Fiscal 2011
(April 1, 2011 to March 31, 2012)

Japan Finance Organization for Municipalities

Financial Statements

Japan Finance Organization for Municipalities

Contents
Financial Statements
Balance Sheets�
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Statements of Income�
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�3
Statements of Appropriation of Profit [General account/Management account]�
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Statements of Changes in Net Assets
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�6
Statements of Cash Flows�
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�8
Notes to Financial Statements�
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�9

1

Financial Statements
Balance Sheets(Millions of yen) (Thousands of U.S. dollars)(As of March 31, 2011 and 2012)

Item

Fiscal 2010
(March 31,
2011)

Fiscal 2011
(March 31, 2012)

Item

Fiscal 2010
(March 31,
2011)

AmountFiscal 2011
(March 31, 2012)
AmountAssetsLiabilities

Loans (Note 4)¥22,231,856¥22,387,411 $271,329,669

Bonds (Notes 7 and 8)

Securities (Note 18)457,590762,987

9,247,212

Borrowed money (Note 9)

Cash andbank deposits

516,633

172,250

2,087,627

Other liabilities

Other assets

17,033

14,894

180,523

Tangible fixed
assets (Note 6)

2,918

2,563

Intangible fixed
assets (Note 6)

756

600

¥18,327,190¥18,176,696 $220,296,886-

30,000363,592

17,69815,373

186,318

Reserve for bonuses (Note 10)

41

47

580

31,067

Reserve for directors’
bonuses (Note 10)

6

6

84

7,278

Reserve for retirement
benefits (Notes 10 and 13)

195

146

1,780

Reserve for retirement
benefits for directors andcorporate auditors (Note 10)

27

23

291

Fund for improvement ofoperations of municipalities

915,823

919,871

11,148,604

Basic fund for improvementof operations ofmunicipalities (Note 12)908,104

911,935

11,052,420

Additional fund for
improvement of operationsof municipalities (Note 12)

7,719

7,936

96,184

Reserve under special laws

3,896,421

4,104,844

49,749,662

Reserve for interest rate
volatility (Note 11)

660,000

880,000

10,665,374

Management account reserve forinterest rate volatility (Note 11)3,136,532

3,137,557

38,026,385

Reserve for interest rate reduction

99,88987,287

1,057,903

23,157,405

23,247,010

281,747,797

Capital16,602

16,602201,213Retained earnings

13,86029,393356,238

General account surplus
reserve

13,86029,393356,238

Valuation, translation
adjustments and others(8,645)(5,964)(72,291)

Management accountsurplus reserve

47,56553,666650,419

Total net assets

69,382

93,696

1,135,579

Total liabilities
Net Assets

Total assets¥23,226,787 ¥23,340,707 $282,883,376 Total liabilities and net assets ¥23,226,787 ¥23,340,707 $282,883,376

See notes to financial statements.

2

Statements of Income(For the years ended March 31, 2011 and 2012)

Item(Millions of yen) (Thousands of U.S. dollars)

Fiscal 2010
(April 1, 2010 toMarch 31, 2011)

Fiscal 2011
(April 1, 2011 to March 31, 2012)

AmountAmountIncome¥539,997¥511,805$6,202,949

539,812511,641

6,200,967

Fees and commissions

134

128

1,561

Other income

50

34

421

292,428

281,749

3,414,734

283,177

274,320

3,324,690

Fees and commissions

269

275

3,334

Other operating expenses

4,418

4,539

55,016

General and administrative expenses

2,374

2,385

28,911Other expenses

2,187

229

2,783

2,187

216

2,629

-

12

154

Ordinary income

247,569

230,055

2,788,215

Special gains

233,994

232,601

2,819,072

Reversal of management account reserve forinterest rate volatility (Note 11)

220,000

220,000

2,666,343

Reversal of reserve for interest rate reduction

13,994

12,601

152,729

465,489

441,024

5,345,101

Provision for reserve for interest rate volatility (Note11)

220,000

220,000

2,666,343

Provision for management account reserve forinterest rate volatility (Note 11)245,489

221,024

2,678,758¥16,074¥21,632$262,186

Interest income

Expenses
Interest expenses

Transfer to fund for improvement of operations ofmunicipalities (Note 12)
OthersSpecial losses

Net income
See notes to financial statements.

3

Statements of Appropriation of Profit [General account](For the year ended March 31, 2011)(Millions of yen)

1 Profit available for appropriation¥8,025

Net income¥8,025

Accumulated deficit brought forward-

2 Profit appropriatedSurplus reserve

8,025

8,025

Statements of Appropriation of Profit [General account](For the year ended March 31, 2012)(Millions of yen)

1 Profit available for appropriation¥15,532

Net income¥15,532

Accumulated deficit brought forward-

2 Profit appropriatedSurplus reserve

15,532

15,532(Thousands of U.S. dollars)

1 Profit available for appropriation$188,249

Net income$188,249

Accumulated deficit brought forward-

2 Profit appropriatedSurplus reserve

188,249

188,249

Notes: 1. Profit was appropriated at the end of this fiscal year in accordance with the provisions of Article 39, Section 1 of the Japan
Finance Organization for Municipalities Law (Law No. 64, 2007; hereinafter the “Law”).
2. Surplus reserve appropriated was posted as general account surplus reserve on the balance sheets.
See notes to financial statements.

4

Statements of Appropriation of Profit [Management account](For the year ended March 31, 2011)(Millions of yen)

1 Profit available for appropriation¥8,048Net income¥8,048

Accumulated deficit brought forward-

2 Profit appropriatedSurplus reserve

8,048

8,048

Statements of Appropriation of Profit [Management account](For the year ended March 31, 2012)(Millions of yen)

1 Profit available for appropriation¥6,100Net income¥6,100

Accumulated deficit brought forward-

2 Profit appropriatedSurplus reserve

6,100

6,100

(Thousands of U.S. dollars)

1 Profit available for appropriation$73,937

Net income$73,937

Accumulated deficit brought forward-

2 Profit appropriatedSurplus reserve

73,93773,937

Notes: 1. Profit was appropriated at the end of this fiscal year in accordance with the provisions of Article 13, Section 8 of the
supplementary provisions of the Law.
2. Surplus reserve appropriated was posted as management account surplus reserve on the balance sheets.
See notes to financial statements.

5

Statements of Changes in Net Assets(For the year ended March 31, 2011)

Valuation,translation
Stockholders’ equity
adjustments
and others Management
account
Retained earnings
Unrealized
surplusTotal
gain/
reserve
GeneralTotal
stockholders’ (loss) fromaccount
retained
equityhedging
surplusearnings
instruments
reserve

CapitalBalance at April 1, 2010

(Millions of yen)

Total
net
assets¥16,602¥5,834¥5,834¥22,436¥(1,340)¥39,517¥60,613

Net income

-

8,025

8,025

8,025

-

8,048

16,074

Net changes duringaccounting period
in items other thanstockholders’ equity

-

-

-

-

(7,305)-(7,305)

-

8,025

8,025

8,025

(7,305)

8,048

8,768

¥16,602¥13,860¥13,860¥30,462¥(8,645)¥47,565¥69,382

Changes duringaccounting period

Net changes duringaccounting period
Balance at March 31,
2011

6

(For the year ended March 31, 2012)

Valuation,translation
Stockholders’ equity
adjustments
and others Management
account
Retained earnings
Unrealized
surplusTotal
gain/
reserve
GeneralTotal
stockholders’ (loss) fromaccount
retained
equityhedging
surplusearnings
instruments
reserve

CapitalBalance at April 1, 2011

(Millions of yen)

Total
net
assets¥16,602¥13,860¥13,860¥30,462¥(8,645)¥47,565¥69,382

Net income-

15,532

15,532

15,532-

6,100

21,632

Net changes duringaccounting period
in items other thanstockholders’ equity

-

-

-

-

2,681

-

2,681

-

15,532

15,532

15,532

2,681

6,100

24,314¥16,602¥29,393¥29,393¥45,995¥(5,964)¥53,666¥93,696

Changes duringaccounting period

Net changes duringaccounting period
Balance at March 31,
2012(For the year ended March 31, 2012)(Thousands of U.S. dollars)

Valuation,translation
Stockholders’ equity
adjustments
and others Management
account
Retained earnings
Unrealized
surplusTotal
gain/
reserve
GeneralTotal
stockholders’ (loss) fromaccount
retained
equityhedging
surplusearnings
instruments
reserve

Total
net
assets$201,213$167,989$167,989$369,202$(104,785)$576,482$840,899

Net income-

188,249

188,249

188,249-

73,937262,186

Net changes duringaccounting period
in items other thanstockholders’ equity

-

-

-

-

32,494-32,494-

188,249

188,249

188,249

32,49473,937

294,680$201,213$356,238$356,238$557,451$(72,291)$650,419$1,135,579

CapitalBalance at April 1, 2011
Changes duringaccounting period

Net changes duringaccounting period
Balance at March 31,
2012
See notes to financial statements.

7

Statements of Cash Flows(For the years ended March 31, 2011 and 2012)

Item(Millions of yen) (Thousands of U.S. dollars)

Fiscal 2010
(April 1, 2010 toMarch 31, 2011)

Fiscal 2011
(April 1, 2011 to March 31, 2012)

AmountAmountⅠ Cash flows from operating activities

Net income
Depreciation and amortization
Interest income
Interest expenses
Increase/(decrease) in reserve for bonuses
Decrease in reserve for directors’ bonuses
Decrease in reserve for retirement benefits
Decrease in reserve for retirement benefits for
directors and corporate auditors
Increase in fund for improvement ofoperations of municipalities
Increase in reserve for interest rate volatility
Increase in management account reserve forinterest rate volatility
Decrease in reserve for interest rate reduction
Net (increase)/decrease in loans
Net increase/(decrease) in bonds
Net increase/(decrease) in borrowed money
Interest received
Interest paid
Others¥16,074353(539,812)
283,177
(1)
(0)
(14)

¥21,632
345(511,641)
274,3206(0)(48)$262,186
4,189(6,200,967)
3,324,690
75
(0)
(589)

(28)

(3)

(39)

2,187

216

2,629

220,000

220,000

2,666,343

25,4891,024

12,414(13,994)(201,628)(211,245)
539,475(279,095)(7,434)(12,601)(155,554)(154,272)
30,000513,086(271,287)
1,507(152,729)(1,885,282)(1,869,738)
363,592
6,218,480(3,287,933)
18,271(166,498)(43,268)(524,408)

Proceeds from redemption of securities
Purchases of securities
Purchases of tangible fixed assets
Purchases of intangible fixed assets
Proceeds from sales of tangible fixed assets

6,711,500(6,184,118)
(15)
(195)
-

4,065,600(4,370,780)
(108)
(75)
421

49,274,027(52,972,742)(1,320)
(920)
5,106

Net cash provided by/(used in) investing activities

527,170(304,944)(3,695,849)

6,696

3,830

46,425

6,696

3,830

46,425---367,368(344,382)(4,173,832)

Ⅵ Cash and cash equivalents at beginning of year

149,264

516,633

6,261,459

Ⅶ Cash and cash equivalents at end of year

¥516,633¥172,250$2,087,627

Net cash used in operating activities
Ⅱ Cash flows from investing activities

Ⅲ Cash flows from financing activities

Revenue from contributions made frommunicipally operated racing
Net cash provided by financing activities
Ⅳ Effect of exchange rate changes on cash andcash equivalents

Ⅴ Net increase/(decrease) in cash and cash

equivalents

See notes to financial statements.

8

■Notes to Financial Statements
1. Basis of Presentation
Japan Finance Organization for Municipalities (hereinafter, “JFM”) has prepared financial statements in accordance with
the Japan Finance Organization for Municipalities Law (Law No. 64, 2007; hereinafter the “Law”), the ordinances basedon the Law and other regulations applicable to JFM and accounting principles generally accepted in Japan.
   Since JFM does not have any subsidiaries or affiliates, it does not prepare consolidated financial statements.
   Amounts less than one million yen have been omitted. As a result, the totals in Japanese yen shown in the financial
statements do not necessarily agree with the sum of the individual amounts.
   The translation of the Japanese yen amounts into U.S. dollars is included solely for the convenience of readers
outside Japan, using the prevailing exchange rate as of March 31, 2012, the final business day of the fiscal year, whichwas ¥82.51 to U.S. $1.

2. Summary of Significant Accounting Policies(1) Securities
Held-to-maturity securities are carried at amortized cost (straight-line method).
(2) Derivative transactions
Derivative transactions are carried at fair value with changes in unrealized gain or loss charged or credited to income,
except for those which meet the criteria for hedge accounting.
(3) Depreciation(a) Tangible fixed assets
Depreciation of tangible fixed assets is calculated by the straight-line method based on the estimated useful lives
and the residual value determined by management. The estimated useful lives of major items are as follows:   Buildings: 20 to 41 years   Others: 2 to 19 years(b) Intangible fixed assets
Amortization of intangible fixed assets is calculated by the straight-line method based on the estimated useful
lives and the residual value determined by management. Software for internal use owned by JFM is amortizedover 5 years.
(4) Deferred assets
Bond issuance costs are expensed in full when incurred.
(5) Translation of assets and liabilities denominated in foreign currencies into Japanese yen
Monetary assets and liabilities denominated in foreign currencies, for which foreign currency swaps or foreign exchange
forward contracts are used to hedge the foreign currency fluctuation, are translated at the contracted rate as theseswap contracts or the forward contracts qualify for deferral hedge accounting.
(6) Reserves(a) Reserve for possible loan losses
JFM has never experienced any loan losses. Accordingly, no reserve for loan losses has been maintained.
(b) Reserve for bonuses
Reserve for bonuses is provided for payment of bonuses to employees, in the amount of estimated bonuses,
which are attributable to the fiscal year.
(c) Reserve for directors’ bonuses
Reserve for directors’ bonuses is provided for payment of bonuses to directors, in the amount of estimatedbonuses, which are attributable to the fiscal year.
(d) Reserve for retirement benefits
Reserve for retirement benefits is provided for payment of retirement benefits to employees, in the amount deemed
accrued at the fiscal year-end, based on the projected retirement benefit obligation and fair value of plan assets
at the fiscal year-end.
(e) Reserve for retirement benefits for directors and corporate auditors
Reserve for retirement benefits for directors and corporate auditors is provided for payment of retirement benefits
to directors and corporate auditors, in the amount deemed accrued at the fiscal year-end based on the internal
policies.
(7) Hedge accounting(a) Hedge accounting method
Interest rate swaps used to hedge the risk of interest rate fluctuations that qualify for hedge accounting and meet
specific matching criteria are not measured at fair value, but the differential paid or received under the swap
agreements is recognized and included in interest expense or income. If swap contracts or forward contracts
used to hedge the risk of foreign currency fluctuation qualify for deferral hedge accounting, the foreign currencydenominated assets and liabilities are translated at the contracted rate.
(b) Hedging instruments and hedged items(ⅰ) Hedging instruments・・・Interest rate swaps

9

Hedged items・・・・・・・・・Bonds and borrowed money(ⅱ) Hedging instruments・・・Currency swaps
Hedged items・・・・・・・・・Foreign currency-denominated bonds(ⅲ) Hedging instruments・・・Foreign exchange forward contracts
Hedged items・・・・・・・・・Receipt of interest and principal of foreign currency-denominated bank deposits(c) Hedging policy
JFM uses hedging instruments as a means of hedging exposure to interest rate risk and foreign exchange risk.
Hedged items are identified by each individual contract.
   As a means of hedging foreign exchange fluctuation risks associated with the receipt of interest and principalof foreign currency-denominated bank deposits, a foreign exchange forward contract is entered into at the timeof each deposit to hedge the risks.
(d) Assessment of hedge effectivenessJFM ensures hedging instruments and hedged items have the same major terms when entering into hedgetransactions to offset bond and borrowed money market fluctuation risks. Accordingly, JFM deems these to behighly effective and thus does not assess effectiveness. Moreover, a periodic assessment of hedge effectivenessfor interest rate swaps, currency swaps and forward contracts that qualify for deferral hedge accounting is omitted
when the exceptional accrual method is applied.
(8) Cash and cash equivalents
Cash and cash equivalents in the statement of cash flows consist of “Cash and bank deposits” on the balance
sheets.
(9) Fund for improvement of operations of municipalities
In accordance with the provisions of Article 46, Section 1 of the Law, JFM has established the fund for improvementof operations of municipalities to reserve contributions as stipulated in Article 32-2 of the Local Finance Law (Law No.
109, 1948). Also, pursuant to the provisions of Article 46, Section 5 of the Law, income arising from the investment of
the fund (hereinafter, “investment income”) is used to reduce interest rates of the loans to municipalities, and if there
is any surplus in the investment income after this interest rate reduction process, the surplus amount is added to thefund. Further, pursuant to the provisions of Article 46, Section 6 of the Law, if there is any shortfall after the interest
rate reduction process, the shortfall is covered by withdrawal of the fund within the limits of the total of the additional
portion to the fund made up to the previous fiscal year and the contributions made in the most current fiscal year.
(10) Reserve for interest rate volatility and management account reserve for interest rate volatility
The reserve for interest rate volatility is set aside to prepare for interest rate risk associated with refinancing of JFM
bonds (excluding the bonds issued by the former Japan Finance Corporation for Municipal Enterprises; hereinafter,“former JFM”) pursuant to the provisions of Article 38, Sections 1 and 3 of the Law, and Article 9, Section 8 of the
supplementary provisions of the Law, and is calculated and accounted for based on the provisions of Article 34 of the
Ministerial Ordinance on Finance and Accounting of Japan Finance Organization for Municipalities (Ordinance No. 87
of the Ministry of Internal Affairs and Communications, 2008; hereinafter, “Ordinance on Finance and Accounting”) and
Article 22 of the Government Ordinance on preparation of relevant government ordinances and provisional measures
for the abolishment of the Japan Finance Corporation for Municipal Enterprises Law (Government Ordinance No.
226, 2008; hereinafter, “Preparation Ordinance”).
   The management account reserve for interest rate volatility is set aside to manage interest rate risk associatedwith refinancing of bonds issued by the former JFM pursuant to the provisions of Article 9, Sections 9 and 10,
and Article 13, Sections 5 and 7 of the supplementary provisions of the Law, and is calculated and accounted forbased on the provisions of Articles 1 through 3 of the Ministerial Ordinance on the operations of the Management
Account at Japan Finance Organization for Municipal Enterprises (Ordinance No. 2 of the Ministry of Internal Affairs
and Communication, and the Ministry of Finance, 2008; hereinafter, “Management Account Operations Ordinance”)
and Articles 3 and 5 of the supplementary provisions of the above ordinance.
(11) Reserve for interest rate reduction
Reserve for interest rate reduction is set aside to reduce interest rates on the loans made by the former JFM to local
governments pursuant to the provisions of Article 9, Section 13, and Article 13, Section 8 of the supplementaryprovisions of the Law, and Article 26, Sections 1, 3 and 4 of the Preparation Ordinance, and is calculated andaccounted for based on the provisions of Article 5 of the Management Account Operations Ordinance.
(12) Management account surplus reserve
Profits generated in the management account are accounted for as the management account surplus reserve
separately from retained earnings in accordance with the provisions of Article 13, Section 8 of the supplementaryprovisions of the Law and Article 26, Section 2 of the Preparation Ordinance.
(13) Consumption taxes
National and local consumption taxes are accounted for using the tax exclusion method.

3. Additional Information
Effective April 1, 2011, JFM has adopted “Accounting Standard for Accounting Changes and Error Corrections”(Accounting Standards Board of Japan (ASBJ) Statement No.24, December 4, 2009) and “Guidance on AccountingStandard for Accounting Changes and Error Corrections” (ASBJ Guidance No.24, December 4, 2009).

10

4. Loans
There are no bankrupt loans, non-accrual loans, past due loans (three months or more), or restructured loans. Since
JFM has never experienced loan losses in the past, it does not record a reserve for possible loan loss.
   Bankrupt loans represent loans to borrowers as defined in Articles 96, Section 1, Clause 3 (a) through (e) and
Clause 4 of the Enforcement Ordinance of the Corporate Income Tax Law (Government Ordinance No. 97, 1965), and on
which accrued interest is not accounted in revenue as there is no expectation of collection of either principal or interest
because they are past due for a considerable period of time or for other reasons (excluding loans on which bad debts
are written off; hereinafter, “Non-accrual loans”).
   Non-accrual loans represent loans on which accrued interest is not accounted in revenue, excluding loans tobankrupt borrowers and loans with grace periods for interest payments to assist in corporate reorganization or to
support business.
   Past due loans (three months or more) represent loans on which payment of principal or interest is in arrears formore than three months, calculated from the day following the contractual due date, excluding bankrupt loans andnon-accrual loans.
   Restructured loans represent loans, given certain favorable terms and conditions, such as reduction or exemption ofinterest, grace periods for interest or principal payments, and debt waivers, to assist borrowers in corporate rehabilitationor to support business, excluding bankrupt loans, non-accrual loans and past due loans (three months or more).
   All principal and interest (2,543 million yen in total) of which due dates had been extended during the previous
fiscal year ended March 31, 2011 due to the Great East Japan Earthquake, were fully repaid on or before September
20, 2011.

5. Financial Instruments(1) Status of financial instruments(a) Policy for financial instruments
In order to maintain a sound and good financial standing and earn the solid confidence of capital markets, JFM
needs to appropriately manage various risks including interest rate risks.
   JFM adopts an integrated risk management approach to appropriately respond to various risks while
endeavoring to further advance its risk analysis and management.
   Accordingly, JFM has developed a system for appropriate risk management, including the establishmentof the Integrated Risk Management Committee, which supervises JFM’s overall risk management, and the Risk
Management Office, which monitors the risks in each department. The content of risk management can then be
appropriately reflected in management decisions.
(b) Details and risks of financial instruments
JFM raises funds by primarily issuing 10-year bonds, and makes loans with a maximum maturity of 30 years andwith repayment of interest and principal in equal installments. Therefore, a large maturity gap is created between
lending and funding, and JFM is exposed to the interest rate risk associated with bond refinancing.
   JFM has set aside reserves for interest rate fluctuations (reserve for interest rate volatility), and has set up the
ALM Committee separately from the Integrated Risk Management Committee to comprehensively analyze andmanage JFM’s assets and liabilities in a timely and appropriate manner. The ALM Committee is held four times ayear in principle. At the meeting, the medium- and long-term management analysis and risk analysis and evaluation
are conducted through scenario analysis, VaR analysis, and duration analysis, among other methods. In addition,
by reflecting the conclusions of the ALM Committee in JFM’s management such as funding plans, JFM endeavors
to lower interest rate risk by narrowing the maturity gap between lending and funding.
(c) Risk Management for Financial Instruments(ⅰ) Credit risk
Credit risk is the risk of loss arising from a credit event, such as deterioration in the financial condition of aborrower, that causes an asset to lose value or become worthless. In addition to credit risk associated withloans, market transactions also involve credit risk.
A. Credit risk on loans
JFM extends loans exclusively to local governments. Local governments have a zero Bank of International
Settlements (BIS) risk weighting and JFM does not expect any default on loans made to local governments
for the reasons outlined below. JFM and the former JFM have never experienced any loan losses.
• The national government of Japan includes local government debt servicing costs in the expenditureof the Local Government Finance Program, and secures the total amount of local allocation tax whichbalances local governments’ total expenditures including debt servicing costs and total revenue. Thus,
the national government effectively secures revenue sources for principal and interest payments for local
governments. The national government also secures revenue sources for debt servicing for individual local
governments by including a portion of local government debt servicing costs in the Standard Financial
Needs when calculating local allocation tax.
• Under the consultation system for local government bonds and loans, credit reviews must include checks
on the circumstances of local government debt servicing, and tax revenue and necessary revenue sources
to be secured. Additionally, under the Early Warning System, the local governments whose debt servicing

11costs and financial deficits exceed a certain level must apply for approval to issue bonds or obtain loans,so that the credit standing of local government bonds and loans is maintained.
• Under the Law Relating to the Financial Soundness of Local Governments, which was promulgated inJune 2007 (No. 94), local governments whose fiscal indicators exceed the early warning limits must
make their own efforts toward achieving fiscal soundness, and local governments whose fiscal indicators
exceed the reconstruction limits must take necessary actions to restore their finances under the oversightof the national government with regard to redemption of local government bonds and loans, and otheroperations.
• JFM is not subject to the “Banking Law” (1981, No. 59) or the “Financial Reconstruction Law” (1998, No.
132) but performs self-assessment of loans made by the former JFM to local government road corporationsin accordance with the “Financial Inspection Manual” of the Financial Services Agency (FSA).
B. Credit risk on transactions
JFM is exposed to the risk of loss arising from credit events, such as deterioration in the financial conditionof a counterparty, which causes an asset to lose value or become worthless. However, JFM appropriately
manages credit risk of this type by constantly monitoring counterparties’ financial standing, taking measures
including suspension of new deals and cancellation of transactions in case of a deterioration of their credit
standings. Moreover, JFM limits counterparties to financial institutions that achieve a certain credit rating andother criteria, and conducts transactions within the credit lines for each counterparty in order to diversify
risks. In addition, JFM enters into ISDA (International Swaps and Derivatives Association) Master Agreements
and CSA (Credit Support Annex) with all derivatives counterparties to reduce credit risk.
(ⅱ) Market risk
Market risk is the risk of loss resulting from changes in the value of assets and liabilities due to fluctuations
in risk factors such as interest rates, securities prices and foreign exchange rates, or the risk of loss resulting
from changes in earnings generated from assets and liabilities. Market risk includes interest rate risk, foreignexchange risk, inflation risk and price change risk.
A. Interest rate risk
Interest rate risk is the risk of loss resulting from fluctuations in interest rates. More specifically, it is the riskof losses incurred or decrease in profits, which would arise from fluctuations in interest rates when there isan interest rate or maturity gap between assets and liabilities.
   JFM makes loans to local governments. The maximum term to maturity is 30 years, but the majorityof the funds for these loans are raised mainly through issuance of 10-year bonds, which creates interest
rate risk associated with bond refinancing. JFM takes the following measures to address the interest raterisk resulting from a duration gap between lending and fund-raising.
• JFM maintains necessary reserves to cope with the interest rate risk resulting from a duration gap between
lending and fund-raising.
• As assets and liabilities in JFM’s general account will expand as a result of loans and fund-raising for local
governments, JFM carries out an ALM analysis of this account in a timely and appropriate manner to further
enhance the effectiveness of its management of interest rate risk. JFM also endeavors to reduce exposure
to interest rate risk by setting the following medium-term (between fiscal 2009 and fiscal 2013) managementtarget, such as continuously issuing super-long bonds with maturities exceeding 10 years.
   a. Maintain the “outlier ratio” below approximately 20%   Notes: 1. “Outlier ratio” is the ratio of “decline in economic value” as a result of interest rate shocks
to net assets including reserves for interest rate volatility and the fund for improvement ofoperations of municipalities.
  
2. “Decline in economic value” is the decline of present value after interest rate shocks (anupward or downward 200 bp parallel shift of the yield curve).
   b. Maintain a duration gap of less than approximately 2 years.
  The management account, which manages assets related to money loaned by the former JFM, iscurrently exposed to greater interest rate risk than the general account, but JFM contributes to therequired reserves for interest rate volatility as described above.
   In accordance with Article 14 of the Supplementary Provisions to the Law, it was decided that a part of
JFM’s reserves for interest rate volatility within the management account would be attributed to the Japanesenational government. The transfer is projected to occur over a period of three years from FY2012 throughFY2014, with the aim of transferring 1 trillion yen over this period.
   JFM is also exposed to pipeline risk, whereby losses would be incurred or profits decreased as a resultof interest rate fluctuations during the time from when JFM raises money until the point at which the money
is loaned to local governments. JFM uses swap transactions to hedge against pipeline risk.
B. Foreign exchange and other risks
Various risks associated with bond principal and interest payments are hedged by swap transactions. Theserisks include foreign exchange risk related to foreign currency-denominated bonds, interest rate risk related
to floating rate bonds, and risk of fluctuations in the amounts of principal and interest of inflation-indexed

12bonds.
   JFM’s investments of surplus funds are exposed to the risk of losses on the sale of securities resulting
from price declines and the risk of realized losses on foreign currency-denominated deposits resulting fromfluctuations in foreign exchange rates. Accordingly, in principle, JFM minimizes the risk of price fluctuation
by holding investments until maturity, and hedges foreign exchange risk by using foreign exchange
contracts.
C. Quantitative information on market risk
Loans, bonds and borrowed money are primarily affected by interest rate risk, which is a major risk variable
among the market risks.
   With respect to general account loans, bonds and borrowed money, JFM establishes a managementtarget and uses the outlier ratio for quantitative analysis in the management of interest rate risk.
   Specifically, JFM is attempting to maintain the outlier ratio below approximately 20% from Fiscal 2009
to Fiscal 2013 by means of issuing bonds of various terms, including super long-term bonds, which havea redemption period of over 10 years, considering the composition of the remaining periods of the bonds
held.
   The outlier ratio is calculated based on the following conditions.
• Future Cash Flows
With respect to loans, future cash flows regarding such loans are calculated based on the type of interest
rate of the loans. In addition, the advanced redemption in the future is not expected by JFM.
   With respect to fixed-rate bonds, future cash flows regarding such fixed-rate bonds are calculated
based on the redemption schedule. With respect to floating rate bonds hedged by interest rate swaps,that qualify for hedge accounting and meet specific matching criteria, future cash flows corresponding
to such floating rate bonds are calculated in a manner similar to fixed-rate bonds.
• Indicative Interest Rate
For the assessment of loans, bonds and borrowed money, the corresponding interest rate of Japanese
government bonds as of March 31, 2012 is used.
• Calculation of Outlier Ratio
Based on an assumption that risk variables, except for interest rate risk, are fixed as of March 31, 2012,
the outlier ratio is calculated by dividing the change in fair value in the case where the indicative interest
rate (government bonds) rises across-the-board by 200 basis points (2.00%) or the change in fair value
in the case such rate falls across-the-board by 200 basis points (2.00%), whichever is greater, by net
assets including the reserve for interest rate volatility and the fund for improvement of operations ofmunicipalities.
   Information the outlier ratio as of March 31, 2012, is as follows:
One outlier ratio reflecting a rise of 200 basis points of the indicative interest rate is calculated as JFM
has determined that the change in fair value in the case of rising interest rates would be greater thanthat in the case of falling interest rates.
(Millions of yen) (Millions of U.S. dollars)
Outlier
ratio(a)=-(b)/(e)Generalaccount

17.5%[+2.9%]

Change in fair value in the case of 200 basis points rise in interest rates
Total(b)=(c)+(d)¥(321,992)[(88,064)]$(3,902)[(1,067)]

Loans
(c)
¥(998,914)[(306,305)]$(12,106)[(3,712)]

Bonds and borrowed
money
(d)

Net assets including reservefor interest rate volatility andthe fund for improvement ofoperations of municipalities (e)¥+676,921[+218,240]¥1,839,901[+242,261]$+8,204[+2,645]$22,299[+2,936]

Note: Amounts posted in square brackets indicate the change from March 31, 2011.

   With respect to loans and bonds in the management account, JFM raises funds by the issuanceof bonds as necessary in order to manage existing loans until their redemption. For this reason, while
JFM reports the calculation results of the quantitative information regarding the interest rate risk to the
ALM Committee and confirms the status or transition, etc. of interest rate risk, JFM does not establish amanagement target or use the quantitative analysis in the management of interest rate risk.
   With respect to these financial instruments in the management account, based on an assumptionthat the risk variables, except for interest rate risk, hold steady, for an indicative interest rate as of March
31, 2012 that is 10 basis points higher than the actual rate, it is assumed that the fair value of the net
amount (assets side), after offsetting such financial instruments with the financial liabilities, would decline
by 61,644 million yen (747 million U.S. dollars). On the contrary, for an indicative interest rate as of March
31, 2012 that is 10 basis points lower than the actual rate, it is assumed that the fair value of the net
amount (assets side), after offsetting such financial instruments with the financial liabilities, would increaseby 62,558 million yen (758 million U.S. dollars).

13

(ⅲ) Liquidity risk
Liquidity risk is the risk that JFM would incur losses due to difficulties in securing the necessary funds or thenecessity of obtaining funds at far higher interest rates than under normal conditions as a result of a mismatch
between the maturities of assets and liabilities or an unexpected outflow of funds (funding liquidity risk). It also
includes the risk that JFM would incur losses because it is unable to conduct market transactions or is forced
to conduct transactions at far more unfavorable prices than under normal conditions due to market disruption
or other difficult situations (market liquidity risk).
   JFM’s exposure to liquidity risk is extremely low because loans are made to local governments according
to a pre-set schedule, and the daily cash and liquidity management is carried out based on a quarterly planfor fund management. Moreover, JFM has entered into overdraft agreements with several financial institutions
to prepare for the unexpected events, and invests surplus funds only in short-term financial products.
(ⅳ) Supplemental remarks on fair value of financial instruments
In addition to the amount based on the market price, the fair value of illiquid financial instruments includes avalue that has been rationally calculated. Since certain assumptions were made when calculating the fair value,
the value may differ in the event that the assumptions change.

14(2) Items related to fair value of financial instruments
The book value, fair value and difference between them as of March 31, 2011 are as follows.
(Millions of yen)Book value(1) Loans

Fair value¥23,462,149¥1,230,293

457,590

457,582(7)

516,633

516,633-

23,206,079

24,436,365

1,230,285

Bonds

18,327,190

18,873,549

546,359

Total liabilities

18,327,190

18,873,549

546,359

Derivative transactions(*1)
Hedge accounting applied

(789)

(789)

-

Total of derivative transactions

(789)

(789)

-

(2) Securities
held-to-maturity securities(3) Cash and bank deposits
Total assets¥22,231,856

Difference

The book value, fair value and difference between them as of March 31, 2012 are as follows.
(Millions of yen)Book value(1) Loans

Fair value

Difference¥22,387,411¥23,797,792¥1,410,381(2) Securities
held-to-maturity securities

762,987

762,979(8)(3) Cash and bank deposits

172,250

172,250-

Total assets

23,322,648

24,733,021

1,410,373(1) Bonds(2) Borrowed money

18,176,696
30,00018,890,039
30,072

713,343
72

Total liabilities

18,206,696

18,920,112

713,416

Derivative transactions(*1)
Hedge accounting applied

222

222

-

Total of derivative transactions

222

222

-

(Thousands of U.S. dollars)Book value(1) Loans

Difference$288,423,127$17,093,458

9,247,212

9,247,113(99)

2,087,627

2,087,627-

282,664,508

299,757,867

17,093,359(1) Bonds(2) Borrowed money

220,296,886
363,592

228,942,426
364,475

8,645,540
883

Total liabilities

220,660,478

229,306,901

8,646,423

Derivative transactions(*1)
Hedge accounting applied

2,695

2,695

-

Total of derivative transactions

2,695

2,695

-

(2) Securities
held-to-maturity securities(3) Cash and bank deposits
Total assets$271,329,669

Fair value(*1) Assets and liabilities resulting from derivative transactions are presented on a net basis with liabilities in parentheses.

15Note 1. Method for calculating fair value of financial instruments and items related to marketable securities and derivativetransactions
Assets(1) Loans
The fair value of loans is calculated by discounting future cash flows assuming prepayment at the discount rate
calculated using the Japanese government bond rates as of March 31, 2011 and 2012.
(2) Securities
All bonds are held until maturity, and the fair value of treasury discount bills is the market price.
Since all negotiable certificates of deposit are short-term, the fair value approximates the book value. As a result, thebook value is deemed to be the fair value.
As of March 31, 2011

(Millions of yen)
Type

Securities with fair values
exceeding the balance sheet
amountSecurities with fair values that
do not exceed the balance sheet
amountBook value-

Fair value

Difference

¥-

¥-

¥-

-

-

-

Treasury discount bills
Negotiable certificatesof deposit

86,990370,600

86,982
370,600(7)-

Sub total

457,590

457,582(7)¥457,590¥457,582¥(7)

Sub total

Total

As of March 31, 2012

(Millions of yen)
Type

Securities with fair values
exceeding the balance sheet
amountSecurities with fair values that
do not exceed the balance sheet
amountBook value-

Fair value

Difference

¥-

¥-

¥-

-

-

-

Treasury discount bills
Negotiable certificatesof deposit

96,987
666,000

96,979666,000(8)-

Sub total

762,987

762,979(8)¥762,987¥762,979¥(8)

Sub total

Total(Thousands of U.S. dollars)
Type
Securities with fair values
exceeding the balance sheet
amountSecurities with fair values that
do not exceed the balance sheet
amountBook value-

Fair value

Difference

$-

$-

$-

-

-

-

Treasury discount bills
Negotiable certificatesof deposit

1,175,463
8,071,749

1,175,364
8,071,749(99)-

Sub total

9,247,212

9,247,113(99)$9,247,212$9,247,113$(99)

Sub total

Total(3) Cash and bank deposits
The book value is used as the fair value for deposits without maturities. Since all deposits with maturities are shortterm, the fair value approximates the book value. As a result, the book value is deemed to be the fair value.

16

Liabilities(1) Bonds
The fair value of bonds issued by JFM that have a market price is based on the market price. The fair value of bonds
without a market price is calculated by discounting the future cash flows using the interest rate that would be applied
when issuing similar bonds with the same total principal and interest and payment term.
   Deferral hedge accounting is used for currency swaps, and the fair value of foreign currency-denominated bonds
is thus calculated using the total of the fair value of that bond and the fair value of the swap transaction.
   Hedge accounting is used for interest rate swaps, and the fair value of floating rate bonds is thus calculated
by determining the current value using the total of the corresponding interest rate swap accounted for together withthe principal and interest and discounting the future cash flows using the interest rate that would be applied whenissuing a similar bond.
(2) Borrowed money
The fair value of borrowed money is calculated by discounting the future cash flows using the interest rate that would
presumably be applied when issuing bonds with the same total principal and interest and payment term.

Derivative transactions
Transactions for which hedge accounting is applied
For derivative transactions for which hedge accounting is applied, the contractual amount or the amount equivalent
to the principal in the contract under each hedge accounting method as of March 31, 2011 is as follows:(Millions of yen)Hedge
accounting
methodType ofderivativetransactions

Contract amountPrimary
hedged items

Of which
1 year or
more

Fair
value

Method for
calculating fairvalue
Based on prices
provided by thecounterparty
financial institution

Principal
accounting
methodInterest rate swap
transactions
Receive/fixed andpay/floating

Bonds¥100,000¥100,000¥(789)

Hedge
accounting forinterest rate
swaps

Interest rate swap
transactions
Receive/floating
and pay/fixed

Bonds

95,00095,000(*1)

Deferral hedge
accounting for
currency swaps

Currency swap
transactions

Foreign currencydenominatedbonds

483,090

483,090(*2)

Deferral hedge
accounting forforeign exchange
contracts

Foreign exchange
contracts

Foreign currencydenominateddeposits

138,000-(*2)¥816,090¥678,090

Total

17

¥(789)

For derivative transactions for which hedge accounting is applied, the contractual amount or the amount equivalent
to the principal in the contract under each hedge accounting method as of March 31, 2012 is as follows:(Millions of yen)Hedge
accounting
methodContract amountType ofderivativetransactions

Primary
hedged items

Fair
value

Method for
calculating fairvalue

Principal
accounting
methodInterest rate swap
transactions
Receive/fixed andpay/floating

Bonds
Borrowed money¥44,500¥222

Based on prices
provided by
the counterparty
financial institution¥44,500

Hedge accountfor interest rate
swaps

Interest rate swap
transactions
Receive/floating
and pay/fixed

Bonds

95,00095,000(*1)

Deferral hedge
accounting for
currency swaps

Currency swap
transactions

Foreign currencydenominatedbonds

551,494

551,494(*2)

Deferral hedge
accounting forforeign exchange
contracts

Foreign exchange
contracts

Foreign currencydenominateddeposits

125,000-(*2)¥815,994¥690,994

Total

Of which
1 year or
more

¥222
(Thousands of U.S. dollars)Hedge
accounting
methodContract amountType ofderivativetransactions

Primary
hedged items

Principal
accounting
methodInterest rate swap
transactions
Receive/fixed andpay/floating

Bonds
Borrowed money$539,329

Hedge accountfor interest rate
swaps

Interest rate swap
transactions
Receive/floating
and pay/fixed

Bonds

Deferral hedge
accounting for
currency swaps

Currency swap
transactions

Foreign currencydenominatedbonds

Deferral hedge
accounting forforeign exchange
contracts

Foreign exchange
contracts

Foreign currencydenominateddeposits

Total

Fair
value

Method for
calculating fairvalue

$539,329$2,695

Based on prices
provided by
the counterparty
financial institution

1,151,376

1,151,376(*1)

6,683,974

6,683,974

(*2)

-

(*2)

Of which
1 year or
more

1,514,968$9,889,647$8,374,679$2,695(*1) Since interest rate swaps for which hedge accounting is applied are accounted for together with the bond being
hedged, the fair value is presented together with the fair value of the relevant bond.
(*2) Since currency swaps and foreign exchange contracts for which deferral hedge accounting is applied are accounted
for together with the foreign currency-denominated bond or foreign currency-denominated deposit being hedged,
the fair value is presented together with the fair value of the relevant hedged item.

18

Note 2. The repayment schedule for monetary claims and securities with maturities is as follows:

As of March 31, 2011
(Millions of yen)
Within1 yearAfter
1 yearthrough
2 yearsAfter
2 years
through
3 yearsAfter
3 years
through
4 yearsAfter
4 years
through
5 yearsAfter
5 years
through
10 years

After
10 years
through
20 years

After
20 years
through
30 years¥1,579,622¥1,551,565¥1,544,319¥1,510,292¥1,478,709¥6,288,292¥6,911,416¥1,367,638

Securities
held-tomaturity
securities

457,590

-

-

-

-

-

-

-

Deposits

516,632

-

-

-

-

-

-

-

Loans

As of March 31, 2012
(Millions of yen)
Within1 yearAfter
1 yearthrough
2 yearsAfter
2 years
through
3 yearsAfter
3 years
through
4 yearsAfter
4 years
through
5 yearsAfter
5 years
through
10 years

After
10 years
through
20 years

After
20 years
through
30 years¥1,555,010¥1,552,019¥1,548,246¥1,540,203¥1,481,212¥6,369,714¥6,939,819¥1,401,184

Securities
held-tomaturity
securities

762,987

-

-

-

-

-

-

-

Deposits

172,249

-

-

-

-

-

-

-

Loans

(Thousands of U.S. dollars)Within1 yearLoans

After
1 yearthrough
2 yearsAfter
2 years
through
3 yearsAfter
3 years
through
4 yearsAfter
4 years
through
5 years$18,846,332 $18,810,080 $18,764,352 $18,666,866

After
5 years
through
10 years

After
10 years
through
20 years

After
20 years
through
30 years$17,951,911 $77,199,306 $84,108,829 $16,981,993

Securities
held-tomaturity
securities

9,247,212

-

-

-

-

-

-

-

Deposits

2,087,626

-

-

-

-

-

-

-

19

Note 3. The repayment schedule is as follows:
As of March 31, 2011

Bonds

(Millions of yen)

Within1 yearAfter
1 yearthrough
2 yearsAfter
2 years
through
3 yearsAfter
3 years
through
4 yearsAfter
4 years
through
5 yearsAfter
5 years
through
10 years

After
10 years
through
20 years

After
20 years
through
30 years¥2,176,130¥2,030,560¥2,164,070¥1,931,670¥1,680,970¥6,865,040¥1,286,338¥211,452

As of March 31, 2012
(Millions of yen)

Bonds
Borrowedmoney

Within1 yearAfter
1 yearthrough
2 yearsAfter
2 years
through
3 yearsAfter
3 years
through
4 yearsAfter
4 years
through
5 yearsAfter
5 years
through
10 years

After
10 years
through
20 years

After
20 years
through
30 years¥2,030,560-¥2,164,070-¥1,931,670-¥1,680,970-¥1,560,228-¥7,058,245
30,000¥1,549,120-¥220,000-(Thousands of U.S. dollars)Within1 year
Bonds
Borrowed
money

After
1 yearthrough
2 yearsAfter
2 years
through
3 yearsAfter
3 years
through
4 yearsAfter
4 years
through
5 yearsAfter
5 years
through
10 years$24,609,865 $26,227,972 $23,411,344 $20,372,924 $18,909,574-

After
10 years
through
20 years

After
20 years
through
30 years$85,544,126 $18,774,936
363,592-$2,666,343-

6. Tangible and Intangible Fixed Assets
Tangible and intangible fixed assets at March 31, 2011 consisted of the following:
Balance at
March 31,2011
(Acquisition
costs)(Millions of yen)

Accumulated
Depreciation
depreciation
andand
amortizationamortization
during theat March 31,
year
2011

Balance at
March 31,
2011
(Net bookvalue)

Balance atApril 1, 2010
(Acquisition
costs)

Increaseduringthe year

Buildings

¥555

¥12

¥-

¥568

¥107

¥42

¥460

Land

2,403

-

-

2,403

-

-

2,403

96

43

-

140

85

45

54

3,055

56

-

3,111

193

87

2,918

1,219

113

-

1,332

576

264

756

13

-

13

0

-

-

0

¥1,233¥113¥13¥1,332

¥576

¥264

¥756

Type of assets

Decreaseduringthe year

Tangible fixed assets

Other tangible fixed assets
Total tangible fixed assets
Intangible fixed assets
Software
Other intangible fixed assets
Total intangible fixed assets

20

Tangible and intangible fixed assets at March 31, 2012 consisted of the following:(Millions of yen)

Increaseduringthe year

Buildings

¥568

¥95

¥10

¥652

¥149

¥43

¥502

Land

2,403

-

408

1,994

-

-

1,994

140

36

74

102

37

25

65

3,111

131

493

2,750

186

68

2,563

1,332

118

74

1,376

776

274

600

0

-

-

0

-

-

0

¥1,332¥118¥74¥1,376

¥776

¥274

¥600

Type of assets

Balance at
March 31,2012
(Acquisition
costs)

Accumulated
Depreciation
depreciation
andand
amortizationamortization
during
at March 31,
the year2012

Balance atApril 1,2011
(Acquisition
costs)

Decreaseduringthe year

Balance at
March 31,
2012
(Net bookvalue)

Tangible fixed assets

Other tangible fixed assets
Total tangible fixed assets
Intangible fixed assets
Software
Other intangible fixed
assetsTotal intangible fixed assets(Thousands of U.S. dollars)
Balance atApril 1,2011
(Acquisition
costs)

Increaseduringthe year

Buildings$6,886

Land

29,126

Other tangible fixed assets

Type of assets

Accumulated
Depreciation
depreciation
andand
amortizationamortization
during
at March 31,
the year2012

Decreaseduringthe year

Balance at
March 31,2012
(Acquisition
costs)$1,154$131$7,909$1,813$527$6,096-

4,950

24,176--24,176

1,701

443

897

1,247

452

308

795

37,713

1,597

5,978

33,332

2,265

835

31,067

16,154

1,432

899

16,687

9,410

3,328

7,277

1

-

-

1

-

-

1

$16,155$1,432$899$16,688$9,410$3,328$7,278

Balance at
March 31,
2012
(Net bookvalue)

Tangible fixed assets

Total tangible fixed assets
Intangible fixed assets
Software
Other intangible fixed
assetsTotal intangible fixed assets

Notes: 1. Accumulated depreciation of tangible fixed assets amounted to 186 million yen (2,265 thousand dollars)and 193 million yen as of March 31, 2012 and 2011, respectively.

7. Assets Pledged as Collateral(1) Pursuant to the provisions of Article 40, Section 2 of the Law, JFM’s total assets are pledged as general collateralfor JFM bonds in the amounts of 18,176,696 million yen (220,296,886 thousand dollars) and 18,327,190 million yen
as of March 31, 2012 and 2011, respectively.
(2) Securities in the amounts of 469 million yen (5,695 thousand dollars) are pledged as collateral for derivative transactions
as of March 31, 2012.

21

8. Bonds
Bonds at March 31, 2011 consisted of the following:(Millions of yen)Type of bondDate of
issue

Balanceat April 1,
2010

Government-guaranteed bonds (domestic)
1st-22th JFM bonds

6/15/20093/14/2011¥680,402

Government-guaranteed bond(international)
1st Global U.S. dollar JFM bond

1/13/2011

Public offering bonds without government
guarantee 1st-4th 5-year JFM bonds

Couponrate (%)

Maturity¥1,330,908

0.9
to 1.5

10Y-

83,170[U.S. dollars 1,000,000 thousand]

4.0

10Y

5/25/20102/21/2011-

90,0000.423
to 0.639

5Y

Public offering bonds without government
guarantee 1st-22nd JFM bonds

6/18/20093/17/2011

245,000

605,000

0.976
to 1.648

10Y

Public offering bonds without government
guarantee 1st-13th 20-year JFM bonds

6/25/20091/24/2011

195,000

355,000

1.752
to 2.266

20Y

Public offering bonds without government
guarantee F-1st - F-52th, F-54th - F-56th
JFM bonds

7/22/20092/3/2011

186,000

461,000

0.185
to 2.332

3Y
to 29Y

Public offering bond without government
guarantee F-53th JFM bond(Floating Rate Note)

2/1/2011-

15,000Floating
rate

9Y

Private placement bonds without
government
guarantee A-1st – A-14th JFM bonds

7/31/20093/22/2011

280,000

680,000

0.99
to 1.53

10Y-

1,586,402

3,620,078--

Government-guaranteed bond (domestic)
1st 4-year JFM bond

2/27/2009

299,872

299,917

0.7

4Y

Government-guaranteed bonds (domestic)
1st-8th JFM bonds

10/16/20085/25/2009

560,087

560,3621.3
to 1.6

10Y

Public offering bond without government
guarantee 1st 5-year JFM bond

2/24/2009

29,99329,994

1.01

5Y

Public offering bonds without government
guarantee 1st-4th JFM bonds

11/25/20085/28/2009

139,957

139,962

1.59
to 1.77

10Y

Public offering bonds without government
guarantee 1st-2nd 20-year JFM bonds

1/26/20094/30/2009

84,94384,9462.07
to 2.29

20Y

Private placement bonds without
government
guarantee A-1st-2nd JFM bonds

4/30/20095/26/2009

120,000

120,000

1.69
to 1.73

10Y

Japan Finance Organization for MunicipalEnterprises bonds - Sub-total-

1,234,854

1,235,183--

Government-guaranteed bonds (domestic)
788th-886th former JFM bonds

4/27/20006/19/2008

9,220,051

7,556,867(1,540,760)

0.5
to 2.0

10Y

Government-guaranteed bonds (domestic)
1st-5th 15-year former JFM bonds

6/22/20057/18/2007

184,637

184,659

1.6
to 2.2

15Y

1,043,458

923,913(200,000)[U.S. dollars 3,200,000 thousand][Euro 900,000 thousand][Pound sterling 150,000 thousand]

1.350
to 5.875

10Y
to 20YJapan Finance Organization for
Municipalities bonds - Sub-total

Government-guaranteed bonds(international)
4th Euro sterling pound former JFM bond- 5th Global Yen former JFM bond

8/9/19996/25/2008

22

Balance at
March 31, 2011

Public offering bond without government
guarantee 1st 5-year former JFM bond

2/29/2008

129,963

129,976

1.14

5Y

Public offering bonds without government
guarantee 1st-30th former JFM bonds

12/26/20016/16/2008

1,279,786

1,279,829(100,000)

0.64
to 2.07

10Y

Public offering bonds without government
guarantee 1st-25th 20-year
former JFM bonds

7/30/20026/16/2008

569,611569,636

1.03
to 2.58

20Y

Public offering bonds without government
guarantee 1st-10th 30-year
former JFM bonds

1/29/20049/20/2006

189,848

189,855

2.39
to 2.95

30Y

Public offering bond without government
guarantee 1st floating rate former JFM
bond

10/31/2002

20,00020,000Floating
rate

15Y

Public offering bonds without government
guarantee 1st-2nd inflation-indexed
former JFM bonds

3/2/20057/19/2005

40,00040,0000.45
to 0.47

10Y

Public offering bonds without government
guarantee 1st-3rd former JFM bonds
with scheduled repayment

2/14/20036/9/2004

45,66043,490(2,170)1.39
to 2.01

28Y

20,00020,000Floating
rate

10Y

4/28/20007/31/2008

2,970,200

2,513,700(333,200)

0.67
to 2.18

10Y

Former JFM bonds - Sub-total-

15,713,218

13,471,927(2,176,130)

-

-

Total

-

¥18,534,475¥18,327,190(2,176,130)--

Public offering bond without government
guarantee 1st CMS-linked floating rate
former JFM bondPrivate placement bonds A series 55th
- Special No. 1 series 31st
former JFM bonds

9/13/2006

Notes:1. Pursuant to the provisions of Article 40, Section 2 of the Law, JFM’s total assets are pledged as generalcollateral for JFM bonds for 18,327,190 million yen at March 31, 2011.
2. Amounts in square brackets under “Balance at March 31, 2011” for “Government-guaranteed bond (international)
1st Global U.S. dollar JFM bond” and “Government-guaranteed bond (international) - 4th Euro sterling pound
former JFM bond - 5th Global Yen former JFM bond” are denominated in foreign currencies.
3. Amounts in parentheses under “Balance at March 31, 2011” are to be repaid within one year.

23

Bonds at March 31, 2012 consisted of the following:(Millions of yen)Type of bondDate of
issue

Balanceat April 1,
2011

Government-guaranteed bonds (domestic)
1st-34th JFM bonds

6/15/20093/14/2012¥1,330,908

Government-guaranteed bonds (domestic)
1st-4th 6-year JFM bonds

9/27/20113/26/2012

Government-guaranteed bond(international)
1st Global U.S. dollar JFM bondCouponrate (%)

Maturity¥1,841,660

0.9
to 1.5

10Y-

199,964

0.4

6Y

1/13/2011

83,17083,170[U.S. dollars 1,000,000 thousand]

4.0

10Y

Public offering bonds without government
guarantee 1st-8th 5-year JFM bonds

5/25/20102/20/2012

90,000170,000

0.384
to 0.639

5Y

Public offering bonds without government
guarantee 1st-34th JFM bonds

6/18/20093/19/2012

605,000

1,005,000

0.976
to 1.648

10Y

Public offering bonds without government
guarantee 1st-20th 20-year JFM bonds

6/25/20091/26/2012

355,000

525,000

1.752
to 2.266

20Y

Public offering bonds without government
guarantee F-1st - F-52th, F-54th - F-109th
JFM bonds

7/22/20093/28/2012

461,000

754,500

0.185
to 2.334

3Y
to 30Y

Public offering bond without government
guarantee F-53th JFM bond(Floating Rate Note)

2/1/2011

15,00015,000Floatingrate

9YInternational without government guarantee
2nd, 3rd, 7th, 14th-16th, 19th, 28th
JFM bonds

1/12/20123/13/2012-

17,795[U.S. dollars 227,000 thousand]1.84
to 2.40

5Y
to 7Y

International without government guarantee
1st, 4th-6th, 8th-13th, 17th, 18th, 20th-27th
JFM bonds

1/17/20123/13/2012-

50,608[U.S. dollars 591,000 thousand][NZ dollars 40,000 thousand][AU dollars 20,000 thousand]Floating
rate

5Y

Private placement bonds without
government
guarantee A-1st - A-26th JFM bonds

7/31/20093/19/2012

680,000

980,000

0.99
to 1.53

10Y-

3,620,078

5,642,699--

Government-guaranteed bond (domestic)
1st 4-year JFM bond

2/27/2009

299,917299,962(300,000)

0.7

4Y

Government-guaranteed bonds (domestic)
1st-8th JFM bonds

10/16/20085/25/2009

560,362

560,636

1.3
to 1.6

10Y

Public offering bond without government
guarantee 1st 5-year JFM bond

2/24/2009

29,99429,996

1.01

5Y

Public offering bonds without government
guarantee 1st-4th JFM bonds

11/25/20085/28/2009

139,962

139,967

1.59
to 1.77

10Y

Public offering bonds without government
guarantee 1st-2nd 20-year JFM bonds

1/26/20094/30/2009

84,946

84,9492.07
to 2.29

20Y

Private placement bonds without
government
guarantee A-1st - A-2nd JFM bonds

4/30/20095/26/2009

120,000

120,000

1.69
to 1.73

10Y-

1,235,183

1,235,513(300,000)--

Japan Finance Organization for
Municipalities bonds - Sub-total

Japan Finance Organization for MunicipalEnterprises bonds - Sub-total

24

Balance at
March 31, 2012

Government-guaranteed bonds (domestic)
801th-886th former JFM bonds

4/26/20016/19/2008

7,556,867

6,018,749(1,108,390)

0.5
to 2.0

10Y

Government-guaranteed bonds (domestic)
1st-5th 15-year former JFM bonds

6/22/20057/18/2007

184,659

184,682

1.6
to 2.2

15Y

Government-guaranteed bonds(international)
4th Euro sterling pound former JFM bond- 5th Global Yen former JFM bond

8/9/19996/25/2008

923,913723,848[U.S. dollars 2,200,000 thousand][Euro 900,000 thousand][Pound sterling 150,000 thousand]

1.350
to 5.75

10Y
to 20Y

Public offering bond without government
guarantee 1st 5-year former JFM bond

2/29/2008

129,976

129,989(130,000)

1.14

5Y

Public offering bonds without government
guarantee 1st-30th former JFM bonds

12/26/20016/16/2008

1,279,829

1,179,870(250,000)

0.64
to 2.07

10Y

Public offering bonds without government
guarantee 1st-25th 20-year
former JFM bonds

7/30/20026/16/2008

569,636569,661

1.03
to 2.58

20Y

Public offering bonds without government
guarantee 1st-10th 30-year
former JFM bonds

1/29/20049/20/2006

189,855

189,8612.39
to 2.95

30Y

20,00020,000Floating
rate

15Y

Public offering bond without government
guarantee 1st floating rate former JFM
bond

10/31/2002

Public offering bonds without government
guarantee 1st-2nd inflation-indexed
former JFM bonds

3/2/20057/19/2005

40,00040,0000.45
to 0.47

10Y

Public offering bonds without government
guarantee 1st-3rd former JFM bonds
with scheduled repayment

2/14/20036/9/2004

43,49041,320(2,170)1.39
to 2.01

28Y

20,00020,000Floating
rate

10Y

7/31/20017/31/2008

2,513,700

2,180,500(240,000)

0.67
to 2.18

10Y

Former JFM bonds - Sub-total-

13,471,927

11,298,483(1,730,560)

-

-

Total

-

¥18,327,190¥18,176,696(2,030,560)--

Public offering bond without government
guarantee 1st CMS-linked floating rate
former JFM bondPrivate placement bonds A series 58th
- Special No. 1 series 31st
former JFM bonds

9/13/2006

25

(Thousands of U.S. dollars)
Type of bondDate of
issue

Balance atApril 1, 2011

Balance at
March 31, 2012

Couponrate (%)

Maturity

Government-guaranteed bonds (domestic)
1st-34th JFM bonds

6/15/20093/14/2012$16,130,273$22,320,447

0.9 to 1.5

10Y

Government-guaranteed bonds (domestic)
1st-4th 6-year JFM bonds

9/27/20113/26/2012-

2,423,524

0.4

6YGovernment-guaranteed bond (international)
1st Global U.S. dollar JFM bond

1/13/2011

1,007,999

1,007,999

4.0

10Y

Public offering bonds without government
guarantee 1st-8th 5-year JFM bonds

5/25/20102/20/2012

1,090,777

2,060,356

0.384
to 0.639

5Y

Public offering bonds without government
guarantee 1st-34th JFM bonds

6/18/20093/19/2012

7,332,445

12,180,342

0.976
to 1.648

10Y

Public offering bonds without government
guarantee 1st-20th 20-year JFM bonds

6/25/20091/26/2012

4,302,509

6,362,865

1.752
to 2.266

20Y

Public offering bonds without government
guarantee F-1st - F-52th, F-54th - F-109th
JFM bonds

7/22/20093/28/2012

5,587,202

9,144,346

0.185
to 2.334

3Y to 30Y

Public offering bond without government
guarantee F-53th JFM bond(Floating Rate Note)

2/1/2011

181,796

181,796

Floatingrate

9YInternational without government guarantee
2nd, 3rd, 7th, 14th-16th, 19th, 28th
JFM bonds

1/12/20123/13/2012-

215,681

1.84
to 2.40

5Y to 7YInternational without government guarantee
1st, 4th-6th, 8th-13th, 17th, 18th, 20th-27th
JFM bonds

1/17/20123/13/2012-

613,367

Floating
rate

5Y

Private placement bonds without
government
guarantee A-1st - A-26th JFM bonds

7/31/20093/19/2012

8,241,425

11,877,348

0.99
to 1.53

10Y-

43,874,426

68,388,071--

Government-guaranteed bond (domestic)
1st 4-year JFM bond

2/27/2009

3,634,923

3,635,468(3,635,923)

0.7

4Y

Government-guaranteed bonds (domestic)
1st-8th JFM bonds

10/16/20085/25/2009

6,791,446

6,794,776

1.3
to 1.6

10Y

Public offering bond without government
guarantee 1st 5-year JFM bond

2/24/2009

363,531363,553

1.01

5Y

Public offering bonds without government
guarantee 1st-4th JFM bonds

11/25/20085/28/2009

1,696,308

1,696,367

1.59
to 1.77

10Y

Public offering bonds without government
guarantee 1st-2nd 20-year JFM bonds

1/26/20094/30/2009

1,029,533

1,029,569

2.07
to 2.29

20Y

Private placement bonds without
government
guarantee A-1st - A-2nd JFM bonds

4/30/20095/26/2009

1,454,369

1,454,369

1.69
to 1.73

10Y

Japan Finance Organization for MunicipalEnterprises bonds - Sub-total-

14,970,110

14,974,102(3,635,923)--

Government-guaranteed bonds (domestic)
801th-886th former JFM bonds

4/26/20016/19/2008

91,587,292

72,945,698(13,433,402)

0.5 to 2.0

10Y

Government-guaranteed bonds (domestic)
1st-5th 15-year former JFM bonds

6/22/20057/18/2007

2,238,029

2,238,299

1.6 to 2.2

15YJapan Finance Organization for
Municipalities bonds - Sub-total

26

Government-guaranteed bonds(international)
4th Euro sterling pound former JFM bond- 5th Global Yen former JFM bond

8/9/19996/25/2008

11,197,591

8,772,863

1.350
to 5.75

10Y to 20Y

Public offering bond without government
guarantee 1st 5-year former JFM bond

2/29/2008

1,575,278

1,575,435(1,575,566)

1.14

5Y

Public offering bonds without government
guarantee 1st-30th former JFM bonds

12/26/20016/16/2008

15,511,199

14,299,733(3,029,936)

0.64
to 2.07

10Y

Public offering bonds without government
guarantee 1st-25th 20-year
former JFM bonds

7/30/20026/16/2008

6,903,850

6,904,149

1.03
to 2.58

20Y

Public offering bonds without government
guarantee 1st-10th 30-year
former JFM bonds

1/29/20049/20/2006

2,300,994

2,301,068

2.39
to 2.95

30Y

Public offering bond without government
guarantee 1st floating rate former JFM bond

10/31/2002

242,395

242,395

Floating
rate

15Y

Public offering bonds without government
guarantee 1st-2nd inflation-indexed
former JFM bonds

3/2/20057/19/2005

484,790484,7900.45
to 0.47

10Y

Public offering bonds without government
guarantee 1st-3rd former JFM bonds
with scheduled repayment

2/14/20036/9/2004

527,088

500,788(26,300)

1.39
to 2.01

28Y

Public offering bond without government
guarantee 1st CMS-linked floating rate
former JFM bond

9/13/2006

242,395

242,395

Floating
rate

10Y

Private placement bonds A series 58th
- Special No. 1 series 31st
former JFM bonds

7/31/20017/31/2008

30,465,398

26,427,100(2,908,738)

0.67
to 2.18

10Y

Former JFM bonds - Sub-total-

163,276,299

136,934,713(20,973,942)

-

-

Total

-

$222,120,834$220,296,886(24,609,865)--

Notes:1. Pursuant to the provisions of Article 40, Section 2 of the Law, JFM’s total assets are pledged as general collateralfor JFM bonds for 18,176,696 million yen (220,296,886 thousand dollars) at March 31, 2012.
2. Amounts in square brackets under “Balance at March 31, 2012” for “Government-guaranteed bond (international)
1st Global U.S. dollar JFM bond”, “International without government guarantee 2nd, 3rd, 7th, 14th-16th, 19th,
28th JFM bonds”, “International without government guarantee 1st, 4th-6th, 8th-13th, 17th, 18th, 20th-27th
JFM bonds” and “Government-guaranteed bond (international) - 4th Euro sterling pound former JFM bond - 5th
Global Yen former JFM bond” are denominated in foreign currencies.
3. Amounts in parentheses under “Balance at March 31, 2012” are to be repaid within one year.

27

9. Borrowed Money
Borrowed money at March 31, 2012 consisted of the following:(Millions of yen)Classification of borrowed money

Balance atApril 1, 2011

Balance at
March 31, 2012

Averageinterest rate (%)

Repayment
date

Short-term borrowed money

¥-

¥-

-

-

Long-term borrowed money(repayment within 1 year)

-

-

-

-

Long-term borrowed money(excluding repayment within 1 year)-

30,0000.69

Other interest-bearing liabilities

-

-

-

-

Total

¥-

¥30,000--

3/26/2019(Thousands of U.S. dollars)
Classification of borrowed money

Balance atApril 1, 2011

Balance at
March 31, 2012

Averageinterest rate (%)

Repayment
date

Short-term borrowed money

$-

$-

-

-

Long-term borrowed money(repayment within 1 year)

-

-

-

-

Long-term borrowed money(excluding repayment within 1 year)-

363,592

0.69

Other interest-bearing liabilities

-

-

-

-

Total

$-

$363,592--

28

3/26/201910. Reserves
Reserves at March 31, 2011 consisted of the following:(Millions of yen)
Decrease during the year

Balance atApril 1,
2010

Increaseduring the
year

¥43

¥41

¥43

¥-

¥41

Reserve for directors’ bonuses

7

6

7

-

6

Reserve for retirement benefits

210

5

10

9

195

Reserve for retirement benefits for directors
and corporate auditors

56

6

10

24

27

Classificationof reserve
Reserve for bonuses

Intended
purposeOther

Balance at
March 31,2011

Reserves at March 31, 2012 consisted of the following:(Millions of yen)
Decrease during the year

Balance atApril 1,
2011

Increaseduring the
year

¥41

¥47

¥41

¥-

¥47

Reserve for directors’ bonuses

6

6

6

-

6

Reserve for retirement benefits

195

9

47

9

146

Reserve for retirement benefits for directors
and corporate auditors

27

4

5

1

23

Classificationof reserve

Reserve for bonuses

Intended
purposeOther

Balance at
March 31,
2012

(Thousands of U.S. dollars)
Decrease during the year

Balance atApril 1,
2011

Increaseduring the
year

$505

$580

$505

$-

$580

Reserve for directors’ bonuses

84

84

84

-

84

Reserve for retirement benefits

2,369

114

582

121

1,780

330

51

72

18

291

Classificationof reserve

Reserve for bonuses

Reserve for retirement benefits for directors
and corporate auditors

29

Intended
purposeOther

Balance at
March 31,2012

11. Reserve for Interest Rate Volatility
Reserve for interest rate volatility at March 31, 2011 consisted of the following:(Millions of yen)
Increase during the year

Decrease during the year

AmountprovidedAmountWithdrawn

Classification of reserve

Balance atApril 1,
2010

Reserve for interest rate volatility¥440,000¥220,000¥220,000¥-

Management account reserve forinterest rate volatility

3,111,043

245,489

245,489

220,000

220,000

3,136,532¥3,551,043¥465,489¥465,489¥220,000¥220,000¥3,796,532

Total

Balance at
March 31,2011
¥660,000Reserve for interest rate volatility at March 31, 2012 consisted of the following:(Millions of yen)
Increase during the year

Decrease during the year

AmountprovidedAmountWithdrawn

Classification of reserve

Balance atApril 1,
2011

Balance at
March 31,2012

Reserve for interest rate volatility¥660,000¥220,000¥220,000¥-

Management account reserve forinterest rate volatility

3,136,532

221,024

221,024

220,000

220,000

3,137,557

Total¥3,796,532¥441,024¥441,024¥220,000¥220,000¥4,017,557¥880,000(Thousands of U.S. dollars)
Increase during the year

Decrease during the year

AmountprovidedAmountWithdrawn

Classification of reserve

Balance atApril 1,
2011

Reserve for interest rate volatility$7,999,031$2,666,343$2,666,343$-

Management account reserve forinterest rate volatility

38,013,970

2,678,758

2,678,758

2,666,343

2,666,343

38,026,385

Total$46,013,001$5,345,101$5,345,101$2,666,343$2,666,343$48,691,759

30

Balance at
March 31,2012
$10,665,374

12. Fund for Improvement of Operations of Municipalities
Fund for improvement of operations of municipalities at March 31, 2011 consisted of the following:(Millions of yen)
Increase during the year
Classification of fund

Basic fund for improvement ofoperations of municipalities
Additional fund for improvementof operations of municipalities
Total

Balance atApril 1,2010

Decrease during the year
Balance at
March 31,2011

Amount ofreserveAmountMarch
31, 2011
Transferred

AmountWithdrawn¥901,407¥6,696¥-¥-¥-¥908,104

5,531

-

2,187

-

-

7,719

¥906,939¥6,696¥2,187¥-¥-¥915,823

OthersFund for improvement of operations of municipalities at March 31, 2012 consisted of the following:(Millions of yen)
Increase during the year
Classification of fund

Basic fund for improvement ofoperations of municipalities
Additional fund for improvementof operations of municipalities
Total

Balance atApril 1,2011

Decrease during the year
Balance at
March 31,2012

Amount ofreserveAmountMarch
31, 2012
Transferred

AmountWithdrawn¥908,104¥3,830¥-¥-¥-¥911,935

7,719

-

216

-

-

7,936

¥915,823¥3,830

¥216

¥-

¥-

¥919,871

Others(Thousands of U.S. dollars)
Increase during the year
Classification of fund

Basic fund for improvement ofoperations of municipalities
Additional fund for improvementof operations of municipalities
Total

Balance atApril 1,2011

Decrease during the year
Balance at
March 31,2012

Amount ofreserveAmountMarch
31, 2012
Transferred

AmountWithdrawn$11,005,995$46,425

$-

$-

$-

$11,052,420

93,555

-

2,629

-

-

96,184$11,099,550$46,425$2,629$-$-$11,148,604

OthersNote:1. The “increase during the year” of the “amount of reserves” applicable to “Basic fund for improvement of operationsof municipalities” is the payment of the amount stipulated in Article 46, Section 1 of the Law and received inaccordance with Article 46, Section 2 of the Law.
2. Amount transferred in “Increase during the year” applicable to “Additional fund for improvement of operationsof municipalities” represents the amount transferred to “Additional fund for improvement of operations ofmunicipalities” pursuant to the provisions of Article 46, Section 7 of the Law.

31

13. Reserve for Employee Retirement Benefits
As of and for the years ended March 31, 2011
(1) Outline of retirement benefits system
JFM has a defined benefit plan that contributes to the Employees’ Pension Fund and offers lump-sum payments
upon retirement of employees.
(2) Projected benefit obligation
Projected benefit obligation 344 million yen
Plan assets 149 million yen
Reserve for employee retirement benefits 195 million yen(3) Pension expenses
Pension expenses 5 million yen
Pension expenses related to lump-sum payments upon retirement 2 million yen
Pension expenses related to the Employees’ Pension Fund 2 million yen(4) Basis of calculation of projected benefit obligation
Projected benefit obligation is calculated by the simplified method.
As of March 31, 2012
(1) Outline of retirement benefits system
JFM has a defined benefit plan that contributes to the Employees’ Pension Fund and offers lump-sum payments
upon retirement.
(2) Projected benefit obligation
Projected benefit obligation 298 million yen (3,613 thousand dollars)
Plan assets 151 million yen (1,833 thousand dollars)
Reserve for employee retirement benefits 146 million yen (1,779 thousand dollars)(3) Pension expenses
Pension expenses 9 million yen (113 thousand dollars)
Pension expenses related to lump-sum payments upon retirement 4 million yen (49 thousand dollars)
Pension expenses related to the Employees’ Pension Fund 5 million yen (64 thousand dollars)(4) Basis of calculation of projected benefit obligation
Projected benefit obligation is calculated by the simplified method.

14. Net Income by Account(For the year ended March 31, 2011)
Net income of the general account was 8,025 million yen, while net income of the management account was 8,048
million yen.
(For the year ended March 31, 2012)
Net income of the general account was 15,532 million yen (188,249 thousand dollars), while net income of the
management account was 6,100 million yen (73,937 thousand dollars).

15. Subsequent events
Transfer to the National Treasury of a Part of JFM’s Reserve for Interest Rate Volatility within the Management Account   In accordance with the supplementary provisions to the Law, a part of JFM’s reserve for interest rate volatility within
the management account is to be attributed to the Japanese national government over a period of three years from
FY2012 through FY2014, with the aim of transferring 1 trillion yen over this period.
   In FY2012, 350 billion yen has been transferred to the national treasury by JFM, pursuant to Article 14 of the
supplementary provisions to the Law for FY2012 (Ordinance No. 2 of the Ministry of Internal Affairs and Communication,and the Ministry of Finance, 2012).

32

16. Information by Account (Balance sheets)
Balance sheets of general account and management account at March 31, 2011 were as follows:(Millions of yen)
Item

Generalaccount

Management
account

OffsetTotal(Assets)
Loans¥3,586,125

Securities

457,590

Cash and bank deposits

516,633

Other assets

2,420

Tangible fixed assets

2,918

Intangible fixed assets

756

Due from general account¥22,231,856
457,590516,633

14,612

17,033
2,918
756

827,351

Due to management account for fund for
improvement of operations of municipalities
Total assets¥18,645,731

442,831¥(827,351)(442,831)

5,009,275

19,487,695(1,270,183)

23,226,787

2,580,904

15,746,285

18,327,190

3,107

14,59017,698(Liabilities)
Bonds
Other liabilities
Reserve for bonuses

41

41

Reserve for directors’ bonuses

6

6

Reserve for retirement benefits

195

195

Reserve for retirement benefits for directors andcorporate auditors

27

27

915,823

915,823

908,104

908,104

7,719

7,719

Fund for improvement of operations ofmunicipalities
Basic fund for improvement of operations ofmunicipalities
Additional fund for improvement of operations ofmunicipalities
Due to management account827,351

Due from general account for fund for improvementof operations of municipalities
Reserve under special laws
Reserve for interest rate volatility

442,831660,000(442,831)

3,236,421

3,896,421

660,000

Management account reserve for interest rate
volatility
Reserve for interest rate reduction
Total liabilities(827,351)

4,987,458

660,000
3,136,532

3,136,532

99,88999,88919,440,129(1,270,183)

23,157,405(Net Assets)
Capital16,602

16,602Retained earnings

13,86013,86013,86013,860General account surplus reserve
Valuation, translation adjustments and others(8,645)

Management account surplus reserve

47,565

21,81647,56569,382¥5,009,275¥19,487,695

Total net assets
Total liabilities and net assets(8,645)47,56533¥(1,270,183)¥23,226,787

Balance sheets of general account and management account at March 31, 2012 were as follows:(Millions of yen)
Item

Generalaccount

Management
account

OffsetTotal(Assets)
Loans¥5,351,164

Securities

762,987

Cash and bank deposits

172,250

Other assets

2,628

Tangible fixed assets

2,563

Intangible fixed assets

600

Due from general account¥22,387,411
762,987
172,250

12,266

14,8942,563
600

820,207

Due to management account for fund for
improvement of operations of municipalities
Total assets¥17,036,246

292,831¥(820,207)(292,831)

6,585,025

17,868,720

3,892,818

14,283,877(1,113,038)

23,340,707(Liabilities)
Bonds
Borrowed money

30,000

Other liabilities

1,872

18,176,696
30,00013,50015,373

Reserve for bonuses

47

Reserve for directors’ bonuses

6

6

Reserve for retirement benefits

146

146

Reserve for retirement benefits for directors andcorporate auditors

23

23

919,871919,871

911,935

911,935

7,936

7,936

Fund for improvement of operations ofmunicipalities
Basic fund for improvement of operations ofmunicipalities
Additional fund for improvement of operations ofmunicipalities
Due to management account820,207

Due from general account for fund for improvementof operations of municipalities
Reserve under special laws
Reserve for interest rate volatility(820,207)
292,831880,000(292,831)

3,224,844

4,104,844

880,000

Management account reserve for interest rate
volatility
Reserve for interest rate reduction
Total liabilities

47

6,544,995

880,000
3,137,557

3,137,557

87,28787,287

17,815,054(1,113,038)

23,247,010(Net Assets)
Capital16,602

16,602Retained earnings

29,39329,39329,39329,393General account surplus reserve
Valuation, translation adjustments and others(5,964)

Management account surplus reserve

53,66640,03053,666

93,696¥6,585,025¥17,868,720

Total net assets
Total liabilities and net assets(5,964)53,66634¥(1,113,038)¥23,340,707

(Thousands of U.S. dollars)
Item

Generalaccount

Management
account$64,854,736$206,474,933

OffsetTotal(Assets)
Loans$271,329,669

Securities

9,247,212

9,247,212

Cash and bank deposits

2,087,627

2,087,627

Other assets

31,860

Tangible fixed assets

31,067

Intangible fixed assets

7,278

Due from general account148,663

180,523
31,067
7,278

9,940,702

Due to management account for fund for
improvement of operations of municipalities

3,549,042

Total assets

79,808,822

216,564,298

47,179,959

173,116,927$(9,940,702)(3,549,042)(13,489,744)

282,883,376(Liabilities)
Bonds
Borrowed money

363,592

Other liabilities

22,696220,296,886
363,592

163,622

186,318

Reserve for bonuses

580

Reserve for directors’ bonuses

84

84

Reserve for retirement benefits

1,780

1,780

291

291

11,148,604

11,148,604

11,052,420

11,052,420

96,18496,184

Reserve for retirement benefits for directors andcorporate auditors
Fund for improvement of operations ofmunicipalities
Basic fund for improvement of operations ofmunicipalities
Additional fund for improvement of operations ofmunicipalities
Due to management account9,940,702

Due from general account for fund for improvementof operations of municipalities
Reserve under special laws
Reserve for interest rate volatility(9,940,702)
3,549,042

10,665,374(3,549,042)

39,084,288

49,749,662

10,665,374

Management account reserve for interest rate
volatility
Reserve for interest rate reduction
Total liabilities

580

79,323,662

10,665,374
38,026,385

38,026,385

1,057,903

1,057,903

215,913,879(13,489,744)

281,747,797(Net Assets)
Capital201,213201,213Retained earnings

356,238

356,238

356,238

356,238

General account surplus reserve
Valuation, translation adjustments and others(72,291)

Management account surplus reserve

650,419

485,160

650,419

1,135,579$79,808,822$216,564,298

Total net assets
Total liabilities and net assets(72,291)
650,419$(13,489,744)$282,883,376

Notes:1. General account and management accountIn accordance with the provisions of Article 13, Section 1 of the supplementary provisions of the Law, themanagement account is used to conduct administration, collection and other related operations of the assetsthat JFM inherited from the former JFM (management of the assets of the former JFM).
   The management account is separated from the other account (general account) pursuant to the provisionsof Article 13, Section 3 of the supplementary provisions of the Law.

35

2. General account surplus reserve and management account surplus reserve“Net income” of the general account is posted as “General account surplus reserve” in accordance with theprovisions of Article 39, Section 1 of the Law, while “Net income” of the management account is posted
as “Management account surplus reserve” in accordance with the provisions of Article 13, Section 8 of the
supplementary provisions the Law.
3. Due from general account and due to management account
These amounts represent funds lent between the general account and the management account pursuant to
the provisions of Article 13, Section 4 of the supplementary provisions of the Law.
4. Due from general account for fund for improvement of operations of municipalities and due to management
account for fund for improvement of operations of municipalities
These amounts represent cash received for “Fund for improvement of operations of municipalities,” which waslent to the management account from the general account pursuant to the provisions of Article 9, Section 12of the supplementary provisions of the Law.

17. Information by Account (Statements of income)Statements of income of general account and management account from April 1, 2010 through March 31, 2011 wereas follows:(Millions of yen)
Item
IncomeInterest income

General account Management account¥62,032¥512,245

45,152494,659

OffsetTotal¥(34,280)¥539,997
539,812Fees and commissions

134

134

Other income

5050Administrative fee for management account

962

(962)

15,730(15,730)

Interest on fund for improvement ofoperations of municipalities
Interest on due from general account

594

(594)

16,992(16,992)

54,006

272,702(34,280)

29,637

253,540

26

243

269

Other operating expenses

2,303

2,115

4,418

General and administrative expenses

2,264

109

2,374

Other expenses

2,187

2,187

Transfer to fund for improvement ofoperations of municipalities

2,187

2,187

Interest on due to management account

594

(594)

16,992(16,992)

Transfer from general account for fund for
improvement of operations of municipalities
Expenses
Interest expenses
Fees and commissions

Transfer to management account for fund for
improvement of operations of municipalities
Administrative fee for management accountInterest on fund for improvement ofoperations of municipalities
Ordinary income
Special gains
Provision for management account292,428
283,177

962

(962)

15,730(15,730)

8,025

239,543-

247,569

220,000

233,994(220,000)

233,994

220,000(220,000)

Reversal of management account reserve forinterest rate volatility

220,000

220,000

Reversal of reserve for interest rate reduction

13,994

13,994

Special losses
Provision for reserve for interest rate volatility

220,000

Provision for management account reservefor interest rate volatility(220,000)¥8,02536465,489
220,000

245,489

Transfer to management accountNet income

465,489

220,000

245,489

220,000(220,000)¥8,048¥-¥16,074

Statements of income of general account and management account from April 1, 2011 through March 31, 2012 wereas follows:(Millions of yen)
Item
IncomeInterest income

General account Management account¥83,092¥456,669

70,563441,078

OffsetTotal¥(27,957)

511,641

Fees and commissions

128

Other income

31

Administrative fee for management account

930

(930)

11,438(11,438)

Interest on fund for improvement ofoperations of municipalities
Interest on due from general accountExpenses
Interest expenses

128
3

34

635

(635)

14,952(14,952)

67,560242,146(27,957)

Transfer from general account for fund for
improvement of operations of municipalities¥511,805

281,749

46,922

227,397

Fees and commissions

43

231

275

Other operating expenses

2,503

2,035

4,539

General and administrative expenses

2,272

113

2,385

Other expenses
Transfer to fund for improvement ofoperations of municipalities

229

229

216

216

OthersInterest on due to management accountTransfer to management account for fund for
improvement of operations of municipalities

274,320

12

12

635

(635)

14,952(14,952)

Administrative fee for management accountInterest on fund for improvement ofoperations of municipalities

930

(930)

11,438(11,438)

Ordinary income

15,532

214,523-230,055

Special gains

220,000

232,601(220,000)

232,601

Provision for management account

220,000(220,000)

Reversal of management account reserve forinterest rate volatility

220,000

220,000

Reversal of reserve for interest rate reduction

12,601

12,601

Special losses
Provision for reserve for interest rate volatility

220,000

441,024(220,000)

220,000

Provision for management account reservefor interest rate volatility

221,024

Transfer to management account

220,000(220,000)¥6,100¥-Net income¥15,53237

441,024
220,000
221,024¥21,632(Thousands of U.S. dollars)
Item
IncomeInterest income
Fees and commissions
Other income

General account Management account$1,007,061$5,534,722

855,214

5,345,753

OffsetTotal$(338,834)$6,202,949
6,200,967

1,561
376

1,561
45

421

Administrative fee for management account11,279(11,279)

Interest on fund for improvement ofoperations of municipalities

138,631(138,631)

Interest on due from general accountTransfer from general account for fund for
improvement of operations of municipalities
Expenses

7,706(7,706)

181,218(181,218)(338,834)

818,8122,934,756

568,6932,755,997

3,324,690

Fees and commissions

527

2,807

3,334

Other operating expenses

30,347

24,66955,016

General and administrative expenses

27,538

1,373

28,911Other expenses

2,783

2,783

2,629

2,629

Interest expenses

Transfer to fund for improvement ofoperations of municipalities
OthersInterest on due to management accountTransfer to management account for fund for
improvement of operations of municipalities

154

3,414,734

154

7,706

(7,706)

181,218(181,218)

Administrative fee for management account11,279(11,279)

Interest on fund for improvement ofoperations of municipalities

138,631(138,631)

188,2492,599,966-

2,788,215

2,666,343

2,819,072(2,666,343)

2,819,072

Ordinary income
Special gains
Provision for management account2,666,343

Reversal of management account reserve forinterest rate volatility

2,666,343

Reversal of reserve for interest rate reduction
Special losses
Provision for reserve for interest rate volatility(2,666,343)
2,666,343

152,729
2,666,343

5,345,101

152,729(2,666,343)

2,666,343

2,666,343

Provision for management account reservefor interest rate volatility

2,678,758

Transfer to management account2,666,343(2,666,343)$73,937$-

Net income$188,249

38

5,345,101
2,678,758$262,186

18. Fair Value of Marketable Securities
Marketable held-to-maturity securities at March 31, 2011 consisted of the following:(Millions of yen)Book value

Fair value

Difference

Unrealized gains Unrealized losses

Treasury discount bills¥86,990¥86,982

¥(7)

¥-

¥(7)

Negotiablecertificates of deposit

370,600

370,600

-

-

-

Total

¥457,590¥457,582

¥(7)

¥-

¥(7)

Marketable held-to-maturity securities at March 31, 2012 consisted of the following:(Millions of yen)Book value

Fair value

Difference

Unrealized gains Unrealized losses

Treasury discount bills¥96,987¥96,979

¥(8)

¥-

¥(8)

Negotiablecertificates of deposit

666,000

666,000

-

-

-

Total

¥762,987¥762,979

¥(8)

¥-

¥(8)

(Thousands of U.S. dollars)Book value

Fair value

Difference

Unrealized gains Unrealized losses

Treasury discount bills$1,175,463$1,175,364

$(99)

$-

$(99)

Negotiablecertificates of deposit

8,071,749

8,071,749

-

-

-

Total

$9,247,212$9,247,113

$(99)

$-

$(99)

Notes:1. The fair value of treasury discount bills is based on the market price at the end of the fiscal year.
2. The balance sheet amount for negotiable certificates of deposit is the fair value.
3. Difference is the net amount of “unrealized gains” and “unrealized losses.”39

19. Information on Derivative Transactions(1) Types of derivative transactions
Derivative transactions entered into by JFM are interest rate swaps for interest rate related transactions, and currency
swaps and foreign exchange forward contracts for currency related transactions.
(2) Policies and purposes of derivative transactions
JFM uses interest rate swaps, currency swaps and foreign exchange forward contracts as a means of hedging
exposure to interest rate and foreign exchange fluctuation risks, and does not enter into derivatives for speculative
purposes.
   Interest rate swaps are used to hedge exposure to interest rate risk on fund-raising activities. Currency swaps andforeign exchange forward contracts are used to hedge exposure to foreign exchange risk associated with issuanceof foreign currency-denominated bonds and foreign currency-denominated deposits.
   Hedge accounting is applied to interest rate swaps, currency swaps and foreign exchange contracts.
(a) Hedge accounting method
Interest rate swaps used to hedge the risk of interest rate fluctuations that qualify for hedge accounting and meet
specific matching criteria are not measured at fair value, but the differential paid or received under the swap
agreements is recognized and included in interest expense or income. If swap contracts or forward contracts used
to hedge the foreign currency fluctuation qualify for deferral hedge accounting, the foreign currency-denominatedassets and liabilities are translated at the contracted rate.
(b) Hedging instruments and hedged items(ⅰ) Hedging instruments: Interest rate swaps
Hedged items: Bonds and borrowed money(ⅱ) Hedging instruments: Currency swaps
Hedged items: Foreign currency-denominated bonds(ⅲ) Hedging instruments: Foreign exchange forward contracts
Hedged items: Receipt of interest and principal of foreign currency-denominated bank deposits(c) Hedging policy
JFM uses hedging instruments as a means of hedging exposure to interest rate risk and foreign exchange risk.
Hedged items are identified by each individual contract.
   As a means of hedging foreign exchange fluctuation risks associated with the receipt of interest and principalof foreign currency-denominated bank deposits, a foreign exchange forward contract at the time of deposit isentered into by JFM.
(d) Assessment of hedge effectivenessJFM ensures hedging instruments and hedged items have the same major terms when entering into hedgetransactions are to offset bond and borrowed money market fluctuations.
   Accordingly, JFM deems these to be highly effective and thus does not assess their effectiveness. Moreover,a periodic assessment of hedge effectiveness for interest rate swaps and currency swaps and forward contracts
that qualify for deferral hedge accounting is omitted when the exceptional accrual method is applied.
(3) Risks on derivative transactions
Major risks on derivative transactions are market risk and credit risk. Market risk is the risk of future revenue fluctuations
due to market value changes. Credit risk is the risk of losses incurred when counterparties are unable tofulfill their contracts due to bankruptcy or other reasons.
   As for derivative transactions used for hedging purposes, market risk is offset by the corresponding change into
underlying hedged items.
   JFM enters into ISDA Master Agreements and CSA Agreements with financial institutions, which are its derivativetransactions counterparties, to reduce credit risk. Moreover, JFM constantly monitors the transactions’ restructuringcosts and their credit profiles, and deals with multiple counterparties.
(4) Risk management system for derivative transactions
Execution and management of derivative transactions are conducted by the Finance Department of JFM with theapproval of persons in charge in accordance with the operational guidelines which specify transaction authority andlimits on the transaction amount.
   Additionally, the total amount of derivative transactions, the status of risks, the assessed fair value, and the credit
risk on counterparties are regularly reported to the Integrated Risk Management Committee.

40Report of Independent Auditors41