Our Vision

Medium-Term Management Policy
Under the Sixth Mid-Term Management Plan formulated in March 2020, we have been working to steadily increase
our earning power under the assumption that we will maintain the high degree of financial soundness required ofus as a key player in the securities market infrastructure.
During that time, the Corporate Governance Code was revised in June 2021, and the Tokyo Stock Exchange
restructured its market segments in April 2022. As a publicly listed company, we recognize that the current
situation calls for us to ensure greater commitment and transparency to achieve sustainable growth and enhance
corporate value over the medium to long term based on a sophisticated governance system.
We see this transformation for listed companies as an opportunity to accelerate our current efforts toward
management reform. To deepen our dialogue with the capital market and meet the expectations of shareholders
and investors, we have formulated the medium-term management policy.

Guided by its corporate philosophy, JSF will strive to maintain strong
financial soundness, achieve the sustainable growth expected of aVision for JSF

listed company, and enhance its corporate value over the medium toin the Future

long term, while firmly embracing the public roles expected of it as asecurities finance company serving as securities market infrastructure.

FY2023–FY2025
FY2020–FY2022

The next mid-term management plan

The Sixth Mid-Term Management Plan

ROE 5%

ROE 4%

Achieve sustainablegrowth and mediumto long-term
enhancement ofcorporate value as
expected of a listedcompany

Maintain strong
financial soundness
Medium-Term Management Goals• Assumed maintenance of the high degree of financial soundness required to maintain
Thinking

market infrastructure functionality• Adding ROE, which is widely used as an indicator of profitability and capital efficiency,
to management goals• ROE target set above cost of equity capital (recognized as around 4.5%)

Estimated Cost of Equity Capital

Approach to the Business Portfolio

We recognize our cost of equity capital to be considerablyWith strong awareness of the public role it plays as securities

lower than the general level, due to our characteristicallymarket infrastructure, the JSF Group will actively respond tolow-risk business strategy and high financial and earnings

diverse needs in the securities and finance sectors bystability, given that financial securities companies are by theirproviding a variety of related services, focusing on securities

nature subject to financial soundness standards andand financing with the licensed business of loans for margin

restrictions on the scope of their operations as part of thetransactions at the core.

securities market infrastructure, including those imposed by

are substantially affected by market fluctuations and othersecurities and payment systems.

factors, the JSF Group will continue working to diversify earnings

the cost of equity capital, and as a result of repeated

ROE > Capital Cost
ROE Target
Achieve 5% ROE by FY2025

Sustained

In addition, given that loans for margin transactions services

laws and regulations and standards for participation inSpecifically, we have used various methods to estimate

while functioning as
securities market
infrastructuresources and to achieve management goals in each businessarea while maintaining awareness of improving capital efficiency.

discussions by the Board of Directors, we recognize that theUsing this approach, the JSF Group will endeavor toCompany’s cost of equity capital is around 4.5%. The ROE

achieve the Vision for JSF in the Future through a businesstarget for the next mid-term management plan has been set

portfolio consisting of the securities finance businessat a level above this cost of equity capital (5% by FY2025).

(securities financing centered on loans for margin transactions,

MeasuresShareholder Returns Policy

corporate value• Strengthen the securities financebusiness centered on loans formargin transactions• Reinforce consolidated

enhancement of

100% total payout ratio fromFY2021 to FY2025 (cumulative)

Group management• Improve operational efficiency

securities investment business), the trust banking businessand the real estate leasing business.

18

Japan Securities Finance Co., Ltd. Integrated Report 2022

Japan Securities Finance Co., Ltd. Integrated Report 2022

19

Our Vision

The Sixth Mid-Term Management Plan

Medium-Term Management Policy

Management Goals

Strategy

Given that the loans for margin transactions business, JSF’s core business, is greatly affected by market fluctuations,
we will strengthen its base by increasing the number of loanable stock issues, and stabilize our functions as securities

Strengthen the Securities Finance BusinessCentered on Loans for Margin Transactions

market infrastructure by diversifying revenue sources and steadily increasing basic profit (ordinary profit estimatedReinforce Consolidated Group Management

based on the assumed profit of loans for margin transactions).

• Make further use of Group resources to improve• Initiatives such as improving the operational stability andoverall profitability

Strategy

convenience of the loans for margin transactions business,steadily increasing the number of loanable stock issues, andImprove Operational Efficiency

strengthening the dissemination of information related to• Review business processes and other areas to promote

standardized margin transactions and margin loans

Enhance the loans for margintransactions business as part of securities
market infrastructure
Develop and establish new businessfurther improvements in operational efficiency• Use of the financial and securities transaction expertise

Expand and enhance thesecurities finance business• Maintain awareness of sustainability issues, promotecultivated thus far to handle diverse transactions in abusiness operations with low environmental impact andproactive manner and increase the number of businessdiverse employee work styles

Diversify securities investment for
efficient use of capitalStrengthen thebusiness management structure

partners and applicable securities
Facilitate diverse work styles and makeJSF more dynamic

Framework to integrate management goals and strategy with risk management

Shareholder Returns

Use of the Risk Appetite Framework (RAF)
FY2022 (Forecast)

To ensure the operational stability and financial soundness
required of us as a key player in the securities market

Dividend(Forecast)

ShareBuy-backs¥32.0(+¥2.0 YoY)3.2 million shares(3.5% of total
shares issued andoutstanding)¥3 billion

infrastructure, we will enhance corporate value while
maintaining solid shareholders’ equity. At the same time,
we intend to increase returns to shareholders based oncomprehensive consideration of the earnings environment,+investment plans and other factors.

Total Payout
Ratio=103.4%

Shareholder Returns Policy
We are aiming for a cumulative total payout ratio of 100% through dividend payments and flexible share buy-backs in
the FY2021–FY2025 period (achieving the ROE target of 5%).
We aim to pay annual dividends per share of no less than ¥30.0 during that period.

Strengthen the Loans for Margin Transactions
Business as Part of Securities Market Infrastructure
We aim for operational stability and increased profitability in
our loans for margin transactions business by appropriately
responding to changes in the stock market´s operatingenvironment. In addition, we will carefully identify trends
among market participants, steadily increase the number ofloanable stock issues, promote the use of loans for margintransactions, step up the dissemination of information relating
to margin transactions and loans for margin transactions, andexpand our investor base.

Expand and Enhance the Securities Finance BusinessWe aim to effectively use the financial and securities transaction
expertise we have cultivated thus far to proactively handle
diverse transactions with domestic and overseas financial
instruments businesses and increase the number of business
partners and applicable securities to enhance and expand oursecurities finance business, increasing opportunities for profit.

FY2017FY2018FY2019FY2020

FY2021¥4.2 billion¥3.7 billion¥3.5 billion¥3.9 billion¥5.1 billion¥5.6 billion

Dividends perShare

¥26.0

¥22.0

¥22.0

¥26.0

¥30.0

¥32.0

Develop and Establish New Business

Dividend PayoutRatio

58.8%

49.2%

Share Buy-backAmount¥0.9 billion

We will leverage our history, background and characteristics
as a securities finance company, and take a long-term perspective
in developing and establishing new businesses in collaboration
with Group companies and domestic and foreign partners.

Total Payout Ratio

79.3%

55.0%
¥1.2 billion
87.8%* Announced on May 10, 2022

20StrategyFY2022(Forecast*)

ProfitStrengthen our competitive basethrough efficient business operations

Japan Securities Finance Co., Ltd. Integrated Report 2022

57.2%
¥0.5 billion
71.0%

60.1%
—60.1%

53.0%¥2.3 billion
97.6%¥3.0 billion
103.4%

Diversify Securities Investment for Efficient Use of Capital
We will secure stable revenues by responding to changes inthe external environment with agile revisions to our portfolio,
based on appropriate risk controls. In addition, we will expand
foreign currency funding methods to increase management offoreign currency-denominated securities such as foreign
government bonds, and to support business developmentusing foreign currencies.

Strengthen the Business Management Structure
We will proactively meet our social obligations, and reaffirm
that compliance is a management prerequisite for achieving
our corporate philosophy.
To establish unwavering public trust in JSF, we aim toensure the effectiveness of our internal auditing and further
enhance our risk management in response to the increasingly
diverse and complex risks associated with the finance business.
We will further strengthen our business continuity system
to enable us to carry out our securities market infrastructure
functions even in the event of a major disaster.

Strengthen Our Competitive Base through Efficient
Business Operations
Given the increase in transaction volume and complexity ofbusiness, we will review our business processes and actively
promote the use of digital technologies such as robotic
process automation (RPA) to build an efficient business
operation structure and strengthen our competitive base.

Facilitate Diverse Work Styles and Make JSF
More Dynamic
Amid changes and diversification of work, such as work-stylereform and delayed retirement, we will review our employment
systems to establish a rewarding and employee-friendly working
environment, thereby improving individual productivity andincreasing JSF’s vitality.

Japan Securities Finance Co., Ltd. Integrated Report 202221

Our Visionmarket conditions, was sluggish, especially stock lending.

Message from the Executive Officer in Charge ofCorporate Planning

In this way, we were able to achieve solid results in oursecurities finance business, centered on bond lending andequity repo transactions, which I believe is not only a result ofefforts on the sales side, but also of the increased efficiencyof business operations resulting from reviewing businessprocesses, utilizing RPA and promoting telework amid theincrease in transactions and growing complexity of operations.

Aiming to be a company thatearns the trust of all
stakeholders

Outlook for FY2022
In the loans for margin transactions business, we will steadilyfinancial institutions in Japan and overseas, and increase

promote measures such as increasing the number of loanablebusiness partners and applicable securities to further expand

stock issues and stepping up the dissemination of information

the business.
We aim to achieve ROE of 4% for FY2022, which together

related to margin transactions and loans for margintransactions. In the securities finance business, we aim towith further promotion of the trust business at JSF Trust andutilize our financial and securities transaction expertise to

Banking is one of the milestones of our medium-term

proactively expand our handling of diverse transactions withmanagement policy.

About Shareholder Returns

Senior Managing Executive Officer,
Executive Officer in charge of Corporate Planning

Yutaka Okada

We will comprehensively consider the earnings environmentbuy-backs in the market totaling ¥2.3 billion for a total payout

and investment plans as we strive to return profits to ourratio of 97.6%.

shareholders while maintaining financial soundness.

See page 20 for details.

In FY2022, we are aiming for a total payout ratio of 100%In FY2021, based on our shareholder return policy, wethrough dividends and the flexible implementation of sharepaid annual dividends of ¥30.0 per share, an increase of ¥4.0

buy-backs in accordance with our shareholder return policy.

compared with the previous fiscal year, and carried out share

FY2021 Consolidated Financial Results
Shareholder Returns

22In FY2021, the business performance of companies in JapanThe growth engine of the Group, the securities financerecovered from the stagnation caused by the impact of thebusiness, drove the increase in profits. In particular, bond

COIVD-19 pandemic, and the recovery trend strengthened.

lending (repo transactions and gensaki transactions for theHowever, stock market movement remained stuck in a narrow

purchase and resale of Japanese government bonds andrange due to the impact of circumstances overseas, includingother bonds) and equity repo transactions performed strongly,concerns about default on debts by the Evergrande Group ofsetting a new record-high balance by actively responding toChina, the implementation of tapering by the Federal Reserve

FY2021

FY2022 (Forecast)

Annual¥30.0(+¥4.0 vs. FY2020)¥32.0(+¥2.0 vs. FY2021)

Interim

¥15.0

¥16.0

Year-end

¥15.0

¥16.0

the market’s growing need for investment and procurement of

Dividend payout ratio

53.0%

49.2%

(phasing out quantitative easing) in the United States andsecurities. In addition, at our subsidiary JSF Trust and Banking,soaring crude oil prices due to the situation in Ukraine.

trust fees reached a record high as the trust balance of custodial

Aggregate no. of shares
to be repurchased¥2.3 billion
2.80 million¥3.0 billion
3.2 million

Result¥2.3 billion
2.48 million—

Under these circumstances, consolidated results fortrust services centered on preservation trusts such as cash

FY2021 included operating profit of ¥6,235 million, a 30.5%

segregated as deposits for customers and crypto-asset-

increase year on year, ordinary profit of ¥7,164 million, arelated trusts, as well as asset-backed loan trusts, continued

28.9% increase, and profit of ¥5,174 million, a 30.3% increase,

to increase. On the other hand, the loans for margin

for an increase of about 30% for all three levels of income.

transactions business, which is greatly affected by stock

Japan Securities Finance Co., Ltd. Integrated Report 2022

Dividends per share

Share buy-backs

Repurchase period
Total payout ratio

December 21, 2021 to March 11,2022
97.6%

May 11, 2022 to March 31, 2023103.4%

Japan Securities Finance Co., Ltd. Integrated Report 202223

Our Vision

Message from the Executive Officer in Charge of Corporate Planning

Lecture on Financial and Securities Markets and Industry-Academia Alliance to theGraduate School of Engineering, University of Tokyo

Features of the Consolidated Balance Sheet
The loans for margin transactions business, securities financeIn addition, in the security finance business, bond repoand securities investments are the pillars of the Company’sand gensaki transactions are brokerage transactions thatearnings and features of its balance sheet.

match the needs of lenders and borrowers. As a result, theFunds lending transactions are recorded under assets as

ESG Initiatives as the Executive Officer in Charge of Sustainability

balance sheet is expanded in both assets (collateral money

Distributed ledger technology (blockchain) has drawn increasing attention in recent years, and discussions
about its applicability in the securities field are progressing. Since June 2021, JSF has been conducting
empirical research jointly with the University of Tokyo on the applicability of blockchain technology, with afocus on the Company’s main business area, securities lending.
On January 17, 2022, as JSF's Managing Executive Officer at the time, I delivered a lecture regarding thisloans while the collateral for those loans is off-balance-sheet.

for securities borrowed) and liabilities (collateral money

In securities lending transactions, while the securities lent arereceived for securities lent), but financial soundness is ensured

empirical research to students of the Graduate School of Engineering at the University of Tokyo on the topic

off-balance-sheet, collateral deposits received in connection

as both are secured transactions.

“Financial and Securities Markets and Industry-Academia Alliance—Blockchain Case Studies.” All students inwith such lending are recorded under liabilities as collateralattendance were keenly aware of recent trends in finance and securities, as well as the latest technologies suchmoney received for securities lent.

as blockchain, and industry-academia collaboration. Lively discussion ensued, not only on current issues, butalso on the future of the securities finance industry and how it should ideally evolve.

Road to Achieving the Management Goals
The Company aims to ensure the financial soundness required

business scope imposed by laws and regulations, standardsof a company that is a key part of Japan’s securities market

for participation in securities and fund settlement systems,

infrastructure while achieving the sustainable growthamong others, as a key part of Japan’s securities market

expected of a listed company and increasing corporate value

infrastructure. Therefore, I believe that our cost of equity

over the medium to long term. To make these management

capital is considerably lower than the general level due to ourpolicies clear, we are aiming for ROE of 4% during the term ofcharacteristic low business strategy risk and high financial andthe current mid-term management plan (FY2020–FY2022),

earnings stability. Based on these characteristics, we are

and 5% during the term of the next plan (FY2023–FY2025).

going to take a steady and stable approach to achieving ROE

To formulate the ROE target, we estimated the Company’s
cost of equity capital to be around 4.5% using objective data

Financial and Securities Markets andIndustry-Academia Alliance—Blockchain Case Studies
Lecture materials from Tanaka Laboratory,
Graduate School of Engineering, University of TokyoJanuary 17, 2022
Yutaka Okada
Managing Executive Officer
Japan Securities Finance Co., Ltd.

of 5% by FY2025.
ROE has steadily increased in recent years, reaching 3.79%

and multiple calculation methods. Accordingly, we set ain FY2021 due to ongoing efforts under the mid-termtarget of 5% for the term of the next plan to exceed thismanagement plan. I believe that we have built a foothold forfigure. Characteristic of a securities finance company, we areachieving our medium-term management policy targets of 4%

subject to restrictions in terms of financial soundness andfor FY2022 and 5% for FY2025.

Cooperative Relationships with Indonesia’s Securities Market Infrastructure
In Indonesia, the government’s policy objectives are to strengthen the financial services sector to contribute tomedium- to long-term growth and to stabilize the financial system as a basis for sustainable economicdevelopment. In the securities sector, one measure for achieving an efficient, highly liquid and stable securities
market is to enhance the efficiency of securities transactions and settlements using securities finance. A project
to establish and operate a securities finance company in Indonesia was launched in 2014, and in December

To Our Stakeholders

2016, PT Pendanaan Efek Indonesia (PEI) was established with investments by three companies, including theIndonesia Stock Exchange.
In FY2021, despite the impact of the COVID-19 pandemic

stakeholders, whose support has made this possible.

and the situation overseas on market conditions, we wereIn addition to business and financial issues such asable to build earnings centered on the securities financeenhancing profitability and improving capital efficiency, frombusiness, which is crucial to enhancing profitability. Results

the perspective of sustainability I will work to gain a broad

utilize the knowledge we have accumulated in the securities finance business to support PEI and Indonesia

surpassed the estimates we made at the beginning of theunderstanding of non-financial information centered on ESG

Stock Exchange Group in their business development and market infrastructure improvements, and continue tofiscal year. In addition, due to a dividend increase and sharefactors and expand disclosure.

strengthen cooperative relationships with all parties involved as we contribute to the sustainable development

buy-backs, we were able to return profits to shareholders at a
total payout ratio of close to 100%.
I would like to express my heartfelt gratitude to ourCompany officers and employees will continue to work

As part of the infrastructure of the Japanese securities market, JSF has been actively supporting this projectsince its beginning, and has acquired a 10% stake in PEI (about ¥400 million). Going forward, we will furtherof Indonesia’s economy as well as its financial and securities markets.

together for sustainable growth in corporate value so that JSF
achieves wide recognition from society as a valuable presence.

shareholders, investors, business partners and other24

Japan Securities Finance Co., Ltd. Integrated Report 2022

Japan Securities Finance Co., Ltd. Integrated Report 2022

25

Our Vision

Financial and Non-Financial Highlights
Financial Highlights

Non-Financial Highlights

Operating Revenue

Operating Profit

営業収益

営業利益

(Millions of yen)

(Millions of yen)

35,0007,000

30,00025,000Loanable Stock Issues

29,101
26,33330,924 30,138

6,2356,000

15,0003,000

10,000

2,000

0

3,881

3,981

2018

2019

2020

2021

400.0

2,426

2,479

2,522

2,572

366.1
350.1

2,661

333.9

1,500

300.6

283.1

284.2
261.6

4,129

219.9

200.0

224.6

175.5

1,000
100.0
500

0
2017

3,000

2,000

1,000

5,000

(Billions of yen)

2,500

4,777

4,000

20,000(No. of issues)

300.0

5,000

24,321

 verage Outstanding Balance ofA
Margin Loans and Stock Loans

0(FY)

2017

2018

2019

2020

2021(FY)

0
2017

2018

2019

2020

2021(FY)

2017

2018

2019

2020

2021(FY)

Average outstanding balance of margin loansAverage outstanding balance of stock loans rofit Attributable to Owners of Parent
Pand ROE(Millions of yen)

(%)

8,000

3.79

4Net Assets

 irectors and Ratio of Outside Directors
Dto Total Board of Directors(Millions of yen)(No. of directors)

150,000

860

6,000

2.98
2.65

4,000

4,225

3,765

2.66

3,556

3

140,793140,000

3,971

130,000

1

241

77

78

79

77

78

179

174

172

170

163

(FY)

2018

2019

2020

2021

2022 (As of April 1)

No. of outside directors (Left axis)
No. of inside directors (Left axis)
Ratio of outside directors to total Board of Directors (Right axis)

Male employees

255522202017

2018

2019

2020

2021

(FY)

Profit attributable to owners of parent (Left axis)
ROE (Right axis)

26

Japan Securities Finance Co., Ltd. Integrated Report 2022

03

2018

2019

2020

2021

(FY)

200

100
17.5

30
2017

52.5

35.0

52

30

7247

4

120,000300

251

126,687

2,000

70.0

(No. of employees)

252

135,166260

6137,996

5,174

60

(%)

256

143,8113.03

71

 mployees (Non-consolidated,Eincluding seconded employees)

0
2019

2020

2021

2022

0Female employees

Japan Securities Finance Co., Ltd. Integrated Report 202227