The following is a transcription of the Japan Securities Finance Co.,
Ltd. financial results presentation for the 1st half of FY2021 held on
November 24, 2021.
Speakers
1. Shigeki Kushida, Representative Executive Officer and Pres
ident, Japan Securities Finance
2. Masaru Sekiguchi Managing Executive Officer, Japan Securit
ies Finance
Presented by
Japan Securities Finance Co., Ltd.
Company website
https://www.jsf.co.jp

１．Executive Summary (Consolidated)

Masaru Sekiguchi: My name is Masaru Sekiguchi Managing Executive Officer, Jap
an Securities Finance. I am in charge of the Corporate Planning Department, w
hich oversees accounting and finance. Today, I will present our financial res
ults for the 1st half of FY2021.

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Page three shows an executive summary, which provides an overview of our cons
olidated financial results for the 1st half of FY2021. Our performance result
ed in operating revenues of 15,056 million yen, down 1.5% year on year, opera
ting income of 3,442 million yen, up 24.8%, recurring income was 3,851 millio
n yen, up 26.7% year on year, and net income was 2,745 million yen, up 25.5%
year on year.
Operating revenues declined overall. Although revenues increased for our fourbusinesses, excluding general stock lending for the Securities Financing Business, and our subsidiary JSFTB, revenues declined on lower stock loan balances due for the Margin Loan Business.
On the other hand, operating income, recurring income, and net income all increased due to an increase in reversal amounts resulting from revisions to thecalculation method for the allowance for doubtful accounts that we adopted fr
om this fiscal year.
２．Summary Financial Results for 1H, FY2021

This page shows a summary of consolidated performance for the Japan Securities Group and non-consolidated performance of each Group company. Operating rev

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enues and operating expenses shown here exclude premium charges, which do not
impact income.
Please look at the rows titled “Ex. Premium Charges”. Excluding premium charges, operating revenues increased 17.4% to 13,595 million yen and operating
expenses increased 32.4% to 6,724 million yen.
Amounts excluding premium charges include the impact of decreased revenues fr
om the Margin Loan Business due to lower stock loan balances, i.e., the decli
ne in premium charges. As such, looking at amounts excluding premium charges
more accurately reflects our status.
We also recorded 23 million yen in extraordinary income. During the 1st quarter, we recorded gains on the sale of certain fixed assets as part of the disp
osal of unnecessary objects when we relocated our Osaka Branch at the end of
August. Figures for the 2nd quarter are the result of having recorded relocat
ion expenses.
３．Summary Financial Results for 1H, FY2021（JSF, non-consolidated）

Next, please look at page 5. I will explain key points concerning non-consoli
dated financial results for Japan Securities Finance. To provide a better rep

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resentation of our current situation, the figures in these materials exclude
negative interest per diem (premium charges) for margin transactions, which,as I explained previously, do not impact income.
First, operating revenues, increased by over 1.8 billion yen year on year to
11,812 million yen. As a breakdown of each business, the Margin Loan Businessrecorded decreased revenues due to lower stock loan balances.
Conversely, revenues increased for the Securities Financing Business, which collectively refers to capital and securities lending operations other than ma
rgin transactions. Revenues increased significantly for securities investment, which we categorize under other revenues. Later, I will provide details on
key points of financial earnings for each business.
Operating expenses increased 1,717 million yen year on year to 6,598 million
yen due to increased expenses for procuring government bonds in the Bond Lend
ing Business. General and administrative expenses decreased by 505 million ye
n year on year due mainly to a reduced burden resulting from a revision to ou
r calculation method for the allowance for doubtful accounts, as I explained
earlier. As a result, operating income, recurring income, and net income all
increased significantly.

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４．Financial Highlight （Margin Loan Business）

Next, please look at page 6. I will explain key points concerning non-consoli
dated financial results for Japan Securities Finance. I will begin with trends in margin transactions. The graphs at the bottom of the slide show transiti
ons in monthly average margin loan and stock loan balances for FY2020 and the
1st half of FY2021.
The blue graph to the left shows margin loans and the red graph to the rightshows stock loans. In each graph, the light-colored lines indicate FY2020 andthe dark lines indicate the 1st half of FY2021. The horizontal line in each graph represents margin loan rate and stock loan rate, respectively. At present, margin loan interest is 0.60 percent and stock loan rate is 0.40 percent.
Margin loan balances were firm, transitioning at levels higher than the same
period of the previous fiscal year. Average balances for the 1st half were 28
6.7 billion yen, a year on year increase of 67 billion yen. This slightly out
performs our assumption of 280 billion yen based on estimates made at the beg
inning of the fiscal year.
On the other hand, since the beginning of the fiscal year, stock loan balances have transitioned at a rate underperforming the same period of the previous

5fiscal year. In September, we saw new sale orders when the Nikkei index retur
ned to the 30,000 yen range, which drove balances back towards the 200 billio
n yen range. However, 1st half average balances decreased significantly, by 1
26.6 billion yen compared to the same period of the previous fiscal year to 1
88 billion yen. This is significantly below our assumptions 300.6 billion yen
based on estimates made at the beginning of the fiscal year.
As reference, the most recent average balances for October, which we announced on November 1, were 299.6 billion yen for margin loans and 186.6 billion yen for stock loans.
５．Financial Highlight （Securities Financing）

Next, page 7 shows highlights for our Securities Financing business. In our 6
th Medium-Term Management Plan, we are working to expand revenue opportunitie
s by applying our cumulative knowhow related to capital transactions and secu
rities transactions to strengthen and expand the Securities Financing Busines
s. The term Securities Financing Business excludes margin transactions and is
the term we use to collectively refer to five businesses: loans for general m
argin transactions, loans to securities companies, loans to individual invest
ors or firms, general stock loans, and bond services.

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As of the 1st half of FY2021, the general stock loans business recorded signi
ficantly decreased revenues due to a declined borrowing demand but the bond s
ervices business remained firm. Also, loans for general margin transactions,loans to securities companies, and loans to individual investors or firms alloutperformed the same period of the previous fiscal year, resulting in overall increased revenues for the Securities Financing Business.
６．Financial Highlight（Securities Investment of JSF, non-consolidated）

Next, I will explain highlights from our securities investment business. Please look at page 8. The bar graph at the upper right of the slide shows transitions in our investment portfolio.
During our 6th Medium-Term Management Plan, we are working to diversify investment securities with a focus on pursing the effective utilization of capita
l. In FY2018, domestic bonds made up nearly 90 percent of our portfolio withthe remaining 10 percent comprising a mix of foreign bonds, stocks, and investment trusts. However, at of the end of September 2021, domestic bonds repres
ent 80 percent of our investment portfolio.

7Non-consolidated investment revenues from securities for the 1st half of FY20
21 increased by roughly 1.2 billion yen from the previous fiscal year to 2,78
6 million yen on gains from the sale of investment securities.
７．Summary Financial Results for 1H, FY2021（JSF Trust Bank）

Next, I will discuss financial results for JSF Trust Bank, our wholly owned s
ubsidiary. Please turn to page 9.
Our trust business focuses on custodian type trust services such as segregate
d cash of customers deposited at the brokers and asset backed loans. Continui
ng the trend from the 1st quarter, we achieved record high trust fees in the
2nd quarter of FY2021 and outperformed the same period of the previous fiscal
year.
Looking at segregated cash of customers deposited at the brokers, crypto asset trust balances were firm amid a recovery on the Bitcoin market. As for asset backed loan trusts, we believe success in capturing balance accumulation at
the beginning of the fiscal year contributed to the increase in trust fees inthe difficult environment of ultra-low interest rates.

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Looking at banking services, interest income increased on higher loan balances but reversals of doubtful accounts decreased by 160 million yen year on yea
r. Overall, recurring revenues were 1,519 million yen, an increase of 2.1 million yen year on year. Furthermore, recurring expenses were 768 million yen,down 1.1 million yen year on year. Depreciation expenses increased due to ban
k accounting system upgrades while interest expenses decreased.
As a result, recurring income increased by 33 million yen year on year to 750
million yen. However, due to increased income tax expenses, net income decrea
sed by 44 million yen to 519 million yen.
８．Balance Sheet Summary （end of Sep-2021, consolidated）

Page 10 shows our balance sheet as of the end of September 2021. Compared tothe end of March, total assets increased by 1,218.7 billion yen. Looking at t
otal assets, receivables under resale agreement and collateral money of secur
ities borrowed increased while cash & deposits and short-term loans receivabl
e decreased.
Cash and deposits decreased due to capital strategy. Receivables under resaleagreement and collateral money of securities borrowed increased due to an inc

9rease in gensaki transactions and repo transactions in the bond services divi
sion.
Looking at liabilities, the bond services division similarly has payables und
er repurchase agreements and collateral money received of securities lent, bo
th of which increased significantly. We record standby funds in trust accounts as borrowed money from trust accounts. Compared to the end of March, end of
September amounts decreased by 85.4 billion yen.
９．Estimated Figures for FY2021

Next, I will discuss our estimated figures for FY2021. Please look at page 1
1. First, I will explain our non-consolidated figures. The average balances for margin transactions representing the preconditions for our estimates, whic
h we calculate based on the latest market trends, are 290 billion yen for mar
gin loans and 190 billion yen for stock loans. Compared to previous estimate
figures in July, we revised margin loan balances upward by 10 billion yen andrevised stock loan balances downward by 40 billion yen.
The estimate figure for JSF non-consolidated in FY2021 is shown near the center of the table to the right. We conducted an upward revision to reflect decr
eased general and administrative expenses resulting from the revision of the10

calculation method for the allowance for doubtful accounts and favorable perf
ormance by the Securities Financing Business. Our revised estimates are opera
ting income of 3,808 million yen, recurring income of 5,495 million yen, andnet income of 4,196 million yen, each representing an upward revision of 400
to 500 million yen.
Similarly, we conducted an upward revision for JSF Group consolidated figures, which are shown in the upper part of the table, to reflect JSF earnings growth and firm performance for JSF Bank, particularly trust services. Comparedto our initial estimates, we revised operating income upward by 700 million yen to 5.7 billion yen, ordinary income upward by 800 million yen to 6.5 billi
on yen, and net income upward by 500 million yen to 4.5 billion yen.
As for margin transaction balances, the key indicator for evaluating our revenue trends, please refer use the monthly average balance as reference. This concludes my presentation.
1. Background of the medium-term management policy

Shigeki Kushida: My name is Shigeki Kushida, Representative Executive Officer
and President of Japan Securities Finance. I will explain the key points of o11

ur medium-term management policy, which was approved by our board of directors on November 19.
It has been approximately 18 months since we launched our 6th Medium-Term Man
agement Plan in March 2020 to expand revenues and steadily improve profitabil
ity by more effectively utilizing our capital, including human resources, tow
ards maintaining the high standard of financial soundness expected of a compa
ny providing infrastructural functions to the securities market.
As was explained in the presentation on our interim financial results, the cu
rrent environment is conducive to producing expected results. While we are steadily recording favorable results, the background driving our decision to dr
aft this medium-term management policy, involves the recent Corporate Governa
nce Code revisions and the upcoming shift to a new market segment on the TSE.
As a listed company, we recognized the need to elevate our commitment to appl
ying an advanced governance structure to pursue sustainable growth and of med
ium- and long-term improvements in our corporate value while also striving fo
r a higher level of transparency.
We view the various changes affecting listed companies as an opportunity to a
ccelerate initiatives related to our ongoing corporate reforms. We drafted this new medium-term management policy to enhance our engagement with capital markets and meet the expectations of our investors and shareholders.

122. Management Philosophy and Future Vision

Please turn to page 14. As we have explained in the past, our management philosophy is to maintain a keen awareness of our role as a public institution sp
ecializing in securities finance and contribute to the development of the sec
urities market by actively meeting the diverse needs of the securities and fi
nancial sectors and improving the long-term interests of participants and use
rs in the securities market.

One aspect of our future vision about which I have touched on in the past is
the fact that we must maintain the financial soundness as a securities financ
e company providing infrastructural functions to the securities market.

At the same time, as is evident through the revisions to the Corporate Govern
ance Code, as a listed company, we must achieve the sustainable growth expect
ed of a listed company and enhance our medium- and long-term corporate value.

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3. Medium-term management Goals

Based on our management philosophy and future vision, we outlined medium-term
management goals of achieving an ROE of 4% by FY2022, the final year of our current Medium-Term Management Plan, and an ROE of 5% between FY2023 and FY202
5, the period of our next Medium-Term Management Plan.
To elaborate a little, as I mentioned earlier, this represents our commitment
to maintaining the strong financial soundness required of a company providing
and maintaining the infrastructural functions to the market.
To reflect our awareness of the need to further enhance our commitment and tr
ansparency, we added ROE to our management goals. ROE is generally used as anindicator of profitability and capital efficiency.
Prior to adding ROE, our Board of Directors discussed cost of equity levels.
Through those deliberations and sharing of awareness, we reached the conclusi
on that the mid-4% range was a suitable figure, and decided to set a goal ROE
that exceeds that figure.
To balance financial soundness while also improving profitability and capitalefficiency, we will aim to achieve our management goals by integrating busine14ss management and risk management, including management goals, under the Risk
Appetite Framework we adopted during the current Medium-Term Management Plan.
4. Strategies

Next, I will explain how the strategies and policies related to how we will achieve our management goals. Our medium-term management policy reflects our enhanced commitment to achieving sustainable growth and medium- to long-term improvements in our corporate value and to increasing transparency. The manage
ment goals we have set reflect that commitment.
However, we do not intend to change our current Medium-Term Management Plan.
Rather, we are aiming to accelerate and strengthen the initiatives outlined in the Medium-Term Management Plan.
Of course, the new medium-term management policy I presented earlier covers t
he period of our next Medium-Term Management Plan. As such, next fiscal year,
we will apply this policy to advance deliberations concerning specific strategies for our next Medium-Term Management Plan.
The strategies shown in this slide represent the core policies for which we are working to accelerate and strengthen initiatives during our current Medium

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-Term Management Plan. Our strategy largely breaks down into the three items
shown here.
The first is to strengthen our Securities Finance Business, which is centeredon the margin loan business. This will involve accelerating and strengthening
services we are addressing in the current Medium-Term Management Plan.
The second is reinforcing Group consolidated management. This is something wehave recognized for some time but we will work to improve overall Group profitability and capital efficiency by further utilizing Group resources such as
JSF Bank and Japan Building.
The third is to improve our operational efficiency. We will review business processes to promote increased work efficiency. We will eventually link these
efforts to reducing our general and administrative expenses but, for next fis
cal year and beyond, we will work to strengthen profitability by focusing on
the strategy that successfully improving our operational efficiency, includin
g meaningfully reducing in our system amortization burden, will effectively l
ead to reduced general and administrative expenses.
We will also continue to review other areas. We will evaluate the details ofother initiatives in the next Medium-Term Management Plan.
We also recognize that sustainability is an important issue. We will promote
environmentally friendly business operations and diverse workstyles for emplo
yees.

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5. Capital management and shareholder value

Next, I will discuss our approach to capital management and shareholder valu
e. In addition to increasing profitability by accelerating and strengthening
initiatives related to our strategies, we will also work to improve our capit
al efficiency. In terms of how we view our current level of shareholdersʼ equity, we feel that levels are sufficient for maintaining strong financial soundness and, as a listed company, achieving sustainable growth while also impr
oving our medium and long-term corporate value.
We view capital adequacy ratio as a major indicator by which we measure our shareholdersʼ equity level. From this perspective as well, our most recent ca
pital adequacy ratio is sufficient for promoting these types of strategies and pursuing our management goals.
We will further enhance shareholder returns. From FY2021 through FY2025, theperiod during which we will aim for an ROE of 5%, we will implement dynamic dividend and share repurchases to aim for a cumulative dividend payout ratio of 100%.
Our full-year dividend forecast for FY2021 is unchanged from the 30 yen per s
hare outlined in our FY2021 dividend forecast announced on November 2. From F

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Y2022 through FY2025, we will aim for aggressive dividends that do not fall b
elow 30 yen per share.
Investors and shareholders all have various expectations concerning sharehold
er returns. We believe that by setting numerical goals in the form of a perce
ntage for dividend payout ratio and a dividend amount, we can implement a policy of shareholder returns that meets a diverse range of needs.
6. Corporate Governance Response

Next, I will discuss our corporate governance response. To respond to revisio
ns to the Corporate Governance Code and the transition to a new market segment on the TSE, we want to increase our sense of urgency in addressing the corp
orate governance issues expected of a listed company, including enhancing thefunctions of the Board of Directors and responding to sustainability issues.
We established a new Corporate Governance Office as the department in chargeof these initiatives. This office will oversee all matters related to corpora
te governance. In addition to evaluating measures and promoting initiatives,
the new office will serve as a secretariat to the Board of Directors as well
as work to strengthen IR/PR activities.

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Lastly, we focused on cost of equity and set ROE-based management goals by ou
tlining the milestones we are working towards in a format that is easy for ou
r shareholders to understand. It may be that some will view our ROE goal as not being particularly aggressive.
However, this is a very challenging goal for our company. ROE at the end of t
he previous fiscal year was 3%, so this means increasing ROE by one percent during the remainder of the current Medium-Term Management Plan and up to five
percent during the next Medium-Term Management Plan.
[reference Ⅲ] Trend of Total Shareholder Return（TSR）

In that sense, there is room for discussion concerning our ROE level. Howeve
r, throughout our history, we have maintained high-level shareholder returns
and we will strive to maintain such performance through FY2025 and beyond. We
hope our shareholders continue to show understanding of our policies.
Among todayʼs materials, this slide represents trends in our shareholder val
ue. We have maintained shareholder value that outperformance average levels f
or TOPIX.

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I want to thank you for the opportunity to present this information and ask for your continued understanding, support, and cooperation. This concludes mypresentation.

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