May 16, 2022
To Shareholders:Company: Japan Securities Finance Co., Ltd.
Representative Executive Officer & President: Shigeki Kushida(Code No. 8511, Tokyo Stock Exchange Prime)
Contact: Kentaro Hibi, General Manager, Corporate Governance Office(E-mail : info@jsf.co.jp)
Notice Regarding Board of Directors’ Opinion on Shareholder Proposal
Japan Securities Finance Co., Ltd. (hereina fter, “JSF”) received a document(hereinafter, the “Shareholder Proposal Document ”) stating t hat its shareholders
INTERTRUST TRUST EES (CAYMAN) LIMITED SOLELY IN ITS CAPACITY AS
TRUSTEE OF JAPAN -UP and Strategic Capital, Inc. (hereinafter, collectively, t he“Proposing Shareholders ”) would engage in a shareholder proposal (hereina fter,“Shareholder Proposal ”) for a resolution at the 112th Ordinary G eneral Meeting of
Shareholders scheduled to be convened on June 23, 2022 (hereinafter, the“Ordinary General Meeting of Shareholders”) , however at its Board of Directors
resolved to oppose the Shareholder Proposal at a meeting convened today, and assuch JSF provides notice as follows.
I.
1.

Content and Reason for Shareholder Proposal
Agenda Items(1)
Partial ame ndments to the Articles of Incorporation with regard to
Disclosure of Individual Remuneration for Representative Executive
Officer & President(2)
Partial amendments to the Articles of Incorporation with regard to
Disclosure of Individual Remuneration for Officers Coming from Bankof Japan(3)
Establishment of Special Advisors(4)
Partial ame ndments to the Articles of Incorporation with regard to
Cross-Shareholdings(5)
Partial amendments to the Articles of Incorporation with regard to Saleof Shares and Unlisted REIT Held for Net Investment Purposes(6)
Partial amendments to the Articles of Incorporation with regard to
Disclosure of Results of Exercise of Voting Rights

This is the English translation of the document originally written in Japanese for non-Japaneseconvenience. Although Japan Securities Finance intends to faithfully translate the Japanese-written
documents into English version, the accuracy and correctness of translation are not guaranteed, so
you are kindly encouraged to refer to the original Japanese version of the document.

1

2.

Summary of Proposal and Reason for Proposing
As set forth in the Exhibit.

II.

Board of Directors’ Opinion on Shareholder Proposal
JSF, as a securities finance company that takes on an infrastructural function
in securities markets, has obtained a license under the Financial Instruments andExchange Act and abides by laws, ordinances and other regulations. JSF, with astrong recognition of the public role its existence plays, formulated a “Medium-termManagement Policy” in November of 2021, with the aim of becoming a company thatmaintains a high degree of financial soundness, and realizes both the sustainablegrowth expected as a listed company and the medium to long-term enhancement of
its corporate value. Here, our management goal is to achieve an ROE of 5% which
exceeds our cost of equity by FY 2025.
To date, under its Sixth Medium-term Management Plan, JSF has advanced
the strengthening of security financing and its revenue base otherwise, and has
aggressively worked to address a variety of corporate governance related issues
through such efforts as appointing officers in line with its revised Corporate
Governance Code, building an incentive program with respect to remuneration, andaddressing overall sustainability. The appointment of the officers from the Bank ofJapan, which called into question by the Proposing Shareholders has been
conducted in consideration of the nature of JSF and amid its efforts related toappointment and remuneration, on personal character basis in an effort to secure
the talent required by JSF.
These efforts are manifesting results, in fact JSF has maintained steady
growth in ROE, and amid efforts to enhance shareholder returns, total shareholder
return has exceeded the average for listed companies in recent years.
The JSF Board of Directors believes that the maintenance and strengtheningof these past efforts will lead to improve corporate value at JSF of the medium tolong-term, and as the result of careful consideration of the Shareholder Proposal, it
has decided to oppose the Shareholder Proposal in its entirety as set forth in section“2. Opinion of JSF Board of Directors Regarding Individual Agenda Items in
Shareholder Proposal.”
We sincerely hope that our shareholders will understand in depth our policies,
rationale and achievements.
Hereunder, we will provide a specific explanation regarding the efforts
undertaken by JSF to date and the results thereof.

2

1.
(1)

JSF Medium-term Management Policy and Efforts in Corporate Governance
JSF Management Policy and Vision of the Future
JSF, with a strong recognition of the public role it plays as a securities financecompany that takes on an infrastructural function in securities markets, aims tobecome a company that maintains a high degree of financial soundness, andrealizes both the sustainable growth expected as a listed company and the medium
to long-term enhancement of its corporate value.
(2)
Medium-term Management Policy and Management Goals
Under this rationale, JSF, under the recognition that it is expected to further
commit and secure transparency for sustainable growth and the enhancement of
medium to long-term corporate value based on a high degree of governance,
released a “Medium-term Management Policy” in November of 2021. Under thispolicy, JSF targets an ROE of 4% in the period of the current medium-term
management plan (through FY2022), and an ROE of 5% in the period of the nextplan (FY2023 ~ FY2025) as a management goal.
In the formulation of these ROE goals, JSF estimated the cost of equity using
objective data and several methods to reach acknowledgement of the mid 4% range,
and then set its ROE goal higher at 5%.
Furthermore, as infrastructure in securities market, securities financing
companies are unique in that they are subject to restrictions on financial soundness
and scope of business under laws, regulations and standards for participation insecurities and funds transfer settlement systems, with low business strategy risk andhigh financial and earnings stability, and as such the cost of equity at JSF is
considered to be somewhat lower than the general level.
In addition, based on these features of securities financing companies, JSF
is well on track to achieve its ROE goal by FY2025. In that sense, the medium-term
management policy does not revise the existing Sixth Medium-term Management
Plan, but rather it seeks to accelerate and strengthen this plan.

3

(3)

Results of JSF’s Efforts to Date
The efforts under the existing medium-term management plan have stacked
up to steadily increase our ROE in recent years, reaching 3.8% in FY2021, andmaking it possible to establish a foothold for achieving our goals under the mediumterm management policy of 4% in FY2022 and 5% in FY2025.
Additionally, total shareholder returns at JSF have risen to a level thatsignificantly exceeds the recent TOPIX average.

4

(Change in ROE at JSF)

FY2017FY2018FY2019FY2020

FY2021(Total Shareholder Return at JSF)

JSF’s Total Shareholder Return
TOPIX Return Including Dividends

3/31/18

3/31/19

3/31/205

3/31/21

3/31/22(4)Measures to Realize Management Goals, and Concept of our Business
Portfolio
In order to realize the management goals set forth in sections (1) and (2)above, JSF will accelerate its efforts to increase its earning power and capitalefficiency by 1) strengthening its securities finance business centered on loans for
margin transactions, 2) reinforcing consolidated management of its group, and 3)
improving its operational efficiency.
JSF is a licensed securities financing company which is supposed to havebusiness related loans for margin transactions as its main business under applicablelaw, and has its other business mandatorily restricted within the scope that does notinterfere with its operations in loans for margin transactions. As such, the group’sbusiness portfolio, inclusive of its subsidiaries, is limited to a relatively narrow range
which is considered to be related and contribute to the execution of JSF’s business,and due to regulations under laws and ordinances as set forth above, the group’sbusiness portfolio is not subject to frequent change arising from M&A or othertransactions.
Based on the fundamental nature of this group business and the purport ofCorporate Governance Code, the JSF Board of Directors have deliberated,
determined and released a fundamental policy for its business portfolio as follows.
 With a strong recognition of the public role it plays as infrastructure insecurities markets, the JSF Group will actively respond to diverse needs inthe securities and finance sectors to provide a variety of securities and financerelated services focused on their licensed business of securities financing
centered on loans for margin transactions.
 In addition, in consideration of the large susceptibility of its loans for margintransactions services to market fluctuations and other factors, JSF Group willcontinue its efforts to diversify the sources of its earnings and to achieve its
management goals in each sector with an increased consciousness ofenhanced capital efficiency.
 Under this concept, JSF Group will endeavor to realize its vision of the future
through a business portfolio consisting of security financing businesscentered on loans for margin transactions, securities management business,trust banking business and real estate management business.
(5)

Shareholder Returns
To further enhance shareholder returns, JSF aims at cumulative total payout
ratio of 100% through dividends and the flexible implementation of share buy-backs
in the period from FY2021 through FY2025 (achieving the goal of ROE 5%).

6

Furthermore, with regard to dividends, the amount of our annual dividends reached
JPY 30 per share in FY2021, and our aim is to aggressively pay annual dividends inthe period from FY2022 through FY2025 at a level that does not fall below theamount of JPY 30 per share.
Under this policy, the shareholder return in FY2022 has been established as
annual dividend forecast of JPY 32 (+JPY 2 year-on-year), and a share buy-back up
to a maximum of JPY 3,000,000,000 or 3,200,000 shares (3.5% of total number ofshares outstanding). Combined, this will result in the total payout ratio of 103.4%.
(6)(i)

Efforts in Corporate Governance
Policy on the Composition of Board of Directors, etc.
JSF transitioned to a company with a nominating committee, etc. in 2019 toseparate oversight from execution, creating a Board of Directors composed of five
directors with three outside directors, and appointing outside directors to serve as
the chairs for the Board of Directors and all three committees. Independent outside
directors account for the majority of the Nominating Committee and theRemuneration Committee.
Under this system, considerations and deliberations from diverse angles areamassed in the formation of management policies. Additionally, reviews of reports,
explanatory meetings on business and other efforts to enhance the information
provided to directors are being made to facilitate the appropriate oversight of theexecution of business. These efforts are also acclaimed as appropriate in evaluating
the effectiveness of the Board of Directors.
Faced with the revision of Corporate Governance Code, transition to a new
TSE market segment and environmental changes from factors such as progressing
internationalization and digital transformation, as well as the formation andimplementation of a management plan for the next period under the medium-term
management policy, JSF had its Board of Directors reexamine the composition etc.
of its Board of Directors through deliberation by the Nominating Committee from aviewpoint of enhancing the role of the Board of Directors in a company with anominating committee, etc.
As a result thereof, the Board of Directors reached a recognition that
increasing the size of Board of Directors by adding two directors (both outside
directors) to the current five directors would be appropriate based on the multifacetedskills required to face the changing environment, the balance of the number ofpeople engaged in the oversight and execution of business, and the importance ofdiversification in terms of age and gender. In addition, taking into consideration theability of speedy decision making and the size of JSF’s business, the Board of7

Directors reached to the conclusion that it is worth reassessing the maximum
number of directors while maintaining some leeway in the actual number of members
required based on a skill matrix.
Based thereon, JSF proposes a board composition of seven directors,
including five outside candidates and two inside candidates, and a maximum
number of eight seats of the Board of Directors under its Articles of Incorporation,
consisting of seven actual members and one vacant seat.
(ii)
Formation and Disclosure of “Policy for Executive Officer Appointments”
As part of the exertion of the Board of Directors’ supervisory function, JSF
had the Nominating Committee deliberate and determine a policy for theappointment of management. Last year, due to changes in the environment set forth
above, a comprehensive reexamination was conducted regarding the criteria on theappointment of executive officers based on the results of the deliberations of theNominating Committee, and specific appointments are conducted under thefollowing classifications of the talent expected of executive officers in light of the factthat the purpose of their appointment is to create an executive system that facilitates
the advancement of the medium-term plan.
 Someone who is able to fully recognize JSF’s public role in the execution of
JSF’s business Someone who has extensive knowledge of the overall finance and securities
markets
 Someone who is well versed in the Financial Instruments and Exchange Act
and other various laws and regulations
 Someone with knowledge and experience involving JSF’s highly specializedbusiness
 Someone with the internationality required in the advance of JSF’s business Someone with a high degree of knowledge and experience in business
management and risk management
 Someone with a high degree of knowledge and experience in finance andaccounting
 Someone who is able to nimbly respond to the various environmental
changes encircling JSF in the finance and securities sectors
In addition, a long list of people from inside the company, from the public
sector and from the finance and securities sectors is prepared when making specificappointments. The executive officer appointments released by JSF on February 28,
2022 were based on this policy.
The Proposing Shareholders have a negative assessment of the appointmentof people from the Bank of Japan as officers at JSF, but as stated above, in light of8the public role and uniqueness of securities financing business which includes loans
for margin transactions, JSF focuses on the talent expected of executive offers andmanagement, i.e. the ability to fully recognized JSF’s public role in the execution of
JSF’s business, extensive knowledge of the overall finance and securities markets,the ability to nimbly respond to the various environmental changes encircling JSF in
the finance and securities sectors, and other talents, and people from the Bank ofJapan are appointed based on a determination that they have these talents. Their
benefits are commensurate to their work responsibilities, and the payment status of
remunerations is being appropriately disclosed by JSF and its consolidated
subsidiaries pursuant to laws and regulations.
(7)

Rationale Regarding Remuneration and Incentives
JSF has established a remuneration system that supports the foregoing
management policies and governance system which strongly recognized its publicrole as infrastructure in securities markets and provides incentives that areconsistent with JSF’s management policy of enhancing its corporate value in themedium and long-term.
Specifically, with an eye towards a high degree of correlation with JSF’s
earnings and share price, executive officer remuneration is set as monthly
remuneration (base remuneration) and officer bonuses and stock remuneration
linked to earnings. The set as monthly remuneration (base remuneration) is basedon an individual executive officer’s position. With an eye towards the clarification ofmanagement responsibilities, officer bonuses are determined after the end of a fiscal
year, linked to the achievement status of the management goals in the medium-term
management plan and performance in each term, and paid within three months after
this determination. Stock remuneration utilizes a board benefit trust scheme toaward points linked to and determined by medium-term performance, and awards
JSF shares based on the number of points at the time of retirement.
From a viewpoint of exerting a supervisory function, directors (excluding those
concurrently serving as executive officers) are only paid fixed-amount monthly
remuneration (base remuneration) and are not paid performance linked
remunerations. The remuneration of an individual director is determined by theirclassification as fulltime or non-fulltime director, appointment as chair and otherpositions as a director. Directors who concurrently serve as executive officers are
not paid remuneration as a director.
Remuneration for individual directors and executive officers is determined by
the Remuneration Committee. Additionally, changes etc. to remuneration categories
and the remuneration system are also determined by the Remuneration Committee.

92.

Opinion of JSF Board of Directors Regarding Individual Agenda Items in
Shareholder Proposal

Agenda Item 1

Partial amendments to the Articles of Incorporation with regard to
Disclosure of Individual Remuneration for Representative
Executive Officer & President(1)

Content of Proposal
The following Chapter and Article shall be newly established in the existing
Articles of Incorporation.
Chapter IX Disclosure of Officer Remuneration
Article 38(Disclosure of Remuneration for Representative Executive Officer &President)
The Company shall individually disclose the amount (including nonmonetary remuneration) paid to the executive officer having the power ofrepresentation as remuneration for the preceding fiscal year in the Corporate
Governance Report submitted to the Tokyo Stock Exchange by the Company.
(2)
Opinion of the Board of Directors
The Board of Directors opposes this Proposal.
JSF, in accordance with laws and regulations, appropriately discloses thepolicies for determining the content of remunerations of executive officers anddirectors (hereinafter, “Executive Officers, etc.”) and the total amount of
remunerations by officer classification in the business reports and annual securities
reports.
In addition, the Proposal is related to the remunerations for Executive Officers,etc., and the Remuneration Committee has deliberated the Proposal and reached
the conclusion that governance of the remunerations for Executive Officers, etc. at
JSF is being appropriately managed by the Remuneration Committee, that
remunerations is being appropriately disclosed, and there is no need for theestablishment of a provision such as that of the Proposal in the Articles ofIncorporation.
Also, at JSF the Remuneration Committee has the authority to decide thepolicies on the determination of the content of remunerations for Executive Officers,etc. and the details of individual remunerations for Executive Officers, etc. Moreover,the Remuneration Committee has appropriately exercised this authority toappropriately determine the details of individual remunerations for Executive
Officers, etc. Specifically, the remunerations for Executive Officers, etc. is based on

10the corporate philosophy and management policies, in a system and at a level thecoincides with the roles and expected functions of directors and executive officers,
with an eye towards sustainable growth and the enhancement of corporate value inthe medium to long-term. Among others, the executive officer remuneration is set as
monthly remuneration (base remuneration) and officer bonuses and stock
remuneration, with an eye towards a high degree of correlation with JSF’s earnings
and share price.
Furthermore, the Shareholder Proposal states “There is concern that thepresident from the Bank of Japan losing his incentives to enhance shareholder value
since he is earning remuneration that far exceeds his remuneration when he worked
at the Bank of Japan, and to dispel this concern we are seeking the disclosure of thepresident’s individual remuneration.”
However, as addressed above, theremuneration of Executive Officers, etc. is established to work as an incentive
consistent with the enhancement of corporate value, and is unrelated toremuneration at the Bank of Japan. The Proposing Shareholders fail to provide abasis as to how JSF’s remuneration system is disincentivizing the enhancement ofshareholder value, and their allegation is unrelated to the enhancement ofshareholder value.
Based on the foregoing the Board of Directors has determined that there isno need to establish a provision such that in the Proposal in the Articles ofIncorporation since JSF is appropriately and fully responding in accordance withlaws and regulations in both the determination and disclosure of remunerations.
Agenda Item 2

Partial amendments to the Articles of Incorporation with regard to
Disclosure of Individual Remuneration for Officers Coming fromBank of Japan(1)

Content of Proposal
The following Article shall be newly established in the existing Articles ofIncorporation.
Article 39(Disclosure of Remuneration for Officers from Bank of Japan)
The Company shall individually disclose the money (including nonmonetary remuneration) paid to the executive officers, directors and special
advisors who have a history of work at the Bank of Japan and the directors,
advisers and counselors of subsidiaries who have a history of work at the
Bank of Japan as remuneration for the preceding fiscal year in the Corporate
Governance Report submitted to the Tokyo Stock Exchange by the Company.

11

(2)
Opinion of the Board of Directors
The Board of Directors opposes this Proposal.
As set forth in the opinion of the Board of Directors regarding Agenda Item 1,
at JSF the policies for determining the content of remunerations of executive officers
and directors (hereinafter, “Executive Officers, etc.”) and the details of remunerations
for individual Executive Officers, etc. is appropriately determined by the
Remuneration Committee based on its authority, and these policies and the total
amount of remunerations by officer classification is being appropriately disclosed in
the business reports and annual securities reports.
In addition, the commissioning of special advisors is determined by the Boardof Directors through deliberation by the Nominating Committee, their remuneration
is determined by the Remuneration Committee, and appropriate disclosure on thesepoints is being provided in the Corporate Governance Report.
Also, the Proposal is related to the remunerations for Executive Officers, etc.
and special advisors, and the Remuneration Committee has deliberated the
Proposal and reached the conclusion that governance of the remunerations for
Executive Officers, etc. and special advisors at JSF is being appropriately managed
by the Remuneration Committee, that remunerations is being appropriately
disclosed, and there is no need for the establishment of a provision such as that of
the Proposal in the Articles of Incorporation.
The reason for the proposal is a negative assessment of the appointment ofofficers from the Bank of Japan at JSF, but in light of the public role and uniquenessof the securities financing business that includes loans for margin transactions, JSF
focuses on the talent expected of executive offers and management, i.e. the ability
to fully recognized JSF’s public role in the execution of business, extensive
knowledge of the overall finance and securities markets, the ability to nimbly respondto the various environmental changes encircling JSF in the finance and securities
sectors, and the like, and people from the Bank of Japan are appointed based on adetermination that they have these talents. Their benefits are commensurate to theirwork responsibilities, and the payment status of remunerations is being appropriately
disclosed by JSF and its consolidated subsidiaries pursuant to laws and regulations.
Furthermore, the Shareholder Proposal states “It is very possible that people
from the Bank of Japan enjoy special treatment within the JSF Group landing cushy
positions, and this special treatment is a risk of negating the incentive for enhancing
shareholder value.
As such, we are seeking the disclosure of individual
remuneration for people from the Bank of Japan to clarify any existence of special
treatment in terms of remuneration.” However, the remuneration of Executive
Officers, etc. is established to work as an incentive consistent with the enhancement12

of corporate value, and is unrelated to remuneration at the Bank of Japan. The
Proposing Shareholders fail to provide a basis as to how JSF’s remuneration system
is disincentivizing the enhancement of shareholder value, and their allegation isunrelated to the enhancement of shareholder value.
Based on the foregoing the Board of Directors has determined that there isno need to establish a provision such that in the Proposal in the Articles ofIncorporation.
Agenda Item 3

Establishment of Special Advisors(1)

Content of Proposal
The following Chapter and Article shall be newly established in the existing
Articles of Incorporation.
Chapter X
Special Advisors
Article 40(Special Advisors)
The Company shall be entitled to establish special advisors by
resolution of the Board of Directors.
(2)
Opinion of the Board of Directors
The Board of Directors opposes this Proposal.
The role of special advisors at JSF centers on business community activities
and social contribution activities, and since the commissioning of advisors isdetermined by the Board of Directors through deliberation by the Nominating
Committee and their remuneration is determined by the Remuneration Committee,
disclosure on these points is being provided in the Corporate Governance Report.
JSF has determined that having a person with past experience as president engage
in these activities is expected to contribute in ways such as to the maintenance ofrelations in its business community as well as having an anticipated PR effect, andthat this will lead to the enhancement of corporate value.
If the intent of this Proposal is the establishment of a special advisor system,
we fail to understand the reason for proposing the stipulation of an establishment
basis provision in the Articles of Incorporation. In consideration of securing
objectiveness and transparency in the special advisor system, JSF, as addressed
above determines and discloses the commissioning of advisor and their benefits
through deliberation by the Nominating Committee, Remuneration Committee and
Board of Directors, and in the day to day execution of business as well, the oversightand execution of business is separated by design in the organization of a company
with nominating committee, etc. to create an appropriate decision making system,

13

and advisors at JSF are not actually involved in any management decisions. These
efforts have secured the objectiveness and transparency of the special advisor
system, and there is no need to stipulate a special advisor establishment provisionin the Articles of Incorporation.
Furthermore, the Shareholder Proposal states “Governance related issues
have been identified with regard to the advisory system itself, and the continued
service of a someone who landed a cushy appointment as president after leaving
the Bank of Japan as special advisor after retiring, runs contrary to social justice (the“S” of the so-called ESG),” but this allegation is thought unrelated to theenhancement of shareholder value.
As such, we have determined that there is no need to establish a provisionsuch as that of the Proposal in the Articles of Incorporation.
Agenda Item 4

Partial amendments to the Articles of Incorporation with regard to
Cross-Shareholdings(1)

Content of Proposal
The following Chapter and Article shall be newly established in the existing
Articles of Incorporation.
Chapter XI Securities Held by Company
Article 41(Validation of Purpose and Disclosure of Results of CrossShareholdings)(1)
At least once a year, the Company communicates to the issuers ofcross-held shares the desire to sell these shares in order to validate as towhether the purposes of cross-shareholding at the Company, the“strengthening of business relations” and the “undertaking of alliances”, areactually effectuated by cross-held shares.
(2)
The Company shall disclose the content of the responses from issuing
companies have been obtained in response to the request for sale to theissuing companies of the preceding paragraph, by each individual company,in the corporate governance report submitted by the Company to the Tokyo
Stock Exchange.
(2)
Opinion of the Board of Directors
The Board of Directors opposes this Proposal.
With cross-shareholdings, the status of dividends and valuation gains orlosses, the status of transactions with the company invested in, the history of theholdings and the like are validated each year by the Board of Directors, reduction is14

sought in those holdings the necessity for which is weak, and a determination ismade on the reasonableness of the holdings based on the result of this validation.
This is disclosed in the Corporate Governance Report, and the status of crossshareholding is further disclosed in the Annual Securities Report.
Since FY2018, JSF has reduced its cross-held shares, reducing its holding oflisted shares by 91% on market price basis and reducing its holding of both listed
and unlisted shares by 78% in total in the period from March of 2018 through Marchof 2022. As of March 2022, JSF holds nine cross-held shares (two listed and sevenunlisted) at a value of JPY 2,816,000,000, which accounts for merely 0.02% of its
total assets and 2.04% of its total net assets on a consolidated basis. As such,general criticism of cross-shareholding is not warranted at JSF.
Furthermore, this Proposal seeks a provision in the Articles of Incorporationthat states “At least once a year, the Company communicate to the issuers of crossheld shares the desire to sell these shares in order to validate as to whether the
purposes of cross-shareholding at the Company, the ‘strengthening of business
relations’ and the ‘undertaking of alliances’, are actually effectuated by cross-heldshares.” But the necessity of selling is an issue that should be validated by JSF, theresponse policy regarding the intent of holding, economic feasibility and the like isdetermined through deliberation by the Board of Directors, and JSF has ensured aprocess for disclosing the results thereof in the Corporate Governance Report.
In addition, the Articles of Incorporation stipulate fundamental policies in the
management of JSF, and as such it would not be appropriate to establish provisions
on matters related to the individual and specific execution of business. Accordingly
we have determined that there is no need to establish a provision such as that of the
Proposal in the Articles of Incorporation.
Agenda Item 5

Partial amendments to the Articles of Incorporation with regard to
Sale of Shares and Unlisted REIT Held for Net Investment
Purposes(2)

Content of Proposal
The following Article shall be newly established in the existing Articles ofIncorporation.
Article 42(Sale of Shares and Unlisted REIT Held for Net Investment Purposes)
The Company shall no longer acquire, and shall sell by the end of
March of 2026 all shares and unlisted REIT for which the purpose of holding
is net investment.

15

(2)
Opinion of the Board of Directors
The Board of Directors opposes this Proposal.
JSF secures sufficient liquidity from the finance market at low interest rates
to facilitate the stable operation of its security financing business that includes loans
for margin transactions. It has raised additional revenues by efficiently investing theexcess funds arising in the course thereof in securities. In addition, JSF engages ina wide range of financial intermediation business in the finance and securities
markets through the lending and the like of securities and funds. This financial
intermediation business, due to the nature thereof, does not simply invest its own
capital and earn revenues, rather it leverages debt financing, and is touted on thewhole as a management goal for achieving ROE in excess of the cost of equity. The
concept under the corporate governance code as well that the enhancement ofcorporate value should be conducted from a medium to long-term point of view, andJSF’s ROE goal will be achieved in a medium-term span by FY2025 through thesteady earning of profits by each division, including investment in securities.
In addition, JSF’s thinking on its business portfolio has been resolved by the
Board of Directors and disclosed on its corporate website, all business including
investment in securities is expected to improve in medium to long-term profitability,
and at present there are no assets which we have determined should be sold.
In addition, the Articles of Incorporation stipulate fundamental policies in the
management of a company, and as such it would not be appropriate to establish
provisions on matters related to the individual and specific execution of business.
Accordingly we have determined that there is no need to establish a provision suchas that of the Proposal in the Articles of Incorporation.
Agenda Item 6

Partial amendments to the Articles of Incorporation with regard to
Disclosure of Results of Exercise of Voting Rights(1)

Content of Proposal
The following Article shall be newly established in the existing Articles ofIncorporation.
Article 43(Disclosure of Reasons for Not Voting and Voting)
In principle, the Company shall not exercise voting rights with regard
to the shares securing debt held in the name of the Company, shall examine
support or non-support and exercise voting rights individually only in
exceptional cases where it is evident that the shareholder value for thecorresponding shares will be harmed, and shall provide timely disclosure forthe reason for voting.

16

(2)
Opinion of the Board of Directors
The Board of Directors opposes this Proposal.
The shares held by securities financing companies in connection with loans
on margin transactions are not held for pure investment purposes or crossshareholding purposes, rather they are held on a temporary and formality basis by
securities financing companies in the course of the execution of ordinary business.
As such, these shares are exempted from the application of various regulations
under the Financial Instruments and Exchange Act (large-volume reporting
regulations, tender offer regulations and major shareholder regulations). Due to thisconstruction under the Financial Instruments and Exchange Act, JSF, with regard to
the shares it holds with regard to loans on margin transactions, has enacted
independent, fair and neutral voting standards conforming to the nature of its
business, to limit impact on the business activities of the issue company as much as
possible, based on the thinking that it serves a public role as infrastructure in the
securities market with regard to voting as well, and this is tied to the enhancementof shareholder value. The disclosure of voting standards and voting rights as
proposed in this Proposal may incite issuing companies to manipulate voting at JSF,
and ultimately have an effect on the business activities of the issuing company,
having the opposite effect on JSF’s maintenance of fairness and neutrality, andgoing against the foregoing intent of the Financial Instruments and Exchange Act.
In addition, the Articles of Incorporation stipulate fundamental policies in the
management of JSF, and as such it would not be appropriate to establish provisions
on matters related to the individual and specific execution of business. Accordingly
we have determined that there is no need to establish a provision such as that of the
Proposal in the Articles of Incorporation.
End

17

(SCHEDULE)
1.

Partial amendments to the Articles of Incorporation with regard to Disclosureof Individual Remuneration for Representative Executive Officer & President(1)

Content of Proposal
The following Chapter and Article shall be newly established in the existing
Articles of Incorporation.
Chapter IX Disclosure of Officer Remuneration
Article 38(Disclosure of Remuneration for Representative Executive Officer &President)
The Company shall individually disclose the amount (including non-monetary
remuneration) paid to the executive officer having the power of representation as
remuneration for the preceding fiscal year in the Corporate Governance Reportsubmitted to the Tokyo Stock Exchange by the Company.
(2)

Reason for Proposal
JSF’s share price is greatly lower than its dissolution value, and JSF’s
management has been unable to implement drastic promising measures for theenhancement of shareholder value. Since listing in 1950 all 10 of JSK’s presidents
have come from the Bank of Japan. The Proposing Shareholders are concernedthat the president from the Bank of Japan is losing his incentive to enhanceshareholder value since he is earning remuneration that far exceeds his
remuneration when at the Bank of Japan, and are seeking the disclosure of thepresident’s individual remuneration to dispel this concern.
Furthermore, last year the average amount of remuneration for each of JSF’s
six executive officers was JPY 50,270,000, greatly exceeding the annual
remuneration of JPY 35,300,000 for the Governor of the Bank of Japan in 2020. JSF
President Kushida last served as a director at the Bank of Japan, and the maximum
annual remuneration for a director at the Bank of Japan is JPY 22,230,000 in thesame year. Doubts persist as to whether it was necessary to provide benefits inexcess of the Governor of the Bank of Japan to hire a director from the Bank ofJapan to be the president of JSF.

2.

Partial amendments to the Articles of Incorporation with regard to Disclosureof Individual Remuneration for Officers Coming from Bank of Japan

18

(1)

Content of Proposal
The following Article shall be newly established in the existing Articles ofIncorporation.
Article 39(Disclosure of Remuneration for Officers from Bank of Japan)
The Company shall individually disclose the amount (including non-monetary
remuneration) paid to the executive officers, directors and special advisors who havea history of work at the Bank of Japan and the directors, advisers and counselors ofsubsidiaries who have a history of work at the Bank of Japan as remuneration forthe preceding fiscal year in the Corporate Governance Report submitted to theTokyo Stock Exchange by the Company.
(2)

Reason for Proposal
Since 1992, all presidents at JSF have served as advisors or the like after
stepping down as president. In addition, the current special advisor, chairman andsenior managing executive officer all came from the Bank of Japan.
In addition, even if limited to the persons who came to JSF after serving as
bureau chiefs at the Bank of Japan (hereinafter, “Bureau Chief Level Personnel”),
from 1980 until currently reaching Senior Managing Executive Officer Okada hascontinuously held the post-government post of managing executive officer or higher
over 40 years without interruption, and ultimately all Bureau Chief Level Personnel
have been appointed senior managing executive officers at JSF. Additionally, since
the establishment of JSF Trust and Banking in 1998, all of the Bureau Chief Level
Personnel serving as managing executive officers at JSF have been appointed toserve a president of that company, and subsequently a portion thereof wereappointed advisors or the like of that company after stepping down as president.
It is highly possible that the people from the Bank of Japan have enjoyedspecial treatment with the JSF Group after leaving the Bank of Japan, and there isa risk that this special treatment is disincentivizing the enhancement of shareholder
value. As such we are seeking the disclosure of the individual remuneration for
officers from the Bank of Japan to clarify the existence of any special treatment interms of remuneration

3.

Establishment of Special Advisors(1)

Content of Proposal
The following Chapter and Article shall be newly established in the existing
Articles of Incorporation.

19

Chapter X
Special Advisors
Article 40(Special Advisors)
The Company shall be entitled to establish special advisors by resolution of
the Board of Directors.
(2)

Reason for Proposal
Minoru Masubuchi, a former president at JSF, was appointed president in
2004, chairman in 2012 and special advisor in 2019 after leaving the Bank of Japan.
There are two others who were also appointed president, chairman and special
advisor after leaving the Bank of Japan.
Governance related issues have been identified with regard to the advisor
system, and the continued service of someone who landed a cushy appointment aspresident after leaving the Bank of Japan as special advisor after retiring, runs
contrary to social justice (the “S” of the so-called ESG).
JSF explains the significance of the special advisor system is to contributeand the like to the enhancement of medium to long-term corporate value through a
PR effect in the business community, so this Proposal seeks the establishment of a
special advisor system in line with this explanation in the Articles of Incorporation. A
Shareholder Proposal that does not acknowledge the significance of the special
advisor system would natural go against this proposal. JSF, by rejecting this
Proposing Shareholders, would recognize that the shareholders do not acknowledge
the significance of the existence of this system, and should immediately discontinue
the special advisor system.
4.
Partial amendments to the Articles of Incorporation with regard to CrossShareholdings(1)

Content of Proposal
The following Chapter and Article shall be newly established in the existing
Articles of Incorporation.
Chapter XI Securities Held by Company
Article 41(Validation of Purpose and Disclosure of Results of CrossShareholdings)(1)
At least once a year, the Company communicate to the issuers of cross-heldshares the desire to sell these shares in order to validate as to whether the purposesof cross-shareholding at the Company, the “strengthening of business relations” andthe “undertaking of alliances”, are actually effectuated by cross-held shares.

20

(2)
The Company shall disclose the content of the responses from issuing
companies obtained in response to the request for sale to the issuing companies ofthe preceding paragraph, by individual company, in the corporate governance reportsubmitted by the Company to the Tokyo Stock Exchange.
(2)

Reason for Proposal
As of the end of March 2021, JSF held nine issues of cross-held shares worth
JPY 2,777,000,000 on its balance sheet (nonconsolidated).
According to the Annual Securities Report for FYE March 2021, the purpose
for holding the two listed issues is disclosed as the “strengthening of business
relations” and the “undertaking of alliances” with key subsidiaries and the like of theissuing companies, but it is unclear as to there can be a causal relationship between
the holding of shares and any strengthening of business relations and possibility ofalliances.
The foregoing two companies are in compliance with Corporate Governance
Code Supplementary Principle 1-4-1, so there is no possibility that JSF would suffera curtailment of business even if it sold the shares.
As such, the Proposing Shareholders are seeking revalidation as to whether
the holding of cross-held shares actually fulfills its purpose. The Proposing
Shareholders believe that JSF should not engage in any cross-shareholding, but atthe very least, those cross-shareholdings that are discovered not to perform the
purpose of holding as the result of this validation should be promptly reduced since
the holding of these shares cannot found to be reasonable.

5.

Partial amendments to the Articles of Incorporation with regard to Sale ofShares and Unlisted REIT Held for Net Investment Purposes(1)

Content of Proposal
The following Article shall be newly established in the existing Articles ofIncorporation.
Article 42(Sale of Shares and Unlisted REIT Held for Net Investment Purposes)
The Company shall no longer acquire, and shall sell by the end of March of2026 all shares and unlisted REIT for which the purpose of holding is net investment.
(2)

Reason for Proposal

21

This proposal seeks the sale of all shares and unlisted REIT (hereinafter,“Shares, etc.”) for net investment purposes held by JSF during the current mediumterm management plan.
As of the end of March 2021, JSF held shares for net investment purposes
totaling JPY 12,900,000,000 and unlisted REIT totaling JPY 14,500,000,000 on its
balance sheet. The Shares, etc. are not business assets which are expected to beheld in the conduct of JSF’s business, rather they are securities that are purely held
for the purpose of investment.
However, the return earned from the holding of the Shares, etc. is less thanthe cost of capital, and the holding of these Shares, etc. lowers JSF’s capitalefficiency and serves as one facture harming its shareholder value.
As such, these Shares, etc. should be sold during the current medium-term
management plan to also realize the higher capital efficiency raised by JSF in thecurrent medium-term management plan.

6.

Partial amendments to the Articles of Incorporation with regard to Disclosureof Results of Exercise of Voting Rights(1)

Content of Proposal
The following Article shall be newly established in the existing Articles ofIncorporation.
Article 43(Disclosure of Reasons for Not Voting and Voting)
In principle, the Company shall not exercise voting rights with regard to theshares securing debt held in the name of the Company, shall examine support or
non-support and exercise voting rights individually only in exceptional cases where
it is evident that the shareholder value for the corresponding shares will be harmed,
and shall provide timely disclosure for the reason for voting.
(2)

Reason for Proposal
As of the end of December 2022, the total amount of shares securing debt
held by JSF in connection with its principal business of loans on margin transactions
will reach JPY 500,000,000,000, and JSF is within the top 30 shareholders at 384
listed companies.
JSF has explained that, in principle, they vote these shares securing debt tosupport company proposals, but the random voting of shares held merely as security
in support of a company proposal would be an issue in terms of the fairness andneutrality of the business of loans on margin transactions.

22Based on the foregoing point of view, the principal at JSF should be not tovote on shares securing debt. Additionally, voting should be conducted after making
an individual examination of support and non-support only in exceptional cases
where there is clear harm to shareholder value.
The purpose of this Shareholder Proposal is to maintain the fairness andneutrality of the business of loans on margin transactions by asking JSF to make thenon-voting of debt securing shares the principal, and seeking the disclosure of thereasons for voting in exceptional cases where voting is conducted after making an
individual examination is made regarding support or non-support.

23

Board of Directors’ Opinion on Shareholder Proposal(Supplementary material)

May 2022
Japan Securities Finance Co., Ltd.

Copyright Japan Securities Finance Co., LTD. All Rights Reserved〜 All For Securities Market 〜1. Board of Directors’ Opinion on Shareholder Proposal

Copyright Japan Securities Finance Co., LTD. All Rights Reserved〜 All For Securities Market 〜Summary
Shareholder Proposal(1) Disclosure of Individual Remuneration for Representative Executive Officer & President(2) Disclosure of Individual Remuneration for Officers Coming from Bank of Japan(3) Establishment of Special Advisors(4) Cross-Shareholdings(5) Sale of Shares and Unlisted REIT held for Net Investment Purpose(6) Disclosure of Results of Exercise of Voting Rights in connection with loans for margin transactions

Board of Directors’ Opinion

The Board of Directors opposes ALL Proposal
 JSF, as a securities finance company (licensed company under the Financial Instruments and ExchangeAct) that takes on an infrastructural function in securities markets, has abides by laws, ordinances andother regulations, and recognize the public role.
 JSF formulated “Medium-term Management Policy”, with the aim of becoming a company that maintains ahigh degree of financial soundness, and realizes both the sustainable growth expected as a listedcompany and the medium to long-term enhancement of its corporate value.(Nov. 2021)
 Management goal is to achieve ROE of 5% which exceeds our costs of equity by FY2025.
 Under its Sixth Medium-term Management Plan, JSF has advanced the strengthening of its revenue baseand has aggressively worked to address a variety of corporate governance related issues. These efforts
are manifesting results, in fact JSF has maintained steady growth in ROE, and TSR has exceeded theaverage of listed companies in recent years.
 The appointment of the officers from the Bank of Japan (BOJ) has been conducted on personal character
basis in an effort to secure the talent required by JSF.
 JSF Board of Directors believes that the maintenance and strengthening of these past efforts will lead to
improve corporate value at JSF of the medium to long-tern.
Copyright Japan Securities Finance Co., LTD. All Rights Reserved〜 All For Securities Market 〜

22. Medium-term Management Policy andEfforts in Corporate Governance

Copyright Japan Securities Finance Co., LTD. All Rights Reserved〜 All For Securities Market 〜Medium-term Management Policy: Overview

Corporate
Philosophy

Long-term
direction forrealizing corporate
philosophy

As an institution specializing in securities finance, JSF has a mission to contributeto the development of the securities market by proactively meeting the diverse
needs of the securities and financial sectors and to enhance the long-term
interests of users, while always maintaining a keen awareness of its public role.

Vision for JSF in the Future
Be a company that maintains strong financial soundness, achieves thesustainable growth expected of a listed company, and enhances its
enterprise value over the medium to long-term, while firmly embracing
the public roles expected of it as a securities finance company providing
infrastructural functions to the securities market.
Management Policy through 2025

Medium-termManagement
PolicyManagement
goals(targets to beachieved)

Strategies

 Strengthen securities finance business centered on loans for
margin transactions
 Reinforce consolidated management of the group
 Improve operational efficiency
 Further enhance shareholder returns (aim for total payout ratio of100%)

Corporate
Governance Expeditiously tackle the diverse challenges that need to be
overcome in order to maintain the level of corporate governanceexpected of a listed company.

6th Medium-termManagement Plan
（FY2020-2022)

 ROE of 4% during period of 6th Medium-term Business Plan
(through FY2022)
 ROE of 5% during period of next plan (FY2023-2025)

Copyright Japan Securities Finance Co., LTD. All Rights Reserved〜 All For Securities Market 〜4Medium-term Management Policy & Management Goals

Management Goals
Aim to achieve the following target
Period of the Current Medium-term Management Plan (until fiscal 2022)

ROE４％

Period of the Next Medium-term Management Plan (FY2023-FY2025)

ROE５％

Approach JSF will further commit and secure transparency for sustainable growth and theenhancement of medium to long-term corporate value based on a high degree ofgovernance.
 JSF targets an ROE of 5% which exceeds our cost of equity (CoE), as a managementgoal.
 JSF estimated the CoE using objective data and several methods to reachacknowledgement of the mid 4% range.
 Our CoE is somewhat lower than general level, due to low business strategy risk,
and high financial and earnings stability. (JSF is subject to restrictions on financial
soundness and scope of business under laws, as infrastructure in securities
market.)Copyright Japan Securities Finance Co., LTD. All Rights Reserved〜 All For Securities Market 〜5Results of JSF’s Efforts to Date
 Our efforts under the current Medium-term Management Plan have stacked up
and steadily increased our ROE.
 Additionally, Total Shareholder Returns at JSF have risen to a level that exceeds
the recent TOPIX average.
ROE

Total Shareholder Return

4.5%

180.0%

JSF's Total Shareholder
Return3.8%

4.0%

176.8%

160.0%TOPIX Return Including
Dividends

3.5%

3.0%

3.0%
3.0%

140.0%

2.6%

151.0%
144.3%

2.7%

141.5%
120.0%

2.5%

100.0%

2.0%

1.5%

115.8%

110.0%

99.5%

114.6%

106.7%

95.1%

80.0%

FY2017FY2018FY2019FY2020

FY2021

Copyright Japan Securities Finance Co., LTD. All Rights Reserved

3/31/18 3/31/19 3/31/20 3/31/21 3/31/22〜 All For Securities Market 〜

6Measures to Realize Management Goals& Concept of our Business Portfolio
Measures for Realization of Management Goals
1)
2)
3)

Strengthening its securities finance business centered on loans
for margin transactions
Reinforcing consolidated management of its group
Improving its operational efficiency

Accelerate its efforts toincrease its earning powerand capital efficiency

Policy for Business PortfolioJSF is supposed to have business related to loans for margin transactions as its main business under applicable law, and has its
other business mandatorily restricted within the scope that does not interfere with its operations in loans for margin transactions.
The group’s business portfolio, inclusive of its subsidiaries, is limited to a relatively narrow range which is considered to be related
and contribute to the execution of JSF’s business.
The group’s business portfolio is not subject to frequent change arising from M&A or other transaction.
Based on the fundamental nature of this group business and the purport of Corporate Governance Code, Board of Directors havedeliberated and determined a fundamental policy for its business portfolio.

Fundamental
Policy for
Business Portfolio

 With a strong recognition of the public role it plays as infrastructure in securities
markets, the JSF Group will actively respond to diverse needs in the securities andfinance sectors to provide a variety of securities and finance related services focusedon their licensed business of securities financing centered on loans for margintransactions.
 In addition, in consideration of the large susceptibility of its loans for margintransactions services to market fluctuations and other factors, JSF Group will continue
its efforts to diversify the sources of its earnings and to achieve its management goals
in each sector with an increased consciousness of enhanced capital efficiency.
 Under this concept, JSF Group will endeavor to realize its vision of the future througha business portfolio consisting of security financing business centered on loans for
margin transactions, securities management business, trust banking business and realestate management business.

Copyright Japan Securities Finance Co., LTD. All Rights Reserved〜 All For Securities Market 〜

7Shareholder Returns
Policy for Shareholder Return
 To further enhance shareholder returns, JSF aims at cumulative total payout ratio of 100%
through dividends and the flexible implementation of share buy-backs in the period fromFY2021 through FY2025 (achieving the goal of ROE 5%).
ー With regard to dividends, the amount of our annual dividends reached JPY 30 per share
in FY2021, and our aim is to aggressively pay annual dividends in the period fromFY2022 through FY2025 at a level that does not fall below the amount of JPY 30 per
share.
Shareholder Returns in FY 2022

Dividend forecast

Share Buy-BackTotal Payout Ratio

3.2 mil. shares
JPY 32（YoY ＋JPY 2）（3.5% of total number ofshares outstanding)

103.4%

JPY 300 mil.

Copyright Japan Securities Finance Co., LTD. All Rights Reserved〜 All For Securities Market 〜

8Effort in Corporate Governance (1) Composition of Board of Directors

Overview

 Transitioned to a company with a nominating committee, etc., in 2019 to separate
oversight from execution.
 Creating a Board of Directors composed of 5 directors with 3 outside directors.
 Appointing outside directors to serve as the chairs of the Board of Directors andall committees.

Environmental changes
 Revision of the Corporate Governance Code
 Transition to a new TSE market segment
 Internationalization & Digital Transformation

Thinking

 Formation & Implementation of a next
medium-term management plan

 Multifaceted skills required to face the changing environment.
 Balance of the number of people engaged in the oversight and execution.
 Diversification in terms of age and gender.

 Adding 2 outside directors⇒ Board Composition of 7 directors :5 outside & 2 inside Under an overall skillset package

 Proposing 8 seats as a maximum number of the Board of
Directors under its Articles of Incorporation.
 Consideration the availability of speedy decision making and the size of JSF.
 Consisting of 7 actual members and one vacant seat.
Copyright Japan Securities Finance Co., LTD. All Rights Reserved〜 All For Securities Market 〜

9Effort in Corporate Governance (2) Appointment of Executive Officers
 Comprehensive reexamination was conducted regarding criteria on the appointment of executive
officers, due to changes in the environment.
 In the light of the fact that the purpose of their appointment is to create an executive system thatfacilitates the advancement of the medium-term management plan, specific appointments are
conducted to classify the talent expected of executive officers.

【Long list】【Talent expected of Executive Officers】

People from Someone who is able to fully recognize JSF’s public role in theexecution of JSF’s business.
 Someone who has extensive of knowledge of the overall financeand securities markets.
 Someone who is well versed in the Financial Instruments andExchange Act and other various laws and regulations.
 Someone with knowledge and experience involving JSF’s highly
specialized business.
 Someone with the internationality required in the advance of
JSF’s business.
 Someone with a high degree of knowledge and experience inbusiness management and risk management.
 Someone with a high degree of knowledge and experience infinance and accounting.
 Someone who is able to nimbly respond to the various
environmental changes encircling JSF in the finance andsecurities sectors.

- Inside thecompany- Public sector- Finance &Securities sectors

Copyright Japan Securities Finance Co., LTD. All Rights Reserved

Appointmentof 7 Executive
Officers
People from the
BOJ have been
appointed basedon a determinationthat they havethese talents〜 All For Securities Market 〜

10Rationale Regarding Remuneration and Incentives

JSF has established a remuneration system of Directors & Executive Officers that supports the foregoing management
policies and governance system which strongly recognized its public role as infrastructure in securities markets andprovides incentives that are consistent with JSF’s management policy of enhancing its corporate value in the medium andlong-term.
Remuneration for individual directors and executive officers is determined by the Remuneration Committee. Additionally,changes and the like to remuneration categories and the remuneration system are also determined by the Remuneration
Committee.

【Policy regarding determining of remuneration】

Executive
Officers








DirectorsWith an eye towards a high degree of correlation with JSF’s earnings and share price,
executive officer remuneration is set as monthly remuneration (base remuneration) andofficer bonuses and stock remuneration linked to earnings.
The set as monthly remuneration (base remuneration) is based on an individual executive
officer’s position.
With an eye towards the clarification of management responsibilities, officer bonuses are
determined after the end of a fiscal year, linked to the achievement status of the
management goals in the medium-term management plan and performance in each term,and paid within three months after this determination.
Stock remuneration utilizes a board benefit trust scheme to award points linked to anddetermined by medium-term performance, and awards JSF shares based on the number ofpoints at the time of retirement.
From a viewpoint of exerting a supervisory function, directors (excluding those concurrently
serving as executive officers) are only paid fixed-amount monthly remuneration (baseremuneration) and are not paid performance linked remunerations.
The remuneration of an individual director is determined by their classification as fulltime or
non-fulltime director, appointment as chair and other positions as a director.
Directors who concurrently serve as executive officers are not paid remuneration as adirector.

Copyright Japan Securities Finance Co., LTD. All Rights Reserved〜 All For Securities Market 〜113. Opinion of JSF Board of Directors Regarding
Individual Agenda Items in Shareholder Proposal

Copyright Japan Securities Finance Co., LTD. All Rights Reserved〜 All For Securities Market 〜Agenda Item 1: Partial amendments to the Articles of Incorporation with regard to Disclosure of
Individual Remuneration for Representative Executive Officer & President
ProposalOpinion of the Board of Directors

The following Chapter
and Article shall be
newly established in theexisting Articles ofIncorporation.
Chapter IX
Disclosure of Officer
Remuneration
Article 38(Disclosure of
Remuneration for
Representative
Executive Officer &President)
The Company shallindividually disclose theamount (including nonmonetary remuneration)
paid to the executive
officer having the poweror representation as
remuneration for thepreceding fiscal year in
the Corporate
Governance Reportsubmitted to the Tokyo
Stock Exchange by theCompany.

The Board of Directors opposes this Proposal.
JSF, in accordance with laws and regulations, appropriately discloses the policies for determining the content
of remunerations of executive officers and directors (hereinafter, “Executive Officers, etc.”) and the total amount of
remunerations by officer classification in the business reports and annual securities reports.
In addition, the Proposal is related to the remunerations for Executive Officers, etc., and the Remuneration
Committee has deliberated the Proposal and reached the conclusion that governance of the remunerations for
Executive Officers, etc. at JSF is being appropriately managed by the Remuneration Committee, that
remunerations is being appropriately disclosed, and there is no need for the establishment of a provision such asthat of the Proposal in the Articles of Incorporation.
Also, at JSF the Remuneration Committee has the authority to decide the policies on the determination of thecontent of remunerations for Executive Officers, etc. and the details of individual remunerations for Executive
Officers, etc. Moreover, the Remuneration Committee has appropriately exercised this authority to appropriately
determine the details of individual remunerations for Executive Officers, etc. Specifically, the remunerations for
Executive Officers, etc. is based on the corporate philosophy and management policies, in a system and at a level
the coincides with the roles and expected functions of directors and executive officers, with an eye towards
sustainable growth and the enhancement of corporate value in the medium to long-term. Among others, theexecutive officer executive officer remuneration is set as monthly remuneration (base remuneration) and officer
bonuses and stock remuneration, with an eye towards a high degree of correlation with JSF’s earnings and shareprice.
Furthermore, the Shareholder Proposal states “There is concern that the president from the Bank of Japanlosing his incentives to enhance shareholder value since he is earning remuneration that far exceeds his
remuneration when he worked at the Bank of Japan, and to dispel this concern we are seeking the disclosure of
the president’s individual remuneration.” However, as addressed above, the remuneration of Executive Officers,etc. is established to work as an incentive consistent with the enhancement of corporate value, and is unrelated toremuneration at the Bank of Japan. The Proposing Shareholders fail to provide a basis as to how JSF’s
remuneration system is disincentivizing the enhancement of shareholder value, and their allegation is unrelated tothe enhancement of shareholder value.
Based on the foregoing the Board of Directors has determined that there is no need to establish a provisionsuch that in the Proposal in the Articles of Incorporation since JSF is appropriately and fully responding inaccordance with laws and regulations in both the determination and disclosure of remunerations.

Copyright Japan Securities Finance Co., LTD. All Rights Reserved〜 All For Securities Market 〜

13Agenda Item 2: Partial amendments to the Articles of Incorporation with regard to Disclosure of
Individual Remuneration for Officers Coming from Bank of Japan
ProposalOpinion of the Board of Directors

The following Article shallbe newly established in
the existing Articles ofIncorporation.
Article 39(Disclosure of
Remuneration for Officers
from Bank of Japan)
The Company shallindividually disclose themoney (including nonmonetary remuneration)
paid to the executive
officers, directors andspecial advisors who havea history of work at the
Bank of Japan and the
directors, advisers andcounselors of subsidiaries
who have a history ofwork at the Bank of Japanas remuneration for thepreceding fiscal year in
the Corporate
Governance Reportsubmitted to the Tokyo
Stock Exchange by theCompany.

The Board of Directors opposes this Proposal.
As set forth in the opinion of the Board of Directors regarding Agenda Item 1, at JSF the policies fordetermining the content of remunerations of executive officers and directors (hereinafter, “Executive Officers,etc.”) and the details of remunerations for individual Executive Officers, etc. is appropriately determined by the
Remuneration Committee based on its authority, and these policies and the total amount of remunerations byofficer classification is being appropriately disclosed in the business reports and annual securities reports.
In addition, the commissioning of special advisors is determined by the Board of Directors throughdeliberation by the Nominating Committee, their remuneration is determined by the Remuneration Committee,
and appropriate disclosure on these points is being provided in the Corporate Governance Report.
Also, the Proposal is related to the remunerations for Executive Officers, etc. and special advisors, and theRemuneration Committee has deliberated the Proposal and reached the conclusion that governance of the
remunerations for Executive Officers, etc. and special advisors at JSF is being appropriately managed by the
Remuneration Committee, that remunerations is being appropriately disclosed, and there is no need for theestablishment of a provision such as that of the Proposal in the Articles of Incorporation.
The reason for the proposal is a negative assessment of the appointment of officers from the Bank of Japanat JSF, but in light of the public role and uniqueness of the securities financing business that includes loans for
margin transactions, JSF focuses on the talent expected of executive offers and management, i.e. the ability to
fully recognized JSF’s public role in the execution of business, extensive knowledge of the overall finance andsecurities markets, the ability to nimbly respond to the various environmental changes encircling JSF in thefinance and securities sectors, and the like, and people from the Bank of Japan are appointed based on adetermination that they have these talents. Their benefits are commensurate to their work responsibilities, andthe payment status of remunerations is being appropriately disclosed by JSF and its consolidated subsidiaries
pursuant to laws and regulations.
Furthermore, the Shareholder Proposal states “It is very possible that people from the Bank of Japan enjoy
special treatment within the JSF Group landing cushy positions, and this special treatment is a risk of negating
the incentive for enhancing shareholder value. As such, we are seeking the disclosure of individual
remuneration for people from the Bank of Japan to clarify any existence of special treatment in terms of
remuneration.” However, the remuneration of Executive Officers, etc. is established to work as an incentive
consistent with the enhancement of corporate value, and is unrelated to remuneration at the Bank of Japan.
The Proposing Shareholders fail to provide a basis as to how JSF’s remuneration system is disincentivizing theenhancement of shareholder value, and their allegation is unrelated to the enhancement of shareholder value.
Based on the foregoing the Board of Directors has determined that there is no need to establish a provisionsuch that in the Proposal in the Articles of Incorporation.

Copyright Japan Securities Finance Co., LTD. All Rights Reserved〜 All For Securities Market 〜

14Agenda Item 3: Establishment of Special Advisors
ProposalOpinion of the Board of Directors

The following Chapter andArticle shall be newly
established in the existing
Articles of Incorporation.
Chapter X
SpecialAdvisors
Article 40(Special
Advisors)
The Company shall beentitled to establish
special advisors by
resolution of the Board of
Directors.

The Board of Directors opposes this Proposal.
The role of special advisors at JSF centers on business community activities and social contribution activities,
and since the commissioning of advisors is determined by the Board of Directors through deliberation by the
Nominating Committee and their remuneration is determined by the Remuneration Committee, disclosure onthese points is being provided in the Corporate Governance Report. JSF has determined that having a personwith past experience as president engage in these activities is expected to contribute in ways such as to themaintenance of relations in its business community as well as having an anticipated PR effect, and that this willlead to the enhancement of corporate value.
If the intent of this Proposal is the establishment of a special advisor system, we fail to understand thereason for proposing the stipulation of an establishment basis provision in the Articles of Incorporation. In
consideration of securing objectiveness and transparency in the special advisor system, JSF, as addressed
above determines and discloses the commissioning of advisor and their benefits through deliberation by
the Nominating Committee, Remuneration Committee and Board of Directors, and in the day to day
execution of business as well, the oversight and execution of business is separated by design in theorganization of a company with a nominating committee, etc., to create an appropriate decision making
system, and advisors at JSF are not actually involved in any management decisions. These efforts havesecured the objectiveness and transparency of the special advisor system, and there is no need to stipulate
a special advisor establishment provision in the Articles of Incorporation.
Furthermore, the Shareholder Proposal states “Governance related issues have been identified withregard to the advisory system itself, and the continued service of a someone who landed a cushy
appointment as president after leaving the Bank of Japan as special advisor after retiring, runs contrary tosocial justice (the “S” of the so-called ESG),” but this allegation is thought unrelated to the enhancement ofshareholder value.
As such, we have determined that there is no need to establish a provision such as that of the Proposal
in the Articles of Incorporation.

Copyright Japan Securities Finance Co., LTD. All Rights Reserved〜 All For Securities Market 〜

15Agenda Item 4: Partial amendments to the Articles of Incorporation with regard to Cross-Shareholdings

ProposalOpinion of the Board of Directors

The following Chapter and
The Board of Directors opposes this Proposal.
Article shall be newly
With cross-shareholdings, the status of dividends and valuation gains or losses, the status of transactions
established in the existingwith the company invested in, the history of the holdings and the like are validated each year by the Board of
Articles of Incorporation.
Directors, reduction is sought in those holdings the necessity for which is weak, and a determination is made on
Chapter XI
Securities
the reasonableness of the holdings based on the result of this validation. This is disclosed in the Corporate
Held by Company
Governance Report, and the status of cross-shareholding is further disclosed in the Annual Securities Report.
Article 41(Validation
Since FY2018, JSF has reduced its cross-held shares, reducing its holding of listed shares by 91% onof Purpose and Disclosure ofmarket price basis and reducing its holding of both listed and unlisted shares by 78% in total in the period
Results of Crossfrom March of 2018 through March of 2022. As of March 2022, JSF holds nine cross-held shares (twoShareholdings)
listed and seven unlisted) at a value of JPY 2,816,000,000, which accounts for merely 0.02% of its total(1)At least once a year, theassets and 2.04% of its total net assets on a consolidated basis. As such, general criticism of crossCompany communicates toshareholding is not warranted at JSF.
the issuers of cross-heldshares the desire to sell
Furthermore, this Proposal seeks a provision in the Articles of Incorporation that states “At least once athese shares in order toyear, the Company communicate to the issuers of cross-held shares the desire to sell these shares in ordervalidate as to whether theto validate as to whether the purposes of cross-shareholding at the Company, the ‘strengthening of
purposes of crossbusiness relations’ and the ‘undertaking of alliances’, are actually effectuated by cross-held shares.” But theshareholding at thenecessity of selling is an issue that should be validated by JSF, the response policy regarding the intent ofCompany, the “strengthening
holding, economic feasibility and the like is determined through deliberation by the Board of Directors, andof business relations” andthe “undertaking of alliances”, JSF has ensured a process for disclosing the results thereof in the Corporate Governance Report.
In addition, the Articles of Incorporation stipulate fundamental policies in the management of JSF, andare actually effectuated byas such it would not be appropriate to establish provisions on matters related to the individual and specificcross-held shares.
execution of business. Accordingly we have determined that there is no need to establish a provision such(2)The Company shalldisclose the content of theas that of the Proposal in the Articles of Incorporation.
responses from issuing
companies have beenobtained in response to therequest for sale to theissuing companies of thepreceding paragraph, byeach individual company, inthe corporate governancereport submitted by theCompany to the Tokyo Stock
Exchange.
Copyright Japan Securities Finance Co., LTD. All Rights Reserved〜 All For Securities Market 〜

16Agenda Item 5: Partial amendments to the Articles of Incorporation with regard to Sale ofShares and Unlisted REIT Held for Net Investment Purposes
ProposalOpinion of the Board of Directors

The following Article shallbe newly established in
the existing Articles ofIncorporation.
Article 42(Sale of Shares
and Unlisted REIT Heldfor Net Investment
Purposes)
The Company shall nolonger acquire, and shallsell by the end of March of2026 all shares andunlisted REIT for which
the purpose of holding is
net investment.

The Board of Directors opposes this Proposal.
JSF secures sufficient liquidity from the finance market at low interest rates to facilitate the stable operationof its security financing business that includes loans for margin transactions. It has raised additional revenues
by efficiently investing the excess funds arising in the course thereof in securities. In addition, JSF engages in awide range of financial intermediation business in the finance and securities markets through the lending andthe like of securities and funds. This financial intermediation business, due to the nature thereof, does not
simply invest its own capital and earn revenues, rather it leverages debt financing, and is touted on the whole asa management goal for achieving ROE in excess of the cost of equity. The concept under the corporate
governance code as well that the enhancement of corporate value should be conducted from a medium to longterm point of view, and JSF’s ROE goal will be achieved in a medium-term span by FY2025 through the steadyearning of profits by each division, including investment in securities.
In addition, JSF’s thinking on its business portfolio has been resolved by the Board of Directors anddisclosed on its corporate website, all business including investment in securities is expected to improve inmedium to long-term profitability, and at present there are no assets which we have determined should be sold.
In addition, the Articles of Incorporation stipulate fundamental policies in the management of a company,
and as such it would not be appropriate to establish provisions on matters related to the individual andspecific execution of business. Accordingly we have determined that there is no need to establish aprovision such as that of the Proposal in the Articles of Incorporation.

Copyright Japan Securities Finance Co., LTD. All Rights Reserved〜 All For Securities Market 〜17Agenda Item 6: Partial amendments to the Articles of Incorporation with regard to
Disclosure of Results of Exercise of Voting Rights
ProposalOpinion of the Board of Directors

The following Article shallbe newly established in
the existing Articles ofIncorporation.
Article 43(Disclosure of
Reasons for Not Voting
and Voting)
In principle, the Company
shall not exercise voting
rights with regard to theshares securing debt heldin the name of theCompany, shall examine
support or non-supportand exercise voting rights
individually only in
exceptional cases where itis evident that theshareholder value for thecorresponding shares will
be harmed, and shallprovide timely disclosurefor the reason for voting.

The Board of Directors opposes this Proposal.
The shares held by securities financing companies in connection with loans on margin transactions are notheld for pure investment purposes or cross-shareholding purposes, rather they are held on a temporary andformality basis by securities financing companies in the course of the execution of ordinary business. As such,these shares are exempted from the application of various regulations under the Financial Instruments andExchange Act (large-volume reporting regulations, tender offer regulations and major shareholder regulations).
Due to this construction under the Financial Instruments and Exchange Act, JSF, with regard to the shares it
holds with regard to loans on margin transactions, has enacted independent, fair and neutral voting standards
conforming to the nature of its business, to limit impact on the business activities of the issue company as muchas possible, based on the thinking that it serves a public role as infrastructure in the securities market withregard to voting as well, and this is tied to the enhancement of shareholder value. The disclosure of voting
standards and voting rights as proposed in this Proposal may incite issuing companies to manipulate voting at
JSF, and ultimately have an effect on the business activities of the issuing company, having the opposite effecton JSF’s maintenance of fairness and neutrality, and going against the foregoing intent of the Financial
Instruments and Exchange Act.
In addition, the Articles of Incorporation stipulate fundamental policies in the management of JSF, and assuch it would not be appropriate to establish provisions on matters related to the individual and specificexecution of business. Accordingly we have determined that there is no need to establish a provision such asthat of the Proposal in the Articles of Incorporation.

Copyright Japan Securities Finance Co., LTD. All Rights Reserved〜 All For Securities Market 〜

18