May 7, 2024
To Whom It May Concern:
Company: Japan Securities Finance Co., Ltd.
Representative Executive Officer & President: Shigeki Kushida(Code No. 8511, TSE Prime)
Contact: Kentaro Hibi, General Manager, Corporate Governance Office(E-mail : info@jsf.co.jp)

Response, etc. to the Tokyo Stock Exchange’s
Request to Listed Companies
Japan Securities Finance Co., Ltd. (JSF) , upon repeated review by its Board ofDirectors, has compiled the following information on its efforts regarding the mattersrequired of listed companies by the Tokyo Stock Exchange (TSE) as of March 31,2023.
I.

Efforts to Achieve Management with an Awareness of Cost of Equity and Stock
Price (Analysis of the Current Situation and Efforts in FY2023)
1.

Analysis of the Current Situation

Pursuant to the Medium-Term Management Policy formulated and publicly
announced on November 19, 2021, and the Seventh Medium-Term
Management Plan based thereon, JSF, in its capacity as a TSE Prime-listedcompany that supports the infrastructure of securities and financial markets,
set a management goal of achieving an ROE of 5% by the end of FY2025,
while strengthening its corporate governance. Additionally, JSF has focusedmanagement efforts on increasing its earning power and improving its
capital efficiency.

As a result of efforts directed towards the achievement of these goals, weachieved an ROE of 5.73% in FY2023, two years ahead of our target.

In addition, the market’s evaluation of JSF’s corporate value has steadily
improved, with the price to book ratio (PBR) recently hovering around 1.0.
Our total shareholder return (TSR) has also consistently outperformed theTOPIX index by a significant margin.

JSF determines its cost of equity, which serves as the basis for the setting

1

targets and evaluation of performance as mentioned above, by referencing
multiple methods that employ objective, long-term chronological data. Our
fundamental understanding is that our cost of equity remains in the mid-4%
range, even when taking into account the current market environment. JSF
is licensed as a securities finance company, and as such it is legally required
to maintain financial soundness, and is restricted in its scope of itsoperations. As a result, our financial and business strategy risks arerelatively low, and we believe this to be reflected in our risk premium. We
therefore believe our cost of equity is at its natural level.

22.

Efforts in FY2023(1) Formulation and Announcement of the Long-Term Management Vision(i) Long-Term Management Vision
In November 2023, JSF formulated and announced its Long-Term
Management Vision. The decision to do so was influenced by the Board ofDirectors’ recognition that it was the appropriate time to rethink our future
management strategy given that we expected to achieve our goal of 5% ROE
in FY2023 two years ahead of schedule—an indicator that JSF had reacheda turning point after achieving positive outcomes from its management
initiatives. After repeated discussions, the Board resolved that it would beappropriate to establish and release a two-tiered structure that gave
consideration to future management by (i) defining a long-term vision for
JSF management, and (ii) based on this long-term vision, formulating a
medium-term management plan (based on specific business strategies) anda shareholder return policy.

Our Long-Term Management Vision expresses JSF’s targeted vision of thefuture and its ideals over the long term. First, regarding our vision of thefuture, we have reaffirmed that as Japan’s only securities finance company
supporting the infrastructure functions of the securities and financial
markets, JSF will continue to aim to be a distinct and unique company, witha high degree of agility and flexibility, that achieves sustainable growth andenhances its corporate value, while maintaining strong financial soundness,through its contributions to the development of securities and financialmarkets.

Next, we established a new corporate message: “Be unique. Be a pioneer.”This expresses what we want to be—a company that, as Japan’s only
securities finance company, is capable of agilely and flexibly addressing thetrading needs of participants in the securities and financial markets, while
incorporating advances in financial technology in an ever-changing
environment to pioneer the future of both the markets and JSF.

3

Corporate message

Be unique. Be a pioneer.
The direction of our long-term management is as follows:JSF will continue to address the trading needs of participants in thesecurities and financial markets in an agile and flexible manner. Throughits contributions to market development, JSF will seek to concentrate
the collective efforts of its Group companies to sustain growth andenhance its corporate value, while maintaining strong financial
soundness.

JSF will continue to steadily strengthen its earnings base and to seek
the stable and steady improvement of its capital efficiency, whileremaining mindful of the cost of equity, and will continue to work toward
the steady improvement of ROE, keeping the 8% level in mind.

With regard to shareholder returns, JSF will maintain a total payout ratioof 100% throughout the duration of its Seventh Medium-Term
Management Plan, and strive to enhance shareholder returns thereafter
as well.



Through these management efforts, JSF aims to establish a market
valuation with a PBR exceeding 1.0.

Under its organizational design as a company with a Nominating
Committee, etc., JSF will strive to strengthen its corporate governanceby tackling sustainability issues while focusing on the further
improvement of the effectiveness of deliberations by its Board ofDirectors and its respective committees, the further enhancement of
information disclosure, and the development of a robust human capitalbase.

(ii) RevisionofManagementGoals

undertheSeventh

Medium-TermManagement Plan

In light of the Long-Term Management Vision, as well as performance in
FY2023, JSF has upwardly revised the management goals for the Seventh
Medium-Term Management Plan, as follows.

4ROE
Maintain at a stable level above 5% and aim for further improvement.
Consolidated ordinary profit
Maintain at a stable level of over 10 billion yen and aim for furtherimprovement.
In conjunction with the abovementioned revisions, only necessary changes
have been made to the reference values for share-based remuneration thatare based on our projected progress toward goals. No changes have been
made to the basic structure of reference indicators and method of reflection
in officers’ bonuses and share-based remuneration.
(iii) Shareholder Return Policy during the Period of the Seventh Medium-TermManagement PlanWith respect to shareholder returns, we have formulated a Shareholder
Return Policy for the Period of the Seventh Medium-Term Management Plan
that is in line with the Long-Term Management Vision.
Specifically, from the viewpoint of the further enhancement of returns, JSF
will continue to aim for a total payout ratio of 100% on a cumulative basis forthe three-year period from FY2023 through FY2025, through dividends andflexible implementation of share buybacks. With regard to dividends, ourpolicy for FY2024 through FY2025 is to actively pay dividends, aiming for atarget payout ratio of 70%.

(2) Other Efforts(i) Enhanced Information Disclosure (Revision of Integrated Reports)
We are actively enhancing information disclosure in an effort to provide
shareholders and various other stakeholders with a deeper understanding ofJSF. This includes the production of integrated reports, starting from FY2022.
The integrated reports cover matters including our business model,
management policy, corporate governance, and sustainability initiatives.

In the integrated report for FY2023, we enhanced reporting on theabovementioned Long-Term Management Vision, the background andreasoning behind our deliberations, and the newly formulated corporate
message in an effort to gain broader understanding and recognition. We also
reported on our Human Capital Policy, which is one of our key measures5

under the Seventh Medium-Term Management Plan.
Furthermore, since the publication of the FY2022 report, we haveendeavored to enhance content based on the opinions we have received
from stakeholders. Specifically, with regard to corporate governance, wehave published our approach to the appointment of management executives
and our internal human resources development policy, providing not only
procedural information on the selection of our management team, but also
information on the specific functions of the Board of Directors andNomination Committee, both of which primarily comprised of outside
directors, in the actual nomination process. In addition, we have provided
explanations on special features related to the details of our operations, theinitiatives we are focusing on, and risk management regarding the securities
finance business that has driven our growth in recent years.

(ii) Clarifying the Responsibilities of Executive Officers


As a company with a Nominating Committee, etc., JSF is structured so thatits executive officers execute business under the leadership and direction ofthe Representative Executive Officer & President, and under the highly
effective supervision of the Board of Directors, based on the management
policies formulated by a Board of Directors which is primarily comprised ofoutside directors.

In order to explain the duties of executive officers in a way that is easier for
all stakeholders to understand, we have restated and disclosed the duties ofeach executive officer, as reflected in the discussions by the Nomination
Committee for the selection of executive officers and corporate officers inFY2024.

(iii) Company Stock Incentive ProgramAs in FY2022, we will continue to grant employees JSF stock in FY2023,
based on overall business performance, through the Company’s stockincentive program. The purpose of the Company’s stock incentive programis to raise the motivation of employees for the achievement of management
goals, and enhance their job satisfaction and their interest in theimprovement of corporate value by providing them with an opportunity toown JSF shares. The program aims to enhance our medium- to long-term
corporate value by promoting the sharing of value among all shareholders.

6(iv) Efforts to Address Sustainability Issues
We also take a proactive approach to key issues related to sustainability. The
two main efforts in FY2023 were as follows.
Empirical Research on Securities Finance Transactions Using DistributedLedger Technology

JSF and the Graduate School of Engineering of the University of Tokyo(University of Tokyo) have been engaged in empirical research sinceApril 2021 to explore the feasibility of using distributed ledger
technology to facilitate transactions involving tokenized securities orcollateral in repo transactions and securities lending and borrowing
transactions. The two parties released a report* on the results of thisresearch on May 30, 2023.
* Published on JSF’s websiteWe expect the findings of this research to be utilized for social
implementation into a number of fields in the future, including thesecurities industry. In addition, we believe that this research, throughindustry-academia collaboration, provided positive outcomes that
address important sustainability issues recognized by JSF, in particular
to the promotion of academic research activities and contributions to
the infrastructure of securities and financial markets.

Cooperative Relationships with Indonesia’s Securities Market

JSF is advancing activities that contribute to and support theinfrastructure of overseas securities and financial markets, which arekey issues in the realization of a sustainable society. As a specificinitiative, we are collaborating internationally with the Indonesiansecurities industry.

Drawing on our position of supporting the infrastructure of Japan’ssecurities and financial markets, we have providing securities-relatedorganizations in Indonesia with administrative and management related
expertise in lending and borrowing operations. We have also conductednumerous briefings on the critical role of securities finance in market
revitalization, with the aim of contributing to the establishment of asecurities finance company in Indonesia. Following the establishment ofPT Pendanaan Efek Indonesia (PEI) at the end of 2016, we havecontinued to provide practical support in such areas as risk management

7and financing. We invested in PEI in August 2020, and began receiving
dividends from 2022.
Currently, we are energetically contributing to discussions regarding
PEI’smanagement

policiesandbusiness

operations

throughparticipation in an advisory committee and the general meeting ofshareholders comprised of JSF and other shareholders such as theIndonesia Stock Exchange Group, and PEI. From time to time, we also
hold seminars in Jakarta and Tokyo directed at the Indonesian securities
industry, including supervisory authorities, stock exchange personnel,
and securities companies.


Going forward, we will make greater use of the knowledge we haveaccumulated in the securities finance business to contribute to thesustainable development of Indonesia’s economy as well as its financial
and securities markets.

8II.

Status of Dialogue with Shareholders
As a Prime market listed company, JSF, based on Japan’s Corporate Governance

Code, actively engages in dialogue with its shareholders, within reasonable limits, togain their understanding on the Company’s management policies, business activities
and characteristics, so to contribute to sustainable growth of the Company andenhancement of its corporate value over the medium to long-term.
The status of dialogue with shareholders conducted by JSF’s management andothers during FY2023 is as follows.
1.

Persons engaging in dialogue

The Representative Executive Officer & President and the Senior Managing
Executive Officer Responsible for Corporate Strategy engaged in dialogue.

Depending on the content of the dialogue, sometimes outside directors may
also participated.

2.

Overview of shareholders with whom dialogue was conducted

Total: 30 times
Individual interviews: 27 times (domestic investors: 10; overseas investors: 6)

Information sessions: 3 times (total of 42 companies participated)- In FY2023, in addition to regular briefings for full-year and interim financial
results, in April 2024, we held an information session on the Seventh MediumTerm Management Plan and Human Capital Policy which were launched at thestart of FY2024.

3.

Feedback from shareholders to the Board of Directors



Executive officers report the status of dialogue with shareholders to theBoard of Directors promptly after each opportunity for dialogue.

Through these initiatives, we strive to ensure that the Board of Directors andthe various committees will engage in discussions that also take into
account feedback of shareholders.

94.

Main themes, matters of interest to shareholders, etc.
ThemesMain matters of interest
・Seventh Medium-Term Management Plan

(1) Management Strategy

・Human Capital Policy・Long-Term Management Vision
・Efforts to enhance corporate governance(2) Governance(3) Disclosureofinformation
5.

・Disclosure of information enhanced throughIntegrated Reports, etc.

Specific examples of dialogue(1) Management Strategy(i) Long-Term Management Vision; Seventh Medium-Term Management PlanIn November 2023, JSF formulated its new Long-Term ManagementVision, and upwardly revised the management goals of the Seventh
Medium-Term Management Plan. We also formulated and announced theShareholder Return Policy for the duration of the Seventh Medium-TermManagement Plan. (Note: Please refer to page 3 of this press release.)

Additionally, in May 2023, in response to a request made by TSE to listedcompanies, we disclosed our efforts directed towards the realization ofmanagement that is aware of cost of equity and stock price, and disclosed
the status of the dialogue with shareholders in FY2022.

In FY2023, we explained to shareholders the details of our initiatives andpolicies, and the processes behind their formulation. We also reported on
our strong business performance, especially in the securities financebusiness, and our steady progress toward achieving our 5% ROE target.

Many shareholders have expressed their understanding regarding theLong-Term Management Vision, the corporate message included therein,
the content of the Seventh Medium-Term Management Plan and theShareholder Return Policy, and shareholders have also given high regard
to our initiatives and corresponding outcomes over the past few years. Inaddition, many shareholders have praised the timing of the November
2023 announcement of our Long-Term Management Vision after having
projected that we would achieve our 5% ROE target in FY2023.

10(ii) Human Capital PolicyIn order to achieve sustainable growth and enhance corporate value, we
recognize that strengthening our human resource foundation is a criticalissue, and we are promoting initiatives related to the development of
human capital, including human resource development. To that end, weestablished the Human Capital Policy as our basic policy for the future.
In addition to explaining this policy during individual interviews withshareholders, we also emphasized the Human Capital Policy in theexplanation provided at the information session for the Seventh MediumTerm Management Plan held in April 2023.

Many shareholders have assessed the content of our Human Capital
Policy and future initiatives to be appropriate. In addition, someshareholders have told us they would like JSF to disclose the story of how
these initiatives will lead to increased corporate value.

(2) GovernanceJSF transitioned to a company with a Nominating Committee, etc. in 2019and is working to further enhance and strengthen its corporate
governance. In March 2023, in an effort to improve the transparency ofthe nomination process for management executives, we disclosed thespecific operational status of the nomination process, particularly
regarding the independent and active involvement of outside directors in
the Nomination Committee and other committees.

Furthermore, our initiatives to strengthen governance have beenrecognized as advanced in comparison to other companies in Japan.

Opinions regarding JSF’s executive structure include a desire for simpler
explanation of the role of JSF’s chairperson. Pursuant to discussions by
the Nomination Committee, we redefined the duties of executive officers
and corporate officers for appointments in FY2024, and disclosed this ina February 2024 press release regarding the appointment of executive
officers and corporate officers.

(3) Disclosure of Information

JSF began producing and publishing integrated reports in FY2022
to disclose information regarding initiatives and results relevant toenhanced corporate value and corporate governance.

11Regarding the FY2022 report, shareholders commented that theexplanations of the nomination process for management executives
and the governance system otherwise were substantial, but also
expressed a desire for information on specific initiatives centeredon outside directors. They also commented that the messages fromthe Representative Executive Officer & President and theChairperson of the Board of Directors were useful, and were of theopinion that additional comments from a greater number of people,
including outside directors and employees, would make it easier tounderstand JSF’s initiatives from a more realistic view.

Based on the opinions received from shareholders, the FY2023
report included our approach to the appointment of management
executives, as well as internal personnel training measures to thatend which were originally disclosed in March 2023. This content not
only provides information on the procedures for selecting
management executives, but also describes the specific roles of theBoard of Directors and Nomination Committee, both of which areprimarily comprised of outside directors, in the actual nomination
process. We have also added details to the explanation of the
securities finance business, which has seen significant growth inrecent years, and to the explanations of focused initiatives and risk
management. Furthermore, we included dialogue with outside
directors and comments from employees hired mid-career, andotherwise significantly revised the content to reflect the opinions ofshareholders.

In addition, the FY2023 report referenced the Long-Term
Management Vision formulated and announced in November 2023,
and the details, approach, and formulation process thereof wereexplained in the message from the Representative Executive Officer& President and in other sections.

Many shareholders have praised these initiatives. In addition, fromthe perspective of further improving the disclosure of information,12

we received opinions and the like regarding the need for furtherefforts to better convey JSF’s vision for the future and its mindset
regarding its corporate message. We will keep these opinions inmind in our ongoing considerations regarding the active sharing ofinformation via the integrated reports and other various media.
As Japan’s only securities finance company supporting the infrastructure
functions of securities and financial markets, JSF will continue working tomaintain its position as a distinct and unique company that operates with ahigh degree of agility and flexibility. Our goal is to achieve sustainable growthand enhance corporate value, while maintaining strong financial soundness
and contributing to the development of securities and financial markets.
We would like to ask our shareholders and other stakeholders for theirsincere understanding of our efforts and for their continued support andcooperation.
End of Document

This document has been translated from the Japanese original for reference purposes only.
Although Japan Securities Finance intends this to serve as a faithful translation of the Japaneseoriginal, it does not guarantee the accuracy and correctness of the translation, and encourages
you to refer to the Japanese original.

13