Development Bank Of Japan 18-K/A Annual report (foreign governments) (amended)

Exhibit 4

Report of Independent Auditors

To the Governor of

Development Bank of Japan

We have audited the accompanying consolidated balance sheets of Development Bank of Japan and its subsidiaries as of March 31, 2007 and 2006, and the related consolidated statements of operations, changes in net assets , and cash flows for the years then ended, all expressed in Japanese yen. These consolidated financial statements are the responsibility of the Bank’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Development Bank of Japan and its subsidiaries as of March 31, 2007 and 2006, and the consolidated results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in Japan.

The amounts expressed in U.S. dollars, which are provided solely for the convenience of the reader, have been translated on the basis set forth in Note 1 to the accompanying consolidated financial statements.

/s/ Misuzu Audit Corporation

Misuzu Audit Corporation

Tokyo, Japan

June 26, 2007

Development Bank of Japan

CONSOLIDATED BALANCE SHEETS

	Millions of yen						Thousands of U.S. dollars
At March 31	2007			2006			2007
Assets
Cash and Due from banks (Note 3(a))	¥	40,264		¥	28,187		$	341,083
Reverse Repurchase Agreements (Note 4)		223,829			150,003			1,896,058
Money Held in Trust (Note 27)		90,805			28,422			769,212
Securities (Notes 4, 13 and 27)		420,860			433,021			3,565,101
Loans (Note 5)		12,089,812			12,873,226			102,412,647
Other Assets (Note 6)		53,262			203,896			451,183
Tangible Fixed Assets (Note 7)		35,778			36,169			303,077
Intangible Fixed Assets (Note 7)		1			1			15
Deferred Charges on Bonds and Notes		—			2,610			—
Customers’ Liabilities for Acceptances and Guarantees		273,965			161,567			2,320,756
Allowance for Loan Losses (Note 8)		(146,626	)		(199,702	)		(1,242,067	)
Allowance for Investment Losses		(3,093	)		(31,462	)		(26,205	)
Total Assets	¥	13,078,861		¥	13,685,943		$	110,790,860
	Millions of yen						Thousands of U.S. dollars
	2007			2006			2007
Liabilities and Net Assets
Liabilities
Bonds and Notes (Note 9)	¥	2,671,644		¥	2,261,799		$	22,631,468
Borrowings (Note 10)		7,923,935			9,004,474			67,123,556
Other Liabilities (Notes 11 and 24)		192,475			211,104			1,630,459
Allowance for Bonus Payments		1,617			1,658			13,703
Allowance for Employee Retirement Benefits (Note 22)		29,558			30,887			250,386
Acceptances and Guarantees (Note 12)		273,965			161,567			2,320,756
Total Liabilities	¥	11,093,197		¥	11,671,492		$	93,970,328
Net Assets
Capital	¥	1,272,286		¥	1,272,286		$	10,777,518
Retained Earnings (Note 14)		809,898			734,637			6,860,636
Total Equity	¥	2,082,184		¥	2,006,923		$	17,638,154
Net Unrealized Gain on Available-for-sale Securities, Net of Taxes (Note 27(3))	¥	21,539		¥	3,415		$	182,463
Net Deferred Hedge Losses on hedges, Net of Taxes (Note 6)		(122,294	)		—			(1,035,957	)
Total Revaluation and Translation Adjustments	¥	(100,754	)	¥	3,415		$	(853,494	)
Minority Interests		4,234			4,111			35,872
Total Net Assets	¥	1,985,663		¥	2,014,450		$	16,820,532
Total Liabilities and Net Assets	¥	13,078,861		¥	13,685,943		$	110,790,860

Accompanying notes are an integral part of these financial statements.

Development Bank of Japan

CONSOLIDATED STATEMENTS OF OPERATIONS

	Millions of yen					Thousands of U.S. dollars
For the Fiscal Years ended March 31	2007		2006			2007
Revenue
Interest Income	¥	329,480	¥	367,600		$	2,791,021
Interest on Loans		325,844		365,949			2,760,220
Interest and Dividends on Securities		2,450		1,640			20,757
Interest on Reverse Repurchase Agreements		707		6			5,992
Interest on Due from banks		92		4			784
Other Interest Income		385		0			3,268
Fees and Commissions (Note 15)		4,051		2,430			34,321
Other Operating Income (Note 16)		—		4			—
Other Ordinary Income (Note 17)		62,325		33,782			527,961
Collection of Written-off Claims		5,875		7,414			49,769
Gains on Sales of Fixed Assets		0		653			1
Total Revenue	¥	401,732	¥	411,885		$	3,403,073
Expenses
Interest Expense	¥	236,812	¥	271,421		$	2,006,034
Interest on Bonds and Notes		33,973		30,920			287,792
Interest on Borrowings		179,674		221,070			1,522,017
Other Interest Expense		23,164		19,430			196,225
Fees and Commissions (Note 18)		65		54			554
Other Operating Expenses (Note 19)		2,038		1,737			17,271
General and Administrative Expenses		25,354		25,825			214,774
Other Ordinary Expenses (Note 20)		61,445		20,368			520,504
Losses on Impairment of Fixed Assets (Note 21)		—		337			—
Losses on Sales of Fixed Assets		56		12			479
Total Expenses	¥	325,772	¥	319,757		$	2,759,616
Earnings before Income Taxes	¥	75,960	¥	92,128		$	643,457
Income Taxes (Note 3(n))	¥	672	¥	23		$	5,696
Current		661		2			5,607
Deferred		10		20			89
Minority Interests in Net Earnings		27		(125	)		233
Net Earnings	¥	75,260	¥	92,231		$	637,528

Accompanying notes are an integral part of these financial statements.

Development Bank of Japan

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Millions of yen						Thousands of U.S. dollars
For the Fiscal Years ended March 31	2007			2006			2007
Cash Flows from Operating Activities
Earnings before Income Taxes	¥	75,960		¥	92,128		$	643,457
Depreciation and Amortization		779			851			6,606
Losses on Impairment of Fixed Assets (Note 21)		—			337			—
Amortization of Goodwill		(20	)		(1	)		(175	)
Change in Allowance for Loan Losses		(47,168	)		(17,699	)		(399,562	)
Change in Allowance for Investment Losses		(44	)		10,847			(378	)
Change in Allowance for Bonus Payments		(40	)		6			(342	)
Change in Allowance for Employee Retirement Benefits		(1,329	)		(1,330	)		(11,265	)
Interest Income-Accrual Basis		(329,480	)		(367,600	)		(2,791,021	)
Interest Expense-Accrual Basis		236,713			271,421			2,005,200
Net Gains and Losses on Securities		47,077			(1,411	)		398,794
Net Gains and Losses on Money Held in Trust		(1,349	)		(965	)		(11,429	)
Net Gains and Losses on Foreign Exchanges		(0	)		(0	)		(4	)
Net Gains and Losses on Sale of Fixed Assets		56			(641	)		477
Net Change in Loans		773,633			918,698			6,553,438
Net Change in Bonds and Notes		410,555			266,582			3,477,808
Net Change in Borrowings		(1,080,539	)		(1,210,325	)		(9,153,233	)
Net Change in Reverse Repurchase Agreements		(73,825	)		(42,004	)		(625,378	)
Interest Income-Cash Basis		334,315			375,742			2,831,979
Interest Expense-Cash Basis		(236,130	)		(274,817	)		(2,000,254	)
Other		(80,579	)		(1,011	)		(682,586	)
Sub-total		28,583			18,807			242,132
Refund of (Payments for) Income Taxes		294			(795	)		2,493
Net Cash provided by (used in) Operating Activities		28,877			18,012			244,625
Cash Flows from Investing Activities
Payments for Purchases of Securities		(314,948	)		(89,980	)		(2,667,926	)
Proceeds from Redemption of Securities		357,050			50,349			3,024,566
Payments for Money Held in Trust		(64,674	)		(25,525	)		(547,857	)
Proceeds from Money Held in Trust		3,609			2,205			30,575
Payments for Purchases of Fixed Assets		(445	)		(188	)		(3,774	)
Proceeds from Sale of Fixed Assets		2			700			18
Payments for Purchases of Subsidiaries (affecting the scope of consolidation)		90			7			762
Net Cash (used in) provided by Investing Activities		(19,317	)		(62,431	)		(163,636	)
Cash Flows from Financing Activities
Capital Contribution from the Japanese Government		—			56,825			—
Payment to National Treasury		(1,179	)		(2,836	)		(9,990	)
Dividends Paid to Minority Interests		—			(129	)		—
Net Cash provided by Financing Activities		(1,179	)		53,858			(9,990	)
Effect of Exchange Rate Changes on Cash and Cash Equivalents		0			0			1
Net Change in Cash and Cash Equivalents		8,381			9,439			70,999
Cash and Cash Equivalents at the Beginning of the Fiscal Year		27,869			18,429			236,079
Net Increase in Cash and Cash Equivalents Resulted from the newly Consolidation of Subsidiary		—			—			—
Cash and Cash Equivalents at the End of the Fiscal Year (Note 3(a))	¥	36,250		¥	27,869		$	307,079

Accompanying notes are an integral part of these financial statements.

Development Bank of Japan

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

	Millions of yen
	Equity							Revaluation and translation adjustments
For the Fiscal Year ended March 31, 2006	Capital		Retained Earnings			Total Equity		Net Unrealized Gain(Loss) on Available- for- sale Securities, Net of Taxes			Net Deferred Hedge Losses on hedges, Net of Taxes			Total Revaluation and Translation Adjustments			Minority Interests			Total Net Assets
Balance at March 31, 2005	¥	1,215,461	¥	653,043		¥	1,868,504	¥	6,915		¥	—		¥	6,915		¥	4,498		¥	1,879,917
Net Earnings		—		92,231			92,231		—			—			—			—			92,231
Net Changes in Items other than Equity		56,825		(10,636	)		46,189		(3,499	)		—			(3,499	)		(387	)		42,303
Balance at March 31, 2006	¥	1,272,286	¥	734,637		¥	2,006,923	¥	3,415		¥	—		¥	3,415		¥	4,111		¥	2,014,450
	Millions of yen
	Equity							Revaluation and translation adjustments
For the Fiscal Year ended March 31, 2007	Capital		Retained Earnings			Total Equity		Net Unrealized Gain(Loss) on Available- for- sale Securities, Net of Taxes			Net Deferred Hedge Losses on hedges, Net of Taxes			Total Revaluation and Translation Adjustments			Minority Interests			Total Net Assets
Balance at March 31, 2006	¥	1,272,286	¥	734,637		¥	2,006,923	¥	3,415		¥	—		¥	3,415		¥	4,111		¥	2,014,450
Net Earnings		—		75,260			75,260		—			—			—			—			75,260
Net Changes in Items other than Equity		—		—			—		18,124			(122,294	)		(104,170	)		122			(104,047	)
Balance at March 31, 2007	¥	1,272,286	¥	809,898		¥	2,082,184	¥	21,539		¥	(122,294	)	¥	(100,754	)	¥	4,234		¥	1,985,663
	Thousands of U.S. dollars
	Equity							Revaluation and translation adjustments
For the Fiscal Year ended March 31, 2007	Capital		Retained Earnings			Total Equity		Net Unrealized Gain(Loss) on Available- for- sale Securities, Net of Taxes			Net Deferred Hedge Losses on hedges, Net of Taxes			Total Revaluation and Translation Adjustments			Minority Interests			Total Net Assets
Balance at March 31, 2006	$	10,777,518	$	6,223,108			17,000,626	$	28,933		$	—		$	28,933		$	34,832		$	17,064,391
Net Earnings		—		637,528			637,528		—			—			—			—			637,528
Net Changes in Items other than Equity		—		—			—		153,530			(1,035,957	)		(882,427	)		1,040			(881,387	)
Balance at March 31, 2007	$	10,777,518	$	6,860,636			17,638,154	$	182,463		$	(1,035,957	)	$	(853,494	)	$	35,872		$	16,820,532

Accompanying notes are an integral part of these financial statements.

Development Bank of Japan

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The accompanying consolidated financial statements have been prepared from the accounts maintained by Development Bank of Japan (“DBJ”) and its consolidated subsidiaries in accordance with accounting principles and practices generally accepted in Japan, which are different in certain respects as to the application and disclosure requirements of International Financial Reporting Standards.

The consolidated financial statements are not intended to present the financial position and the result of operations in accordance with accounting principles and practices generally accepted in countries and jurisdictions other than Japan.

The amounts indicated in millions of yen are rounded down by omitting the figures less than one million yen. Accordingly, the sum of each amount appearing in the accompanying financial statements and the notes thereto may not be equal to the sum of the individual account balances. Amounts in U.S. dollars are presented solely for the convenience of readers outside Japan. The rate of ¥118.05=$1.00, the effective exchange rate prevailing as of March 31, 2007, has been used in the conversion. The presentation of such amounts is not intended to imply that Japanese yen amounts have been or could have been readily translated, realized or settled in U.S. dollars at that rate or any other rate.

2. Basis of Consolidation

(a) Scope of Consolidation

The consolidated financial statements include the accounts of DBJ and its consolidated subsidiaries, DBJ Business Investment Co.,Ltd, DBJ Corporate Investment Fund (formerly DBJ Business Restructuring Fund prior to March, 2007), DBJ Technology and New Business Creation Fund, DBJ VALUE UP FUND, DBJ Structured Investment Fund, DBJ Corporate mezzanine partners Co.,Ltd., DBJ Credit Line Ltd., New Business Investment Co.,Ltd. and one limited liability partnership. The number of consolidated subsidiaries as of March 31,2007 and 2006 was 9 and 3, respectively.

In the fiscal year ended March 31, 2007, DBJ Corporate Investment Fund, DBJ Technology and New Business Creation Fund, DBJ VALUE UP FUND and DBJ Structured Investment Fund were newly consolidated, as DBJ adopted the new accounting standard, “Practical Solution on Application of Control Criteria and Influence Criteria to Investment Association” (Accounting Standards board of Japan Report No.20, September 8, 2006) commencing with this period. Also, DBJ Credit Line, Ltd. and one limited liability partnership were newly consolidated on their establishment in the current year.

As of March 31, 2007, DBJ has 8 subsidiaries, Asuka DBJ Investment LPS, GAD financial Service Limited and certain other subsidiaries, which are neither consolidated nor accounted for by the equity method, because underlying interests in their assets, net earnings, retained earnings and deferred hedged gains and losses have no material impact on the consolidated financial statements of DBJ. As of March 31, 2006, the number of such subsidiaries was 2.

As of March 31, 2007, DBJ invests in 5 companies, Tomatoh, Inc., Shin Mutsu-Ogawara, Inc. and certain other companies, in which DBJ has over 50% ownership interest. These companies are not considered to be subsidiaries and consequently not consolidated because DBJ made those investments as part of its financing operations, which are DBJ’s primary business, and did not intend to obtain control over their operating and financing policies. As of March 31, 2006, the number of such companies was 2.

Though DBJ has 15 affiliates as of March 31, 2007, Technology Alliance Investment, Ltd., Japan Energy Investment Inc., Asuka DBJ Partners Co.,Ltd., Intellectual Properties Development & Investment, Bridgehead Co.,Ltd and certain other affiliates, the equity method is not applied to them, since underlying interests in their net earnings, retained earnings and deferred hedged gains and losses have no material impact on the consolidated financial statements of DBJ. As of March 31, 2006, the number of such affiliates was 4.

As of March 31, 2007, DBJ owns greater than 20% but less than a majority of voting stock of Nihonkai LNG Co., Ltd. and 36 other companies. These companies, however, are not considered to be affiliates because DBJ made these investments as part of its financing operations, which are DBJ’s primary business, and did not intend to obtain the ability to exercise significant influence on their operating and financing policies. As of March 31, 2006, the number of such companies was 31.

On consolidation, significant intercompany accounts, transactions and unrealized intercompany profits have been eliminated.

(b) Year-end Date of Consolidated Subsidiaries

Fiscal year-end of the consolidated subsidiaries is March 31.

(c) Valuation of Consolidated Subsidiaries’ Assets and Liabilities

Assets and liabilities of newly consolidated subsidiaries are measured at fair value as at the date of acquisition of control.

(d) Amortization of Goodwill

The differences between the fair value of net assets and the cost of the acquired subsidiary is being amortized on a straight-line basis over the estimated beneficial period. Minor differences are charged to income in the year of acquisition.

Effective from the year ended March 31, 2007, DBJ applied “Accounting standard for business combinations” (Accounting Standards issued on October 31, 2003 by the Business Accounting Council in Japan), “Accounting standard for business divestitures” (Accounting Standards Board of Japan Statement No.7) and “Implementation guidance on Accounting standard for business combinations and Accounting standard for business divestitures” (Accounting Standards Board of Japan Guidance No.10) both issued on December 27, 2005 by the Accounting Standards Board of Japan.

3. Summary of Significant Accounting Policies

(a) Cash and Cash Equivalents

“Cash and Cash Equivalents” in the consolidated statements of cash flows consist of cash on hand and due from banks.

The reconciliation between “Cash and Cash Equivalents” and “Cash and Due from banks” is as follows:

	Millions of yen						Thousands of U.S. dollars
March 31	2007			2006			2007
Cash and Due from Banks	¥	40,264		¥	28,187		$	341,083
Time Deposits with Banks		(4,000	)		(300	)		(33,884	)
Trust Money to Financial Agencies		(14	)		(18	)		(120	)
Cash and Cash Equivalents	¥	36,250		¥	27,869		$	307,079

(b) Securities

Held-to-maturity debt securities are stated at amortized cost on a straight-line basis, computed using the weighted average method. Available-for-sale securities with readily available market quotations are stated at market value (cost is calculated principally using the weighted average method), and other securities without market quotations are stated at cost or amortized cost computed using the weighted average method. Investments in limited partnerships and other similar partnerships are accounted for at the net amounts of DBJ’s underlying interests in their net earnings based on their most recent financial statements.

Unrealized gain and loss on available-for-sale securities are included in net assets, net of income taxes.

Securities which are held as trust assets in money held in trust accounts are valued in the same way as securities above.

Effective in the fiscal year ended March 31, 2006, DBJ applied the accounting treatment for other compound instruments which do not have the ability to increase paid-in capital (Guidelines on Implementation of Business Accounting Standard No. 12 issued by the Accounting Standards Board of Japan on March 30, 2006).

(c) Valuation Method for Derivative Financial Instruments

All derivative financial instruments are carried at market value, except for certain derivatives that are designated as hedging instruments as discussed below.

(d) Hedge Accounting

(i) Hedge Accounting

DBJ applies the deferral method of hedge accounting. Foreign currency swaps, which are used to hedge foreign currency fluctuations are translated not at market values but at contractual rates, as the foreign currency swap contracts meet the hedging criteria under the Accounting Standards for Financial Instruments.

(ii) Hedging Instruments and Hedged Items

• Hedging Instruments: Interest Rate Swaps

Hedged Items            : Bonds and Notes, Borrowings, and Loans

• Hedging Instruments: Foreign Currency Swaps

Hedged Items            : Foreign currency denominated Loans and Bonds and Notes

(iii) Hedging Policy

DBJ utilizes hedging instruments to hedge interest rate and foreign currency fluctuations on its assets and liabilities.

(iv) Evaluation of Hedge Effectiveness

DBJ evaluates the effectiveness of the hedges by testing whether the derivatives are effective in reducing the risks associated with the hedged items.

In regards to both interest rate swap contracts which meet the hedging requirements of accrual method*1 and foreign currency swap contracts which meet the hedging requirements of assignment method*2, under the Accounting Standards for Financial Instruments at the inception date, DBJ is not required to evaluate their hedge effectiveness periodically.

*1

If interest rate swap contracts are used as hedges and meet certain hedging criteria, the net amount to be paid or received under the interest rate swap contract is added to or deducted from the interest on the assets or liabilities for which the swap contract was executed.

*2

In cases where foreign currency swaps are used as hedges and meet certain hedging criteria, forward foreign exchange contracts and hedged items are accounted for in the following manner;

1) If a foreign currency swap is executed to hedge an existing foreign currency assets or liabilities, a) the difference, if any, between the Japanese yen amount of the hedged foreign currency asset or liability translated using the spot rate at the inception date of the contract and the book value of the asset or liability is recognized in the statement of operations in the period which includes the inception date, and b) the discount or premium on the contract (that is, the difference between the Japanese yen amount of the contract translated using the contracted forward rate and that translated using the spot rate at the inception date of the contract) is recognized over the term of the contract.

2) If a foreign currency swap is executed to hedge a future transaction denominated in a foreign currency, the future transaction will be recorded using the contracted forward rate, and no gains or losses on the forward foreign exchange contract are recognized.

(e) Fixed Assets

(i) Depreciation of Tangible Fixed Assets

Tangible Fixed Assets are depreciated using the declining-balance method, except for buildings (excluding installed facilities) that are depreciated on a straight-line basis.

The estimated useful lives are principally as follows:

Buildings: 22 years to 50 years

Equipment: 3 years to 20 years

(ii) Amortization of Intangible Fixed Assets

Intangible Fixed Assets are amortized using the straight-line method.

(iii) Accounting standard for impairment of fixed assets

On August 9, 2002, the Business Accounting Council in Japan issued “the Accounting Standard for Impairment of Fixed Assets”. The standard requires that fixed assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Impairment losses shall be recognized in the statement of operations by reducing the carrying amount of impaired assets or a group of assets to the recoverable amount to be measured as the higher of net selling price and value in use.

DBJ has applied this standard from the fiscal year beginning April 1, 2005. In the banking industry, fixed assets are stated at cost less accumulated depreciation pursuant to the Enforcement Ordinance of the Banking Law for long term credit banks and the accumulated impairment losses are also deducted from the book value of each asset.

(f) Amortization of deferred charges

“Discounts on Bonds and Notes”, accounted as “Deferred Charges on Bonds and Notes” and “Premium on Bonds and Notes”, included in “Other Assets” on consolidated balance sheets respectively are amortized under the straight-line over the term of bonds and notes, and “Bonds and Notes Issuance Costs” are charged to income as incurred.

Although, the new standard, “Tentative Solution on Accounting for Deferred Assets” (ASBJ Report No. 19, August 11, 2006), is effective from the year ended March 31, 2007, discounts and premium on bonds and notes as of March 31, 2007 are amortized under the straight-line method over the term of the bonds and notes continuously by applying the tentative measure stipulated in this standard.

In accordance with the partial revision of “Accounting Standards for Financial Instruments” (the Business Accounting Deliberation Council, January 22, 1999) as of August 11, 2006(ASBJ Statement No. 10) and the application effective from the fiscal year and interim period ending upon or after the public announcement of such, DBJ adopted the revised accounting standard commencing in this fiscal year, and “Bonds and Notes” were stated at amortized cost (straight line method). As a result, “Discounts on Bonds and Notes”, accounted as “Deferred Charges on Bonds and Notes” decreased ¥3,951 million ($33,475 thousand), and “Premium on Bonds and Notes”, included in “Other Assets” decreased ¥1,632 million ($13,828 thousand), and “Bonds and Notes” increased and decreased such amounts.

(g) Foreign currency translation and revaluation method

Assets and liabilities denominated in foreign currencies are translated into Japanese yen at the market exchange rates prevailing at the fiscal year end.

(h) Allowance for Loan Losses

DBJ provides for “Allowance for Loan Losses” as detailed below pursuant to the internal policies for self-assessment of credit quality and loan losses.

The allowance for claims on debtors who are legally bankrupt, in special liquidation or effectively bankrupt is provided for based on the amount of claims, after the write-off described below, net of amounts expected to be collected through disposal of collateral or execution of guarantees.

The allowance for claims on debtors who are not legally bankrupt at the moment, but likely to become bankrupt, and for which future cash flows cannot reasonably be estimated, is provided for at the amount considered to be necessary based on an overall solvency assessment performed on the claims, net of amounts expected to be collected through disposal of collateral or execution of guarantees.

With respect to the claims on debtors who are likely to become bankrupt or to be closely monitored, and for which future cash flows can reasonably be estimated, the allowance is provided for as the difference between the present value of expected future cash flows discounted at the contracted interest rate and the carrying value of the claims.

The allowance for claims on debtors other than those described above is provided for based on the historical default rate, which is calculated based on the actual defaults over a certain historical period (the average financing period for DBJ).

All claims are assessed initially by the investment and lending departments and then by the Credit Risk Management Department, which is independent from the investment and lending departments based on internal policies for self-assessment of credit quality. The allowance is provided based on the results of the self-assessment.

With respect to the claims on debtors who are legally or substantially bankrupt with collateral or guarantees, the amount of claims exceeding the estimated market values of collateral or guarantees which are deemed uncollectible, have been written-off, and totalled ¥56,267 million ($476,643 thousand) and ¥95,546 million for the years ended March 31, 2007 and 2006, respectively.

The allowance for claims on debtors other than those described above was previously provided for using the estimated probability of default. From the March 31, 2007 fiscal year, the default rate is used to provide for the allowance, which is calculated based on the actual value of default experiences of the company. The calculation method has been changed because the historical data of actual default loans value have been accumulated.

As a result of this change, net earnings increased by ¥17,738 million ($150,263 thousand).

(i) Allowance for Investment Losses

“Allowance for Investment Losses” is provided for based on the estimated losses on investments.

(j) Allowance for Bonus Payments

“Allowance for Bonus Payments” is calculated and provided for based on the estimated amounts of future payment attributable to the services that have been rendered by employees and executive directors to the date of the balance sheets.

(k) Allowance for Employee Retirement Benefits

“Allowance for Employee Retirement Benefits” represents future payments for pension and retirement benefits to employees and executive directors, and is accrued based on the projected benefit obligations and estimated pension plan assets at each fiscal year end. The actuarial gain or loss is recognized during the year it arises.

(l) Equipment Used under Finance Lease Agreements

Equipment used under finance lease agreements is accounted for as equipment leased under operating leases, except for those in which the ownership of leased equipment is substantially transferred to the lessee.

(m) Consumption tax

Income and expenses subject to consumption tax exclude related consumption taxes paid or received.

(n) Income Taxes

DBJ is exempt from taxes based on income, however, DBJ is subject to parity taxes among local taxes. On the other hand, the consolidated subsidiaries are subject to income and local taxes.

Deferred income taxes are recorded based on differences between the tax bases of assets and liabilities and those as reported in the consolidated financial statements, using enacted tax rates which will be in effect when the differences are expected to reverse. The asset and liability method is used to determine deferred income taxes.

(o) Change of Accounting Policy

Effective from the year ended March 31, 2007, DBJ has applied “Accounting standards for presentation of net assets in the balance sheet (Accounting Standards Board of Japan Statement No.5)”, and “Implementaion guidance for Accounting standards for presentation of net assets in the balance sheet (Accounting Standards of Japan Guidance No.8)” both issued by the Accounting Standard Board of Japan on December 9, 2005.

The amounts corresponding to the conventional “Equity” in the consolidated balance sheet is ¥2,103,723 million ($17,820,617 thousand). DBJ presented its net assets in the consolidated balance sheet using the new standard as of March 31, 2006, retrospectively.

Furthermore, “Minority Interests” previously presented on the consolidated balance sheet between the liabilities section and the equity section is presented in “Net Assets”.

Additionally, the consolidated statements of changes in net assets for the fiscal year ended March 31, 2006 are presented under the new standard, retrospectively.

4. Securities

Securities as of March 31, 2007 and 2006 are as follows:

	Millions of yen				Thousands of U.S. dollars
At March 31	2007		2006		2007
Japanese Government Bonds	¥	120,705	¥	189,645	$	1,022,495
Corporate Bonds		96,374		48,961		816,387
Equities		114,865		139,591		973,024
Other securities		88,914		54,822		753,195
	¥	420,860	¥	433,021	$	3,565,101

Notes:	1.	Investments in subsidiaries and affiliates included in “Equities” as of March 31, 2007 and 2006 are ¥468 million ($3,969 thousand) and ¥205 million, respectively. And investments in subsidiaries and affiliates included in “Other securities” as of March 31, 2007 and 2006 are ¥13,498 million ($114,345 thousand) and ¥1,339 million, respectively.
	2.	Contingent liabilities for guarantees on corporate bonds, included in securities, which were issued by private placement (Article 2 Paragraph 3 of the Securities and Exchange Law) amounted to ¥130 million ($1,101 thousand) as of March 31, 2007.
	3.	There are no securities repledged as of March 31, 2007 and 2006 respectively, although securities accepted under repurchase agreements, can be sold or repledged. Securities neither sold nor repledged are ¥223, 829 million ($1,896,058 thousand) and ¥150,003 million, respectively.

5. Non-performing Loans

The amounts of non-performing loans included in “Loans” on the consolidated balance sheets as of March 31, 2007 and 2006 are as follows:

	Millions of yen				Thousands of U.S. dollars
At March 31	2007		2006		2007
Loans to Bankrupt Debtors	¥	7,562	¥	4,313	$	64,064
Delinquent Loans		64,065		111,720		542,696
Loans Past Due Three Months or More		28		—		237
Restructured Loans		73,624		89,301		623,672
	¥	145,280	¥	205,335	$	1,230,669

Notes:	1.	The amounts of loans indicated above are stated at gross amounts, before reduction of allowance for loan losses.
	2.	“Loans to Bankrupt Debtors” represent non-accrual loans to debtors who are legally bankrupt as defined in Article 96-1-3 and 4 of the Japanese Tax Law Enforcement Regulation.
	3.	“Delinquent Loans” represent non-accrual loans other than (i) Loans to Bankrupt Debtors and (ii) Loans whose interest payments are deferred in order to assist or facilitate the restructuring efforts of borrowers in financial difficulty.
	4.	“Loans Past Due Three Months or More” are loans whose principal or interest payment is three months or more past due and do not fall under the category of “Loans to Bankrupt Debtors” or “Delinquent Loans”.
	5.	“Restructured loans” are loans whose repayment terms have been modified to the advantage of debtors through means such as reduction or exemption of interest rates, postponement of principal and interest payments, and forgiveness of loans to support or restructure the debtors’ businesses, and do not fall under the category of “Loans to Bankrupt Debtors”, “Delinquent Loans”, or “Loans Past Due Three Months or More”.

DBJ provides commitment lines under which it lends, upon the borrowers’ request, necessary funds up to the pre-determined amount that is within the borrowers’ financing needs for the projects and up to the agreed maximum amount to lend, provided that their requests meet terms and conditions for disbursement prescribed in the loan agreements. The total balance of unused commitment lines as of March 31, 2007 and 2006 are ¥331,130 million ($2,805,222 thousand), including ¥97,695 million ($827,578 thousand) being financed within one year and ¥214,022 million, including ¥53,636 million being financed within one year, respectively.

6. Other Assets

Other assets as of March 31, 2007 and 2006 are as follows:

	Millions of yen				Thousands of U.S. dollars
At March 31	2007		2006		2007
Prepaid Expenses	¥	99	¥	103	$	844
Accrued Income		48,068		52,155		407,188
Derivatives		3,316		3,083		28,095
Deferred Hedge Losses		—		146,698		—
Guarantee Deposits		426		411		3,613
Other		1,350		1,444		11,443
	¥	53,262	¥	203,896	$	451,183

Notes:	1.	Deferred Hedge Losses are net unrealized losses from hedging instruments. The gross amounts of deferred hedge gains and losses before netting are ¥10,138 million and ¥156,837 million as of March 31, 2006, respectively.
	2.	From the year ended March 31, 2007, Deferred Hedge Losses are reclassified to “Net Assets”.
	3.	From the year ended March 31, 2007, Guarantee Deposits are reclassified from “Premises and Equipment” to “Other Assets”. Guarantee Deposits as of March 31, 2006 is presented using the new presentation standard, retrospectively.

7. Fixed Assets

Tangible fixed assets and intangible fixed assets as of March 31, 2007 and 2006 are as follows:

	Millions of yen						Thousands of U.S. dollars
At March 31	2007			2006			2007
Tangible Fixed Assets
Land	¥	20,386		¥	20,386		$	172,695
Buildings		33,820			33,813			286,495
Equipment		1,926			1,973			16,320
	¥	56,133		¥	56,173		$	475,510
Less- Accumulated Depreciation		(20,355	)		(20,003	)		(172,433	)
Net Book Value	¥	35,778		¥	36,169		$	303,077
Intangible Fixed Assets
Other		12			11			107
	¥	12		¥	11		$	107
Less - Accumulated Amortization		(10	)		(10	)		(92	)
Net Book Value	¥	1		¥	1		$	15

Notes: From the year ended March 31, 2007, Premises and Equipment are reclassified to Tangible and Intangible Fixed Assets. Tangible Assets and Intangible Fixed Assets as of March 31, 2006 are presented using the new presentation standard, retrospectively.

8. Allowance for Loan Losses

Allowance for Loan Losses as of March 31, 2007 and 2006 are as follows:

	Millions of yen				Thousands of U.S. dollars
At March 31	2007		2006		2007
General Allowance for Loan Losses	¥	96,933	¥	120,170	$	821,124
Specific Allowance for Loan Losses		49,692		79,532		420,943
	¥	146,626	¥	199,702	$	1,242,067

9. Bonds and Notes

Bonds and notes as of March 31, 2007 and 2006 are as follows:

At March 31

Description of Bonds and Notes

Issue date

Currency and Amounts 2007 (In millions)

Interest rate (%)

Maturity date

Millions of yen

Thousands of U.S. dollars

2007

2006

2007

Japanese Government-guaranteed Bonds 186*1

November 1996

—

2.90

November 2006

¥

—

¥

10,000 [10,000

]

$

—

Japanese Government-guaranteed Bonds 1-16

August 2000- February 2007

JPY613,000

0.80 ~ 2.10

August 2010- December 2021

612,132

423,000

5,185,363

Japanese Government-guaranteed Foreign Bonds 65,67*2

December 1996- September 1998

JPY25,000

1.81 ~ 2.875

December 2006- September 2028

25,087

75,000 [50,000

]

212,516

Japanese Government-guaranteed Foreign Bonds 1-12

November 1999- February 2007

JPY 846,906 USD2,350 EUR750

1.05 ~ 6.875

June 2010- November 2026

846,906

664,389

7,174,131

Japanese Government-underwritten Bonds 186-211*1

May 1996- December 1998

JPY72,810

1.10 ~ 3.60

May 2005- December 2008

72,766 [33,250

]

109,410 [36,600

]

616,397 [281,660

]

FILP Agency Bonds 1-31*3

September 2001- March 2007

JPY1,115,000

0.40 ~ 2.63

September 2006- December 2036

1,114,753 [150,000

]

980,000 [100,000

]

9,443,061 [1,270,648

]

¥

2,671,644

¥

2,261,799

$

22,631,468

Notes:	1.	These bonds are government-guaranteed bonds and government-underwritten bonds issued by the Hokkaido-Tohoku Development Finance Public Corporation prior to the merger with the Japan Development Bank that formed DBJ.
	2.	These bonds are government-guaranteed bonds issued by the Japan Development Bank prior to the merger with the Hokkaido-Tohoku Development Finance Public Corporation that formed DBJ.
	3.	Fiscal Investment and Loan Program (FILP) Agency Bonds issued in Japanese domestic markets are not government-guaranteed.
	4.	Figures indicated in brackets [ ] represent the amounts to be redeemed within one year.

Scheduled redemptions of Bonds and Notes for each of the next five years as of March 31, 2007 are as follows:

Fiscal year ending in March 31,
2008	¥	183,250	million	$	1,552,308	thousand
2009		169,560			1,436,341
2010		110,000			931,809
2011		370,000			3,134,265
2012		423,621			3,588,488

10. Borrowings

Borrowings as of March 31, 2007 and 2006 are as follows:

	Average interest rate (%)	Due date of repayment	Millions of yen				Thousands of U.S. dollars
At March 31			2007		2006		2007
Borrowings
Long-term borrowings from Japanese government	1.92	December 2007 – November 2026	¥	7,923,935	¥	9,004,474	$	67,123,556
			¥	7,923,935	¥	9,004,474	$	67,123,556

Borrowings with maturities for each of the next five years as of March 31, 2007 are as follows:

Fiscal year ending in March 31,
2008	¥	1,229,184	million	$	10,412,409	thousand
2009		1,149,792			9,739,881
2010		977,618			8,281,390
2011		866,367			7,338,984
2012		832,097			7,048,689

11. Other Liabilities

Other liabilities as of March 31, 2007 and 2006 are as follows:

	Millions of yen				Thousands of U.S. dollars
At March 31	2007		2006		2007
Accrued Expenses	¥	34,031	¥	33,049	$	288,278
Unearned Income		17,913		19,008		151,747
Deposits from Employees		153		150		1,300
Derivatives		133,847		156,590		1,133,820
Other		6,529		2,306		55,314
	¥	192,475	¥	211,104	$	1,630,459

12. Acceptances and Guarantees

Acceptances and guarantees as of March 31, 2007 and 2006 are as follows:

At March 31	Millions of yen				Thousands of U.S. dollars
	2007		2006		2007
Guarantees	¥	273,965	¥	161,567	$	2,320,756
	¥	273,965	¥	161,567	$	2,320,756

13. Assets Pledged as Collateral

Securities pledged as collateral in Real Time Gross Settlement for bank deposits at the Bank of Japan are ¥120,705 million ($1,022,495 thousand) as of March 31, 2007, and ¥119,652 million as of March 31, 2006.

14. Retained Earnings

A portion of net earnings of the parent company calculated pursuant to Article 4 of the Development Bank of Japan Law (“DBJ Law”) was appropriated to Statutory Reserve and for payment to the National Treasury as stipulated by Article 41 of the DBJ Law.

There were no payments to the National Treasury attributable to the year ended March 31, 2006.

At May 31, 2007, DBJ are due to pay to the National Treasury, ¥2,499 million ($21,177 thousand), attributable to the year ended March 31,2007, this was resolved at the board meeting held on May 10, 2007.

15. Fees and Commissions (Income)

Fees and commissions (income) for the fiscal years ended March 31, 2007 and 2006 are as follows:

	Millions of yen				Thousands of U.S. dollars
For the fiscal years ended March 31	2007		2006		2007
Commissions	¥	4,051	¥	2,430	$	34,321
	¥	4,051	¥	2,430	$	34,321

16. Other Operating Income

Other operating income for the fiscal years ended March 31, 2007 and 2006 are as follows:

For the fiscal years ended March 31	Millions of yen				Thousands of U.S. dollars
	2007		2006		2007
Foreign exchange gains	¥	—	¥	4	$	—
	¥	—	¥	4	$	—

17. Other Ordinary Income

Other ordinary income for the fiscal years ended March 31, 2007 and 2006 are as follows:

	Millions of yen				Thousands of U.S. dollars
For the fiscal years ended March 31	2007		2006		2007
Reversal of allowance for loan losses	¥	47,133	¥	17,699	$	399,266
Gains on sales of equities and other securities		1,508		2,979		12,778
Gains on money held in trust		1,350		966		11,437
Other		12,333		12,135		104,480
	¥	62,325	¥	33,782	$	527,961

18. Fees and Commissions (Expenses)

Fees and commissions (expenses) for the fiscal years ended March 31, 2007 and 2006 are as follows:

	Millions of yen				Thousands of U.S. dollars
For the fiscal years ended March 31	2007		2006		2007
Wire transfer service charges	¥	5	¥	5	$	49
Commissions		59		49		505
	¥	65	¥	54	$	554

19. Other Operating Expenses

Other Operating Expenses for the fiscal years ended March 31, 2007 and 2006 are as follows:

	Millions of yen				Thousands of U.S. dollars
For the fiscal years ended March 31	2007		2006		2007
Foreign exchange losses	¥	129	¥	3	$	1,100
Bonds and notes issuance costs		1,521		777		12,887
Losses on derivative instruments		30		687		260
Other		356		268		3,024
	¥	2,038	¥	1,737	$	17,271

20. Other Ordinary Expenses

Other ordinary expenses for the fiscal years ended March 31, 2007 and 2006 are as follows:

	Millions of yen				Thousands of U.S. dollars
For the fiscal years ended March 31	2007		2006		2007
Provision for investment losses	¥	112	¥	10,802	$	953
Write-off of Loans		2,982		5,350		25,263
Losses on sales of equities and Other securities		1		—		9
Write-off of equities		47,713		1,568		404,179
Losses on money held in trust		0		0		8
Other		10,635		2,646		90,092
	¥	61,445	¥	20,368	$	520,504

Notes: Losses on sale of loans included in “Other” are ¥890 million ($7,540 thousand) and ¥591 million for the fiscal years ended March 31, 2007 and 2006, respectively.

21. Losses on Impairment of Fixed Assets

Losses on impairment of fixed assets for the fiscal years ended March 31, 2007 and 2006 are as follows:

	Millions of yen				Thousands of U.S. dollars
At March 31	2007		2006		2007
Losses on impairment of fixed assets	¥	—	¥	337	$	—
	¥	—	¥	337	$	—

The differences between the recoverable amount and the book value of the following assets were recognized as losses on impairment of fixed assets in the fiscal year ended March 31, 2006

Principal purpose of use	Type	Area	Losses (Millions of yen)
Idle assets	Land and premises, etc.	Nagano prefecture	4
		Kanagawa prefecture	332

DBJ recognize losses on impairment of fixed assets for idle assets. For the purpose of identifying impaired assets in such cases, the individual asset is assessed as a unit. The recoverable amount is calculated based on net realizable value. Net realizable value is calculated based on the appraisal value less estimated cost of disposal.

22. Employee Retirement Benefits

DBJ has defined benefit pension plans, which consist of welfare pension fund plan and lump-sum severance indemnity plan.

(a) The funded status of the pension plans is as follows:

		Millions of yen						Thousands of U.S. dollars
At March 31		2007			2006			2007
Projected Benefit Obligation	(A)	¥	(44,460	)	¥	(45,000	)	$	(376,621	)
Fair Value of Plan Assets	(B)		14,902			14,112			126,235
Unfunded Pension Obligation	(C)=(A)+(B)		(29,558	)		(30,887	)		(250,386	)
Unrecognized Net Obligation at Transition	(D)		—			—			—
Unrecognized Net Actuarial Gains/Losses	(E)		—			—			—
Unrecognized Prior Service Cost	(F)		—			—			—
Net Amount Recognized on the Balance Sheet	(G)=(C)+(D)+(E)+(F)		(29,558	)		(30,887	)		(250,386	)
Prepaid Pension Cost	(H)		—			—			—
Allowance for Employee Retirement Benefits	(G)-(H)	¥	(29,558	)	¥	(30,887	)	$	(250,386	)

Notes: The above Projected Benefit Obligations include a portion in which the pension fund manages on behalf of the Japanese Government welfare program.

(b) Component of Pension Cost

	Millions of yen						Thousands of U.S. dollars
At March 31	2007			2006			2007
Service Cost	¥	1,400		¥	1,417		$	11,866
Interest Cost		897			880			7,606
Expected Return on Plan Assets		(493	)		(119	)		(4,184	)
Amortization of Prior Service Cost		—			—			—
Amortization of Net Actuarial Gains/Losses		(861	)		(1,315	)		(7,302	)
Amortization of Net Obligation at Transition		—			—			—
Other Costs		—			—			—
Net Pension Cost	¥	942		¥	864		$	7,986

(c) Principal Assumptions Used

At March 31	2007	2006
Discount Rate	2.0%	2.0%
Expected Rate of Return on Plan Assets	3.50%	1.0%
Method of Attributing the Projected Benefits to Periods of Services	Straight-line basis	Straight-line basis
Amortization Period of Actuarial Gains/Losses	Gains/losses are charged to income immediately	Gains/losses are charged to income immediately

23. Lease Transactions

(a) Finance Lease Transactions

(Excluding leases where the ownership of the property is substantially transferred to the lessee)

	Millions of yen
	2007									2006
At March 31	Equipment			Others			Total			Equipment			Others			Total
Acquisition Cost Equivalents	¥	724		¥	277		¥	1,002		¥	773		¥	277		¥	1,051
Less- Accumulated Depreciation Equivalents		(430	)		(151	)		(582	)		(362	)		(127	)		(490	)
Book Value Equivalents	¥	294		¥	125		¥	419		¥	410		¥	149		¥	560

	Thousands of U.S. dollars 2007
At March 31	Equipment			Others			Total
Acquisition Cost Equivalents	$	6,141		$	2,347		$	8,488
Less- Accumulated Depreciation Equivalents		(3,650	)		(1,281	)		(4,931	)
Book Value Equivalents	$	2,491		$	1,066		$	3,557

Future lease payments subsequent to the end of the fiscal years for finance leases (including the interest portion thereon) are summarized below:

	Millions of yen				Thousands of U.S. dollars
At March 31	2007		2006		2007
Due in One Year or Less	¥	215	¥	227	$	1,825
Due after One Year		210		339		1,786
	¥	426	¥	566	$	3,611

Lease expense, depreciation equivalents and interest expense equivalents relating to finance leases for the fiscal year ended March 31, 2007 amount to ¥246 million ($2,084 thousand), ¥237 million ($2,014 thousand) and ¥8 million ($70 thousand), respectively. The corresponding amounts for the fiscal year ended March 31, 2006 are ¥305 million, ¥296 million and ¥10 million, respectively.

Notes:	1.	Depreciation equivalents are calculated using the straight-line method, assuming that useful life is equal to the lease term and the residual value at the end of the lease term is zero.
	2.	Interest expense equivalents are defined as the difference between total lease payments and acquisition equivalents, which are allocated over the lease term using the effective interest method.

(b) Operating Lease Transactions

DBJ has no future lease payments subsequent to the end of fiscal year for operating lease transactions as of March 31, 2007 and 2006.

24. Deferred Tax Assets and Liabilities

Deferred Tax Assets and Liabilities as of March 31, 2007 and 2006 consisted of the followings:

	Millions of yen						Thousands of U.S. dollars
At March 31	2007			2006			2007
Deferred Tax Assets:
Net Losses Carryforwards	¥	—		¥	180		$	—
Enterprise Tax Payable		57			0			484
Allowance for Investment Losses		259			142			2,195
Losses on Available-for-sale Securities		406			—			3,443
Other		51			62			438
Sub Total		774			386			6,560
Less- Valuation Allowance		(767	)		(386	)		(6,500	)
Total Deferred Tax Assets	¥	7		¥	0		$	60
Deferred Tax Liabilities:
Net Unrealized Gain on Available-for-sale Securities		(66	)		(29	)		(565	)
Other		0			(20	)		0
Total Deferred Tax Liabilities		(66	)		(50	)		(565	)
Net Deferred Tax Assets (Liabilities)	¥	(59	)	¥	(50	)	$	(505	)

25. Segment Information

(a) Segment Information by Type of Business

DBJ and its consolidated subsidiaries are engaged in business such as private equity investment and fund management and other activities as well as banking business. Such segment information, however, is not presented, as the percentages of those activities are insignificant.

(b) Segment Information by Geographic Area

Segment information classified by geographic area is not presented, as there are no consolidated subsidiaries and offices located in countries or areas other than Japan.

(c) Ordinary Income from Overseas Entities

Ordinary income from overseas entities is omitted because the amount is below 10 percent of the consolidated ordinary income.

26. Derivative Transactions

1. Details Related to Transactions

(a) Details of Transactions

DBJ utilizes derivative financial instruments, which comprise interest rate swaps, currency swaps, forward foreign exchange contract and credit default swaps.

(b) Policy for Derivative Transactions

DBJ utilizes interest rate swaps, currency swaps and forward foreign exchange contract to reduce its exposure to market risks from fluctuations in interest rates and foreign currency exchange rates, and does not hold or issue derivative financial instruments for trading purposes. DBJ also utilizes credit default swaps as part of its “acceptances and guarantees on customers’ debt” business within the limit of a certain definite amount of risk.

(c) Purposes of Transaction

DBJ utilizes interest rate swaps to reduce its exposure to the risk of interest rate fluctuations associated with funding transactions, and foreign currency swaps to reduce its exposure to the risks of foreign currency exchange rate fluctuations associated with its loans and bonds denominated in foreign currencies. DBJ also utilizes credit default swaps as part of its “acceptances and guarantees on customers’ debt” business.

DBJ adopted the Japanese accounting standards for hedge accounting to interest rate swaps and foreign currency swaps as described below:

(i) Hedge Accounting

DBJ applies the deferral method of hedge accounting. Foreign currency swaps, which are used to hedge the foreign currency fluctuations as the foreign currency swap contracts meet the hedging criteria under the Accounting Standard for Financial Instruments, are translated not at market but at contractual rates.

(ii) Hedging Instruments and Hedged Items

• Hedging Instruments: Interest Rate Swaps

Hedged Items             : Bonds and Notes, Borrowings, and Loans

• Hedging Instruments: Foreign Currency Swaps

Hedged Items             : Foreign currency denominated Loans and Bonds and Notes

(iii) Hedging Policy

DBJ utilizes hedging instruments to hedge interest rate and foreign currency fluctuations of the hedged assets and liabilities.

(iv) Evaluation of Hedge Effectiveness

DBJ evaluates the effectiveness of the hedges by testing whether the derivatives are effective in reducing the risks associated with the hedged items.

In regard to both of interest rate swap contracts which meet the hedging requirements of accrual method*1 and foreign currency swap contracts which meet the hedging requirements of assignment method*2 under the Accounting Standards for Financial Instruments at the inception date, DBJ is not required to evaluate their hedge effectiveness periodically.

*1

If interest rate swap contracts are used as hedges and meet certain hedging criteria, the net amount to be paid or received under the interest rate swap contract is added to or deducted from the interest on the assets or liabilities for which the swap contract was executed.

*2

In cases where foreign currency swap are used as hedges and meet certain hedging criteria, forward foreign exchange contracts and hedged items are accounted for in the following manner;

1) If a foreign currency swap is executed to hedge an existing foreign currency assets or liabilities,

a) the difference, if any, between the Japanese yen amount of the hedged foreign currency asset or liability translated using the spot rate at the inception date of the contract and the book value of the asset or liability is recognized in the statement of operations in the period which includes the inception date, and b) the discount or premium on the contract (that is, the difference between the Japanese yen amount of the contract translated using the contracted forward rate and that translated using the spot rate at the inception date of the contract) is recognized over the term of the contract.

2) If a foreign currency swap is executed to hedge a future transaction denominated in a foreign currency, the future transaction will be recorded using the contracted forward rate, and no gains or losses on the forward foreign exchange contract are recognized.

(d) Risks Involved in Derivatives Transactions

Derivatives involve the following risks:

(i) Market Risk

Potential loss from changes in the market value of financial products due to fluctuations in interest rates or exchange rates.

(ii) Credit Risk

Potential loss from the failure of a counterparty to perform its obligations in accordance with the terms and conditions of contract governing the transactions due to the counterparty’s bankruptcy or deteriorating business conditions.

With regards to derivative transactions for hedging purpose, the market risk on derivatives is offset against the hedged transactions. As for credit risk, DBJ limits the counterparty to financial institutions highly rated by the credit rating agencies, and constantly monitors the cost of restructuring its transactions and creditworthiness of each counterparty. In addition, DBJ transacts with multiple counterparties to reduce credit risk. With regards to credit derivative transactions, DBJ holds credit risk of target debt itself in the transaction.

(e) Risk Management Policies for Derivatives

The treasury department enters into and monitors derivative transactions in accordance with the internal management policy, which defines the authorization procedures, including pre-approval by authorized personnel, and limits on derivative transactions. Also, total contract amount, total amount of risk, market value, and total amount of counterparties’ credit risk in the derivative transactions are reported to the directors in charge periodically.

(f) Supplementary explanation on Market Value of Derivatives

It should be noted that ‘Contract Value’ represents nominal contract value or notional principal amount used in determining the value of receipts or payments of interest, but this does not necessarily reflect the risks of derivative transactions themselves.

2. Information on Market Value of Derivatives

The market values of derivatives at March 31, 2007 and 2006 are as follows:

(a) Interest Rate-related Transactions

	Millions of yen
	2007
	Contract Value							Unrealized Gain (Loss)
At March 31	Total		Over one year		Market Value
Over-the-Counter
Swaps
Receive Fixed/ Pay Float	¥	1,863,361	¥	1,813,361	¥	(13,458	)	¥	(13,458	)
Receive Float/ Pay Fixed		1,863,361		1,813,361		4,219			4,219
	¥	—	¥	—	¥	(9,239	)	¥	(9,239	)
	Millions of yen
	2006
	Contract Value							Unrealized Gain (Loss)
At March 31	Total		Over one year		Market Value
Over-the-Counter
Swaps
Receive Fixed/ Pay Float	¥	1,604,155	¥	1,504,155	¥	(44,226	)	¥	(44,226	)
Receive Float/ Pay Fixed		1,604,155		1,504,155		37,654			37,654
	¥	—	¥	—	¥	(6,572	)	¥	(6,572	)
	Thousands of U.S. dollars
	2007
	Contract Value							Unrealized Gain (Loss)
At March 31	Total		Over one year		Market Value
Over-the-Counter
Swaps
Receive Fixed/ Pay Float	$	15,784,507	$	15,360,957	$	(114,011	)	$	(114,011	)
Receive Float/ Pay Fixed		15,784,507		15,360,957		35,741			35,741
	$	—	$	—	$	(78,270	)	$	(78,270	)

Notes:	1.	The above transactions are marked to market and changes in unrealized gain (loss) are included in the Consolidated Statements of Operations. Derivative transactions qualifying for hedge accounting are excluded from the tables above.
	2.	Market values for the over-the-counter transactions are based primarily on discounted present values.

(b) Currency-related Transactions

	Millions of yen
	2007
	Contract Value						Unrealized Gain (Loss)
At March 31	Total		Over one year		Market Value
Over-the-Counter
Swaps	¥	—	¥	—	¥	—	¥	—
Forwards
Sold	¥	—	¥	—	¥	—	¥	—
Bought		2,410		—		53		53
	¥	—	¥	—	¥	53	¥	53
	Millions of yen
	2006
	Contract Value						Unrealized Gain (Loss)
At March 31	Total		Over one year		Market Value
Over-the-Counter
Swaps	¥	—	¥	—	¥	—	¥	—
Forwards
Sold	¥	—	¥	—	¥	—	¥	—
Bought		—		—		—		—
	¥	—	¥	—	¥	—	¥	—
	Thousands of U.S. dollars
	2007
	Contract Value						Unrealized Gain (Loss)
At March 31	Total		Over one year		Market Value
Over-the-Counter
Swaps	$	—	$	—	$	—	$	—
Forwards
Sold	$	—	$	—	$	—	$	—
Bought		20,418		—		450		450
	$	—	$	—	$	450	$	450

Notes:	1.	The above transactions are marked to market and changes in unrealized gain (loss) are included in the Consolidated Statements of Operations. Derivative transactions qualifying for hedge accounting are excluded from the tables above.
	2.	Market values for the over-the-counter transactions are based primarily on discounted present values.

(f) Credit Derivatives Transactions

	Millions of yen
	2007
	Contract Value						Unrealized Gain (Loss)
At March 31	Total		Over one year		Market Value
Over-the-Counter
Credit Default Swap
Sold	¥	697,877	¥	697,877	¥	130	¥	130
Bought		579,827		579,827		130		130
	¥	—	¥	—	¥	261	¥	261
	Millions of yen
	2006
	Contract Value						Unrealized Gain (Loss)
At March 31	Total		Over one year		Market Value
Over-the-Counter
Credit Default Swap
Sold	¥	—	¥	—	¥	—	¥	—
Bought		—		—		—		—
	¥	—	¥	—	¥	—	¥	—
	Thousands of U.S. dollars
	2007
	Contract Value						Unrealized Gain (Loss)
At March 31	Total		Over one year		Market Value
Over-the-Counter
Credit Default Swap
Sold	$	5,911,714	$	5,911,714	$	1,109	$	1,109
Bought		4,911,714		4,911,714		1,102		1,102
	$	—	$	—	$	2,211	$	2,211

Notes:	1.	The above transactions are marked to market and changes in unrealized gain (loss) are included in the Consolidated Statements of Operations.
	2.	Market values are based on the counterparties’ tendered price.
	3.	‘Sold’ means the underwriting of credit risk and ‘Bought’ means the transferring of credit risk.

27. Market Value of Securities and Money Held in Trust

Market value of Securities and Money held in Trust as of March 31, 2007 and 2006 are summarized below. The information about investments in subsidiaries and affiliates with market value is reported in the notes to non-consolidated financial statements.

1. Securities

(a) Trading Securities

Not applicable

(b) Held-to-maturity Debt Securities with market values

	Millions of yen
	2007
						Unrealized Gain (Loss)
At March 31	Book Value		Market Value			Net			Gain		(Loss)
Japanese Government Bonds	¥	—	¥	—		¥	—		¥	—	¥	—
Japanese Local Government Bonds		—		—			—			—		—
Short-term Corporate Bonds		—		—			—			—		—
Corporate Bonds		44,280		44,458			178			282		(103	)
Other		—		—			—			—		—
	¥	44,280	¥	44,458		¥	178		¥	282	¥	(103	)
	Millions of yen
	2006
						Unrealized Gain (Loss)
At March 31	Book Value		Market Value			Net			Gain		(Loss)
Japanese Government Bonds	¥	—	¥	—		¥	—		¥	—	¥	—
Japanese Local Government Bonds		—		—			—			—		—
Short-term Corporate Bonds		—		—			—			—		—
Corporate Bonds		43,230		43,089			(140	)		185		(326	)
Other		—		—			—			—		—
	¥	43,230	¥	43,089		¥	(140	)	¥	185	¥	(326	)
	Thousands of U.S. dollars
	2007
						Unrealized Gain (Loss)
At March 31	Book Value		Market Value			Net			Gain		(Loss)
Japanese Government Bonds	$	—	$	—		$	—		$	—	$	—
Japanese Local Government Bonds		—		—			—			—		—
Short-term Corporate Bonds		—		—			—			—		—
Corporate Bonds		375,095		376,609	��		1,514			2,390		(876	)
Other		—		—			—			—		—
	$	375,095	$	376,609		$	1,514		$	2,390	$	(876	)

Notes: Market value is based on the closing price at the respective fiscal year ends.

(c) Available-for-sale Securities with market values

	Millions of yen
	2007
					Unrealized Gain (Loss)
At March 31	Acquisition Cost		Market / Book Value		Net			Gain		(Loss)
Equities	¥	18,375	¥	31,936	¥	13,561		¥	13,617	¥	(55	)
Bonds		128,902		128,682		(219	)		282		(502	)
Japanese Government Bonds		120,902		120,705		(196	)		282		(479	)
Japanese Local Government Bonds		—		—		—			—		—
Short-term Corporate Bonds		—		—		—			—		—
Corporate Bonds		8,000		7,977		(22	)		—		(22	)
Other		—		—		—			—		—
	¥	147,277	¥	160,619	¥	13,341		¥	13,899	¥	(558	)
	Millions of yen
	2006
					Unrealized Gain (Loss)
At March 31	Acquisition Cost		Market / Book Value		Net			Gain		(Loss)
Equities	¥	110	¥	95	¥	(15	)	¥	—	¥	(15)
Bonds		194,226		192,543		(1,683	)		32		(1,715	)
Japanese Government Bonds		191,226		189,645		(1,580	)		32		(1,613	)
Japanese Local Government Bonds		—		—		—			—		—
Short-term Corporate Bonds		—		—		—			—		—
Corporate Bonds		3,000		2,897		(102	)		—		(102	)
Other		—		—		—			—		—
	¥	194,337	¥	192,638	¥	(1,698)		¥	32	¥	(1,730)
	Thousands of U.S. dollars
	2007
					Unrealized Gain (Loss)
At March 31	Acquisition Cost		Market / Book Value		Net			Gain		(Loss)
Equities	$	155,657	$	270,535	$	114,878		$	115,351	$	(473	)
Bonds		1,091,929		1,090,069		(1,860	)		2,396		(4,256	)
Japanese Government Bonds		1,024,161		1,022,494		(1,667	)		2,396		(4,063	)
Japanese Local Government Bonds		—		—		—			—		—
Short-term Corporate Bonds		—		—		—			—		—
Corporate Bonds		67,768		67,575		(193	)		—		(193	)
Other		—		—		—			—		—
	$	1,247,586	$	1,360,604	$	113,018		$	117,747	$	(4,729	)

Notes:            Book value above represent the market values determined based on the closing price at the respective fiscal year ends.

(d) Held-to-maturity Debt Securities sold

	Millions of yen
	2007
For the Fiscal Year ended March 31	Cost of securities sold		Proceeds from sales		Net Gain (Loss) on sales
Corporate Bonds	¥	—	¥	—	¥	—
	¥	—	¥	—	¥	—
	Millions of yen
	2006
For the Fiscal Year ended March 31	Cost of securities sold		Proceeds from sales		Net Gain (Loss) on sales
Corporate Bonds	¥	349	¥	349	¥	—
	¥	349	¥	349	¥	—
	Thousands of U.S. dollars
	2007
For the Fiscal Year ended March 31	Cost of securities sold		Proceeds from sales		Net Gain (Loss) on sales
Corporate Bonds	$	—	$	—	$	—
	$	—	$	—	$	—

(e) Available-for-sale Securities sold

	Millions of yen
	2007
For the Fiscal Year ended March 31	Proceeds from Sales		Total amount of Gain on Sales		Total amount of Loss of Sales
Available-for-sale Securities	¥	4,372	¥	1,543	¥	34
	¥	4,372	¥	1,543	¥	34
	Millions of yen
	2006
For the Fiscal Year ended March 31	Proceeds from Sales		Total amount of Gain on Sales		Total amount of Loss of Sales
Available-for-sale Securities	¥	13,096	¥	2,982	¥	3
	¥	13,096	¥	2,982	¥	3
	Thousands of U.S. dollars
	2007
For the Fiscal Year ended March 31	Proceeds from Sales		Total amount of Gain on Sales		Total amount of Loss of Sales
Available-for-sale Securities	$	37,042	$	13,072	$	295
	$	37,042	$	13,072	$	295

(f) Held-to-maturity Debt Securities and Available-for-sale Securities whose market values are not readily determinable

	Millions of yen				Thousands of U.S. dollars
At March 31	2007		2006		2007
Held-to-maturity Debt Securities
Unlisted Corporate Bonds	¥	15,620	¥	783	$	132,324
Available-for-sale Securities
Unlisted Equities		91,430		139,495		774,511
Unlisted Corporate Bonds		21,496		—		182,095
Other		98,344		56,873		833,078
	¥	226,890	¥	197,152	$	1,922,008

(g) Change in Classification of Securities

Not applicable

(h) Redemption Schedule of Available-for-sale Securities with maturities and Held-to-maturity-Debt Securities

	Millions of yen
	2007
	Maturity
At March 31	Within 1 year		1 to 5 years		5 to 10 years		More than 10 years
Bonds	¥	43,181	¥	93,062	¥	69,859	¥	4,000
Japanese Government Bonds		19,995		50,575		50,134		—
Japanese Local Government Bonds		—		—		—		—
Short-term Corporate Bonds		2,996		—		—		—
Corporate Bonds		20,189		42,486		19,724		4,000
Other		—		—		—		—
	¥	43,181	¥	93,062	¥	69,859	¥	4,000
	Millions of yen
	2006
	Maturity
At March 31	Within 1 year		1 to 5 years		5 to 10 years		More than 10 years
Bonds	¥	99,154	¥	80,340	¥	54,165	¥	2,897
Japanese Government Bonds		90,120		50,360		49,165		—
Japanese Local Government Bonds		—		—		—		—
Short-term Corporate Bonds		—		—		—		—
Corporate Bonds		9,033		29,980		5,000		2,897
Other		2,049		—		—		—
	¥	101,203	¥	80,340	¥	54,165	¥	2,897
	Thousands of U.S. dollars
	2007
	Maturity
At March 31	Within 1 year		1 to 5 years		5 to 10 years		More than 10 years
Bonds	$	365,789	$	788,327	$	591,778	$	33,884
Japanese Government Bonds		169,382		428,424		424,689		—
Japanese Local Government Bonds		—		—		—		—
Short-term Corporate Bonds		25,382		—		—		—
Corporate Bonds		171,025		359,903		167,089		33,884
Other		—		—		—		—
	$	365,789	$	788,327	$	591,778	$	33,884

2. Money Held in Trust

There is no Money Held in Trust held for the purpose of investment or held-to-maturity. Market value of Other Money Held in Trust (Money Held in Trust other than that stated above) is summarized below:

	Millions of yen
	2007
					Unrealized Gain (Loss)
At March 31	Acquisition Cost		Market / Book Value		Net			Gain		(Loss)
Other Money Held in Trust	¥	90,836	¥	90,805	¥	(31	)	¥	58	¥	(90	)
	Millions of yen
	2006
					Unrealized Gain (Loss)
At March 31	Acquisition Cost		Market / Book Value		Net			Gain		(Loss)
Other Money Held in Trust	¥	28,422	¥	28,422	¥	—		¥	—	¥	—
	Thousands of U.S. dollars
	2007
					Unrealized Gain (Loss)
At March 31	Acquisition Cost		Market / Book Value		Net			Gain		(Loss)
Other Money Held in Trust	$	769,478	$	769,212	$	(266	)	$	498	$	(764	)

3. Net Unrealized Gain on Available-for-sale Securities

The breakdown of net unrealized gain on Available-for-sale Securities is as follows:

	Millions of yen						Thousands of U.S. dollars
At March 31	2007			2006			2007
Net Unrealized Gain
Available-for-sale Securities	¥	21,696		¥	3,453		$	183,788
Other Money Held in Trust		(62	)		—			(524	)
Add: Deferred Tax Assets (Less: Deferred Tax Liabilities)		(66	)		(29	)		(565	)
	¥	21,566		¥	3,423		$	182,689
Amount corresponding to Minority Interests		(26	)		(8	)		(226	)
Net Unrealized Gain on Available-for-sale Securities, Net of Taxes	¥	21,539		¥	3,415		$	182,463

Notes: Net unrealized gain included foreign currency translation adjustments on non-marketable securities denominated in foreign currency.

Report of Independent Auditors

To the Governor of

Development Bank of Japan

We have audited the accompanying non-consolidated balance sheets of Development Bank of Japan as of March 31, 2007 and 2006, and the related non-consolidated statements of operations , changes in net assets for the years then ended, all expressed in Japanese yen. These non-consolidated financial statements are the responsibility of the Bank’s management. Our responsibility is to express an opinion on these non-consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the non-consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the non-consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall non-consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the non-consolidated financial statements referred to above present fairly, in all material respects, the non-consolidated financial position of Development Bank of Japan as of March 31, 2007 and 2006, and the non-consolidated results of their operations for the years then ended in conformity with accounting principles generally accepted in Japan.

The amounts expressed in U.S. dollars, which are provided solely for the convenience of the reader, have been translated on the basis set forth in Note 1 to the accompanying non-consolidated financial statements.

/s/ Misuzu Audit Corporation

Misuzu Audit Corporation

Tokyo, Japan

June 26, 2007

Development Bank of Japan

NON-CONSOLIDATED BALANCE SHEETS

	Millions of yen						Thousands of U.S. dollars
At March 31	2007			2006			2007
Assets
Cash and Due from banks	¥	34,110		¥	27,804		$	288,953
Reverse Repurchase Agreements (Note 3(3))		223,829			150,003			1,896,059
Money Held in Trust		27,836			28,422			235,805
Securities (Notes 3 and 10)		366,469			429,587			3,104,358
Loans (Note 4)		12,146,462			12,873,226			102,892,524
Other Assets (Note 5)		53,740			203,545			455,234
Tangible Fixed Assets (Note 6)		35,763			36,161			302,955
Intangible Fixed Assets (Note 6)		0			1			6
Deferred Charges on Bonds and Notes		—			2,610			—
Customers’ Liabilities for Acceptances and Guarantees		334,965			161,567			2,837,486
Allowance for Loan Losses (Note 7)		(146,742	)		(199,702	)		(1,243,050	)
Allowance for Investment Losses		(2,456	)		(31,111	)		(20,811	)
Total Assets	¥	13,073,980		¥	13,682,117		$	110,749,518
	Millions of yen						Thousands of U.S. dollars
	2007			2006			2007
Liabilities and Net Assets
Liabilities
Bonds and Notes	¥	2,671,644		¥	2,261,799		$	22,631,468
Borrowings		7,862,935			9,004,474			66,606,826
Other Liabilities (Note 8)		191,683			211,045			1,623,746
Allowance for Bonus Payments		1,617			1,658			13,703
Allowance for Employee Retirement Benefits		29,558			30,887			250,386
Acceptances and Guarantees (Note 9)		334,965			161,567			2,837,486
Total Liabilities	¥	11,092,404		¥	11,671,432		$	93,963,615
Net Assets
Capital	¥	1,272,286		¥	1,272,286		$	10,777,518
Retained Earnings (Note 11)		810,163			734,997			6,862,883
Other Retained Earnings		810,163			734,997			6,862,883
Statutory Reserve		1,076,594			1,068,918			9,119,816
Accumulated Deficit		(266,430	)		(333,921	)		(2,256,933	)
Total Equity	¥	2,082,449		¥	2,007,283		$	17,640,401
Net Unrealized Gain on Available-for-sale Securities	¥	21,493		¥	3,401		$	182,072
Net Deferred Hedge Losses on hedges (Note 5)		(122,367	)		—			(1,036,570	)
Total Revaluation and Translation Adjustments		(100,873	)		3,401			(854,498	)
Total Net Assets	¥	1,981,575		¥	2,010,684		$	16,785,903
Total Liabilities and Net Assets	¥	13,073,980		¥	13,682,117		$	110,749,518

Accompanying notes are an integral part of these financial statements.

Development Bank of Japan

NON-CONSOLIDATED STATEMENTS OF OPERATIONS

	Millions of yen				Thousands of U.S. dollars
For the Fiscal Years ended March 31	2007		2006		2007
Revenue
Interest Income	¥	329,710	¥	367,824	$	2,792,976
Interest on Loans		326,472		365,949		2,765,547
Interest and Dividends on Securities		2,449		1,864		20,751
Interest on Reverse Repurchase Agreements		707		6		5,992
Interest on Due from banks		80		4		679
Other Interest Income		0		0		7
Fees and Commissions (Note 12)		3,405		2,430		28,849
Other Operating Income (Note 13)		—		4		—
Other Ordinary Income (Note 14)		59,989		33,277		508,175
Collection of Written-off Claims		5,875		7,414		49,769
Gains on Sales of Fixed Assets		0		653		2
Total Revenue	¥	398,982	¥	411,604	$	3,379,771
Expenses
Interest Expense	¥	236,720	¥	271,421	$	2,005,256
Interest on Bonds and Notes		33,973		30,920		287,792
Interest on Borrowings		179,674		221,070		1,522,017
Interest on Swaps (net)		23,067		19,383		195,407
Other Interest Expense		4		47		40
Fees and Commissions (Note 15)		65		54		554
Other Operating Expenses (Note 16)		2,025		1,737		17,155
General and Administrative Expenses		25,015		25,602		211,902
Other Ordinary Expenses (Note 17)		59,933		19,758		507,695
Losses on Impairment of Fixed Assets (Note 18)		—		337		—
Losses on Sales of Fixed Assets		56		12		478
Total Expenses	¥	323,815	¥	318,924	$	2,743,041
Net Earnings	¥	75,166	¥	92,679	$	636,730

Accompanying notes are an integral part of these financial statements.

Development Bank of Japan

NON-CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

	Millions of yen
	Equity									Revaluation and translation adjustments
			Retained Earnings					��
For the Fiscal Year ended March 31, 2006	Capital		Statutory Reserve		Accumulated Deficit			Total Equity		Net Unrealized Gain (Loss) on Available-for-sale Securities			Net Deferred Hedge Losses on hedges			Total Revaluation and Translation Adjustments			Total Net Assets
Balance at March 31, 2005	¥	1,215,461	¥	1,027,021	¥	(374,067	)	¥	1,868,415	¥	6,662		¥	—		¥	6,662		¥	1,875,077
Transfer from net earnings accounted under the DBJ Law to Statutory Reserve (Note 11)		—		41,896		(41,896	)		—		—			—			—			—
Net Earnings		—		—		92,679			92,679		—			—			—			92,679
Net Changes in Items other than Equity		56,825		—		(10,636	)		46,189		(3,261	)		—			(3,261	)		42,928
Balance at March 31, 2006	¥	1,272,286	¥	1,068,918	¥	(333,921	)	¥	2,007,283	¥	3,401		¥	—		¥	3,401		¥	2,010,684
	Millions of yen
	Equity									Revaluation and translation adjustments
For the Fiscal Year ended March 31, 2007	Capital		Statutory Reserve		Accumulated Deficit			Total Equity		Net Unrealized Gain (Loss) on Available-for-sale Securities			Net Deferred Hedge Losses on hedges			Total Revaluation and Translation Adjustments			Total Net Assets
Balance at March 31, 2006	¥	1,272,286	¥	1,068,918	¥	(333,921	)	¥	2,007,283	¥	3,401		¥	—		¥	3,401		¥	2,010,684
Transfer from net earnings accounted under the DBJ Law to Statutory Reserve (Note 11)		—		7,675		(7,675	)		—		—			—			—			—
Net Earnings		—		—		75,166			75,166		—			—			—			75,166
Net Changes in Items other than Equity		—		—		—			—		18,092			(122,367	)		(104,275	)		(104,274	)
Balance at March 31, 2007	¥	1,272,286	¥	1,076,594	¥	(266,430	)	¥	2,082,449	¥	21,493		¥	(122,367	)	¥	(100,873	)	¥	1,981,575
	Thousands of U.S. dollars
	Equity									Revaluation and translation adjustments
For the Fiscal Year ended March 31, 2007	Capital		Statutory Reserve		Accumulated Deficit			Total Equity		Net Unrealized Gain (Loss) on Available-for-sale Securities			Net Deferred Hedge Losses on hedges			Total Revaluation and Translation Adjustments			Total Net Assets
Balance at March 31, 2006	$	10,777,518	$	9,054,794	$	(2,828,642	)	$	17,003,670	$	28,811		$	—		$	28,811		$	17,032,481
Transfer from net earnings accounted under the DBJ Law to Statutory Reserve (Note 11)		—		65,022		(65,022	)		—		—			—			—			—
Net Earnings		—		—		636,730			636,730		—			—			—			636,730
Net Changes in Items other than Equity		—		—		—			—		153,262			(1,036,570	)		(883,308	)		(883,308	)
Balance at March 31, 2007	$	10,777,518	$	9,119,816	$	(2,256,933	)	$	17,640,401	$	182,072		$	(1,036,570	)	$	(854,498	)	$	16,785,903

Accompanying notes are an integral part of these financial statements.

Development Bank of Japan

NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The accompanying financial statements have been prepared from the accounts maintained by Development Bank of Japan (“DBJ”) in accordance with accounting principles and practices generally accepted in Japan, which are different in certain respects as to the application and disclosure requirements of International Financial Reporting Standards.

The financial statements are not intended to present the financial position and the result of operations in accordance with accounting principles and practices generally accepted in countries and jurisdictions other than Japan.

The amounts indicated in millions of yen are rounded down by omitting the figures less than one million yen. Accordingly, the sum of each amount appearing in the accompanying financial statements and the notes thereto may not be equal to the sum of the individual account balances.

Amounts in U.S. dollars are presented solely for the convenience of readers outside Japan. The rate of ¥118.05=$1.00, the effective exchange rate prevailing as of March 31, 2007, has been used in the conversion. The presentation of such amounts is not intended to imply that Japanese yen amounts have been or could have been readily translated, realized or settled in U.S. dollars at that rate or any other rate.

2. Summary of Significant Accounting Policies

(a) Securities

Held-to-maturity debt securities are stated at amortized cost, on a straight-line basis, computed using the weighted average method. Investments in subsidiaries are stated at cost computed using the weighted average method. Available-for-sale securities with readily available market quotations are stated at market value (cost is calculated principally using the weighted average method), and other securities without market quotations are stated at cost or amortized cost computed using the weighted average method. Investments in limited partnerships and other similar partnerships are accounted for at the net amounts of DBJ’s underlying interests in their net earnings based on their most recent financial statements.

Unrealized gains and losses on available-for-sale securities are included in net assets.

Securities which are held as trust assets in Money Held in Trust accounts are valued in the same way as securities above.

Effective in the fiscal year ended March 31, 2006, DBJ applied the accounting treatment for other compound instruments which do not have the ability to increase paid-in capital (Guidelines on Implementation of Business Accounting Standard No. 12 issued by the Accounting Standards Board of Japan on March 30, 2006).

(b) Valuation Method for Derivative Financial Instruments

All derivative financial instruments are carried at market value, except for certain derivatives that are designated as hedging instruments as discussed below.

(c) Hedge Accounting

(i) Hedge Accounting

DBJ applies the deferral method of hedge accounting. Foreign currency swaps, which are used to hedge the foreign currency fluctuations are translated not at market values but at contractual rates, as the foreign currency swap contracts meet the hedging criteria under the Accounting Standards for Financial Instruments.

(ii) Hedging Instruments and Hedged Items

• Hedging Instruments: Interest Rate Swaps

Hedged Items            : Bonds and Notes, Borrowings, and Loans

• Hedging Instruments: Foreign Currency Swaps

Hedged Items            : Foreign currency denominated Loans and Bonds and Notes

(iii) Hedging Policy

DBJ utilizes hedging instruments to hedge interest rate and foreign currency fluctuations on its assets and liabilities within the outstanding asset and liability amounts.

(iv) Evaluation of Hedge Effectiveness

DBJ evaluates the effectiveness of the hedges by testing whether the derivatives are effective in reducing the risks associated with the hedged items.

In regards to both interest rate swap contracts which meet the hedging requirements of accrual method*1 and foreign currency swap contracts which meet the hedging requirements of assignment method*2 under the Accounting Standards for Financial Instruments at the inception date, DBJ is not required to evaluate their hedge effectiveness periodically.

*1

If interest rate swap contracts are used as hedges and meet certain hedging criteria, the net amount to be paid or received under the interest rate swap contract is added to or deducted from the interest on the assets or liabilities for which the swap contract was executed.

*2

In cases where foreign currency swap are used as hedges and meet certain hedging criteria, forward foreign exchange contracts and hedged items are accounted for in the following manner;

1) If a foreign currency swaps is executed to hedge an existing foreign currency assets or liabilities, a) the difference, if any, between the Japanese yen amount of the hedged foreign currency asset or liability translated using the spot rate at the inception date of the contract and the book value of the asset or liability is recognized in the statement of operations in the period which includes the inception date, and b) the discount or premium on the contract (that is, the difference between the Japanese yen amount of the contract translated using the contracted forward rate and that translated using the spot rate at the inception date of the contract) is recognized over the term of the contract.

2) If a foreign currency swap is executed to hedge a future transaction denominated in a foreign currency, the future transaction will be recorded using the contracted forward rate, and no gains or losses on the forward foreign exchange contract are recognized.

(d) Fixed Assets

(i) Depreciation of Tangible Fixed Assets

Tangible Fixed Assets are depreciated using the declining-balance method, except for buildings (excluding installed facilities) that are depreciated on a straight-line basis.

The estimated useful lives are principally as follows:

    Buildings: 22 years to 50 years

    Equipment: 3 years to 20 years

(ii) Amortization of Intangible Fixed Assets

Intangible Fixed Assets are amortized using the straight-line method.

(iii) Accounting standard for impairment of fixed assets

On August 9, 2002, the Business Accounting Council in Japan issued “the Accounting Standard for Impairment of Fixed Assets”. The standard requires that fixed assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Impairment losses shall be recognized in the statement of operations by reducing the carrying amount of impaired assets or a group of assets to the recoverable amount to be measured as the higher of net selling price and value in use.

DBJ has applied this standard from the fiscal year beginning April 1, 2005. In the banking industry, fixed assets are stated at cost less accumulated depreciation pursuant to the Enforcement Ordinance of the Banking Law for long term credit banks and the accumulated impairment losses are also deducted from the book value of each asset.

(e) Amortization of deferred charges

“Discounts on Bonds and Notes”, accounted as “Deferred Charges on Bonds and Notes” and “Premium on Bonds and Notes”, included in “Other Assets” on non-consolidated balance sheets respectively are amortized under the straight-line over the term of bonds and notes, and “Bonds and Notes Issuance Costs” are charged to income as incurred.

Although, the new standard, “Tentative Solution on Accounting for Deferred Assets” (ASBJ Report No. 19, August 11, 2006), is effective from the year ended March 31, 2007, discounts and premium on bonds and notes as of March 31, 2007 are amortized under the straight-line method over the term of the bonds and notes continuously by applying the tentative measure stipulated in this standard.

In accordance with the partial revision of “Accounting Standards for Financial Instruments” (the Business Accounting Deliberation Council, January 22, 1999) as of August 11, 2006(ASBJ Statement No. 10) and the application effective from the fiscal year and interim period ending upon or after the public announcement of such, DBJ adopted the revised accounting standard commencing in this fiscal year, and “Bonds and Notes” were stated at amortized cost (straight line method). As a result, “Discounts on Bonds and Notes”, accounted as “Deferred Charges on Bonds and Notes” decreased ¥3,951 million ($33,475 thousand), and “Premium on Bonds and Notes”, included in “Other Assets” decreased ¥1,632 million ($13,828 thousand), and “Bonds and Notes” increased and decreased such amounts.

(f) Foreign currency translation and revaluation method

Assets and liabilities denominated in foreign currencies are translated into Japanese yen at the market exchange rates prevailing at the fiscal year end.

(g) Allowance for Loan Losses

DBJ provides for “Allowance for Loan Losses” as detailed below pursuant to the internal policies for self-assessment of credit quality and loan losses.

The allowance for claims on debtors who are legally bankrupt, in special liquidation or effectively bankrupt is provided for based on the amount of claims, after the write-off described below, net of amounts expected to be collected through disposal of collateral or execution of guarantees.

The allowance for claims on debtors who are not legally bankrupt at the moment, but likely to become bankrupt for which future cash flows cannot reasonably be estimated, is provided for at the amount considered to be necessary based on an overall solvency assessment performed on the claims, net of amounts expected to be collected through disposal of collateral or execution of guarantees.

With respect to the claims on debtors who are likely to become bankrupt or to be closely monitored, and for which future cash flows can reasonably be estimated, the allowance is provided for as the difference between the present value of expected future cash flows discounted at the contracted interest rate and the carrying value of the claims.

The allowance for claims on debtors other than those described above is provided for based on the historical default rate, which is calculated based on the actual defaults over a certain historical period (the average financing period for DBJ).

All claims are assessed initially by the investment and lending departments and then by the Credit Risk Management Department, which is independent from the investment and lending departments based on internal policies for self-assessment of credit quality. The allowance is provided based on the results of the self-assessment.

With respect to the claims on debtors who are legally or substantially bankrupt with collateral or guarantees, the amount of claims exceeding the estimated market values of collateral or guarantees which are deemed uncollectible, have been written-off, and totalled ¥56,267 million ($476,643 thousand) and ¥95,546 million for the years ended March 31, 2007 and 2006, respectively.

The allowance for claims on debtors other than those described above was previously provided for using the estimated probability of default. From the March 31, 2007 fiscal year, the default rate is used to provide for the allowance, which is calculated based on the actual value of default experiences of the company. The calculation method has been changed because the historical data of actual default loans value have been accumulated.

As a result of this change, net earnings increased by ¥18,900 million ($160,103 thousand).

(h) Allowance for Investment Losses

“Allowance for Investment Losses” is provided for based on the estimated losses on investments.

(i) Allowance for Bonus Payments

“Allowance for Bonus Payments” is calculated and provided for based on the estimated amounts of future payment attributable to the services that have been rendered by employees and executive directors to the date of the balance sheets.

(j) Allowance for Employee Retirement Benefits

“Allowance for Employee Retirement Benefits” represents future payments for pension and retirement benefits to employees and executive directors, and is accrued based on the projected benefit obligations and estimated pension plan assets at each fiscal year end. The actuarial gain or loss is recognized during the year it arises.

(k) Equipment Used under Finance Lease Agreements

Equipment used under finance lease agreements is accounted for as equipment leased under operating leases, except for those in which the ownership of leased equipment is substantially transferred to the lessee, in which case the equipment is capitalized.

(l) Consumption tax

Income and expenses subject to consumption tax exclude related consumption taxes paid or received.

(m) Income taxes

DBJ is exempt from taxes based on income, however, DBJ is subject to parity taxes among local taxes.

(n) Change of Accounting Policy

Effective from the year ended March 31, 2007, DBJ has applied “Accounting standards for presentation of net assets in the balance sheet (Accounting Standards Board of Japan Statement No.5)”, and “Implementaion guidance for Accounting standards for presentation of net assets in the balance sheet (Accounting Standards of Japan Guidance No.8)” both issued by the Accounting Standard Board of Japan on December 9, 2005.

The amounts corresponding to the conventional “Equity” in the non-consolidated balance sheet is ¥2,103,942 million ($17,822,473 thousand). DBJ presented its net assets in the non-consolidated balance sheet using the new standard as of March 31, 2006, retrospectively.

Furthermore, “Minority Interests” previously presented on the non-consolidated balance sheet between the liabilities section and the equity section is presented in “Net Assets”.

Additionally, the non-consolidated statements of changes in net assets for the fiscal year ended March 31, 2006 are presented under the new standard, retrospectively.

3. Securities

Securities as of March 31, 2007 and 2006 are as follows:

	Millions of yen				Thousands of U.S. dollars
At March 31	2007		2006		2007
Japanese Government Bonds	¥	120,705	¥	189,645	$	1,022,495
Corporate Bonds		61,753		46,911		523,111
Equities		97,804		142,553		828,498
Other securities		86,206		50,477		730,254
	¥	366,469	¥	429,587	$	3,104,358

Notes:	1.	Investments in subsidiaries and affiliates included in “Equities” as of March 31, 2007 and 2006 are ¥23,809 million ($201,693 thousand) and ¥7,612 million, respectively.
	2.	Contingent liabilities for guarantees on corporate bonds, included in securities, which were issued by private placement (Article 2 Paragraph 3 of the Securities and Exchange Law) amounted to ¥130 million ($1,101 thousand) as of March 31, 2007.
	3.	There are no securities repledged as of March 31, 2007 and 2006 respectively, although securities accepted under repurchase agreements can be sold or repledged, securities neither sold nor repledged are ¥223, 829 million ($1,896,058 thousand) and ¥150,003 million, respectively.

4. Non-performing Loans

The amounts of Non-Performing Loans included in “Loans” on the non-consolidated balance sheets as of March 31, 2007 and 2006 are as follows:

	Millions of yen				Thousands of U.S. dollars
At March 31	2007		2006		2007
Loans to Bankrupt Debtors	¥	7,562	¥	4,313	$	64,064
Delinquent Loans		64,065		111,720		542,696
Loans Past Due Three Months or More		28		—		237
Restructured Loans		73,624		89,301		623,672
	¥	145,280	¥	205,335	$	1,230,669

Notes:	1.	The amounts of Loans indicated above are stated at gross amounts, before reduction of allowance for loan losses.
	2.	“Loans to Bankrupt Debtors” represent non-accrual loans to debtors who are legally bankrupt as defined in Article 96-1-3 and 4 of the Japanese Tax Law Enforcement Regulation.
	3.	“Delinquent Loans” represent non-accrual loans other than (i) Loans to Bankrupt Debtors and (ii) loans whose interest payments are deferred in order to assist or facilitate the restructuring efforts of borrowers in financial difficulty.
	4.	"Loans Past Due Three Months or More" are loans whose principal or interest payment is three months or more past due, and do not fall under the category of “Loans to Bankrupt Debtors” or “Delinquent Loans”.
	5.	"Restructured loans" are loans whose repayment terms have been modified to the advantage of debtors through means such as reduction or exemption of interest rates, postponement of principal and interest payments, and forgiveness of loans to support or restructure the debtors’ businesses, and do not fall under the category of “Loans to Bankrupt Debtors”, “Delinquent Loans”, or “Loans Past Due Three Months or More”.

DBJ provides commitment lines under which it lends, upon the borrowers’ request, necessary funds up to the pre-determined amount that is within the borrowers’ financing needs for the projects and up to the agreed maximum amount, provided that their requests meet terms and conditions for disbursement prescribed in the loan agreements. The total balance of unused commitment lines as of March 31, 2007 and 2006 are ¥331,113 million ($2,804,862 thousand), including ¥97,695 million ($827,578 thousand) being financed within one year and ¥214,022 million, including ¥53,636 million being financed within one year, respectively.

5. Other Assets

Other Assets as of March 31, 2007 and 2006 are as follows:

	Millions of yen				Thousands of U.S. dollars
At March 31	2007		2006		2007
Prepaid Expenses	¥	92	¥	99	$	781
Accrued Income		48,610		52,155		411,777
Derivatives		3,316		3,083		28,095
Deferred Hedge Losses		—		146,698		—
Guarantee Deposits		382		380		3,242
Other		1,338		1,127		11,339
	¥	53,740	¥	203,545	$	455,234

Notes:	1.	Deferred Hedge Losses are net unrealized losses from hedging instruments. The gross amounts of deferred hedge gains and losses before netting are ¥10,138 million and ¥156,837 million as of March 31, 2006, respectively.
	2.	From the year ended March 31, 2007, Deferred Hedge Losses are reclassified to “Net Assets”.
	3.	From the year ended March 31, 2007, Guarantee Deposits are reclassified from “Premises and Equipment” to “Other Assets”. Guarantee Deposits as of March 31, 2006 is presented using the new presentation standard, retrospectively.

6. Fixed Assets

Tangible Fixed Assets and Intangible Fixed Assets as of March 31, 2007 and 2006 are as follows:

	Millions of yen						Thousands of U.S. dollars
At March 31	2007			2006			2007
Tangible Fixed Assets
Land	¥	20,386		¥	20,386		$	172,695
Buildings		33,809			33,802			286,400
Equipment		1,915			1,970			16,223
Construction in Progress		—			—			—
	¥	56,111		¥	56,159		$	475,318
Less- Accumulated Depreciation		(20,347	)		(19,997	)		(172,363	)
Net Book Value	¥	35,763		¥	36,161		$	302,955
Intangible Fixed Assets
Other		11			11			96
	¥	11		¥	11		$	96
Less - Accumulated Amortization		(10	)		(10	)		(90	)
Net Book Value	¥	0		¥	1		$	6

Notes: From the year ended March 31, 2007, Premises and Equipment are reclassified to Tangible and Intangible Fixed Assets. Tangible Assets and Intangible Fixed Assets as of March 31, 2006 are presented using the new presentation standard, retrospectively.

7. Allowance for Loan Losses

Allowance for Loan Losses as of March 31, 2007 and 2006 are as follows:

	Millions of yen				Thousands of U.S. dollars
At March 31	2007		2006		2007
General Allowance for Loan Losses	¥	97,049	¥	120,170	$	822,107
Specific Allowance for Loan Losses		49,692		79,532		420,943
	¥	146,742	¥	199,702	$	1,243,050

8. Other Liabilities

Other Liabilities as of March 31, 2007 and 2006 are as follows:

	Millions of yen				Thousands of U.S. dollars
At March 31	2007		2006		2007
Accrued Expenses	¥	33,346	¥	33,042	$	282,482
Unearned Income		17,913		19,008		151,747
Deposits from Employees		153		150		1,300
Derivatives		133,847		156,590		1,133,820
Other		6,421		2,253		54,397
	¥	191,683	¥	211,045	$	1,623,746

9. Acceptances and Guarantees

Acceptances and Guarantees as of March 31, 2007 and 2006 are as follows:

	Millions of yen				Thousands of U.S. dollars
At March 31	2007		2006		2007
Guarantees	¥	334,965	¥	161,567	$	2,837,486
	¥	334,965	¥	161,567	$	2,837,486

10. Assets Pledged as Collateral

Securities pledged as collateral in Real Time Gross Settlement for bank deposits at the Bank of Japan are ¥ 120,705 million ($1,022,494 thousand) as of March 31, 2007 and ¥119,652 million as of March 31, 2006, respectively.

11. Retained Earnings

A portion of net earnings calculated pursuant to Article 4 of the Development Bank of Japan Law (“DBJ Law”) was appropriated to provision of Statutory Reserve and for payment to the National Treasury as stipulated by Article 41 of the DBJ Law. Unappropriated Accumulated deficit, losses carryforwards to the following fiscal years, are the amounts which are not appropriated under the DBJ Law for each fiscal year.

12. Fees and Commissions (Income)

Fees and Commissions (Income) for the fiscal years ended March 31, 2007 and 2006 are as follows:

	Millions of yen				Thousands of U.S. dollars
For the fiscal years ended March 31	2007		2006		2007
Commissions	¥	3,405	¥	2,430	$	28,849
	¥	3,405	¥	2,430	$	28,849

13. Other Operating Income

Other Operating Income for the fiscal years ended March 31, 2007 and 2006 are as follows:

	Millions of yen				Thousands of U.S. dollars
For the fiscal years ended March 31	2007		2006		2007
Foreign Exchange Gains	¥	—	¥	4	$	—
	¥	—	¥	4	$	—

14. Other Ordinary Income

Other Ordinary Income for the fiscal years ended March 31, 2007 and 2006 are as follows:

	Millions of yen				Thousands of U.S. dollars
For the fiscal years ended March 31	2007		2006		2007
Reversal of Allowance for Loan Losses	¥	47,017	¥	17,699	$	398,283
Reversal of Allowance for Investment Losses		330		—		2,801
Gains on Sales of Equities and Other Securities		776		2,718		6,576
Gains on Money Held in Trust		1,350		966		11,437
Other		10,515		11,892		89,078
	¥	59,989	¥	33,277	$	508,175

15. Fees and Commissions (Expenses)

Fees and Commissions (Expenses) for the fiscal years ended March 31, 2007 and 2006 are as follows:

	Millions of yen				Thousands of U.S. dollars
For the fiscal years ended March 31	2007		2006		2007
Wire Transfer Service Charges	¥	5	¥	5	$	49
Commissions		59		49		505
	¥	65	¥	54	$	554

16. Other Operating Expenses

Other Operating Expenses for the fiscal years ended March 31, 2007 and 2006 are as follows:

	Millions of yen				Thousands of U.S. dollars
For the fiscal years ended March 31	2007		2006		2007
Foreign Exchange Losses	¥	116	¥	3	$	983
Bonds and Notes Issuance Costs		1,521		777		12,887
Losses on derivative instruments		30		687		261
Other		356		268		3,024
	¥	2,025	¥	1,737	$	17,155

17. Other Ordinary Expenses

Other Ordinary Expenses for the fiscal years ended March 31, 2007 and 2006 are as follows:

	Millions of yen				Thousands of U.S. dollars
For the fiscal years ended March 31	2007		2006		2007
Provision for Investment Losses	¥	—	¥	10,710	$	—
Write-off of Loans		2,982		5,350		25,263
Losses on Sales of Equities and Other Securities		1		—		9
Write-off of Equities		47,713		1,568		404,179
Losses on Money Held in Trust		0		0		8
Other		9,235		2,127		78,236
	¥	59,933	¥	19,758	$	507,695

18. Losses on Impairment of Fixed Assets

Losses on Impairment of Fixed Assets for the fiscal years ended March 31, 2007 and 2006 are as follows:

	Millions of yen				Thousands of U.S. dollars
At March 31	2007		2006		2007
Losses on Impairment of Fixed Assets	¥	—	¥	337	$	—
	¥	—	¥	337	$	—

The differences between the recoverable amount and the book value of the following assets were recognized as Losses on Impairment of Fixed Assets in the fiscal year ended March 31, 2006

Principal purpose of use	Type	Area	Losses (Millions of yen)
Idle assets	Land and premises, etc.	Nagano prefecture	4
		Kanagawa prefecture	332

DBJ recognize Losses on Impairment of Fixed Assets for idle assets. For the purpose of identifying impaired assets in such cases, the individual asset is assessed as a unit. The recoverable amount is calculated based on net realizable value. Net realizable value is calculated based on the appraisal value less estimated cost of disposal.

19. Lease Transactions

(a) Finance Lease Transactions

(Excluding leases where the ownership of the property is substantially transferred to the lessee)

	Millions of yen
	2007									2006
At March 31	Equipment			Other			Total			Equipment			Others			Total
Acquisition Cost Equivalents	¥	716		¥	273		¥	990		¥	765		¥	273		¥	1,039
Less- Accumulated Depreciation Equivalents		(427	)		(149	)		(576	)		(361	)		(126	)		(487	)
Book Value Equivalents	¥	289		¥	124		¥	413		¥	404		¥	147		¥	551

	Thousands of U.S. dollars
	2007
At March 31	Equipment			Other			Total
Acquisition Cost Equivalents	$	6,071		$	2,316		$	8,387
Less- Accumulated Depreciation Equivalents		(3,622	)		(1,264	)		(4,886	)
Book Value Equivalents	$	2,449		$	1,052		$	3,501

Future lease payments subsequent to the end of the fiscal year for finance leases (including the interest portion thereon) are summarized below:

	Millions of yen				Thousands of U.S. dollars
At March 31	2007		2006		2007
Due in One Year or Less	¥	212	¥	224	$	1,803
Due after One Year		206		332		1,751
	¥	419	¥	557	$	3,554

Lease expense, depreciation equivalents and interest expense equivalents relating to finance leases for the fiscal year ended March 31, 2007 amount to ¥243 million ($2,061 thousand), ¥235 million ($1,992 thousand) and ¥8 million ($69 thousand), respectively. The corresponding amounts for the fiscal year ended March 31, 2006 are ¥303 million, ¥293 million and ¥10 million, respectively.

Notes:	1.	Depreciation equivalents are calculated using the straight-line method, assuming that useful life is equal to the lease term and the residual value at the end of the lease term is zero.
	2.	Interest expenses are defined as the difference between total lease payments and acquisition equivalents, which are allocated over the lease term using the effective interest method.

(b) Operating Lease Transactions

DBJ has no future lease payments subsequent to the end of fiscal year for operating lease transactions as of March 31, 2007 and 2006.

20. Market Value of Securities

Market value of Securities, excluding investments in subsidiaries and affiliates, are reported in the notes to consolidated financial statements. DBJ holds no investments in subsidiaries with market value as of March 31, 2007 and 2006.