Securities Finance
ANNUAL REPORT 2014

PROFILE
Growing in step with the securities industry and supporting
its future development
In June 1951, Japan Securities Finance Co., Ltd. (JSF) launched its loaning operations,dealing with funds and stock certiﬁcates needed by securities companies for delivery andsettlement of margin transactions.
This margin loan business can be transacted solely by securities ﬁnance companies
licensed in accordance with the Financial Instruments and Exchange Law.
As Japan’s largest securities ﬁnance company designated by the Tokyo, Sapporo, andFukuoka Stock Exchanges, JSF is contributing signiﬁcantly to improving the fairness ofstock price formation and liquidity of stocks in the secondary equity markets

CONTENTS
Financial Highlights ･･･････････････････････････････････････････････････････････････････････････････････････ 2
Message From The President ･ ･･････････････････････････････････････････････････････････････････････････ 4
Business Review ･ ･･･････････････････････････････････････････････････････････････････････････････････････････ 5Management Policy ･･････････････････････････････････････････････････････････････････････････････････････ 10
Our Business Development ････････････････････････････････････････････････････････････････････････････ 13
Our Business Field ････････････････････････････････････････････････････････････････････････････････････ 14
Corporate Governance ･･････････････････････････････････････････････････････････････････････････････････ 21
Risk Management ･ ･･･････････････････････････････････････････････････････････････････････････････････････ 25
Financial Section ･･････････････････････････････････････････････････････････････････････････････････････････ 29
Outline Of JSF Group ････････････････････････････････････････････････････････････････････････････････････ 64
Corporate Data ････････････････････････････････････････････････････････････････････････････････････････････ 65

1

FINANCIAL HIGHLIGHTS

Thousands of
U.S. dollars*Millions of yen*
2010

2011

2012

2013

2014

2014

Operating Results:
Operating revenues￥

27,868￥22,849￥20,229￥17,676￥

19,566＄

190,109

Operating income

5,898

3,656

3,039

1,788

2,569

24,962

Net income

3,572

3,492

779

1,778

6,211

60,348

Total assets￥ 5,479,610￥ 7,078,138￥ 4,931,286￥ 3,433,456￥ 3,914,388＄38,033,307

Net assets

112,656

114,927

115,547

118,591

135,228

1,313,914

2.28

1.73

2.56

3.45

3.45

3.45

38.59 ￥

37.73 ￥

8.42

Financial Position:

Shareholders' equity ratio (%)
Per Share Data:
Net income￥

Net assets

￥

19.10

￥

60.35

＄

0.59

1,217.12

1,241.67

1,245.83

1,274.67

1,260.43

12.25

14

14

14

14

14

0.14

Cash dividend* except per share amount												Operating revenues

Operating income(millions of yen)

30,000(millions of yen)

7,000

27,86825,0006,000

22,84920,22920,000

5,898

5,000

19,566
17,676

4,000

3,656

15,000

3,039

3,000
10,000

1,788

2,000

5,000
0

2,569

1,000

10

11

12

13

0

14

2

10

11

12

13

14

FINANCIAL HIGHLIGHTSNet income

Net income per share(millions of yen)

(yen)

70

7,000
6,211
6,000

60

5,000

50

4,000

3,572

40

3,492

60.4

38.6

37.7

30

3,000
1,778

2,000

20
19.1

779

1,000

10
8.4

0

10

11

12

13

0

14

Net assets per share

10

11

12

13

14

Cash dividend per share

(yen)

(yen)

1,400

20

1,300
1,217

1,242

1,246

1,275

1,260
15

14

14

14

14

14

10

11

12

13

14

1,200
10

1,100
1,000

5
900
800

10

11

12

13

0

14

Note: 1. Yen amounts have been translated into United States dollars, solely for the convenience of the reader, at the rate of￥102.92=U.S.$1 in effect on March 31, 2014.
2. Net income per share is calculated based on the weighted average number of shares outstanding during each
respective year. Net assets per share is calculated based on the number of shares outstanding at the end of each
respective year.
3. Shareholders’ equity ratio is calculated by using following formula.Total net assets / Total liabilities* and net assets*except for securities accounts such as Collateral securities deposited3

MESSAGE FROM THE PRESIDENT

We have formulated a new 4th Mid-term Management Plan
with a view to articulating a new vision of the company
after the merger with Osaka Securities Finance Company,
Ltd. (OSF) and to utilizing our business resources more
effectively.
Under the new management plan, we will execute businessstrategies such as strengthening our network with financial
instruments business operators (FIBOs), expanding our corebusiness “Loans for Margin Transactions,” and responding
to the diverse needs of funding and securities trading.
Additionally, we will strengthen our business management
structures. These initiatives will better enable the company
to respond to changing environments and further develop
its business.
In this, we ask for your continued support andunderstanding.

Eizo Kobayashi
President
Eizo Kobayashi
President

4

BUSINESS REVIEW

BUSINESS REVIEWBusiness Environment

to concerns about emerging economies and questions

During the term, the Japanese economy enjoyed modest

about Japan's economic prospects after the increase in therecovery. Aggressive monetary easing by the Bank of Japan

consumption tax. At the end of the term, the Nikkei 225

combined with expectations for the government's new

closed at 14,827 yen. During this period, the average daily

growth strategy to weaken the yen and cause share prices

trading volume on the First Section of the Tokyo Stockto rise. Meanwhile, improvements were seen in corporate

Exchange increased by 748 million shares over the previous

earnings, jobs and income.

term to reach 2,933 million, and the average daily value
traded increased by 1,072.2 billion yen to reach 2,391.3

On the equity market, the Nikkei 225 stock averagebillion yen.

(Nikkei 225) began the term at 12,135 yen, but aggressive
monetary easing by the Bank of Japan brought it above

At the beginning of the term, the outstanding balance of

15,000 yen in mid-May. The Nikkei 225 began to decline instandardized margin buying on the Tokyo market was in thelate May due to expectations that the United States would

1.6 trillion yen range (was on the order of 1.6 trillion yen?),reduce its quantitative easing policy. In mid-June, the Nikkei

but an increase in new buying by personal investors brought

225 dipped below 13,000 yen, but it soon rebounded in

it above 2 trillion yen in mid-May, and it continued in thereaction to improved domestic and international economic

2.4 trillion yen range through mid-July. After that, as shareindicators and the continued depreciation of the yen. By theprices rose, the balance peaked above 2.9 trillion yen at theend of December, the Nikkei 225 reached the term's highend of January. It then declined to the 2.5 trillion yen levelof 16,291 yen, led by robust prices on US equity markets.

at the end of the term. Conversely, the outstanding balance

From January onward, the Nikkei 225 began to fall dueof standardized margin selling began the term in the 400

Nikkei Indexyen
17,00016,00015,00014,00013,00012,00011,000
Apr
2013

May

Jun

Jul

Aug

Sep

5

Oct

Nov

Dec

Jan
2014

Feb

Mar

Outstanding balance of Standardized Margin Transactions(billions of yen)

3.500
Margin Buying

Margin Selling

3.000
2.500
2.000
1.500
1.000
0.500
0.000
Apr
2013

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan
2014

Feb

Mar

billion yen range, but positions were bought back as share

the JSF group (term average) was 748.5 billion yen, a year-

prices turned downwards, and the balance declined to 300

on-year increase of 364.2 billion yen.

billion yen in mid-June. As share prices turned upwards,

Consolidated operating revenues were 19,566 million

new sales by personal investors brought the balance toyen (increase of 10.7% year-on-year). There were declines inthe term's peak above 520 billion yen in late November.

interest income on JGB holdings and profit on JGB sales, but

It gradually declined from that level, and at the end of theinterest on loans from the margin loan business and otherterm was in the 340 billion yen range.

operations increased. Consolidated operating expenses came
to 8,747 million yen (increase of 6.8% year-on-year) due toOn the bond market, the yields on newly issued 10-year

an increase in securities borrowing fees, while general andJapanese government bonds began the term at 0.560%. The

administrative expenses hit 8,249 million yen (increase of

rapid depreciation of the yen and increase in share prices

7.2% year-on-year).

accelerated selling, and the yield of JGB topped 0.9% in late

As a result, consolidated operating income wasMay. After that, the yield turned downwards due to active

2,568 million yen (increase of 43.7% year-on-year), andJGB purchasing operations by the Bank of Japan, and duringconsolidated ordinary income, 3,119 million yen (increase

the second half remained around 0.65%. At the end of theof 22.0% year-on-year). Consolidated net income was 6,211

term, it was 0.640%.

million yen (increase of 249.4%) due to the posting ofextraordinary income arising from negative goodwill in themerger with OSF.

Business results of the JSF group
In this environment, the total value of outstanding loans for6

BUSINESS REVIEW

1) Securities finance business
Loans for Margin Transactions

operators and to individual investors and non-financial

In the loans for margin transaction business, the outstanding

equity repos also contributed to operating revenues for thisbalance of margin loans rose by 276.4 billion yen over theservice of 1,959 million yen (increase of 141.8% year-on-

previous term to reach a term average of 490.6 billion yen.

year).

companies as a result of the merger with OSF. Higher use ofThis produced a large increase in interest on loans. The
outstanding balance of stock loans was on par with the

Securities lending

previous term at a term average of 176.4 billion yen, but

In the securities lending business, securities lending fees

stock lending fees increased due to higher premium charges

increased due to an increase in SC (Special Collateral)on over-lent issues (issues for which outstanding stock loans

repos in the bond lending section and in use of long-exceed outstanding margin loans). This resulted in operatingterm borrowed stock in the general stock lending section.

revenues for this service of 9,240 million yen (increase of

Operating revenues for this service were 2,217 million yen

39.5% year-on-year).

(increase of 19.0% year-on-year).

Bond financing and General loans

Other business

As for bond financing and general loans, the term average of“Other” revenues were 2,946 million yen (decline of 38.6%

loans increased by 101.3 billion yen over the previous term

year-on-year) due to declines in interest income on JGB

to reach 157.2 billion yen. Factors in the increase included

holdings and profits on JGB sales.

an increase in loans to financial instruments business

Average outstanding balance of Loans for Margin Transactions(billions of yen)

600

Margin Loans

Stock Loans
490

500
400
324

361

300

293
228

218

200

184

214

183

176

100
0

10

11

12

7

13

14

Breakdown of JSF Group operating revenues
2014

2013

( ￥ million)( ￥ million)

16,36314,093

9,240

6,625

4,012

1,760

436

652

Fees on lending securities

4,132

3,746

Bond financing and general loans

1,959

810

Securities lending

2,217

1,862

Stocks

425

289

Bonds

1,791

1,573

Other business

2,946

4,794

Trust Banking Business

2,322

2,762

Interest on loans

317

590

Trust charges

485

338

Real Estate Leasing Business

880

819

Total Operating Revenues

19,566

17,675

Securities Finance Business
Loans for margin transactions
Interest on loans
Interest on collateral money for securities borrowed2) Trust banking businessBank of Japan. We anticipate further developments in the

In the trust banking business, there were increases in trust

financial and securities markets where we do businesscharges and interest income on securities holdings, but theas a result of initiatives to encourage investment andterm average of loans declined by 23.4 billion yen year-

strengthen the functions of securities markets, for example,

on-year to 77.6 billion yen, and interest on loans declined

the integration of the cash equity market and derivatives

as well. Operating revenues from this service were 2,322

market under the Japan Exchange Group, the introduction

million yen (decline of 15.9% year-on-year).

of Nippon Individual Savings Accounts (NISAs) in January,and enhancements to the institutional framework of theComprehensive Exchange.

3) Real estate leasing businessIn the real estate leasing business, operating revenues
increased to 880 million yen (increase of 7.4% year-on-year)

In July of last year, JSF and OSF merged in response

due to increases in rents.

to the integration of the cash equity markets of the Tokyo
Stock Exchange and Osaka Securities Exchange. After the

Future challenges

merger, for the purpose of utilizing our business resources

While there are concerns about the impact of the April

more effectively, the company formulated a new 4th Mid-

consumption tax hike, we think that the Japanese economy

Term Management Plan.

will continue on a modest recovery trajectory due toinitiatives for sustained growth by the government andThe business strategies under the new management

8

BUSINESS REVIEW

plan emphasize an increase in our network with financial

respond to changing environments and further develop our

instruments business operators etc., expansion of ourbusiness.

core business “Loans for Margin Transactions,” responseto an increasingly broad range of funding and securities

JSF Trust and Banking Co., Ltd., a subsidiary company,

trading needs, enhancement of our computer platforms tooffers tailor-made services as a trust bank to support themore effectively support our strategies, strengthening ofoperational infrastructure of securities companies and othercoordination among group companies, and more proactive

institutions. Its products emphasize trust services for the

response to the increasingly diverse needs of our customers.

securities industry, and it endeavors to provide appropriate

In conjunction with this, we will continue to strengthenbanking functions commensurate with its capacity.

our business management structures to enable us to better

9

MANAGEMENT POLICYMANAGEMENT POLICY
Basic Management Policy
As an institution specializing in the securities financeManagement Plan
1. Third Mid-term Management Planbusiness, JSF has a mission, while always keen awareness

In May 2012, the company formulated the Third Mid-termof our public role, to contribute to the development ofManagement Plan covering the three-year period fromthe securities market by proactively meeting the diverse

2012 to 2014, and is now involved in the plan's execution.

needs of securities and financial circles and working to

There is one year remaining on the plan, but after theboost the long-term interest of securities market users andmerger with OSF in July of last year, the opportunity wasparticipants. Based on this corporate philosophy, our basic

taken to formulate a new medium-term business plan thatmanagement policy in as follows.

emphasizes more effective utilization of business resources.
Below is an overview of the achievement of individual
strategies in the Third Mid-term Management Plan during(1) Bearing in mind at all times our social responsibilities

FY2012 and FY2013.

as a securities finance company, we aim to practicesound business management through the exhaustive
implementation of compliance, corporate governanceand risk management to establish unshakeable[Business Strategies]i) Improve the convenience of loans for margin

credibility.

transactions(2) We aim to retain robust equity capital to ensure the

The company redoubled its approaches to issuers tofinancial health and stable management society expects

increase the number of loanable issues. These efforts

of a company that is part of the infrastructure of theresulted in a steady increase in the number of loanablesecurities market, while continuing to comprehensively

issues to 2,059 at the end of March 2014, representing

assess the revenue environment, investment plans, andstock borrowing contracts with 589 companies. We also

other factors to provide a stable return of profits to ourendeavored to improve the convenience of this business byshareholders.

introducing systems to enable applications for loans to besubmitted through the Internet.

(3) We aim to work to improve the convenience of theii) Further expand loans for negotiable margin

margin loan business while expanding our network oftransactions

financial instruments companies and enhancing thefinancial and securities-related services offered by JSF

We actively visited financial instruments business operatorsand its Group companies. And further, we aim to solidify

to ascertain their needs, sign new contracts, and expand

the profit base for the JSF Group as a whole throughusage of existing contracts. These efforts resulted in an

those actions.

increase in the average loan balance to 36.2 billion yen in
FY2013 from 20.3 billion yen in FY2011.

(4) We aim to promote further Group organizationaliii) Respond to diverse funding needs of financial

and business management efficiency to respondinstruments business operators etc.

expeditiously to changes in the business environment.

In June 2012, we launched a new "Stabilizing fund loan"
product to address the needs of financial instruments
business operators etc. to raise stable medium- and longterm funding. This expanded our profit base and brought
new flexibility to our loan formats.

10

MANAGEMENT POLICYiv) Expand securities lending and borrowingiv) Support financial and securities education andbusinessenhance communication of information

In general stock lending business, we emphasized the

We distributed videos explaining margin transactions

development of new customers and also the structuring

and loans for margin transactions through securities

of more flexible trading conditions to improve thecompany web sites, held joint seminars with the Tokyo

convenience of this business. In the bond lending business,

Stock Exchange on mechanisms of margin transactions

we emphasized the development of new customers andand loans for margin transactions, and engaged in otherapproaches to existing customers in an effort to increase

communications and educational activities. We also signed

balances and expand usage.

Memoranda of Understanding (MOUs) with Korea Securities
Finance and Kliring Penjaminan Efek Indonesia (the centralv) Enhance securities-related services

clearing agency of Indonesia) to improve communications

We endeavored to enhance securities-related services by

and ties with Asian markets.

improving coordination with JSF Trust and Banking.

2. Fourth Mid-term Management Plan
In order to improve the convenience of loans for margin[Reinforcing Management Foundations]i) I m p r o v e t h e e f f e c t i v e n e s s o f b u s i n e s stransactions, a system that allows applications to be mademanagement structureusing the Internet has been installed,

We implemented programs to ascertain compliance risks
and to maintain and improve compliance awareness[Concept]

among executives and employees. We also enhanced

Recent years have seen major changes in theinternal management structures and implemented self-

environment in which our company operates. Even as theassessments to maintain and improve the quality of internalinternationalization of finance and capital markets continues

auditing. In addition, we made further enhancements toto accelerate, IT systems have been introduced in Japan’srisk management, in order to better equip management

market at a rapid pitch and Internet investors are becoming

structures to deal with increasingly diverse and complex

a greater presence. In this transformed environment, therisks.

Tokyo Stock Exchange (TSE) and Osaka Securities Exchange(OSE) completed their merger last year, followed this yearii) Strengthen the business structureby the rollout of Nippon Individual Saving Accounts (NISA).

We endeavored to strengthen business organizations

With the institutional framework for the new Comprehensivewith an organization-wide effort to ascertain the needs of

Exchange being put in place, numerous initiatives arewholesale customers, and with the establishment of a newunderway to promote investment and strengthen theBusiness Promotion Meeting tasked with improving financial

functionality of the securities market. This period has also

and securities-related services.

seen a reassessment of the financial restrictions imposed in
response to the Lehman Brothers Shock, giving rise to newiii) Improve the efficiency of organizational andfinancial needs.

business management

With the merger of TSE and OSE, JSF and Osaka

We endeavored to bring efficiency gains to our organizations

Securities Finance Company, Ltd. also merged in July 2013.

and operations by, for example, increasing personnel

Following this merger, our company will strive to effectively

exchanges and concurrent service etc. with subsidiaries, anddeploy our post-merger managerial resources to steadily

reducing and restraining systems costs.

pursue the business strategies laid out below, even as we
continue to further strengthen our business management

11

structure. By these and other measures, we will respond toneeds. We also aim to continue to monitor trends in rapidly

the changing environment and achieve even further growthdeveloping Asia and other foreign markets in order to seekfor our business.

out and seize new business opportunities. We at the sametime aim to improve the efficiency of our fund management
under appropriate risk controls.

[Business strategies]i) Expanding the loans for margin transactions
business as key infrastructure for the securities[Reinforcing business management systems]

marketi) Enhancing internal controls

In light of the integration of the spot market, we aim to

We aim to continue to enhance the effectiveness of ourredouble our efforts both to accurately assess market needs

compliance and internal auditing to respond more nimbly toand to promote the expansion of the investor base andthe evolving social demands placed on financial institutions.

the use of loans for margin transactions by increasing the

We aim to work ever harder to improve our risk

number of loanable issues and improving both the systemmanagement in view of the increasingly diverse andand operation of loans for margin transactions. To this end,

complex risks associated with financial business.

we aim to enhance our informational outreach activitiesii) Strengthening our business management

to better publicize the systems of margin transactions andstructureloans for margin transaction.
Regarding loans for negotiable margin transactions,

We aim to enhance the role and functions of our Business

we aim to work to accurately identify customer needs andPromotion Meetings, and put in place a system to oversee

expand the business.

the implementation of business plans to ensure they are
executed properly. At the same time, we aim to implementii）Responding to the diversifying needs of financial

thoroughgoing cost management.

instruments companies and other customers
Building on our recent merger, we aim to further strengtheniii) Promoting human resources development

our network of financial instruments companies and otherWe aim to train the human resources needed to increase ourpartners, respond proactively to the diversifying needs forcorporate value and make possible the creation of future

funding and securities and work to expand our customer

opportunities for long-term growth.

loans business in collaboration with financial instruments
companies.

Basic Policy on Profit Sharingiii）Strengthening system infrastructure

The company considers the long-term, stable return of

We aim to implement a complete rebuild of the businessprofits to shareholders to be among its most importantsystem (JSF-Net) to achieve an even tighter fusion ofmanagement tasks and therefore has a basic guideline ofbusiness and IT, both to better meet customer needs, topaying dividends according to results after provisioning the

reduce costs resulting from endeavors to improve businesscapital and internal reserves that it requires as a financial

efficiency and to achieve more stable business operations

institution.

through enhanced business continuity planning (BCP)

Our dividend policy is to return profits to shareholders

resiliency. Through these efforts, we reinforce our capacity

basically in accordance with the "consolidated payout ratio"on the system side to support all of our business strategies.

as a standard that reflect our business performance, but also
taking account of the "dividend on equity ratio".

iv）Other business strategies
We aim to further strengthen coordination among our Group
companies to respond proactively to diversifying customer

12

OUR BUSINESS DEVELOPMENT

Services for securities companies and ﬁnancial institutions
Funds loan
Loans for margintransactions

Loan funds needed to settle standardized margintransactions

Stock loan
Loan stock needed to settle standardized
margin transactions

General stock lending

Bond services

Loans for negotiablemargin transactions

Lending stock needed to settle stock trading

Brokerage between borrowers and lenders in bondborrowing and lending market

Loan funds needed to settle negotiable margintransactions

Bond ﬁnancing

Loan funds needed in bond underwriting, trading, etc.

General loans

Loan working funds, etc., to securities companies

Secured loans on securities for individual and corporate investors

COM - STOCK Loan

A loan aimed at individual investors, for which loan
applications are made through the Internet

Business Loan

A large loan aimed at people such as owners of listedcompanies

Peripheral services
Securities custody

Custody services for securities owned byinstitutional investors, etc.

Government bonddebt servicing

Designated by the Bank of Japan, repayment services
for principal and interest on government bonds

13

OUR BUSINESS FIELDLOANS FOR MARGIN TRANSACTIONSWhat is Margin Transactions?
In margin transactions, an investor trades stocks after

Apart from the purpose of obtaining margins as described(1) depositing a certain amount of collateral (margin

above, an investor can use margin transactions as a means

requirements) with a securities company and (2) borrowing

for hedging. In other words, in the event that, although anfunds for purchasing stock or stock for sale. Margin

investor expects that the stock price in hand may decline,transactions help investors to expand their trading volumes

the stock is not to be sold for some reasons, such as thatby enabling them to purchase stock which value is in excess

convertible bond is within its convertible period or that itof their available funds, or to sell stock that they do not own.

is a publicly-offered stock just purchased, the investor canThus, margin transactions broaden and strengthen stock

avoid loss with hedging sale by using margin transactions.

trading and contribute to the smooth circulation of stocks
and the fair stock prices formation.

There are two types of margin transactions, standardized
margin transactions and negotiable margin transactions. In

Margin transactions is used, for example, when an

standardized margin transactions, terms of repayment areinvestor considers that the stock price of a certain issue will

determined by stock exchanges, and a securities company

rise or decline sharply in a short period of time.

can borrow funds for purchasing and stock for sale needed
to settle transactions from a securities finance company

・When it is expected that the stock price will rise, an(loans for margin transactions).

investor borrows funds for purchasing stock from a

In negotiable margin transactions, which is limited to cases

securities company (margin buying), and if the stockin which a securities company can procure funds and stock

price rises as expected within a term of repayment (6to be lent to customers by internal matching (Note) ormonths), the investor sells the stock, repays the funds

external procurement without borrowing from a securities

borrowed (reversing transaction) and receives the margin.

finance company, the condition of margin transactions

The investor may also receive the stock (actual receipt)

may be decided freely in negotiations between a securities

by procuring funds separately and depositing it with acompany and its customer.

securities company.

(Note) This is a system of appropriating purchased stock received from buy
side as collateral to sell side's stock for sale within a company or,conversely, of appropriating sell side's proceeds of sale to buy side's

・Conversely, when it is expected that the stock price willfunds for purchasing stocks.

decline, an investor borrows stock from a securities
company and sells them (margin selling). If the stock
price declines as expected within the term of repayment(6 months), the investor buys back the stock, returns it
to a securities company and receives the margin. The
investor may also receive the equivalent money to stock
sold by procuring stock separately and offering them to asecurities company (actual delivery).

14

OUR BUSINESS FIELD

JSF receives loan applications for each issue from a

What is Loans for Margin Transactions?
Loans for margin transactions is a system in which asecurities company on the trading date of standardized

securities finance company receives a certain amount ofmargin transactions (5).To execute the loan, JSF, in place ofmargin (margin requirements) from a securities company,

the securities company, delivers funds or stock to clearing

who is a general trading participant of stock exchanges (3)facilities of stock exchanges (6). The stock purchased

and lends funds or stock necessary for margin transactions(collateral stock for loans) or proceeds from sale (collateral(4). This is executed through the clearing facilities of stockmoney for stock loans) are received by JSF (7), and thenexchanges. Loans for margin transactions is authorized only

each collateral is appropriated.

for the securities finance companies with a license given by
the Prime Minister. We, Japan Securities Finance Co., Ltd.
conduct loans for margin transactions through the stock
exchange in Tokyo, Sapporo, and Fukuoka.

Standardized margin transactions and Loans for margin transactions

Loans for margin transactions

Standardized margin transactions

Loan funds for purchasing
stock or stock to sell (2)Deposit collateral for margintransaction (3)JSF

Customer

Deposit brokerage margin (1)Loan funds for purchasing stock
or stock to sell (4)Receive purchased stockor sale proceeds
(6)

(7)

Stock exchange
clearing facilities

15

Japan Securities Finance

Submit application (5)Securities company

Place trade orderHandling of over-lent issues

and non-life insurance companies, banks and other sources.

JSF usually appropriates stock received as collateral for

The highest bidding rate becomes the lending rate (Premiumloans to stock loans. However, should the outstanding

Charges) of that issue. This premium charge is applied tostock loans exceed the outstanding loans, it is necessary to

all users of standardized margin transactions, and should

procure the stock needed for settlement by bidding withbe collected by all sell sides and paid to all buy sides or

securities companies or institutional investors such as life

successful bidders.

In case of Premium Charge may apply
Loans for margin transactions

Standardized margin transactions
Issue A
7,000shares

Funds loan application

2,000
shares5,000shares

7,000shares
Amount matchedwithin each ﬁrm

5,000
sharesMargin selling Margin buying
balancebalance2,000shares

Securities company A
Stock loanbalance

Margin loanbalanceJSF

10,000shares
Stock loan application
7,000
sharesStock procurement through bidding

3,000shares
Amount matchedwithin each ﬁrm

Stock loan application for bidding
Margin selling Margin buying
balancebalanceSecurities company B

Securities companies / Institutional investors

16

OUR BUSINESS FIELD

BOND SERVICES
In bond borrowing and lending transactions, a lender lends

matches the needs of both lender and borrower, maintaining

bonds to a borrower, and after mutually agreed period, thehigh confidentiality of information to ensure the complete

borrower repays the lender with bonds of the same typeprivacy of both parities, and transferring all counterpartyand quantity. JSF serves as a broker between borrowers andcredit risk to JSF. The arrangement also contributes tolenders.

creating fair and stable market by publicly disclosing
indication via QUICK, Bloomberg, and other information

The bond borrowing and lending transactions market

services.

was established in May 1990 for the purpose of covering
bonds sold short, and was followed in April 1996 by theTransaction types

introduction of REPO (cash-collateral bond borrowing and

REPO transactions

lending transactions). JSF was the first company in Japan

JSF borrows bonds after depositing cash collateral with ato be authorized to offer such brokerage services, because

lender and then lends bonds after receiving cash collateral

JSF can link securities industries and financial industries

from a borrower. This transaction can be either a Special

on neutral ground and is well versed in handling of bond

Collateral transaction that specifies an issue or a Generaltransactions.

Collateral transaction that does not specify an issue.

JSF receives applications from both parties and, on

Ordinary bond borrowing and lending transactions

their behalf, lends and borrows bonds on the basis of

JSF, in principle, borrows bonds without collateral from aloan agreement. This type of arrangement has several

lender and then lends bonds after receiving collateral from aadvantages, including helping to form a transaction thatborrower.

Types of bond transactions

LenderLending rate

Cash collateral

Cash collateralInterest

Interest

JSF(Fund raising)

Borrowing rate

Borrower

Bonds

Bonds

(Fund investment)

REPO transactions

Ordinary transaction

Lender

Bonds

Bonds
Securities collateral
Lending rate

Borrowing rate

17

Borrower(securities-collateral transaction)

GENERAL STOCK LENDING
This business lends stock needed to settle trades to

In February 2002, we implemented offer-bid borrowing

securities companies. A securities company would use

and lending transactions (e Stock Lending) by expanding theGeneral Stock Lending when it has no stock on hand, foronline network that is linked with securities companies, so

the purpose of hedge sale of convertible bonds or arbitrage

as to include institutional investors, such as life and non-lifetransactions with spots and futures, and so forth. JSF has

insurance companies.

done its utmost to increase the number of eligible issues
and shares for brokerage services since the business waslaunched in 1977.
JSF procures stock for lending from institutional
investors such as life and non-life insurance companies. JSF
also receives stock in advance for quick stock lending.

Mechanism of stock lending business
Stocks (deposit)

Stocklenders
Institutional
investors

Stocks (lend)

JSF
Borrowing fee

Collateral deposit
Lending fee

18

Securities
companies

OUR BUSINESS FIELDLOANS FOR NEGOTIABLE MARGIN
TRANSACTIONSWhat is Loans for Negotiable Margin Transactions?

Loan Period

Loans for negotiable margin transactions is a system

In principle, the due date of loan is the day following thewhich lends the necessary funds for securities companies

lending date, but it can be extended to the deferment

to purchase stocks in negotiable margin transactions on

deadline for repayment of negotiable margin transactions

behalf of its customer (3), receiving stock purchased (1) andfor securities companies.

certain margin requirement (2) as collateral for loans

Interest rate
The interest rate on loans is determined individually

Conditions of loans

Loanable stock Issues

between JSF and securities companies.

In principle, loanable stock issues are those listed on stock
exchange. (However, they can be limited to those we admit

Collateralavailable.) Newly listed stocks can be accepted from the 1st

JSF receive sto ck purchased in negot iable marg in

day of its listing.

transactions and certain margin requirement as collateralfor loans. Margin requirement can be substituted by acertain ratio of cash or by securities.

Negotiable margin transactions and Loans for negotiable margin transactions
Loans for negotiable margin transactions

Negotiable margin transactions
Place an order for negotiablemargin buying

JSF

Loan funds forpurchasing stocks

Deposit margin requirement (2)Loan funds (3)Deposit stock as collateral (1)Payment for the purchaseReceive purchased stock

Stock exchange
clearing facilities

19

Japan Securities Finance

Customer

Deposit margin requirement

Securities company

Application

BOND FINANCING
The aim of bond financing is to contribute to smooth

We are expanding "COM-STOCK Loans" for individuals,

underwriting, circulation and fair price formation in bondwhich do not require applicants to come to a branch,markets. This business offers low-interest loans by using"Business Loans" aimed at owners of listed companies,

government and other bonds as collateral to provide funds

and "Safekeeping Deposited Loans" that utilize investment

required by securities companies in bond operations.

securities deposited with securities companies as capital.

GENERAL LOANS

COM-STOCK Loan

This business loans working funds required by securities

A loan aimed at individual investors, for which loan

companies by using stocks, bonds, and other securities asapplications can be made through the Internet, andcollateral, and aims to respond quickly and flexibly to thefor which investors do not need to come to a branch.

needs of securities companies.

Applications can be made through a special JSF website.

SECURED LOANS ON SECURITIES FOR
INDIVIDUAL AND CORPORATE INVESTORSBusiness loan

We provide loans to individuals and companies for any use,companies.

A large loan aimed at people such as owners of listed

utilizing investment securities for shares, etc. as collateral.

20

CORPORATE GOVERNANCECORPORATE GOVERNANCE
auditors)

BASIC CONCEPT OF CORPORATE GOVERNANCE
As a institution specializing in the securities finance・ Attendance of corporate auditors at internal meetings andbusiness, Japan Securities Finance has a mission, while

instigation of necessary checks

always maintaining a keen awareness of our public role,・ Internal audit by the Audit Department, which is

to contribute to the development of the securities industry

independent from other departments

by proactively meeting the diverse needs of securities andfinancial circles and working to boost the long-term interests

Furthermore, from the perspect ive of ensuringof securities markets users and participants. The company

management transparency, we are committed to making

believes gaining the firm trust of society through soundactive and timely disclosure of management information

business operations is our most important managementthat goes beyond legal requirements via our website.

directive.
・ Establishment of compliance system

CORPORATE GOVERNANCE STRUCTURE
1. Management Structure

・ Establishment and implementation of risk management

Below is an outline of JSF's management structure.
・ The Board of Directors is the decision-making body for all

policies

matters related to management policy and the execution

・ Active invitation of outside directors (three directors, two

Corporate Governance System Structure
Decision Making ofManagement
General Meetingof Shareholders

Inspection System

Audit

Board of Directors

ReportCorporate
Auditors

External
Financial
AuditorBusiness
Operation
Audit

President
Management Committee

Compliance
Committee

Executive Oﬃcers
Meeting
Audit
Department

Audit
Subsidiaries
AﬃliatesManagement
Administration& Report. etc.

Executive Oﬃcers in Charge

Compliance Department
Personnel in chargeof compliance

Mutual CheckBusiness
Departments

Risk Management
Department

JSF Group
Company

21

External Reporting
Contact Desk

Consultation and Report for Compliance

Board ofAuditors

All Departments

of operations, and it appoints executive officers who are2) Board of Auditors

charged with the execution of operations in accordance

The Board of Auditors may have up to four members, ofwith its decisions.

which the majority must be outside auditors.

・ Directors are members of the Board of Directors and

The Board of Auditors shall make a decision on the

supervise the company's decision-making and the activities

execution of the duties of auditors and shall discuss theof representative directors. Executive officers execute theexercise of authority by auditors. Meetings of the Board

operations of the Company in line with decisions made byof Auditors are convened from time to time as necessary.

the Board of Directors.

During fiscal 2014, the Board of Auditors met twelve times.
Two outside auditors are appointed and are expected to・ Directors may concurrently serve as executive officers

provide supervision based on a wealth of experience and(executive directors).

broad knowledge and expertise.

・ Executive officers comprise executive directors andexecutive officers.

3) Management Committee

・ Executive officers are appointed for a term of 1 year.

The purpose of the Management Committee is to deliberate

2. Organization

important matters related to the execution of company

To strengthen management supervisory functions, theoperations.

Company stipulates that three of the ten directors must

Members of the Management Committee are executive

be outside directors, and outside directors serve as the

directors. When necessary, directors who are not executive

center of the Board of Directors. In addition, two of the four

directors and auditors may attend meetings of theauditors on the Board of Auditors must be outside auditors.

Management Committee.

The Management Committee and Executive Officers Meeting

The Management Committee is in principle convened

serve as management-level decision-making bodies.

once per week. The Management Committee may also meet

Below are outlines of these organizations.

other times as necessary.

1) Board of Directors

4) Executive Officers Meeting

The Board of Directors may have up to ten members

The purpose of the Executive Officers Meeting is to report(including three outside directors).

on the status of operations.

Meetings of the Board of Directors shall in principle

Members of the Executive Officers Meeting are all

be convened once per month but may be convened at

executive officers, including executive directors. Directors

other times as necessary. During fiscal 2014, the Board of

who are not executive directors and auditors may also

Directors met eleven times.

attend the Executive Officers Meeting.

Positions on the Board of Directors shall consist of the

The Executive Officers Meeting is in principle convened

chairperson, vice chairperson, president, executive viceonce per week. The Executive Officers Meeting may alsopresident, senior managing directors, managing directors

meet other times as necessary.

and directors. The Board of Directors may appoint directors
to execute operations (executive directors).

3. Outside directors and outside auditors
The Company has three outside directors and two outside

Three outside directors appointed are expected to ensure

auditors.

the appropriateness of company operations and provide
objective, neutral, outside supervision of management

The outside directors and outside auditors have nothrough advice and comments with a wealth of experienceinterest in the Company other than owning shares in thein management and professional knowledge and expertise.

Company. There are not now nor have there ever beenfactors requiring a determination of potential conflict of22

CORPORATE GOVERNANCE

interest with general shareholders by the Tokyo Stockaudits and internal control may exchange information etc.

Exchange.

when necessary for closer coordination.

Outside directors are expected to ensure the

Auditor Toshio Kamiyama is a certified public accountant

appropriateness of company operations and provide

and certified tax accountant and provides considerable

objective, neutral, outside supervision of management

insight on financial and accounting matters.

through advice and comments based on their abundant
experience in management and professional knowledge and5. Status of accounting audits

expertise. They are in an objective position independent of

Accounting audits of the Company are performed by

the executive directors and have no potential conflicts ofcertified public accountants Shigeki Katsuno, Nobuyuki

interest with general shareholders.

Kobayashi and Hironobu Sakai of BDO Toyo & Co.

Outside auditors are expected to provide supervision

Accounting audits are assisted by 13 certified public

based on a wealth of experience and broad knowledge andaccountants and 6 others, and care is taken to eliminate bias

expertise. They have a high degree of independence andin years of experience.

no conflicts of interest with general shareholders and are
therefore judged to contribute to auditing operations and6. Policy regarding the remuneration of
directors and auditors

compliance. They endeavor to mutually coordinate internal1) Executive Directors

audit section etc.
There are no explicit standards or guidelines related

・ With a view to enhancing the correlation between our

to independence in the appointment of outside directors

company’s business performance and remuneration, aand outside auditors, but appointments are made with

fixed percentage of monthly remuneration will be devoted

reference to the standards of judgment for independence

to the acquisition of JFS stocks and will contribute each

formulated by the Tokyo Stock Exchange in the Securities

month to the Executive Stock Ownership Program. JSF

Listing Rules and other documents, and every effort is madestocks obtained under this remuneration program will, into ensure that there are no conflicts of interest with generalprinciple, be held until retirement.
・ Directors’ bonuses will be paid only to executive directors

shareholders.

as a performance-linked remuneration, in order to

4. Status of internal audits and auditor audits

emphasize the management’s responsibility for each year’s

The internal audit structure consists of Audit Department

business performance.

that is independent of all other business units (approximately

2) Non- executive directors (including outside

ten members).

directors) and auditors

Its duties are not only the internal audits of compliance・ They will receive solely their fixed amounts of monthly

with all applicable laws, regulations, contracts etc. It

remuneration, and no director’s bonus.

also figures out the management of risks and so forth byrigorous internal audits of the effectiveness and efficiency
of operation, the accuracy and reliability of financial and

COMPLIANCE SYSTEM

operational information and the assets safeguarding/

The following details our compliance system and consulting

conservation. Through these activities, Audit Department

and reporting system in regard to complianceverifies the appropriateness and effectiveness of internal

The company’s compliance system centers on our Board

management system in respect of control and managementof Directors, the Management Committee, the Complianceof risk and other factors in individual business units.

Committee and the Compliance Department. The situation

Internal audits, auditor audits and accounting audits

regarding internal compliance is constantly studied byare mutually coordinated. All who are responsible for these

the Compliance Department and the results are regularly

23reported to the Board of Directors and the Management

guarantees the complete anonymity of any person

Committee.

consulting or reporting matters regarding the company,

The Compliance Committee deliberates importantmatters concerning compliance.

thereby reducing the psychological burden on those persons

The Complianceand making consulting and reporting easier.

Department makes all possible efforts to promote andthoroughly establish compliance through such measures as

BUSINESS CONDUCT GUIDELINES

urging managers and employees alike to take faithful and1) As an institution specializing in securities-related
financing, the company recognizes its social

honest actions based on clear ethical standards.

responsibility and its public mission. It aims to establish

In addition, the company takes the initiative in thefirm trust through sound business operation.

promotion of the establishment and strengthening of overall

2) The company will comply strictly with relevant rules

group compliance system.

and regulations. It will conduct its business activities
Consulting and reporting system regarding compliancein a fair and reliable manner, in accordance with social

In order to strengthen the compliance system, the company

norms.

has its external consulting and reporting contact desk

3) In the interests of its shareholders, the company willby lawyers, in addition to the Compliance Committee,

maximize its communications with a broad spectrum of

the Compliance Department and personal in charge ofsociety and will disclose information on the management

compliance.

of the organization in a fair and positive manner.

The external consulting and reporting contact desk

Consulting and Reporting
Board of Directors
Management Committee
Compliance Committee

Deliberation of thecountermeasure(Chairman : Executive oﬃcer in charge ofCompliance Department)

Compliance Department

ReportPersonnel in charge ofcompliance

External reporting contact desk
Consult & report

Consult & report

Consulting & Reporting personnel(Managers and employees)

24

RISK MANAGEMENTRISK MANAGEMENT
Basic policies in risk management

Method of risk management

With environmental changes such as financial deregulation

We classify expected risks broadly into 5 categories andand globalization as well as striking advances in information

then set these categories as management objectives; credit

technologies, risks which financial institutions face haverisks, market risks, liquidity risks, processing risks, andbecome diversified and more complicated. Accordingly,

system risks. Among these categories, for credit risks

risk management has become more important in theand market risks, we are striving to secure profits while

management of financial institutions than ever before.

quantitatively grasping the risks and controlling themwithin proper levels as feasible for our management vitality

In this situation, in order to increase profitability while(integrated risk management).

maintaining sound management, we have positioned risk
management at the highest priority and have establishedOn the other hand, for liquidity risks, processing risks

basic policies in risk management at our Board of Directors.

and system risks, we are taking preventive measures against
occurrences of these risks by executing proper management

More precisely, we have established basic policies

according to risk characteristics.

for risk management; “Keeping all employees informedof company’s emphasis on risk management”, “Proper
management of each category of risk”, “Promotion of
integrated risk management”, “Establishing a system ofmutual checks and balances”, and so forth.

Risk Categories
Risk Category
Credit Risk

Risk Description
Credit risks are risks to suffer losses by decreasing or losing the values of the assets due tocredit events such as deterioration in the financial standing of counterparty.
Market risks are risks to suffer losses caused by fluctuations of values of possessed assets (bonds,

Market Risk

stocks) due to fluctuations of various market risk factors such as interest rates and prices of
securities.
Liquidity risks are risks to suffer losses caused by failures of raising necessary funds or by

Liquidity Risk

procurement of funds with unusually high interest rates or risks caused by halt of transactions
due to market disruptions or by forced transactions with unusually unfavorable prices.

Processing Risk
System Risk

Processing risks are risks to suffer losses from failed processing due to negligence, accidents or
fraud by officers and employees.
System risks are risks to suffer losses due to system defects such as failures or malfunction ofcomputer systems or due to unauthorized use of computer systems.

25Integrated risk management

said amounts for transaction limitation. In addition, eachIntegrated risk management is a method to quantify various

department implements rigid self-assessment of those assets

risks with unified methodology and to manage the total

for which they hold jurisdiction.

amount of risks within the realm of management vitality.
For credit risks and market risks, after allocating risk

Additionally, for each loan transaction, as a general

capital to each risk operation department by risk category

rule, we take adequate collateral. By implementing a

within the realm of our own capital, we quantify risks withdaily marking to the market of the relevant collaterals, we

the methodology of Value at Risk (VaR) and manage thesuppress occurrences of impaired loans. In a case where

calculated volume of risks within the range of that allocateda borrower falls into bankruptcy, by selling off collateralrisk capital. With corresponding to Basel II regulation

securities and so forth, we collect receivables in an

enforced in March 2008, operational risks, which consists

expeditious manner.

of processing risks and system risks, is measured by basic
method and we allocate risk capital amounts on it.

Market risk management
In our company, the Risk Management Department

Allocated amounts of risk capital are determined as final

quantifies and manages market risks, and to complement

at the Management Committee, with prior deliberation at

management by quantification, it implements stress tests.

regular “Risk Capital Meeting” in every March.

Furthermore, to validate the reliability of the market
risk quantification model we are adapting, we are also
implementing back testing to compare the calculated VaR

Each risk operation department controls the risks

with the portfolio-fixed virtual profit and loss

within the realm of the allocated risk capital. The Risk
Management Department, which is independent of risk
operation departments, quantifies the risks, monitors risk

Liquidity risk management

operation conditions, and report to board members.

In our company, the Treasury Department has jurisdiction
over the management of liquidity risks and attempts

In case a possible rise for a risk may exceed the allocatedto diversify procurement methods and to secure stableamount of the risk capital, an extraordinary “Risk Capital

supplies. As for cash flow management, while we are

Meeting” will be held to deliberate responses to the case andimplementing development of cash flow projection, graspingthen consult the Management Committee.

the amount which can be procured or liquidity of assets,
and paying attention to concentrated settlement dates for

Credit risk management

large capital, we have a system to report to our management

We try to sustain and improve the soundness of the assets

with daily cash flow status. Furthermore, to be preparedby strictly managing overall credit risks.

for unforeseeable circumstances, we take measures tosupplement liquidity such as possessing a certain amount ofMore precisely, the Risk Management Department

government bonds with high liquidity.

assesses credit risks according to in-house ratings, andquantifies and manages credit risks using a default rate

In addition, at the “ALM Committee” held in every

for each in-house rating. Furthermore, to complement

quarter, we develop cash flow projection based on forecasts

management by quantification, we implement stress tests.

of loans outstanding, deliberate policies for ALM (Asset

On the other hand, for credit control, the Risk Management

Liability Management) such as revenue management for

Department screens client companies and loan transactions

assets and liabilities of the company as a whole and thus

and sets the amounts for transaction limitation for eachreport to the Management Committee.

client, while business operation department manages the26

RISK MANAGEMENT

Processing risk management

systems safely and effectively, all operation procedures

In our company, each department has jurisdiction over theare clarified and our monitoring system is facilitated. In

management of processing risks. To lessen processing risks,

addition, concerning protection of our own information

through facilitation of regulations and manuals and also

assets (information and information systems), necessary

through trainings, all employees are familiarized with proper

regulations are consolidated and all officers and employees

handling of operational work. In addition, by ensuring thatare familiarized with handling of the information assets.

each department implements its own voluntary inspection

Furthermore, to minimize the effects of system failures,on a regular basis, we endeavor to prevent occurrence ofmeasures are taken such as facilitation of various handling

accidents and improve our business processing system.

manuals, implementation of drills, and so on.

System risk management

Internal auditing system

In our company, the Information Systems PlanningIn our company, the Audit Department, which is independent

Department holds jurisdiction over management of systemfrom other departments, implements strict internal auditing

risks. To ensure stable operation of our computer systems,of overall business operation on management status of eachthe department takes preventive measures for occurrence of

category of risk along with regulatory compliance status andsystem failures such as duplicating networks and equipment

validates the appropriateness and efficacy of our internaland so forth. To develop and operate our computer

control system in each department.

Appendix
Risk capitalof financial standing, obligor classifications used in self-

Risk capital is capital necessary to cover losses caused byassessment, and so forth. With this system, we assess therisks generated from business operation.

levels of credit risks properly, quantify credit risks, and set
up amount for transaction limitation.

Value at Risk (VaR)
VaR is the maximum expected loss on an asset calculated

Stress tests

with a certain period (holding period) and a certain

Since VaR is statistical estimated figure, it cannot include

probability (confidence level). This is calculated based on

possible losses, which can be caused by extreme market

data in the past with statistical method. In our company,

fluctuation such as Black Monday or economic crisis (stress

VaR is calculated based on confidence level of 99% andevent). In this situation, to be prepared for unforeseeable

holding period of one year.

circumstances, we implement stress tests to calculate amountof losses in a case of occurrence of stress event based on

Risk Capital Meeting

data in the past or on hypothetical scenarios and assess theThis is a meeting to deliberate issues such as allocatedsoundness of our financial management.

amount of risk capital and so forth. The meeting isorganized by the managers of the Risk Management

ALM Committee

Department (chairperson), the Planning Department, theThis is a committee to deliberate ALM such as development

Treasury Department, and all the other business departmentsof fund management plans and revenue management

concerned.

for assets and liabilities of the company as a whole. The
committee is organized by the executive officer in charge

In-house rating systemof the Treasury Department, and managers of the Treasury

We introduced a rating system which segmentalizes credit

Department (chairperson) and all the other department

ratings of client companies into 6 ranks, based on ratings

concerned.

by external credit rating agencies, quantitative assessment

27

Risk Management System

Board of Auditors,
Corporate Auditors

Board of Directors

Management
Committee
Executive Oﬃcers Meeting

Executive Oﬃcer incharge of Treasury
Department

ALM
Committee

Risk Operation Sector

Executive Oﬃcer in charge of
Risk Management
Department and Information
Systems Planning Department

Executive Oﬃcer incharge of Department

Executive Oﬃcer
in charge of Audit
Department

Risk Capital
Meeting

Liquidity
Risk

MarketRisk

CreditRisk

SystemRisk

Processing
Risk

Treasury
Department

Risk
Management
Department

Risk
Management
Department

Information
Systems
Planning
Department

Each
Department

Treasury
Department

・Treasury
Department
・Margin Loan
Department

Each
Department

Each
Department

・Institutional
Sales
Department
・Retail Business
Department
・Margin Loan
Department
・Tresury
Department
・Branch28

Internal Audit Sector

Risk Management
Department

Audit Department

Risk Management
SectorRisk
Categories

Integrated Risk
Management Sector

Meeting

Management

President

FINANCIAL SECTION

Consolidated Financial Statements ･･････････････････････････････････････････････････････････････････ 30
Consolidated Balance Sheet ･ ･･･････････････････････････････････････････････････････････････････････ 30
Consolidated Statement of Income ･･･････････････････････････････････････････････････････････････ 32
Consolidated Statement of Other Comprehensive Income ･････････････････････････････････ 32
Consolidated Statement of Changes in Net Assets ･ ･･････････････････････････････････････････ 33
Consolidated Statement of Cash Flows ･･････････････････････････････････････････････････････････ 34
Notes to Consolidated Financial Statements ･･･････････････････････････････････････････････････ 35
Independent Auditors' Report ･････････････････････････････････････････････････････････････････････････ 63

29

CONSOLIDATED BALANCE SHEETJapan Securities Finance Co., Ltd. and Consolidated Subsidiaries
As of March 31, 2014
Millions of yen
Assets2014

Current assets:
Cash (note 3)
Short-term investments (notes 4 and 16)
Short-term loans receivable (note 16)
Deferred tax assets (note 9)
Collateral money for securities borrowed
Other current assets (note 16)
Allowance for doubtful receivables
Total current assets¥

Property, plant and equipment:
Buildings and structures
Tools, furniture and fixtures
Land (note 6)
Leased assets
Construction in progress
Accumulated depreciation
Net property, plant and equipment
Intangible assets, net
Investments and other assets:
Investments in securities (notes 4, 5 and 16)
Other investments and other assets
Allowance for doubtful receivables
Total investments and other assets
Total assets¥

See accompanying notes to consolidated financial statements.

30

2013

Thousands of
U.S. dollars(note 2)
2014

93,070 ¥408,571
897,825525
1,303,155
6,106
(369)
2,708,883

124,256
945,972
732,475
211
1,092,112
3,166(1,221)2,896,971

8,790
1,348
3,265
409
3
13,815(6,827)
6,988

8,059
1,374
3,265
42
508
13,248(6,686)
6,562

85,406
13,09731,7243,974
29
134,230(66,333)
67,897

1,054

843

10,241

1,196,823
3,616(2,976)
1,197,463

528,600
1,388(908)
529,080

11,628,673
35,134(28,916)
11,634,891

3,914,388¥

3,433,456$$

904,295
3,969,792
8,723,523
5,101
12,661,825
59,328(3,586)26,320,278

38,033,307

Millions of yen
Liabilities and Net Assets

2014

Current liabilities:
Call money (notes 7 and 16)
Short-term borrowings and current installments oflong-term borrowings (notes 7 and 16)
Commercial paper (note 7)
Accrued income taxes (note 9)
Collateral money received for securities lent
Other current liabilities (note 7)
Total current liabilities¥

Non-current liabilities:
Long-term borrowings (note 7)
Deferred tax liabilities (note 9)
Deferred tax liabilities for land revaluation (note 6)
Liabilities for retirement benefits (note 8)
Other non-current liabilities (note 7)
Total non-current liabilities
Total liabilities
Stockholders’ equity:
Common stock (note 10):
Authorized 200,000,000 shares;
issued 107,307,763 shares in 2014
and 93,700,000 shares in 2013
Additional paid-in capital (note 10)
Retained earnings (note 11)
Treasury stock, at cost; 20,761 shares in 2014
and 663,905 shares in 2013
Total stockholders’ equity
Accumulated other comprehensive income (loss):
Net unrealized holding gain on other securities(note 4)
Deferred losses on hedges(note 18)
Gain on revaluation of land (note 6)
Remeasurements of defined benefit plans
Total accumulated other comprehensive
incomeTotal net assets

1,596,600
509,5102013¥

1,446,600
613,710

Thousands of
U.S. dollars(note 2)
2014$

15,513,020
4,950,544

429,000
132
1,185,725
46,4493,767,416

231,500
222
983,076
32,1503,307,258

4,168,286
1,282
11,520,841
451,31236,605,285

3,000
4,059
86
3,088
1,511
11,744

–
3,676
86
2,341
1,504
7,607

29,14939,438836
30,004
14,681
114,108

3,779,160

3,314,865

36,719,393

10,00010,00097,16316,027
101,596(16)

5,182
96,787(515)

155,723
987,136(156)

127,607

111,454

1,239,866

8,346

7,845

81,092

(598)
156
(283)

(864)
156
–

(5,810)1,516(2,750)

7,621

7,137

74,048135,228

118,591

1,313,914

Commitments and contingencies (note 19)
Total liabilities and net assets¥

31

3,914,388¥

3,433,456$

38,033,307

CONSOLIDATED STATEMENT OF INCOME

Japan Securities Finance Co., Ltd. and Consolidated Subsidiaries
For the year ended March 31, 2014
Millions of yen
Operating revenues
Operating expenses
Operating profit
General and administrative expenses (note 12)
Operating income¥

Other income (deductions):
Interest income
Dividend income
Interest expenses
Equity in earnings of affiliates
Equity in earnings of limited partnership
Gain on negative goodwill
Gain (loss) on sale of investments in securities
Loss on sale/disposal of property, plant andequipment
Merger related costs
Branch removal expenses
Retirement benefit expenses
Other, net

201419,566
8,747
10,8198,250
2,569

17,676
8,194
9,482
7,694
1,788

$

190,109
84,988105,12180,15924,962

21
186
(0)
179
32
4,405
(0)
(29)

4
105
(0)
487
79
–
47
(34)

204
1,807
(0)
1,739
311
42,800
(0)
(282)

(55)
(526)
(199)
138
4,152

–
–
–
95
783

(534)
(5,111)(1,933)
1,341
40,342

6,721

2,571

65,304

255
255
510
6,211
6,211

593
200
793
1,778
1,778

2,478
2,478
4,956
60,34860,348

Income before income taxes and minority
interests
Income taxes (note 9):
Current
DeferredIncome before minority interests
Net income

2013

¥

Thousands of
U.S. dollars(note 2)
2014

¥

¥

$

See accompanying notes to consolidated financial statements.

CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
Japan Securities Finance Co., Ltd. and Consolidated Subsidiaries
Millions of yen
For the year ended March 31, 2014
Income before minority interests
Other comprehensive income (loss) arisingduring the year (note 13):
Net unrealized holding gain on other securities
Deferred losses on hedges
Other comprehensive gain of affiliates accounted
for by the equity method¥

Comprehensive income
Comprehensive income attributable to:
Owners of the parent
Minority interests¥

Total other comprehensive income arising during the year¥

See accompanying notes to consolidated financial statements.

32

Thousands of
U.S. dollars

2013
1,778

(note 2)
2014$
60,348

521
266

3,155
(864)

5,062
2,585

(20)
767
6,978 ¥

189
2,480
4,258

(195)
7,452
67,8006,978 ¥
–

4,258
–

2014
6,211

¥

$
$

67,800–CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS
Japan Securities Finance Co., Ltd. and Consolidated Subsidiaries
For the year ended March 31, 2014

Millions of yen
Accumulated other comprehensive income

Stockholders’ equity
Commonstock

Balance at March 31, 2012
Changes arising during year:
Cash dividends
Net income
Purchase of treasury stock¥

Additional
paid-in
capitalRetainedearnings(note 10)
(note 10)
(note 11)
10,000 ¥5,182 ¥
96,312 ¥(1,303)
1,778

Decrease of treasury stock resulting
from change in equity of affiliates
Decrease of treasury stock
held by affiliates

Net changes other thanstockholders' equity
Total changes during the year
Balance at March 31, 2013
Changes arising during year:
Cash dividends
Net income
Increase resulting from merger–
10,000–5,182

10,845Purchase of treasury stock
Disposition of treasury stock475
96,787stockholders’ equity¥–
10,000 ¥10,845
4,809
16,027 ¥ 101,596 ¥Total(604) ¥ 110,890 ¥Commonstock
Balance at March 31, 2013
Changes arising during year:
Cash dividends
Net income
Increase resulting from merger
Purchase of treasury stock$

97,163 $50,350 $105,373

Retainedearnings
940,410 $Net changes other thanstockholders' equity
Total changes during the year
Balance at March 31, 2014$–
97,163 $105,373
155,723 $¥(note 6)
156 ¥

Total

– ¥

Total net
assets

4,657 ¥ 115,547(1,303)
1,778
(0)

(0)

(0)

89

89

89
(515)

564
111,454(5)504(1,402)
6,211
10,845(5)504

499
16,153(16) ¥ 127,607 ¥

3,344
3,344
7,845

(864)
(864)
(864)

–
156

2,480
2,480
7,137

–
–

2,480
3,044
118,591(1,402)
6,211
10,845
(5)
504

501
501
8,346 ¥

266
266(598) ¥

–
156 ¥

(283)
(283)
(283) ¥

484
484
484
16,637
7,621 ¥ 135,228

Thousands of U.S. dollars(note 2)
Accumulated other comprehensive income
Treasury
stock

Total

(5,004) $ 1,082,919 $

(49)
4,897
46,726
987,136 $–Remeasurementsof defined
benefit plans

Gain onrevaluationof land(0)(13,622)
60,348

Disposition of treasury stock(note 4)4,501 ¥

Deferred
losses onhedges89

Stockholders’ equity
Additional
paid-in
capitalNet
unrealized
gain onothersecurities(1,303)
1,778
(0)

(0)

(1,402)
6,211

Net changes other than

Total changes during the year
Balance at March 31, 2014

TreasurystockNetunrealized
gain onothersecurities

76,224 $Deferred
losses onhedges(8,395) $Gain onrevaluationof land1,516 $

Remeasurementsof defined benefit
plans

–

Total
$

(13,622)
60,348105,373
(49)
4,897

4,848
156,947(156) $ 1,239,866 $See accompanying notes to consolidated financial statements.

33

Total net
assets69,345 $ 1,152,264(13,622)
60,348105,373
(49)
4,897

4,868
4,868
81,092 $

2,585
2,585
(5,810) $–1,516 $

(2,750)(2,750)(2,750) $

4,703
4,703
4,703
161,650
74,048 $ 1,313,914

CONSOLIDATED STATEMENT OF CASH FLOWSJapan Securities Finance Co., Ltd. and Consolidated Subsidiaries
For the year ended March 31, 2014

Thousands of
U.S. dollars(note 2)Millions of yen

Cash flows from operating activities:
Income before income taxes and minority interests
Adjustments to reconcile income before income taxes and minority
interests to net cash provided by (used in) operating activities:
Depreciation and amortization
Gain on negative goodwill
Loss on disposal of property, plant and equipment
Gain relating to short-term
investments and investments in securities
Allowance for doubtful receivables
Decrease in liabilities for retirement benefits
Interest and dividend income
Interest expenses
Equity in earnings of affiliates
Increase in short-term loans(Increase) decrease in collateral money forsecurities borrowed
Increase in call money
Decrease in short-term borrowings
Increase in commercial paper
Increase (decrease) in collateral money
received for securities lent
Increase (decrease) in collateral money received
for loan transactions
Decrease in long-term debt
Purchase of short-term investments andinvestments in securities
Proceeds from sale/redemption of short-term
investments and investments in securities
Other, net
Sub totalInterest and dividend received
Interest paid
Income taxes paid
Income taxes refunded
Net cash provided by (used in) operating activities
Cash flows from investing activities:
Purchase of investments in securities
Proceeds from sale/redemption of investments in securities
Capital expenditures
Purchase of intangible assets
Other, net
Net cash used in investing activities
Cash flows from financing activities:
Dividends paid to stockholders
Purchase of treasury stock
Other, net
Net cash used in financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Increase in cash and cash equivalents resulting from merger
Cash and cash equivalents at end of year (note 3)

2014
¥

¥

See accompanying notes to consolidated financial statements.

34

6,721 ¥

2013

2014

2,571

$

65,303879(4,405)
150

756
–
34

8,541
(42,800)
1,457

(487)
(1,307)461(11,730)
3,939
(179)
(141,755)(1,506)306(51)(9,194)3,817(487)(278,691)(4,732)(12,699)
4,479(113,972)
38,273(1,739)(1,377,332)(203,542)
115,000(99,700)
197,500

34,93458,000(1,223,000)
198,000(1,977,672)
1,117,373(968,714)
1,918,966

202,649(116,940)

1,968,995(2,405)(7,500)

7,655(4,000)(23,368)(72,872)(1,708,676)(1,846,274)(16,601,982)

1,597,395
22,597(34,395)
11,586(3,929)(503)
186(27,055)

3,264,825
10,521
101,276
10,278(4,072)(795)
2106,689

15,520,744
219,559(334,192)
112,573(38,175)(4,887)1,807(262,874)

–
0
(604)
(557)
82
(1,079)(1,201)
546
(623)
(175)
222
(1,231)–0(5,869)(5,412)797(10,484)(1,402)(5)(203)(1,610)(29,744)
114,258
8,556
93,070 ¥(1,303)0(8)(1,311)
104,147
10,111–
114,258(13,622)(49)(1,972)(15,643)(289,001)
1,110,163
83,133904,295$

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Japan Securities Finance Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2014
(1)(a)

Summary of Significant Accounting Policies
Basis of Presenting Consolidated Financial Statements
Japan Securities Finance Co., Ltd. (the Company) and its consolidated subsidiaries maintain their books ofaccount and prepare their financial statements in conformity with financial accounting standards of Japan.
The accompanying consolidated financial statements have been prepared in accordance with the provisions
set forth in the Japanese Financial Instruments and Exchange Law and its related accounting regulations, and in
conformity with accounting principles and practices generally accepted in Japan, which may differ in certain
respects from accounting principles and practices generally accepted in countries and jurisdictions other thanJapan.
In preparing the accompanying consolidated financial statements, certain reclassifications have been madein the financial statements issued domestically in Japan in order to present them in a form which is more familiar
to readers outside Japan. In addition, the notes to the consolidated financial statements include information
which is not required under accounting principles generally accepted in Japan but is presented herein as
additional information.
(b)

Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its 2
subsidiaries.
All significant intercompany accounts and transactions have been eliminated in consolidation.
Investments in affiliates are accounted for by the equity method.
The Accounting Standards for Consolidation require the control or influence concept for the consolidation
scope of subsidiaries and affiliates. Under the control or influence concept, a company in which the parent
company or its consolidated subsidiaries, directly or indirectly, are able to exercise control over operations is fully
consolidated, and a company over which the parent company and/or its consolidated subsidiaries have the ability
to exercise significant influence is accounted for by the equity method.
The difference between the cost and the underlying net assets at the date of investments in subsidiaries oraffiliates is allocated to identifiable assets and liabilities based on fair market value at the date of investments.
The unallocated portion of the difference, which is recognized as goodwill, is amortized over 5 years.

(c)

Cash and Cash Equivalents
For the purpose of the statement of cash flows, the Company considers all highly liquid investments withinsignificant risk of changes in value which have maturities of generally three months or less when purchased tobe cash equivalents.
(d)

Short-term Investments and Investments in Securities
Under the Accounting Standards for Financial Instruments, securities are classified into four categories –“trading securities,” “held-to-maturity securities,” “investments in affiliates” and “other securities.” Securities
classified as “trading securities” are stated at fair value and unrealized gains or losses are recorded in the
consolidated statement of income. Securities classified as “held-to-maturity securities” are stated at amortizedcost. Securities classified as “other securities” with fair value are stated at fair value and unrealized gains orlosses, net of related taxes, are excluded from earnings and recorded in a separate component of net assets.
Realized gains or losses on the other securities are determined by the moving average method. Bond securities
classified as “other securities” for which fair value is not available are stated at the amortized cost. Equity
securities classified as “other securities” for which fair value is not available are stated at the moving-average
cost.
(e)

Property, Plant and Equipment
Property, plant and equipment are carried at cost.
Depreciation is provided principally by the
declining-balance method based on the estimated useful lives, except for the buildings acquired on or after April 1,

35

1998, which are depreciated based on the straight-line method.
The estimated useful lives are as follows:
Buildings and structures
3–50 years(f)Intangible Assets
Intangible assets are carried at cost less accumulated amortization. Software development expenses aredeferred and amortized by the straight-line method over estimated useful lives (5 years). Intangible assets otherthan software are deferred and amortized by the straight-line method at rates based on the estimated useful livesof the respective assets.
(g)

Allowance for Doubtful Receivables
An allowance for doubtful receivables is provided at an amount of uncollectible receivables based on
historical loss ratios and an amount that takes into consideration the possibility of specific liabilities.
(h)Retirement and Severance Benefits
The Company and its consolidated subsidiaries have retirement benefit plans covering substantially all
employees.
Liabilities for retirement benefits have been made in the accompanying consolidated financial statements
based on the present value of the projected future retirement benefits attributable to employee services renderedby the end of the year, less amounts funded under contributory and noncontributory pension plans.
The Company applied “Accounting Standard for Retirement Benefits” (ASBJ Standard No. 26 on May 17,2012) and “Guidance on Accounting Standard for Retirement Benefits” (ASBJ Guidance No.25 on May 17, 2012)(except for certain provisions described in Section 35 of the standard and in Section 67 of the guidance) from theyear ended March 31, 2014. The Company has recorded the amount of retirement benefit obligations after
deducting pension plan assets as liabilities for retirement benefits, and unrecognized actuarial differences arerecorded as liabilities for retirement benefits.
Concerning the application of the Accounting Standard for Retirement Benefits, based on the provisional
treatment set out Section 37 of the accounting standards, the effects of such changes in the year ended March 31,
2014 have been adjusted in remeasurements of defined benefit plans through accumulated other comprehensive
income.
As a result, the Company recorded liabilities for retirement benefits of ¥3,032 million ($29,460 thousand) as
of March 31, 2014. And accumulated other comprehensive income decreased by ¥283 million ($2,750 thousand).
The net assets per share are decreased by ¥2.63 ($ 0.03).
(i)

LeasesAll finance lease transactions are capitalized.
Leased assets related to finance lease transactions without title transfer are depreciated on a straight-line
basis, with the lease periods as their useful lives and no residual value.
Finance leases transactions without title transfer for which the starting date for the lease transactions is onor before March 31, 2008 the Company and its domestic consolidated subsidiaries have continued recognize lease
payments as expenses with disclosure of certain “as if capitalized” information.
(j)

Income Taxes
The Accounting Standards for Deferred Income Taxes require that deferred income taxes should be accounted
for under the asset and liability method. Deferred tax assets and liabilities are recognized for the expected
future tax consequences of events that have been included in the financial statements or tax returns. Under thismethod, deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be recovered or settled, and the effect ondeferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes theenactment date.
(k)

Directors’ Bonus
Directors’ bonuses are accounted for as an expense when such bonuses are accrued.

36

(l)

Securities Accounts
From the year ended March 31, 2014, the Company presented the consolidated balance sheet after offsetting
securities lent, securities in custody and securities in deposit, and collateral securities deposited, securities
borrowed and securities lent opposite account (collectively “securities accounts”) which have been recorded asassets and liabilities.
Since merger with Osaka Securities Finance Company Ltd. on July 22, 2013, as a result of the study of theunification of the accounting treatments, the Company has judged that it is more appropriate not to record the
securities accounts in order to improve comparability between enterprises.
As a result of this change, comparing with prior presentation, total assets as of March 31, 2013 decreased by¥742,082 million and there was no impact on income or retained earnings. Comparing with prior presentation,
total assets as of March 31, 2014 decreased by ¥988,469 million ($9,604,246 thousand).
(m)

Reclassifications
Certain reclassifications have been made to the prior years’ consolidated financial statements to conform to
the presentation used as of and for the year ended March 31, 2014.
(n)

New Accounting Pronouncements not yet Adopted
On May 17, 2012, the ASBJ issued ASBJ Statement No.26, “Accounting Standard for Retirement Benefits”
and ASBJ Guidance No.25, “Guidance on Accounting Standard for Retirement Benefits,” which replaced the
Accounting Standard for Retirement Benefits that had been issued by the Business Accounting Council in 1998
and the other related guidance.
The Company expects to apply the revised accounting standard regarding the amendment of the calculation
method for present value of defined benefit obligations and current service costs from the beginning of the fiscal
year ending March 31, 2015. Because the provisional treatment is set out in the accounting standard, it is not
required to be adopted retroactively.
As a result of the adoption of this revised accounting standard, retained earrings at April 1, 2014 is to be
decreased by ¥16 million ($155 thousand).
(2)

Financial Statement Translation
The translations of the yen amounts into U.S. dollars are included solely for the convenience of the reader,using the prevailing exchange rate as of March 31, 2014, which was ¥102.92 to U.S. $1. This translation should
not be construed as a representation that the amounts shown could be converted into U.S. dollars at such rate.
(3)

Cash and Cash Equivalents
Reconciliation between “Cash” in the accompanying consolidated balance sheet and “Cash and cash
equivalents” in the accompanying consolidated statement of cash flows as of March 31, 2014 and 2013 are as
follows:
Thousands ofMillions of yen
U.S. dollars
2014
2013
2014
Cash
¥
93,070¥124,256$904,295
Certificate of deposits with maturities ofover three months－(9,998)－Cash and cash equivalents¥
93,070¥114,258$
904,295(4)

Short-term Investments and Investments in Securities
No trading securities were held both as of March 31, 2014 and 2013.
Balance sheet amount, gross unrealized gain or gross unrealized loss and fair value of held-to-maturity
securities as of March 31, 2014 and 2013 are summarized as follows:37March 31, 2014
Government bond securities

March 31, 2013
Government bond securities
Corporate bond securities

March 31, 2014
Government bond securities

Millions of yen
Gross
Gross
unrealized
unrealized
gain
loss

Balancesheet
amountFair value¥¥

39,91539,915

¥
¥

301
301

¥
¥

－
－

¥
¥

40,216
40,216¥39,904
1,943
41,847

¥

679
71
750

¥

－
－
－

¥

40,5832,014
42,597¥¥

387,825
387,825¥

Thousands of U.S. dollars
Gross
Gross
unrealized
unrealized
loss
gain

Balancesheet
amount
$
$

¥

$
$

2,925
2,925

$
$

－
－

Fair value$$

390,750
390,750

Acquisition cost, gross unrealized gain or gross unrealized loss and balance sheet amount of other securities
with fair value as of March 31, 2014 and 2013 are summarized as follows:
Millions of yen
GrossBalanceGrossunrealized
unrealized
sheet
Acquisition
gain
loss
amountcost
March 31, 2014
Equity securities¥
4,595 ¥
4,675
¥
(32)
¥
9,238
Bond securities:
Government bond securities
1,402,253
7,774(7)
1,410,020
Corporate bond securities
138,66233(12)
138,683
Other securities
937
435
－
1,372
¥
1,546,447 ¥
12,917¥(51)¥
1,559,313
March 31, 2013
Equity securities
Bond securities:
Government bond securities
Corporate bond securities
Other securities

¥

1,301

¥

1,255,159
157,250937
1,414,647

¥

3,163

¥

8,889
34
285
12,371

38

¥

－

¥

23
26
－
49

¥

4,464

¥

1,264,025
157,258
1,222
1,426,969

March 31, 2014
Equity securities
Bond securities:
Government bond securities
Corporate bond securities
Other securities

Thousands of U.S. dollars
Gross
Gross
unrealized
unrealized
gain
loss

Acquisition
cost$

44,646$

13,624,689
1,347,280
9,104
15,025,719$

45,424$75,534320
4,227
125,505

$

(311)

$

(68)
(116)
－
(495)

Balancesheet
amount
$89,759$13,700,155
1,347,484
13,331
15,150,729

Securities classified as other securities for which fair value is not available are unlisted equity securities
amounting to ¥2,282 million ($22,173 thousand) and ¥2,132 million as of March 31, 2014 and 2013, respectively
and unlisted preferred equity securities amounting to ¥200 million ($1,943 thousand) as of March 31, 2014.
For the years ended March 31, 2014 and 2013, proceeds from sale of other securities, the gross realized gains
and the gross realized losses are summarized as follows:
Thousands ofMillions of yen
U.S. dollars
2014
2013
2014
Proceeds from sale of other securities¥
813,102¥1,554,198$
7,900,330
Gross realized gains
572
1,984
5,558
Gross realized losses
85
478
826
Financial assets received as collateral on which the Company has a right of disposal as of March 31, 2014 and2013 are as follows:
Thousands ofMillions of yen
U.S. dollars
2014
2013
2014
The fair value of the securities as collateral
Securities lentCollateral provided
On hand¥1,591,934
106,484
690,048
795,461¥

1,312,604
110,320593,658
608,626$

15,467,684
1,034,629
6,704,703
7,728,925

Balance sheet amount of securities lent under loan for consumption agreement, etc. as of March 31, 2014 and2013 are as follows:
Thousands ofMillions of yen
U.S. dollars
2014
2013
2014
Short-term investments¥
20,178¥96,838$196,055
Investments in securities
52,46340,091
509,745
The fair value of the securities borrowed under loan for consumption agreement, etc. as of March 31, 2014
and 2013 was as follows:
Thousands ofMillions of yen
U.S. dollars
2014
2013
2014
Securities loaned
Securities pledged as collateral¥

1,258,347
51,153(5)¥

869,401$ 12,226,457

104,603

497,017

Investments in Affiliates
The aggregate carrying amount of investments in affiliates as of March 31, 2014 and 2013 are ¥3,684 million($35,795 thousand) and ¥3,624 million, respectively.

39

(6) Land Revaluation
The Company revaluated its land at fair value, pursuant to the Enforcement Ordinance for the Law
Concerning Land Revaluation and its amendments (the “Law”). According to the Law, net unrealized gain wasreported in a separate component of net assets, net of related taxes, and the related taxes are reported inliabilities as deferred tax liabilities for land revaluation as of March 31, 2002.
The value of the land as of March 31, 2014 decreased by ¥142 million ($1,380 thousand) in comparison withthe book value of the land after revaluation.
(7)

Debt
The composition of debt and the weighted average interest rate on debt as of March 31, 2014 and 2013 are as
follows:
Thousands
Weighted
Millionsof U.S.
averageof yendollars
rate
March 31, 2014
Short-term borrowings¥
506,510 $4,921,395
0.148%
Current portion of long-term borrowings
3,000
29,1490.596
Current portion of lease liabilities
83
807－
Long-term borrowings
3,000
29,1490.570
Lease liabilities
133
1,292
－
Call money
1,596,600
15,513,020
0.067
Commercial paper
429,000
4,168,286
0.102¥ 2,538,326 $ 24,663,098
March 31, 2013
Short-term borrowings
Current portion of long-term borrowings
Current portion of lease liabilities
Lease liabilities
Call money
Commercial paper¥¥

606,2107,500
8
41,446,600
231,500
2,291,822

0.128%
0.618
－
－
0.072
0.116

(8) Retirement and Severance Benefits
March 31, 2014
The Company has defined benefit retirement and pension plans, which consist of defined benefit corporate
retirement and pension plan and unfunded retirement and severance plan that provide for lump-sum payment ofbenefits, and a defined contribution plan. Consolidated subsidiaries’ main retirement plans are unfunded
retirement and severance plans that provide for lump-sum payment. And one subsidiary has participated in
Zenkoku Jutakuchi Kaihatsu Kosei Nenkin Kikin which was established as a multi-employer welfare pension
plan. Consolidated subsidiaries adopt the simplified method for calculation of liabilities for retirement benefits
and retirement benefit expenses of lump-sum payment plans. For the multi-employer plan in which one
subsidiary has participated, the amount of plan assets attributable to the subsidiary’s contribution cannot bereasonably determined, the required contribution to the plan has been accounted for as a defined contribution
plan.
Followings are the information for the Company’s and the consolidated subsidiaries’ defined benefit plans asof March 31, 2014 and for the year then ended.
(1) Reconciliation of changes in retirement benefit obligation (the following table excludes certain plans
mentioned in (3))

40

Retirement benefit obligation at beginning of year

Millions ofyen

Thousands of
U.S. dollars

¥

$

6,964

67,664

Increase by merger
Service cost

481

4,674

213

2,070

Interest cost

104

1,010

Actuarial gains and losses(155)(1,506)

Benefits paid

(265)

(2,574)

Past service costs

199

Retirement benefit obligation at end of year

¥

7,541

1,933
$

73,271(2) Reconciliation of changes in plan assets (the following table excludes certain plans mentioned in (3))
Millions ofThousands ofyen
U.S. dollars
Plan assets at beginning of year
Increase by merger
Expected return on plan assets
Actuarial gains and losses
Employer contributions
Benefits paid
Plan assets at end of year

¥

¥

3,804
195
81
421
392
(247)
4,646

$

$

36,961
1,895
787
4,090
3,809
(2,400)45,142(3) Reconciliation of changes in liabilities for retirement benefits whose plans adopted the simplified method
Millions ofThousands ofyen
U.S. dollars
Liabilities for retirement benefits at beginning of year
Retirement benefit expenses
Benefits paid
Contributions
Liabilities for retirement benefits at end of year

¥

¥

126
12
－
(1)
137

$

$

1,224
117
－
(10)
1,331

(4) Reconciliation between retirement benefit obligation and plan assets and liabilities for retirement benefit andasset for retirement benefit recognized in consolidated balance sheet
Millions ofThousands ofyen
U.S. dollars
Funded retirement benefit obligation
Plan assets
Unfunded retirement benefit obligation
Net liabilities for retirement benefit recognized inconsolidated balance sheet

Liabilities for retirement benefit
Net liabilities for retirement benefit recognized inconsolidated balance sheet

41

¥

5,917
(4,646)
1,271
1,761

$

57,492(45,142)
12,35017,110

¥

3,032

$

29,460Millions ofyen

Thousands of
U.S. dollars

¥

3,032

$

29,460

¥

3,032

$

29,460(5) The components of retirement benefit expenses

Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial gains or losses
Amortization of past service costs*
Retirement benefit expenses calculated by the simplified
methodRetirement benefit expenses

Millions ofyen

Thousands of
U.S. dollars

¥

$

¥

213
104
(81)
144
199
12

591

$

2,070
1,010
(787)
1,399
1,933
117

5,742

* Past service costs occurred when the Company integrated the retirement benefits system of the Company andthe Osaka Securities Finance Company Ltd. that is an absorbed company. Past service costs were recorded asother expenses in the accompanying statement of income. The costs include the effect of change from thesimplified method to the principle method for calculation of the retirement benefit obligation of the absorbed
company at the time of integration.
(6) Remeasurements of retirement benefit plans before related tax effects
Millions ofyen
Unamortized actuarial gains or losses

¥

Total

¥

(7) Plan assets(a) Percentage by major category of plan assets
Debt securities

292

292

Thousands of
U.S. dollars
$

$

2,837

2,837

24.6%
50.9
18.0
6.5

Equity securities
General account
Other
Total

100.0%(b) Determination procedure of long-term expected rate of return on plan assets
In determining long-term expected rate of return on plan assets, the Company considers the current andprojected asset allocation, as well as current and future long-term rate of returns for various categories of theplan assets.
(8) Basis for calculation of actuarial assumptions
The assumptions used in accounting for the above plans as of March 31, 2014 are as follows:(a) Discount rate
1.5%(b) Long-term expected rate of return 2.0%
The amount to be paid by the consolidated subsidiaries to the defined contribution plans (including themulti-employer welfare pension plan whose contribution has been accounted for as a defined contribution plan)was ¥38 million ($369 thousand).
Followings are the information of the multi-employer plan.
(1) The most recent funded status of the whole multi-employer pension plan as of March 31, 2013 was outlined
as follows:42Thousands ofMillions of

U.S. dollars

yenPlan assets at fair value¥

Benefit obligation under pension funding programs
Difference

29,442$32,539¥(3,097)

286,067
316,158$(30,091)(2) The subsidiary’s proportion of the contribution to the aggregate pension contributions in March 2013 are
0.31%.
March 31, 2013
The Company has defined benefit retirement and pension plans, which consist of contract-type defined
benefit corporate retirement and pension plan and unfunded retirement and severance plan that provide forlump-sum payment of benefits, and a defined contribution plan, which is a noncontributory funded contract-type
corporate pension plan. Consolidated subsidiaries have a defined benefit retirement and pension plans, which isan unfunded retirement and severance plan that provide for lump-sum payment of benefits, and a defined
contribution plan, which is a noncontributory funded contract-type corporate pension plan. One subsidiary has
joined Zenkoku Jutakuchi Kaihatsu Kosei Nenkin Kikin which was established as a multi-employer
noncontributory fund. The welfare pension plan consisted of two tiers, the substitution portion of Japanese
Welfare Pension Insurance and the corporate portion, and the plan assets of such welfare pension funds cannot be
specifically allocated to the individual participants nor to the substitution and corporate portions.
The most recent funded status of the whole welfare pension plan under multi-employer pension plan which
was as of March 31, 2012 were outlined as follows:
Millions ofyenPlan assets at fair value
Benefit obligation under pension funding
programs
Difference¥

25,811¥35,411(9,600)The subsidiary’s proportion of the contribution to the aggregate pension contributions in March 2012 are
0.34%.
Millions ofyen
Projected benefit obligation
Plan assets at fair value
Funded status
Unrecognized actuarial loss
Net amount recognized in the consolidatedbalance sheet
Prepaid retirement and severance benefits
Accrued retirement and severance benefits¥¥(7,090)3,804(3,286)
1,013(2,273)－(2,273)

Net periodic pension cost for the year ended March 31, 2013 consists of the following components:
Millions ofyenService cost
Interest cost
Expected return on plan assets
Amortization of actuarial loss
Amortization of prior service cost
Net periodic pension cost

¥

¥

43

188
128
(64)
145
－
397

For the year ended March 31, 2013, the amount in the table above excludes contributions to the welfare
pension fund.
Significant assumptions of pension plans used to determine these amounts in fiscal 2013 are as follows:
2013
Periodic allocation method for projected benefit
Discount rate
Expected rate of return on plan assets
Period for amortization of unrecognized actuarial loss

Straight-line
1.5%
2.0%
15 years

Prior service cost is recognized in the year incurred.
Liabilities for retirement benefits (directors and corporate auditors)
Directors and corporate auditors are not covered by the plans described above. The Company and all
consolidated subsidiaries had abolished retirement benefit system for directors and corporate auditors.
Directors and corporate auditors were entitled to lump-sum payment up to the date of the abolishment when theyleave the Company or subsidiaries.
As of March 31, 2014 and 2013, the liabilities for retirement benefits related to the plans were ¥56 million($544 thousand) and ¥67 million which include the lump-sum payments mentioned above, respectively.
(9)

Income Taxes
The Company and its consolidated subsidiaries are subject to Japanese corporate, inhabitant and businesstaxes based on income which, in the aggregate, result in a statutory tax rate of approximately 38.0% in both 2014
and 2013.
Following the promulgation of the law “Partial Amendment of the Income Tax Act, etc.” (Act No.10 of 2014)
on March 31, 2014, special reconstruction corporation tax will not be imposed from the consolidated fiscal years
beginning on or after April 1, 2014. Accordingly, the effective tax rate applied to the calculation of deferred tax
assets and liabilities for temporary differences expected to be resolved in the consolidated fiscal year beginning on
or after April 1, 2014, were lowered from 38.0% in the prior fiscal year to 35.6%.
The impact of this tax rate change on income is immaterial.
The reconciliation of the statutory tax rate and the effective tax rate as a percentage of income before income
taxes for the years ended March 31, 2014 and 2013 is follows:
2014
2013
Statutory tax rate
Equity in gains of affiliates
Expenses not deductible for tax purposes
Valuation allowance
Income not credited for tax purposes
Gain from negative goodwill
Adjustments of deferred tax assets due to change instatutory tax rate
Other
Effective tax rate

44

38.0%
(1.0)
0.4
(5.1)
(1.3)
(25.0)

38.0%
(7.2)
0.8
0.4
(3.3)
－

0.8
0.8
7.6%

－
2.2
30.9%

Significant components of deferred tax assets and liabilities as of March 31, 2014 and 2013 are as follows:
Thousands ofMillions of yen
U.S. dollars
2014
2013
2014
Deferred tax assets:
Accrued business tax
¥
20
¥
28
$
194
Accrued bonuses
172
142
1,671
Liabilities for retirement benefits (employees)
1,082
832
10,513Liabilities for retirement benefits (directors
and corporate auditors)
20
24
194
Allowance for doubtful receivables
871
539
8,463
Tax loss carryforward
6,114
2,804
59,405
Deferred losses on hedges
213
308
2,070
Net unrealized loss on other securities
11
4
107
Other
325
230
3,158
8,828
4,911
85,775
Valuation allowance(6,579)(3,573)(63,923)
2,249
1,338
21,852
Deferred tax liabilities:
Gain on evaluation of subsidiaries’ assets
(166)
(166)
(1,613)Net unrealized gain on other securities(4,512)(4,239)(43,840)
Gain on transfer of investment in an affiliate
(385)
(385)
(3,740)Gain on evaluation of acquired assets by merger－(702)(6,821)
Other
(18)
(13)
(175)
(5,783)(4,803)(56,189)
Net deferred tax liabilities¥(3,534)¥(3,465)$(34,337)
Net deferred tax assets and liabilities as of March 31, 2014 and 2013 are reflected in the accompanying
consolidated balance sheet under the following captions:Thousands ofMillions of yen
U.S. dollars
2014
2013
2014
Current assets - Deferred tax assets
Non-current liabilities- Deferred tax liabilities¥

525(4,059)¥211(3,676)$

5,101(39,438)(10) Common Stock
Under the Companies Act, the entire amount of the issue price of shares is required to be designated asstated common stock account although a company in Japan may, by resolution of its Board of Directors, accountfor an amount not exceeding 50% of the issue price of new shares as additional paid-in capital.
(11) Retained Earnings and Dividends
The Companies Act provides that an amount equal to 10% of distributions from retained earnings paid by theCompany and its Japanese subsidiaries be appropriated as a legal reserve. No further appropriations are
required when the total amount of the additional paid-in capital and the legal reserve equals 25% of theirrespective stated capital. The Companies Act also provides that additional paid-in capital and legal reserve areavailable for appropriations by the resolution of the stockholders. Balances of the legal reserve are included inretained earnings in the accompanying consolidated balance sheet.
Cash dividends charged to retained earnings for the years ended March 31, 2014 and 2013 represent
dividends paid out during those years. The amount available for dividends is based on the amount recorded in
the Company’s non-consolidated books of account in accordance with the Companies Act.

45

(a)

Dividends paid during the year ended March 31, 2013
The following was approved by the general meeting of stockholders held on June 27, 2012.
(a) Total dividends¥651 million(b) Cash dividends per common share¥7(c) Record date

March 31, 2012(d) Effective dateJune 28, 2012

The following was approved by the Board of Directors held on November 12, 2012.
(a) Total dividends¥651 million(b)(b) Cash dividends per common share¥7(c) Record date

September 30, 2012(d) Effective date

December 7, 2012

Dividends paid during the year ended March 31, 2014
The following was approved by the general meeting of stockholders held on June 26, 2013(a) Total dividends¥651 million ($6,325 thousand)(c) Record date

March 31, 2013(d) Effective dateJune 27, 2013(b) Cash dividends per common share¥7 ($0.07)

The following was approved by the Board of Directors held on November 11, 2013.
(a) Total dividends(b) Cash dividends per common share(c)¥751 million ($7,297 thousand)¥7 ($0.07)(c) Record date

September 30, 2013(d) Effective date

December 6, 2013

Dividends to be paid after the balance sheet date but the record date for the payment belongs to the year
ended March 31, 2014
The following was approved by the general meeting of stockholders held on June 25, 2014.
(a) Total dividends¥751 million ($7,297 thousand)(b) Dividend source

Retained earnings(c) Cash dividends per common share¥7 ($0.07)(d) Record date

March 31, 2014(e) Effective dateJune 26, 2014(12) General and Administrative Expenses
Significant components of general and administrative expenses are as follows:
Millions of yen
2014
2013
Salaries
Retirement benefit expenses
Administrative and computer expenses
Depreciation

¥

3,092
430
1,334
879

¥

2,813
401
1,258
756

Thousands of
U.S. dollars
2014$

30,043
4,178
12,962
8,541(13) Other Comprehensive Income
The reclassification adjustment and the related income tax effects allocated to each component of othercomprehensive income (loss) for the years ended March 31, 2014 and 2013 are as follows:46

Millions of yen
2014
2013
Net unrealized gain on other securities:
Arising during the year
Reclassification adjustment
Before tax amountTax expense
Net-of-tax amount¥Thousands of
U.S. dollars
2014

1,051 ¥
(265)
786
(265)
521

5,976
(1,395)
4,581(1,426)
3,155

(206)
472
266
－
266

(489)
(375)
(864)
－
(864)

(2,002)
4,586
2,584
－
2,584

Share of other comprehensive income (loss) of affiliates accounted for by equity method:
Arising during the year
(21)
209
Reclassification adjustment
1
(20)
(20)
189

(204)
10
(194)

Deferred losses on hedges:
Arising during the year
Reclassification adjustment
Before tax amountTax benefit / expense
Net-of-tax amount

Total other comprehensive income

¥

767

¥

2,480

$

$

10,212(2,575)
7,637(2,575)
5,062

7,452

(14) Per Share Information(a) Net Income per Share
Basic net income per share, and reconciliation of the numbers and the amounts used in the basic net income
per share computations for the years ended March 31, 2014 and 2013 are as follows:
Yen
U.S. dollars
2014
2013
2014
Basic net income per share

¥

60.35

¥

19.10

Millions of yen
2014
2013
Net income
Net income not applicable to common stockholders
Net income applicable to common stockholders

¥
¥

6,211
－
6,211

¥
¥

1,778
－
1,778

$

0.59

Thousands of
U.S. dollars
2014
$
$

60,348－60,348

Number of shares (Thousands)

Weighted average number of shares outstandingon which basic net income per share is calculated

2014

2013

102,915

93,036(b) Net Assets per Share
Net assets per share, and reconciliation of the numbers and the amounts used in the net assets per sharecomputations as of March 31, 2014 and 2013 are as follows:

47

2014
Net assets per share¥

1,260.43

Yen¥

1,274.67

Millions of yen
2014
2013
Total net assets
Amount deducted from total net assets
Net assets applicable to common stockholders¥

135,228－
135,228¥

U.S. dollars
2014

2013

¥
¥

118,591－
118,591$

12.25

Thousands of
U.S. dollars
2014$

1,313,914－
1,313,914$

Number of shares (Thousands)

Number of shares outstanding at end of year
on which net assets per share is calculated

2014

2013

107,287

93,036(15) Leases(a) Finance Lease
Finance leases which do not transfer the title of leased assets to the lessee, commenced prior to April 1, 2008
have been accounted for as operating leases. The main assets are the telephone facilities which are included intools, furniture and fixtures.

(b)

Operating Lease
Future minimum lease payments required under noncancellable operating leases as of March 31, 2014 and2013 are as follows:
Thousands ofMillions of yen
U.S. dollars
2014
2013
2014
Future minimum lease payments:
Within one year

¥

8

¥

13

Over one year

¥

8

¥

17

5

$

78

$

126

9

48

(16) Pledged Assets
The carrying value and classification of assets owned by the Company that have been pledged tocounterparties as of March 31, 2014 and 2013 are as follows:
Thousands of U.S.
Millions of yen
dollars
2014
2013
2014
Short-term investments¥

Short-term loans receivable
Investments in securities

383,683

837,356$

3,727,973

18,800222,824

1,085,846

462,392

10,550,389

Assets in the above table were pledged for the followings:

48¥

22,933

Thousands of
U.S. dollars
2014

Millions of yen
2014
2013
Call money¥

Short-term borrowings

1,353,000¥

191,000

1,021,000$ 13,146,133

397,500

1,855,810

In addition to the above, followings are deposited for the Clearing Fund of Japan Securities Clearing
Corporation and Japan Government Bond Clearing Corporation, etc.
Thousands of U.S.
Millions of yen
dollars
2014
2013
2014
Other current assets¥

Short-term investments

514－
12,075Investments in securities

¥

500

$

5,654

4,994
－

3,569

117,324(17) Financial Instruments
Conditions of Financial instruments(1) Management policy
The Company and a consolidated subsidiary, JSF Trust and Banking Co., Ltd. (“JSFTB”) mainly deal infinancial instruments. The Company is engaged in providing loan services, mainly loans for margintransactions. The loans for margin transaction are loan services which are money lending or stock loan forsettlement of standardized margin transactions. The transaction is strongly effected by security market
condition, therefore, the Company raises money flexibly from short-term finance market, primarily from callmarket. The Company owns securities such as Japanese Government Bonds to maintain daytime liquidity.
A consolidated subsidiary, JSFTB is engaged in providing credit services such as loans as banking businessand finance and securities activities. JSFTB invests in highly liquid and safe-and-secure securities such as
government bonds, government-backed bonds, local government bonds and public corporation bonds as securities
investment activities and usually raises money from call market.
(2) Financial instruments and risks
Main financial instrument that the Company holds are trade loans receivable, collateral money for securities
borrowed, short-term investments and investments in securities such as government bonds and equity securities.
Main financial instrument that JSFTB holds are loans to government and business corporations and securities
such as government bonds, government-backed bonds, local government bonds and public corporation bonds.
Trade loans receivable held by the Company and JSFTB are exposed to credit risks that caused fromcounterparties’ default of contract. Securities are exposed to market risks. Collateral money for securities
borrowed is collateral money mainly for repurchase transaction and securities borrowed of loans for margintransactions. Regarding raising money such as call money and short-term borrowings of the Company and
JSFTB, the liabilities are exposed to liquidity risks that caused from turmoil in the financial markets or a credit
rating down.
JSFTB has entered into interest rate swaps for hedging fixed-rate loans and bonds, and variable-rateborrowings as a part of interest risk control (ALM). Hedge accounting is applied to the derivatives held for ALM
purpose, and the Company regularly monitors the hedge effectiveness whether the relationship between hedging
derivatives and hedged assets or liabilities are appropriate and the interest rate risk of hedged items are offset byhedging derivatives.
(3) Financial instruments risk management
The Company places risk management as top priority of management. Basic policy of risk management isapproved at the Board of Directors, and various rules for risk management according to the basic policy are
established for concrete risk management method or system. The Company regularly receives a report fromJSFTB concerning its risk management.

491) Integrated risk management
The Company quantizes the risk by Value at Risk (VaR) approach after allocating risk capital withinequity capital, and controls the quantized risk amount within the allocated risk capital. Each business
operation department controls a risk within the allocated risk capital, risk management department that is
independent from each operational section quantizes the risk, monitors the risk management and reports tothe management.
2) Credit risk
The Company manages all of the credit risk strictly to maintain and improve assets quality. The Risk
Management Department evaluates credit risks according to the in-house rating and quantizes and controls
the credit risk using the default rate by each in-house rating category. Stress tests are also performed forcompensating the quantization control. The Risk Management Department evaluates customers or loans,and sets up the credit limits, while business operation department monitors the credit limit. Assets owned bybusiness operation departments are assessed by themselves strictly. The Company receives collateral
securities for each loan and revaluates the securities daily to mitigate the collectability issues, and theCompany collects the claims quickly through sale of the collaterals when the customer bankrupts.
3) Market risk
The Risk Management Department quantizes and controls market risks, and performs stress tests tocompensate the quantization control. Back-testing which is the test compared calculated VaR and estimatedprofit or loss by using the fixed portfolio is performed to test the reliability of the Company’s market risk
quantization model.
4) Quantitative information of market risk
The Company calculates VaR of short-term investments and investments in securities by using Deltamethod (holding period: 10-240 days (depending on purposes in holding), confidence interval: 99%, observation
period: mainly 1 year). Market risk amount (possible losses) of the Company is ¥20,003 million ($194,355
thousand) as of March 31, 2014.
Because VaR is a statistical estimate of market risk amount at a particular probability using past market
movement data, VaR may not capture the risk during radical market movements that are extreme in nature.
5) Liquidity risk
The Treasury Department of the Company seeks to diversify financing channels and to secure stablefinancing sources. For sound cash flow management, the Company develops cash flow forecast, understands
the amount can be raised or future liquidity and also understands dates of a large payment concentration, theCompany has a system to report to the management with daily cash flow status. The Company tries to holdenough liquidity, for example, to possess a certain amount of government bonds, makes a contingency plan andbuilds a company-wide emergency response system against contingencies. Liquidity stress tests are
performed monthly for ascertaining whether consolidated liquidity held by the Company and JSFTB is
adequate. At the “ALM Committee” held in every quarter, the Company develops cash flow forecast based on
estimates of loans outstanding, studies policies for ALM (Asset Liability Management) such as revenue
management for assets and liabilities of the Company and the Company has a system to report to the
management.
6) Subsidiary’s risk control system
JSFTB basic policy of risk management is approved at the Board of Directors, and various rules for risk
management according to the basic policy are established for concrete risk management method or system, andthe Risk Management Department controls the risks totally. The Risk Management Department measuresand monitors the risk quantity, collects and analyzes information and reports the risk condition to the
management for maintaining the proper risk management.

50

JSFTB calculates market risk amount for all market transactions. Interest rate risk amount which is amajor risk variable is calculated by VaR (Delta method; holding period: 1 year, confidence interval: 99%,
observation period: 5 years). JSFTB market risk amount is¥5,981 million ($58,113 thousand) as of March 31,
2014.
(4) Supplemental explanation regarding fair value of financial instruments
Fair value of financial instruments are measured based on the quoted market price, if available, or
reasonably assessed value if a quoted market price is not available. Fair value of financial instruments whichquoted market price is not available is calculated based on certain assumptions, and the fair value might differ if
different assumptions are used. In addition, the contract amount of the derivative transactions described below
in note “(18) Derivative financial instruments” does not represent the market risk of the derivative transactions.
Fair value of financial instruments
The carrying value on the consolidated balance sheet, fair value, and differences as of March 31, 2014 and2013 are as follows.
Financial instruments, of which it is extremely difficult to measure the fair value, are not included. (Pleasesee “<2> Financial instruments of which the fair value is extremely difficult to measure”)

Millions of yen

2014
Carrying
value
Assets:(1) Cash(2) Trade loans receivable
Allowance for doubtfulreceivables *1¥

93,070897,825

Fair value

Differences¥¥

93,070897,630

1,303,020

Carrying
value¥

124,256
732,475

Fair value¥

124,256

Differences
¥

－

39

(1,156)
731,319

731,316(3)

1,303,020－

1,092,112

1,092,112

－

Total

39,915
1,559,313¥ 3,892,909

40,216
1,559,313¥3,893,249 ¥

301
－
340

41,847
1,426,969¥ 3,416,503

42,597
1,426,969¥ 3,417,250

¥

750
－
747

(1) Call money¥ 1,596,600¥ 1,596,600 ¥－¥ 1,446,600¥ 1,446,600¥－

606,210606,210－(3) Collateral money for securities
borrowed *1(4) Short-term investments andinvestments in securities
Held-to-maturity securities
Other securities(234)
897,591－2013(2) Short-term borrowings

506,510506,510－(3) Commercial paper(4) Collateral money received for
securities lent
(5) Long-term borrowings *2

429,000

429,000－

231,500

231,500－

1,185,725
6,000

1,185,725
6,000

－
－

983,076
7,500

983,076
7,500

－
－

Total

¥ 3,723,835¥ 3,723,835 ¥－¥ 3,274,886¥ 3,274,886¥－

Derivative transactions *3

¥

(－)

¥

¥

¥

(－)

(598) ¥

(598) ¥

51

(864)

(864)

Thousands of U.S. dollars
2014
Carrying
value
Assets:(1) Cash(2) Trade loans receivable
Allowance for doubtfulreceivables *1$

904,295
8,723,523

Fair value$

Differences

904,295 $－(2,274)
8,721,249

8,721,628

379

12,660,513

12,660,513－

390,750
15,150,729$ 37,827,915 $

2,925
－
3,304

(3) Collateral money for securities
borrowed *1(4) Short-term investments andinvestments in securities
Held-to-maturity securities
Other securities
Total

$

387,825
15,150,729
37,824,611(1) Call money$

15,513,020$ 15,513,020 $－(2) Short-term borrowings

4,921,395

4,921,395－(3) Commercial paper(4) Collateral money received for
securities lent
(5) Long-term borrowings *2

4,168,286

4,168,286－

11,520,841
58,298

11,520,841
58,298－－$ 36,181,840 $

－

$

(－)

Total

$

36,181,840

Derivative transactions *3$(5,810)(5,810) $*1 Allowance for doubtful accounts associated with trade loans receivable is deducted. Carrying value ofcollateral money for securities borrowed as of March 31, 2014 is net amount of related allowance for doubtful
accounts, because the allowance for doubtful accounts for collateral money for securities borrowed is notmaterial.
*2 Current portion of long-term borrowings are included in long-term borrowings.
*3 Derivative receivables and payables are on net basis. Items that are net payables are shown in parenthesis.
<1> Fair value measurement of financial instruments
Assets:(1) Cash
The fair value approximates carrying amount because of the short maturity of these instruments.
(2) Trade loans receivable
The fair value of tarde loans receivable with variable interest rate approximates carrying amount because
the fair value is reflected a fluctuation of interest market in a short period and unless credit status of theborrower does not change so much from when the Company lent. Allowance for doubtful receivables are
estimated based on collectable amounts by collaterals and guarantee and thus the fair value approximates the
carrying amount minus allowance for doubtful receivables amounts.
(3) Collateral money for securities borrowed
The fair value approximates carrying amount because of the short maturity of these instruments.
(4) Short-term investments and investments in securities
The fair value of equity securities and bond securities is calculated by quoted market price. The fair value ofgovernment bonds with variable interest rate held by the Company and JSFTB is estimated based on quotes frominformation venders in accordance with the “Practical Solution on Measurement of Fair Value of Financial

52

Assets” (ASBJ Practical Issue Task Force (PITF) No. 25, October 28, 2008), because based on our determinationthat their market prices cannot be deemed fair value due to the market situation where the number oftransactions is extremely small. The pricing model used by the information vendors is forward pricing model,
and the price determinant variables are the spot rate for Japanese government bonds and the swaption volatility.
The fair value of investment trust is calculated by quoted market price.
Please see note “(4) Short-term Investments and Investments in Securities” for information by category.
Liabilities:(1) Call money, (2) Short-term borrowings, (3) Commercial paper and (4) Collateral money received for securities lent
The fair value approximates carrying amount because of the short maturity of these instruments.
(5) Long-term borrowings
The fair value of long-term borrowings with variable interest rate approximates carrying amount because thefair value is reflected a fluctuation of interest market in a short period and credit status of the Company does notchange very much from when the Company borrowed.
The fair value of long-term borrowings with fixedinterest rate is based on the present value of future cash flows of interest and principal payments discounted
using the current borrowing rate for similar borrowings of a comparable maturity.
Derivatives:
Please see note “(18) Derivative Financial Instruments.”<2> Financial instruments of which the fair value is extremely difficult to measure

Thousands of
U.S. dollars
2014

Millions of yen
2014
2013

Unlisted equity securities
Other securities
Investments in affiliates
Unlisted preferred equity securities

¥

2,282
3,684
200

¥

2,132
3,624
－

$

22,17335,795
1,943

Above securities have no market value and the fair value is extremely difficult to measure, therefore are notincluded in “Assets: (4) Short-term investments and investments in securities.”<3> Projected future redemption of monetary claim and securities with maturities as of March 31, 2014
Millions of yen
Due after
Due after
five years
one year
Due after
through ten
through fiveDue within
ten years
years
years
one year(1) Cash¥(2) Trade loans receivable(3) Collateral money forsecurities borrowed(4) Short-term investments andinvestments in securities
Held-to-maturity securities(Government bonds)
Other securities withmaturities
Bond securities
Government bonds
Corporate bonds
Total¥

93,070846,437¥－
47,130

¥

－
4,259

¥

－
－

1,303,155

－

－

－

－

14,50025,500－338,568
68,1412,649,371

779,099
69,628910,357

185,000－
214,759

92,000－92,000

¥

53

¥

¥

Thousands of U.S. dollars
Due after
Due after
five years
one yearthrough ten
through five
years
years

Due within
one year(1) Cash$(2) Trade loans receivable(3) Collateral money forsecurities borrowed(4) Short-term investments andinvestments in securities
Held-to-maturity securities(Government bonds)
Other securities withmaturities
Bond securities
Government bonds
Corporate bonds
Total$

904,295
8,224,222$－
457,929$

Due after
ten years$－
41,382－－

12,661,825

－

－

－

－

140,886

247,765－

3,289,623
662,077
25,742,042

7,569,948
676,525
8,845,288

1,797,513－
2,086,660

893,898－
893,898$$$<4> The annual maturities of the long-term borrowings, lease liabilities and other interest bearing liabilities as ofMarch 31, 2014
Millions of yen
Due after
Due after
Due after
Due after
four years
three
two years
one year
Due after
throughyears
throughthrough
Due within
five years
five years
throughthree
two years
one yearfour years
years
Call money
Short-termborrowings
Commercial paper
Collateral money
received for
securities lentLong-term
borrowings *Total

Call money
Short-termborrowings
Commercial paper
Collateral money
received for
securities lentLong-term
borrowings *Total¥ 1,596,600 ¥－

506,510429,000

－
－

－
－

－
－

－
－

－
－

1,185,725

－

－

－

－

－

3,000
¥ 3,720,835 ¥

3,000
3,000

Due within
one year

Due after
one yearthrough
two years

¥

¥

－

－
－

¥

¥

－

－
－

¥

¥

Thousands of U.S. dollars
Due after
Due after
three
two years
years
throughthroughthreefour years
years

¥

Due after
four years
throughfive years－－

Due after
five years

4,921,395
4,168,286

－
－

－
－

－
－

－
－

－
－

11,520,841

－

－

－

－

－

29,14929,149

$

54

－
－

$

－

－
－

$

－

－

－

$

－
－

¥

$ 15,513,020 $29,149$ 36,152,691 $

$

－

$

－

－
－

$

$

－

－
－

* Current portion of long-term borrowings are included in long-term borrowings.
(18) Derivative Financial Instruments
Derivative transactions to which hedge accounting are applied as of March 31, 2014 and 2013 aresummarized as follows:
Millions of yen
2014
2013
Contract orContract or
Hedge
notional
notional
accounting
amounts Fair value
Fair value
amounts
Hedged items
Nature of transaction
method*1

Interest rate swaps:
Investments
in securities
Trade loans*2

Variable rate received
for fixed rate
Variable rate received
for fixed rate
Interest rate swaps:
Variable rate received
for fixed rate
Variable rate paid forvariable rate

Hedge
accounting
methodNature of transaction

36,000 ¥

(583)

7,500

(15)

Trade loans

6,159

Long-term
borrowings－

Hedged items*1

Interest rate swaps:
Investments
in securities
Trade loans*2

Variable rate received
for fixed rate
Variable rate received
for fixed rate
Interest rate swaps:
Variable rate received
for fixed rate

Trade loans¥¥

32,000 ¥

(864)

－

－

*3

7,462

*3

－

5,500

*3

Thousands of U.S. dollars
2014
Contract ornotional
Fair value
amounts$

349,786 $(5,654)72,872(146)

59,843*3*1 Deferred hedge accounting is applied.
*2 The difference in amounts to be paid or received on interest rate swaps is recognized over the life of theagreements as an adjustment to interest expense.
*3 For the assets and liabilities for which interest rate swap contracts are used to hedge the interest rate
fluctuations, fair value of derivative financial instrument is included in fair value of the respective assets andliabilities as hedged items.
The fair value of interest rate swaps are estimated based on quotes from counterparties.
(19) Commitments and Contingencies
As of March 31, 2014 and 2013, undrawn amount of general loan for securities companies and customers,
overdraft loan and loan commitment line are as follows:

55

Millions of yen
2014
2013
Total credit line
Drawn amount
Undrawn amount¥¥

692,404
158,542533,862¥¥

614,595
109,173505,422

Thousands of
U.S. dollars
2014$

6,727,594
1,540,439
5,187,155$

Since some of these contracts expire without the rights exercised, the undrawn amount itself does notnecessarily affect future cash flows.
(20) Business Combination
Business combination through stock acquisition
1. Outline of the business combination
The Company acquired all the outstanding shares of Osaka Securities Finance Co., Ltd. (“OSF”) on July 22,
2013. Since Tokyo Stock Exchange and Osaka Stock Exchange merged, the Company decided to merge with
Osaka Securities Finance Co., Ltd. The Company and OSF agreed that the integrated Company would obtain a
big synergy effect by enhancing the convenience of market participants, investors and improving the market
effectiveness and integrating two companies’ systems.
2. The consolidated statement of income included OSF results from July 22, 2013 to March 31, 2014.
3. Acquisition cost of OSF

Millions ofyen

Thousands of
U.S. dollars

Fair value of the Company’s stocks issued atacquisition date
Advisery fee, etc.

¥

11,349100$

110,270972

Total acquisition cost¥

11,449$111,242

4. Share allocation ratio, calculation method and delivered shares(1) Share allocation ratio
The Company allotted 0.39 shares of the Company for 1 share of OSF.
(2) Calculation method of share allocation ratio
The Company and OSF agreed that each company would select their own independent third party organization
for the calculation of the share allocation ratio in order to ensure fairness and validity. The Company selected
Mizuho Securities Co., Ltd. and OSF selected Nomura Securities Co., Ltd. as their own third party organization.
The Company and OSF agreed and decided the ratio through deliberate negotiation and discussion while using
the result of the calculation, considering financial and assets condition, stock price transition for a certain period
taking into account the change in economic and financial environment and future business forecasts.
(3) Delivered shares
14,257,763 shares (650,000 shares are delivered from the Company’s treasury stocks and the remaining share are
newly issued.)
5. Negative goodwill of ¥4,405 million ($42,800 thousand) was incurred because the net assets at fair value at thetime of acquisition exceeded the acquisition costs.
6. Amounts of assets and liabilities acquired on the date of the business combination, and the major breakdowns
thereof, etc. are as follows:56

Millions ofyen
Current assets¥

Non-current assets

55,085

Thousands of
U.S. dollars
$

3,546

535,22134,454

Total assets¥

58,631$

569,675

Current liabilities¥

38,375$372,863

Non-current liabilities

4,401

Total liabilities¥

42,77642,761$

415,624

7. Approximate amounts and their calculation method of impact on the consolidated statement of income for theyear ended March 31, 2014, assuming that the business combination had been completed at the beginning of theyear are as follows:
Millions ofThousands ofyen
U.S. dollars
Operating revenues

¥

782

$

7,598

Operating income(263)(2,555)

Ordinary income(162)(1,574)

Income before income taxes and minority interests

375

3,644

The approximate amounts were the differences between the operating revenues and other income data,assuming that the business combination had been completed at the beginning of the year ended March 31, 2014
and the actual operating revenues and other income data that are recorded in the consolidated statement ofincome.
The information mentioned above has not been audited by BDO Toyo & Co.
(21) Segment Information
The reported segments of the Company are the business units for which the Company is able to obtainrespective financial information separately in order for the Board of Directors to conduct periodic investigation todetermine distribution of management resources and evaluate their business results.
“Securities finance business” conducted by the Company, “Trust banking business” conducted by JSF Trustand Banking Co., Ltd. and “Real estate leasing business” conducted by Nihon Building Co., Ltd. are theCompany’s reported segments. JSF Trust and Banking Co., Ltd. and Nihon Building Co., Ltd. are consolidated
subsidiaries of the Company.
“Securities finance business” is engaged in providing loan services, which are loans for margin transaction,bond financing and general loans, bond lending and stock lending. “Trust banking business” is engaged inproviding trust services such as securities trust and banking services such as deposit or loan. “Real estateleasing business” is mainly engaged in providing services for leasing and managing real estate owned by JSF
Group.
Segment revenues, income, assets, liabilities and others are calculated by accounting methods similar to
those employed to prepare the accompanying consolidated financial statements. Segment income is calculated
based on “Keijo-soneki.” Under accounting principles generally accepted in Japan, an ordinary income or loss,“Keijo-soneki” should be disclosed in the income statement. The ordinary income or loss is an income or loss
figure with certain adjustments, which are categorized as extraordinary items in accordance with accounting
principles generally accepted in Japan, made to income or loss before income taxes and minority interests.
Therefore, ordinary income or loss is operating income or loss plus non-operating income from interest anddividend income and other items less non-operating expenses, such as interest expenses. Intersegment revenue
and transfer are based on arms-length transactions.
The reported segment information for the Company and its consolidated subsidiaries for the years ended
March 31, 2014 and 2013 was summarized as follows:

57

Revenues:
Revenues to third parties ¥Intersegment revenues andtransfers
Total¥

Millions of yen
2014
Real estate
Trust banking
leasing

Securities
finance

Total

16,364

¥

2,322

¥

880

¥

19,56628
16,392

¥

2
2,324

¥

396
1,276

¥

426
19,992

Segment income

¥

2,374

¥

175

¥

503

¥

3,052

Segment assets¥

3,223,899¥

726,861

1.

8,434

¥

3,959,194

601

¥

101

¥

168

¥

870

Others:Depreciation and¥amortization
Extraordinary income:Gain on negative goodwill
Extraordinary loss:
Merger related costs
Branch relocation costs
Retirement benefit
expenses
Income taxes
Increase in property, plantand equipment andintangible assets

Revenues:
Revenues to third parties $Intersegment revenues andtransfers
Total
$

4,405
4,405
794
55
526

－
－
－
－
－

6
－
15
－
－

4,411
4,405
809
55
526

199

－

－

199

292

24

194

510

562

188

411

1,161

Thousands of U.S. dollars
2014Real estate
Trust banking
leasing

Securities
finance

Total

158,997$

22,561

$

8,551

$

190,109272
159,269$

20
22,581$

3,847
12,398$4,139
194,248

Segment income$

23,067

$

1,700

$

4,887

$

29,654

Segment assets$

31,324,320$

7,062,388$

81,947$38,468,655

5,840

$

981

$

1,632

$

8,453

Others:Depreciation and$amortization
Extraordinary income:Gain on negative goodwill
Extraordinary loss:
Merger related costs
Branch relocation costs
Retirement benefit
expenses
Income taxes
Increase in property, plantand equipment andintangible assets

42,80042,800
7,714
534
5,111

－
－
－
－
－

146
－
－

42,85942,800
7,860
534
5,111

1,934

－

－

1,934

2,837

233

1,885

4,955

5,461

1,827

3,993

11,28158

59－

Revenues:
Revenues to third parties ¥Intersegment revenues andtransfers
Total¥

Millions of yen
2013
Real estate
Trust banking
leasing

Securities
financeTotal

14,094

¥

2,762

¥

820

¥

17,67660
14,154

¥

2
2,764

¥

349
1,169

¥

411
18,087

Segment income

¥

1,560

¥

176

¥

442

¥

2,178

Segment assets¥

2,921,288¥

591,267

¥

8,298

¥

3,520,853

502

¥

110

¥

135

¥

747

Others:Depreciation and¥amortization
Extraordinary income:Gain from sale ofinvestments in securities
Extraordinary loss:
Loss from sale of property,
plant and equipment
Loss from sale ofinvestments in securities
Income taxes
Increase in property, plantand equipment andintangible assets

136

－

29

165

136
119

－
－

29
47

165
166

－

－

47

47

118
552

－
80

－
161

118
793

257

35

506

798

Reconciliation between total segment revenues in the table above and revenues in the accompanying
consolidated statement of income for the years ended March 31, 2014 and 2013 are as follows:
Thousands ofMillions of yen
U.S. dollars
2014
2013
2014
Total segment revenues¥

Intersegment revenues
Revenues in the accompanying consolidated
statement of income

19,992¥(426)¥

19,56618,087$(411)¥

17,676

194,248(4,139)$190,109

Reconciliation between total segment income in the table above and ordinary income in the consolidated
income statement for the years ended March 31, 2014 and 2013 are as follows:
Thousands ofMillions of yen
U.S. dollars
2014
2013
2014
Total segment income

¥

3,052

¥

2,178

$

29,654

Intersegment income

(112)

(108)

(1,088)Equity in earnings of affiliates

179

487

1,739

Revenues in the consolidated income
statement

¥

3,119

59

¥

2,557

$

30,305

Reconciliation between total segment assets in the table above and assets in the consolidated accompanying
balance sheet as of March 31, 2014 and 2013 are as follows:
Thousands ofMillions of yen
U.S. dollars
2014
Total segment assets¥

3,959,194

2013¥

3,520,853

2014$

38,468,655

Intersegment accounts(22,030)(64,490)(214,050)

Intersegment investments(26,269)(26,269)(255,237)

3,493

3,362

33,939Other
Assets in the accompanying consolidatedbalance sheet¥

3,914,388¥

3,433,456$

38,033,307

Reconciliation between others in the table above and amounts in the consolidated financial statements as ofand for the years ended March 31, 2014 and 2013 are as follows:
Millions of yen
Amounts intheconsolidated
financialstatements
Adjustments
Segment total
March 31, 2014
Depreciation and amortization
Extraordinary income:¥Gain on negative goodwill
Extraordinary loss:
Merger related costs
Branch relocation costs
Retirement benefit expenses
Income taxes
Increase in property, plant and equipment
and intangible assets

870

¥

4,411

9
－

¥

879

4,405

－

4,405

809
55
526
199
510

－
－
－
－
(0)

809
55
526
199
510

1,161

－

1,161

4,411

March 31, 2013
Depreciation and amortization
Extraordinary income:Gain from sale of investments in securities
Extraordinary loss:
Loss from sale of property, plant andequipment
Loss from sale of investments in securities
Income taxes
Increase in property, plant and equipment
and intangible assets

¥

747
165

9
－

165

－

165

166

(14)

152

47

(14)

33

118
793

－
(0)

118
793

798

－

798

60

¥

¥

756
165

Thousands of U.S. dollars

Adjustments

Segment total
March 31, 2014
Depreciation and amortization
Extraordinary income:$Gain on negative goodwill
Extraordinary loss:
Merger related costs
Branch relocation costs
Retirement benefit expenses
Income taxes
Increase in property, plant and equipment
and intangible assets

8,453
42,85988－$$

42,859－42,800

7,860

－

7,860

534

－

534

5,111

－

5,111

1,934

－

1,934

4,955

(0)

4,955

11,281－

11,281Thousands of
U.S. dollars
2014

Millions of yen
2014
2013

Other

8,541

42,800Related Information(a) Information by services
Sales by services for the years ended March 31, 2014 and 2013 are as follows:

Loans for margin transaction

Amounts intheconsolidated
financialstatements

¥

9,240

¥

19,566

¥

6,626

¥

17,676

10,326$

89,779$190,109

11,050100,330(b)Geographic information
Because there are no revenues from customers outside Japan and no property, plant and equipment locatedoutside Japan, the geographic information is not disclosed for the years ended March 31, 2014 and 2013.
(c)

Information by major customers
Because no particular third party whose revenues are over 10% of revenues in the consolidated statement ofincome exists, the information by major customers is not disclosed for the years ended March 31, 2014 and 2013.
Information of impairment loss on fixed assets by reported segments
The information is not applicable for the years ended March 31, 2014 and 2013.
Goodwill by reported segments
The information is not applicable for the years ended March 31, 2014 and 2013.
Negative goodwill incurred by reported segments
For the year ended March 31, 2014, gain on negative goodwill of ¥4,405 million ($42,800thousand) was
incurred through the acquisition of Osaka Securities Finance Co., Ltd. on July 22, 2013. The information was notapplicable for the year ended March 31, 2013.
(22) Supplemental Cash Flow Information
Assets and liabilities of OSF which was merged in 2014 are as follows:61

Millionsof yenCurrent assets¥

Non-current assets

55,085

Thousands of
U.S. dollars
$

3,546

535,22134,454

Total assets¥

58,631$

569,675

Current liabilities¥

38,375$372,863

Non-current liabilities

4,401

Total liabilities¥

42,77642,761$

Capital surplus increased by merger was ¥10,845 million ($105,373 thousand).

62

415,624

INDEPENDENT AUDITORS' REPORT63

OUTLINE OF JSF GROUP

Japan Securities Finance Co., Ltd.

Subsidiaries

Aﬃliates

JSF Trust and Banking Co., Ltd.

Japan Information Processing
Service Co., Ltd.

Nihon Building Co., Ltd.

JSF Information Technology Co., Ltd.

Name

(millions of yen)

Ratio ofshareholding

14,000100

Trust service, Banking services

100

100

Real estate ownership and leasing
Real estate trading and brokerage

2,460

20.00

Information processing services
Software development and sales

100

20.75

Information processing services
Software development and sales

CapitalBusiness overview

Subsidiaries
JSF Trust and Banking Co., Ltd.
Nihon Building Co., Ltd.
Affiliates
Japan Information Processing Service Co., Ltd.
JSF Information Technology Co., Ltd.

64

CORPORATE DATA

(as of March 31, 2014)

Establishment

President

July 1927

Eizo Kobayashi

Head office

Capital1-2-10 Nihonbashi-Kayabacho, Chuo-ku, Tokyo￥10 billion

103-0025
Tel: +81-3-3666-3184

Number of employees

Fax: +81-3-3666-1403

263

Share Information
Shares outstanding

Stock exchange listing

107,307,763 shares

Tokyo Stock Exchange, 1st section (Code:8511)

Number of shareholders

Transfer agent

15,574（as of March 31, 2014）

Japan Securities Agents, Ltd.
1-2-4 Nihonbashi-Kayabacho, Chuo-ku, Tokyo
103-8202
Tel: +81-3-3668-9211

Major shareholders

Number ofshares held(Thousands)

Ratio ofshareholding

Japan Trustee Services Bank, Ltd.
(Trust account)

6,852

6.38

Northern Trust Co. (AVFC) Re 15Pct
Treaty Account

5,888

5.48

Northern Trust Global Services Limited
Re 15Pct Treaty Account (Non Lending)

5,563

5.18

Mizuho Bank, Ltd.

5,221

4.86

RBC ISB A/C Dub Non Resident-Treaty Rate

5,121

4.77

Capital Market Promotion Foundation

4,610

4.29

MSIP Client Securities

3,278

3.05

Japan Trustee Services Bank, Ltd.
(Trust account 4)

2,890

2.69

State Street Bank and Trust Company

2,418

2.25

The Master Trust Bank of Japan, Ltd.
(Trust account)

2,205

2.05

65

Composition of shareholders(by number of shares)Securities
Companies
9.1%

Other JapaneseCompanies
8.6%

Financial
Institutions
26.7%
Individuals
24.2%
ForeignInvestors
31.4%

Board of Directors, Corporate Auditors and Executive Officers (As of June 26, 2014)
Directors

Executive Officers

Chairperson

Minoru Masubuchi *Chairperson

Minoru Masubuchi

Vice Chariperson

Takao Hotta *Vice Chariperson

Takao Hotta

President

Eizo Kobayshi *President

Eizo Kobayashi

Senior Managing Director

Hiroshi Asakura

Senior Managing Director

Hiroshi Asakura

Managing Director

Yasufumi Oda

Managing Director

Yasufumi Oda

Director

Toshihiro Oritate

Toshihiro Oritate

Toshihiko Ishide

Toshihiko Ishide

Takashi Imai **Senior Executive Officer

Akira Kanno **Tomoyoshi Sugaya
Yutaka Tanaka

Tetsuo Mae **Executive Officer

Kenji Fukushima(* Representative Directors)

Kazuhiro Maeda(** Outside Directors)

Yasuhiro Hirama

Corporate Auditors
Ushio Mizuno *Masao Iguchi
Tadahiko Genta
Toshio Kamiyama *(* Outside Corporate Auditors)

Rating Information
Long-term rating

Short-term ratingStandard and Poor’s (S&P)

A

A-1

Rating and Investment Information, Inc. (R&I)

AA －

a-1+

Japan Credit Rating Agency (JCR)

AA －

J-1+

66

CORPORATE DATAORGANIZATION

General Meetingof Shareholders

Board of Auditors
Board of Directors(Chairperson, Vice Chairperson)
President
Management committee

Executive Oﬃcers Meeting
Compliance
Committee

Executive Oﬃcers in Charge

Audit Department
Compliance Department
Risk Management Department

ALM Committee

General Aﬀaires Department

Risk Capital Meeting

Accounting Department

System Committee

Planning Department
Treasury Department
Margin Loan Department
Institutional Sales Department
Retail Business Department
Settlement & Custody Department
Information Systems Planning Department
Osaka Branch67