material is prepared based on current generally held views of the economy, society and so forth, as well as certain assumptions reasonably made by DBJ. However, the information and content are not warranted as to completeness or accuracy and are subject to change without notice, due to change in the business environment or other reasons.

Please note that DBJ is not responsible for any action taken based on this material and no transactions described herein should be entered into without the independent advice of lawyers, accountants and/or other professional advisors where appropriate. Also please note that it is strictly prohibited to copy, extract or disclose all or any part of this material (including any attachments hereof) without prior written consent from DBJ.

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