Bond Financing
General Loans

ANNUAL REPORT 2003

Trust Banking

Securities Finance

Securities
LendingJAPAN SECURITIES FINANCE CO., LTD.

Profile

Growing in step with the securities industry
and supporting its future development.
In June 1951, Japan Securities Finance Co., Ltd.
(JSF) launched its loaning operations, dealing withfunds and stock certificates needed by securities
companies for delivery and settlement of margintransactions.
This margin loan business can be transacted solely
by securities finance companies licensed inaccordance with the Securities and Exchange Law.
As Japan’s largest securities finance company
designated by the Tokyo, Sapporo and Fukuoka
Stock Exchanges, JSF is contributing significantly to
improving the fairness of stock price formation andliquidity of stocks in the secondary equity markets.

Contents

Financial Highlights

1

A Message from the President

2

Business Review

4Outline of the Corporate Group7

Financial Section

8

Board of Directors and Corporate Auditors

22

Corporate Data

23

Business Outline

24

Organization

25

Financial Highlights
Japan Securities Finance Co., Ltd. and Consolidated Subsidiaries March 31, 2003, 2002, 2001, 2000 and 1999

Consolidated financial results

Operating revenue
Net income
Total assets
Shareholders’ equity
Net income per share
Net shareholders’ equity per share¥ mil.
¥ mil.
¥ bil.
¥ bil.
¥¥FY1998(Apr. 1, 1998 –Mar. 31, 1999)

FY1999(Apr. 1, 1999 –Mar. 31, 2000)

FY2000(Apr. 1, 2000 –Mar. 31, 2001)

FY2001(Apr. 1, 2001 –Mar. 31, 2002)

FY2002(Apr. 1, 2002 –Mar. 31, 2003)

35,741
1,940
4,247.6
113.1
15.98
956.7625,584
3,326
6,343.1
116.7
28.12
986.86

31,5682,837
8,257.6
118.5
24.17
1,045.03

31,6862,989
6,878.3
117.1
26.75
1,089.27

28,661
1,746
4,031.3
118.3
15.86
1,169.05

Operating revenue

Net income(Millions of yen)

(Millions of yen)

40,0004,000
35,741

30,000

3,326

3,000

31,568 31,686
28,661

2,837

2,989

25,58420,000

2,000
1,940

10,000

1,746

1,000

0

0

FY98

99

00

01

02

FY98

99

00

01

Total assets

Net income per share(Billions of yen)

(Yen)

8,800

02

32
8257.6

6,600

28.12

24

6878.36343.14,400

164247.64031.3

2,200

26.75
24.17

15.98

15.86

8

0

0

FY98

99

00

01

02

FY98

99

00

01

02

1

A Message from the President

gradually retreated to the ¥800 billion level by the end of
the fiscal year as stock market conditions continued to
weaken. The outstanding balance of standardized margin
selling fell from approximately ¥800 billion at the
beginning of the fiscal year to the ¥500 billion level at theend of the year, due mainly to the influence of theenhanced regulations on margin selling that became
effective in September.

Kunio Kojima, President

It is my sincere hope that this Annual Report for fiscal 2002
(April 2002-March 31, 2003) will be of use to shareholders,investors and other supporters of the Japan Securities Finance
Company.

1.Review of Fiscal 2002
Business environment
In the stock market, the Tokyo Stock Price Index (TOPIX),
which started the fiscal year at 1,053, rose temporarily,
with expectations for the recovery of the domestic
economy. However, the index recorded a downward trend
since the summer, due to a decline in US stock prices andthe deterioration of supply and demand conditions, causedby companies’ unwinding of cross-shareholdings. From
January, concern about increasing tension in world affairs
sent TOPIX to its lowest figure in the post-bubble period.
The index fell below 800 in March for the first time inabout 19 years and ended the fiscal year at 788.
The outstanding balance of standardized margin buying
in the Tokyo market grew from about ¥1.1 trillion at the
beginning of the fiscal year to ¥1.4 trillion by June, but

2Business results
Loans for margin transactions remained at a low level,
influenced by a slump in the outstanding balance ofstandardized margin buying, and kai-gensaki transactions
fell significantly, due to the absence of bidding for Japanese
government bond repurchase agreements (gensaki) by the
Ministry of Finance, following an active year in fiscal 2001.
As a result, total loans receivable averaged ¥563.5 billion
during fiscal 2002, roughly half the fiscal 2001 average. As
regards the turnover of securities lending businesses, thelending of stock certificates outside the loans for margintransactions business (general stock lending) held firm,
despite a significant decline in bond lending. Operating
income increased because of introducing new fees on stockloans and higher government bond investment revenue,
but consolidated net income fell 40% due to significant
losses on valuation and from the sale of bank stocks, whichwere a source of serious concern. Detailed results for fiscal
2002 are to be found in “Business Review” below.

2.Outlook of Fiscal 2003
Earnings outlook
The future of the Japanese economy remains uncertain.
While there are favorable factors such as recovery incorporate earnings, it will take some time before consumer
sentiment improves, in view of the continuing employment
adjustment pressure. There are also concerns that unstableeconomies in the US, Asia and elsewhere will adverselyaffect exports, which are currently favorable. Stock markets
are expected to remain weak in the near term, with noquick recovery being anticipated.
In this environment, although the potential for further
decline is limited, both margin buying and selling areexpected to remain low, and we forecast a decline in JSF’s
loans and stock loans for margin transactions. The
securities lending business is expected to remain at a level
similar to that of the previous year. As the book value ofstockholdings was lowered by recognizing securities
valuation losses in the previous fiscal year, we see nosignificant risk in going forward with respect to our
securities holdings.
Strategy
Studies are in progress on reforms to the securities
settlement system, including the reduction of settlement
period (T+1) and introducing a book-entry securities
system. Meanwhile, the restructuring of an online system,
which JSF has been developing for the past two years, is
now in the final testing stage, with a scheduled launch by
the end of the year. We intend to use this system torespond more quickly and effectively to a variety ofchanges in financial and securities markets, as well as to
new market needs that may be generated by those changes.
JSF acquired 5,556 thousand shares of treasury stock in
fiscal 2002 and has established a framework to acquire an
additional 6,000 thousand shares (¥3 billion) in fiscal
2003. The number of shares outstanding has been reduced
to 101 million, but with the moderate amount of leeway
that we have in equity capital because of the extremely
undervalued stock price, we will continue to improveshareholder value by purchasing treasury stock.

making preparations in its core loans for margintransactions business to facilitate these efforts by handlingloans for margin transactions in the JASDAQ market.
In the general loans business, in addition to lending tosecurities companies and individual investors, JSF will also
work aggressively to provide loans to general corporations.
JSF Trust and Banking Co., Ltd. provides high-quality
services with full use of its capacity as a trust bank in the
securities market, including the “segregated money ofcustomers in trust” and “securities in trusts.” The company
is looking to a further expansion of its trust assets.
In the information processing services segment, JSF will
work to increase orders by concentrating management
resources in areas where it can demonstrate superiority,
including systems development for the securities andfinance industries, and will focus on outsourcing services.
Although economic conditions and the securities andfinancial environment are expected to remain unfavorable,
we will respond in timely and appropriate fashion to thevarious needs of the securities and financial industries,
with JSF playing a central role in consolidating the member
companies of its group as a specialized financial institution
in the securities market.
I would be most grateful for your continuing support as
we continue to do our utmost to ensure a very successful
future for JSF.

Kunio Kojima
President
August 2003

In the securities financing business, as the Japan Securities
Dealers Association is considering the introduction ofstandardized margin transactions with a view to revitalizing
the JASDAQ over-the-counter trading market, JSF is3

Business Review

Consolidated operating revenue declined by 9.5% from the previous year to ¥28,661 million in
fiscal 2002, due mainly to reduced fees on lending securities in loans for margin transactions.
Consolidated operating costs dropped by 26.6% from the previous year to ¥15,747 million, as aresult of reduced fees on borrowing securities in loans for margin transactions and a decline ininterest paid, thanks to lower money market interest rates.
Consequently, consolidated operating income grew 108.2% to ¥4,806 million. The increases
are mainly attributable to the fees on lending securities of ¥13,576 million (down ¥2,771
million from the previous fiscal year) being significantly higher than those on borrowing
securities of ¥11,229 million (down ¥4,786 million from the previous fiscal year) mainly as aresult of introducing new fees on stock loans for loans transactions in May 2002.
Other losses totaled ¥1,344 million as a result of losses on the sale, devaluation of investment
securities and other factors, due to the decline in the stock market. Consequently, consolidated
net income fell 41.6% to ¥1,746 million.
Breakdown of JSF group operating revenue

Securities financing segment
Loans for margin transactions business
Interest on loans
Interest on collateral money forsecurities borrowed
Fees on lending securities
Bond financing and general loans business
Interest on bond financing
Interest on general loans
Securities lending business
Stocks
Bonds
Fees on lending securities
Interest on collateral money forsecurities borrowed
Trust banking business
Trust charges
Real estate leasing business
Other
Information processing services segment
Fees on information services
Fees on machinery leasing
Other
Total operating revenue

4

Fiscal 2002
April 1, 2002 – March 31, 2003
Amount(¥ million)

Fiscal 2001
April 1, 2001 – March 31, 2002
Amount(¥ million)

25,296
16,681
2,535

28,093
20,5682,887

1,520
12,402
1,239
34
1,205
1,409
638
771
533

2,416
15,087
1,533
32
1,501
1,952
797
1,155
452

233
3,122
207
981
1,864
3,365
3,084
215
66
28,661

702
1,670
189
938
1,432
3,593
3,269
252
72
31,686

1.Securities financing
Operating revenue in the securities financing division fell 10.0% from the previous fiscal year to¥25,296 million.

Loans for margin transactions
Revenue from interest on loans decreased. This is due to a decline in the average balance ofloans for margin transactions of ¥39.4 billion from the previous year to ¥409.4 billion, which
resulted from the decreased outstanding balance of standardized margin buying and frominterest rates on loans reaching record lows during the fiscal year. Despite the introduction of
new fees on stock loans, fees on lending securities also decreased, by a decline in the averagebalance of stock loans for margin transaction of ¥171.5 billion to ¥539.7 billion, which reflected
the reduced balance of margin selling. As a result, operating revenue in this business fell 18.9%
from the previous fiscal year to ¥16,681 million.
Average balance of loans

Average balance of stock loans(Billions of yen)(Billions of yen)

1,200

800
1,098.2

711.2

900

600
790.8

400
448.9

300

539.7

512.8

600

447.9
350.1

409.4

292.6

0

200
0

FY 98

99

00

01

02

FY 98

99

00

01

02

Bond financing and general loans
With the slumping stock market, demand for funds from securities companies and individual
investors did not increase during the year. The average balances of loans for securities
companies and individual investors were ¥7.9 billion and ¥45.7 billion respectively. Operating
revenue from this operation fell 19.2% from the previous fiscal year to ¥1,239 million.
Average balances ofbond financing

Average balance ofgeneral loans(Billions of yen)(Billions of yen)

160

160
144.9

120

120

80

80 89.9

40

52.8

72.0

61.6

55.8

40
7.1

7.9

01

02

0

FY 98

81.2

45.7

0

99

00

FY 98

99

00

01

02

5

Securities lending
Stock lending volume increased significantly with favorable growth of “offer bid stock lending
brokerage transactions” (electronic matching of stock borrowing and lending on screen), which
the company launched in February 2002. Nevertheless, revenue declined as a result of the
reduced lending unit, which forms the basis for calculating lending fees.
As the Bank of Japan continued to make an ample supply of funds available, the amount ofbond lending and borrowing contracts also declined, due to lackluster demand for raising funds
through bond lending and borrowing. Consequently, operating revenue in the securities lending
business fell 27.8% from the previous fiscal year to ¥1,409 million.
Annual agreementsbond lending

Annual agreements
general stock lending(Billions of yen)(Billions of yen)
2,400

100,000

1,800

75,00088,410.5
1,846.6

63,947.5

50,000 56,962.3

1,200 1,292.6

46,975.4

1,169.9
821.9

600

615.7

0

0

FY 98

41,052.7

25,000

99

00

01

02

FY98

99

00

01

02

Trust banking business
Efforts to expand financing and to boost short-term investment resulted in strong performancein fund management operations and increased trust fees. Gains on sales of government bonds
contributed to significant revenue growth, and operating revenue in the trust banking businessjumped 87.0% from the previous year to ¥3,122 million.

Other business
Other revenue amounted to ¥1,864 million, up 30.2% from the previous year, mainly frominterest income on government bond holdings.

2.Information processing services
In the information processing segment, although securities and other system development
business performed well, a decline in orders for system operations services and data entries
caused operating revenue to decline by 6.3% from the previous fiscal year to ¥3,365 million.

6

Outline of the Corporate Group

Securities Finance BusinessInformation Processing Business
Other BusinessSubsidiary

JSF Trust andBanking Co., Ltd.
•Trust services•Banking services for deposits and loans
Subsidiary

Subsidiary

Nihon Building Co., Ltd.

Japan Business
Service Co., Ltd.

•Real estate ownership and leasing•Real estate trading and brokerage•Insurance agency services•Information processing services•Software development and sales•Real estate ownership and leasing

Japan
Securities
Finance Co., Ltd.

Affiliate

Affiliate

Japan Information
Processing Service Co., Ltd.

Japan Securities Agents, Ltd.
•Securities clearing agent•Transfer agent•Securities custody•Information processing services•Software development and sales•Information equipment sales

JSF Group

Affiliate

Nihon Kyoei
Securities Co., Ltd.
•Securities business

Affiliate

Japan Information
System Co., Ltd.
•Production of credit cards, etc.
•Information input and output services

7

Financial Section

Consolidated Balance Sheets
Japan Securities Finance Co., Ltd. and Consolidated Subsidiaries March 31, 2003 and 2002
Thousands of
U.S. dollars (note 2)

Millions of yen

Assets

2003

2002

2003

Cash (note 3)¥0,023,699¥0,022,014$00,197,163

Call loans

300,000

291,400

2,495,840

Short-term investments (notes 4 and 15)997,259

606,781

8,296,664

Short-term loans receivable (note 15)645,762

920,928

5,372,396

Securities lent

493,340

2,250,093

4,104,326

Securities in custody (note 15)

83,171

162,972

691,939

Securities in deposit (note 15)

108,413602,237

901,939

Deferred income taxes (note 9)

448

248

3,727

Collateral money for securities borrowed (note 15)

782,894

1,717,328

6,513,261

Other current assets (note 15)

21,626

2,348

179,917

606

914

5,042

3,456,006

6,575,435

28,752,130

7,227

6,930

60,1255

8

42

Tools, furniture and fixtures

2,746

2,922

22,845

Land

3,130

3,130

26,04034–

282

13,142

12,990109,334

6,236

5,985

51,880

6,906

7,005

57,454

4,193

1,599

34,884563,362

290,317

4,686,872

179

1,263

1,489

9

9

75

Other investments and other assets

794

2,770

6,605

Less allowance for doubtful receivables

110

89

915

Total investments and other assets

564,234

294,270

4,694,126¥4,031,339¥6,878,309$33,538,594

Current assets:

Less allowance for doubtful receivables
Total current assets
Property, plant and equipment:
Buildings and structures
Machinery, equipment and vehicles

Construction in progress
Less accumulated depreciation
Net property, plant and equipment
Intangible assets, net
Investments and other assets:
Investments in securities (notes 4, 5 and 15)
Deferred income taxes (note 9)
Deferred income taxes for land revaluation (note 6)

Total assets
See accompanying notes to consolidated financial statements.

8Thousands of
U.S. dollars (note 2)

Millions of yen

Liabilities and Stockholders’ Equity

2003

2002

2003

Call money (notes 7 and 15)¥0,918,500¥0,768,000$07,641,431

Bills sold (notes 7 and 15)

297,500

201,300

2,475,041

Short-term borrowings (notes 7 and 15)

674,820577,651

5,614,143

Commercial paper (note 7)

85,10053,000707,987

Borrowings on Gensaki transaction (notes 7 and 15)

246,637–

2,051,888

1,080

577

8,985

Collateral money received for securities lent (note 15)

893,4612,070,995

7,433,120

Collateral securities deposited

332,139

1,008,677

2,763,220

Securities borrowed (note 15)352,785

1,908,625

2,934,983

Other current liabilities (note 7)

105,143

165,354874,734

Total current liabilities

3,907,165

6,754,179

32,505,532

Deferred income taxes (note 9)

1,107

–

9,210

Liabilities for retirement and severance benefits (note 8)

4,025

4,389

33,486

680

2,638

5,657

5,812

7,027

48,353

3,912,977

6,761,206

32,553,885

10,00010,00083,195Additional paid-in capital (note 11)

5,182

5,182

43,112Retained earnings (note 12)99,494

100,847

827,737

(13)

(13)

(108)

Net unrealized gain on other securities (note 4)

3,895

1,088

32,404

Treasury stock

(196)

(1)

(1,631)

118,362

117,103

984,709¥4,031,339¥6,878,309$33,358,594

Current liabilities:

Accrued income taxes (note 9)

Non-current liabilities:

Other non-current liabilities
Total non-current liabilities
Total liabilities
Stockholders’ equity:
Common stock (note 11):
Authorized 154,301,000 shares;
issued and outstanding 101,810,000 sharesin 2003 and 107,509,000 in 2002

Loss on revaluation of land (note 6)

Total stockholders’ equity
Commitments and contingencies (note 16)
Total liabilities and stockholders’ equity

9Consolidated Statements of Income
Japan Securities Finance Co., Ltd. and Consolidated Subsidiaries March 31, 2003 and 2002
Thousands of
U.S. dollars (note 2)

Millions of yen

2003

2002

2003

Operating revenue¥28,661¥31,686$238,444

Operating costs
Gross profit

15,747
12,914

21,465
10,221

131,007
107,437

General and administrative expenses (note 10)
Operating income

8,108
4,806

7,913
2,308

67,45439,983

209
60
(8)
(460)
281
(336)
(1,183)93(1,344)
3,462

268
60
(11)
1,050
999
(332)
32
2,066
4,374

1,739
499
(67)
(3,827)2,338(2,795)(9,842)774(11,181)
28,802

1,787
(71)
1,716
¥01,746

1,407
(22)
1,385
¥02,989

14,867(591)
14,276$014,526

Other income (deductions):
Interest income
Dividend income
Interest expenses
Equity in earnings (losses) of affiliates
Reversal of allowance for doubtful receivables
Loss on sale of investments in securities (note 4)
Loss on devaluation of investments in securities (note 4)
Other, net
Income before income taxes
Income taxes (note 9):
Current
Deferred
Net income–

Yen

Per share of common stock:
Net income—basic (note 13)
Cash dividends applicable to the year (note 12)

U.S. dollars (note 2)

2003

2002

2003

¥15.867.00¥26.75
7.00

$0.13
0.06

See accompanying notes to consolidated financial statements.

Consolidated Statements of Stockholders’ Equity
Japan Securities Finance Co., Ltd. and Consolidated Subsidiaries March 31, 2003 and 2002

Thousands of
U.S. dollars (note 2)

Millions of yen

Common stock (note 11):
Balance at beginning of year
Balance at end of year
Additional paid-in capital (note 11):
Balance at beginning of year
Balance at end of year
Retained earnings (note 12):
Balance at beginning of year
Cash dividends
Bonuses to directors and corporate auditors
Net income
Retirement of treasury stock
Balance at end of year
Loss on revaluation of land at end of year (note 6)
Net unrealized gain on other securities at end of year (note 4)
Treasury stock at end of year
Total stockholders’ equity at end of year
See accompanying notes to consolidated financial statements.

10

2003

2002

2003

¥010,000
10,000¥010,000
10,000$083,195
83,195

5,182
5,182

5,182
5,182

43,112
43,112

100,847
(752)
(95)
1,746
(2,252)
99,494
(13)
3,895
(196)
¥118,362

101,268
(794)
(99)
2,989
(2,517)
100,847
(13)
1,088
(1)
¥117,103

838,993(6,256)(791)
14,526(18,735)
827,737(108)
32,404(1,631)$984,709

Consolidated Statements of Cash Flows
Japan Securities Finance Co., Ltd. and Consolidated Subsidiaries March 31, 2003 and 2002
Thousands of
U.S. dollars (note 2)

Millions of yen

2003

Cash flows from operating activities:
Income before income taxes¥(0,003,462
Adjustments to reconcile income before income taxes to
net cash provided by operating activities:
Depreciation and amortization
882
Losses relating to short-term investments and investments
in securities
512
Allowance for doubtful receivables(286)
Increase (decrease) in liabilities for retirement and severance benefits(363)Interest and dividend income(9,072)
Interest expenses
949
Equity in (earnings) losses of affiliates
460
Decrease in short-term loans receivable
275,166(Increase) decrease in call loans(8,600)Decrease in collateral money for securities borrowed
934,434
Increase (decrease) in call money
150,500
Increase (decrease) in bills sold
96,200
Increase in short-term borrowings
97,169
Increase (decrease) in borrowings on Gensaki transaction
246,637
Increase (decrease) in commercial paper
32,100Decrease in collateral money received for securities lent
(1,177,534)
Increase in collateral money received for loan transactions
1,391
Purchase of short-term investments(4,934,365)
Proceeds from sale/redemption of short-term investments
4,273,582
Other, net
22,514
Sub total
5,738Interest and dividend received
8,531
Interest paid
(960)
Income taxes paid
(1,213)
Net cash provided by operating activities
12,096

2002

2003¥(0,004,374$(0,028,802

757

7,338

455
(1,016)
109(10,506)
1,654(1,050)401,076
43,600694,407(182,100)(182,000)
134,635(40,772)(128,500)(379,342)
4,588(1,586,374)
1,233,716(1,689)6,022
11,686(2,062)(2,057)
13,5894,260(2,379)(3,020)(75,474)
7,895
3,827
2,289,235(71,547)
7,773,993
1,252,080
800,333
808,394
2,051,888
267,055(9,796,456)
11,572(41,051,290)
35,553,927
187,304
47,73770,973(7,987)(10,091)
100,632

Cash flows from investing activities:
Purchase of investments in securities
Proceeds from sale/redemption of investments in securities
Capital expenditures
Purchase of intangible assets
Other, net
Net cash provided by (used in) investing activities(4,695)825(435)(3,103)
11(7,397)

(820)
5,194
(1,877)
(980)
(35)
1,482

(39,060)
6,864(3,619)(25,815)
91(61,539)

Cash flows from financing activities:
Dividends paid to stockholders
Purchase of common stock for retirement
Other, net
Net cash used in financing activities(752)(2,252)
1(3,003)(794)(2,517)(11)(3,322)(6,256)(18,735)
8(24,983)

1,696
21,976¥(0,023,672

11,74910,227¥(0,021,976

14,110182,828$(00,196,938

Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year (note 3)
See accompanying notes to consolidated financial statements.

11

Consolidated Statements of Income
Japan Securities Finance Co., Ltd. and Consolidated Subsidiaries March 31, 2003 and 2002

(1) SUMMARY OF SIGNIFICANT ACCOUNTINGPOLICIES(a) Basis of Presenting Consolidated Financial Statements
Japan Securities Finance Co., Ltd. (the Company) and its
consolidated subsidiaries maintain their books of accountand prepare their financial statements in conformity withfinancial accounting standards of Japan.
The accompanying consolidated financial statements
have been prepared in accordance with the provisions set
forth in the Japanese Securities and Exchange Law and its
related accounting regulations, and in conformity withaccounting principles and practices generally accepted inJapan, which may differ in some material respects fromaccounting principles and practices generally accepted incountries and jurisdictions other than Japan.
In preparing the accompanying consolidated financial
statements, certain reclassifications have been made in thefinancial statements issued domestically in Japan in orderto present them in a form which is more familiar to readers
outside Japan. In addition, the notes to the consolidated
financial statements include information which is not
required under accounting principles generally acceptedin Japan but is presented herein as additional information.
(b) Principles of Consolidation
The accompanying consolidated financial statements
include the accounts of the Company and its subsidiaries(3 subsidiaries for 2003 and 2002).
All significant intercompany accounts and transactions
have been eliminated in consolidation.
Investments in affiliates are accounted for by theequity method.
The Accounting Standards for Consolidation require thecontrol or influence concept for the consolidation scope ofsubsidiaries and affiliates. Under the control or influence
concept, a company in which the parent company or its
consolidated subsidiaries, directly or indirectly, are able toexercise control over operations is fully consolidated, andanother company over which the parent company and/or
its consolidated subsidiaries have the ability to exercise
significant influence is accounted for by the equity method.
The excess of cost over the underlying net assets at thedates of investments in subsidiaries is being amortized over
5 years.
(c) Cash and Cash Equivalents
For the purpose of the statements of cash flows, theCompany considers all highly liquid investments withinsignificant risk of changes in value which have maturities
of generally three months or less when purchased to be
cash equivalents.

12(d) Short-term Investments and Investments in Securities
Under the Accounting Standards for Financial Instruments,
securities are classified into four categories—“trading securities”, “held-to-maturity securities”, “investments in affiliates” and “other securities”. Securities classified as “trading
securities” are stated at fair value and unrealized gains
or losses are recorded in the consolidated statement ofincome. Securities classified as “held-to-maturity securities” are stated at amortized cost. Securities classified as“other securities” are stated at fair value and unrealized
gains or losses, net of related taxes, are excluded from
earnings and recorded in a separate component of stockholders’ equity. Realized gains or losses on the othersecurities are determined by the moving average method.
(e) Inventories
Inventories are stated at cost. Cost is determined principallyby the specific identification method.
(f) Property, Plant and Equipment
Property, plant and equipment are carried at cost. Depreciation is provided by the declining-balance method basedon estimated useful lives.
The estimated useful lives are as follows:
Buildings and structures 3–50 years(g) Intangible Assets
Software development expenses are deferred and amortizedby the straight-line method over estimated useful lives(5 years). Intangible assets other than software are deferred
and amortized by the straight-line method at the rates
based on the estimated useful lives of the respective assets.
(h) Allowance for Doubtful Receivables
An allowance for doubtful receivables is provided at an
amount of uncollectible receivables based on historical loss
ratios and an amount that takes into consideration thepossibility of specific liabilities.
(i) Retirement and Severance Benefits
The Company and its consolidated subsidiaries havecontributory and noncontributory pension plans toprovide retirement and severance benefits to substantiallyall employees.
Under the Accounting Standards for Retirement andSeverance Benefits, provisions have been made in theaccompanying consolidated financial statements based on
the present value of the projected future retirement andseverance benefits attributable to employee services rendered by the end of the year, less amounts funded undercontributory and noncontributory pension plans.
(j) Leases
Finance leases, except for those where the legal title of theunderlying property is transferred from the lessor to thelessee at the end of the lease term, are accounted forsimilarly to operating leases.

(k) Income Taxes
The Accounting Standards for Deferred Income Taxes
require that deferred income taxes be accounted for under
the asset and liability method. Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax
assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in whichthose temporary differences are expected to be recoveredor settled, and the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
(l) Appropriation of Retained Earnings
Under the Commercial Code of Japan, the appropriationof retained earnings with respect to a given financial period
is made by resolution of the stockholders at a general
meeting to be held subsequent to the close of such financial period. The accounts for that period do not, therefore,
reflect such appropriation. (See note 12)(m) Data per Common Share
Net income per share is computed on the basis of theweighted average number of shares of common stock
outstanding during the respective years. (See note 13)
Cash dividends per share are computed based on
dividends actually paid during the year.
(n) Reclassifications
Certain reclassifications of the accompanying consolidated
financial statements as of and for the year ended March 31,
2002 have been made to conform to the 2003 presentation.
(2) FINANCIAL STATEMENT TRANSLATIONThe consolidated financial statements are expressed inJapanese yen. However, solely for the convenience of thereader, the consolidated financial statements as of and forthe year ended March 31, 2003 have been translated into
United States dollars at the rate of ¥120.20=U.S.$1, theapproximate exchange rate on the Tokyo Foreign Exchange
Market on March 31, 2003. This translation should not be
construed as a representation that the amounts shown
could be converted into U.S. dollars at such rate.

(3) CASH AND CASH EQUIVALENTS
A reconciliation of the cash and cash equivalents of consolidated balance sheets and that of consolidated statements of cash
flows at March 31, 2003 and 2002 is follows:
Millions of yen

CashTime deposits that have maturities of over three months when acquired
Cash and cash equivalents

Thousands of U.S. dollars

2003

2002

2003

¥23,699(27)¥23,672¥22,014(38)¥21,976$197,163(225)$196,938(4) SHORT-TERM INVESTMENTS AND INVESTMENTS IN SECURITIESBalance sheet amount and changes in fair value of trading securities as of and for the years ended March 31, 2003 and 2002
are summarized as follows:
Millions of yen

2003

Balance sheet amount
Changes in fair value¥¥

Thousands of U.S. dollars

2002

–
–

¥52,595¥00,025

2003

$
$

–
–

Balance sheet amount, fair value and gross unrealized gain and loss of held-to-maturity securities with fair value as ofMarch 31, 2003 and 2002 are summarized as follows:
Balance sheet amountMarch 31, 2003
Government bond securities
Corporate bond securities
Other debt securities
March 31, 2002
Government bond securities
Corporate bond securities
Other debt securities

Millions of yen
Gross unrealized gain
Gross unrealized loss

Fair value¥000,015
608–¥000,623

¥ –
1
–
¥ 1

¥ –
5
–
¥ 5

¥000,015
604–¥000,619¥281,897
60,682–¥342,579

¥589
20
–
¥609

¥013
609
–
¥622

¥282,473
60,093–¥342,566
13

Thousands of U.S. dollars
Gross unrealized gain
Gross unrealized loss

Balance sheet amountMarch 31, 2003
Government bond securities
Corporate bond securities
Other debt securities$0,125
5,058–$5,183$–8–$8

Fair value

$ –
41
–
$41

$0,125
5,025–$5,150Acquisition cost, balance sheet amount and gross unrealized gain and gross unrealized loss of other securities with fairvalue as of March 31, 2003 and 2002 are summarized as follows:
Acquisition cost

March 31, 2003
Equity securities
Bond securities:
Government bond securities
Corporate bond securities
Other debt securities
Other securities
March 31, 2002
Equity securities
Bond securities:
Government bond securities
Corporate bond securities
Other debt securities
Other securities

Balance sheet amount¥0,005,480¥0,307¥0,139¥0,005,648

1,320,080
215,541–
22¥1,541,123

5,585
331
–
–
¥6,223262
68––¥0,4691,325,403
215,804–22¥1,546,877¥0,003,353¥0,522¥0,722¥0,003,153

467,918
16,224––¥0,487,495

1,127
–
–
–
¥1,6491980––¥0,821

469,026
16,144––¥0,488,323

Acquisition cost

March 31, 2003
Equity securities
Bond securities:
Government bond securities
Corporate bond securities
Other debt securities
Other securities

Millions of yen
Gross unrealized gain
Gross unrealized loss

Thousands of U.S. dollars
Gross unrealized gain
Gross unrealized loss

Balance sheet amount$00,045,591$02,554$1,157$00,046,988

10,982,363
1,793,186–
183$12,821,323

46,464
2,754––$51,772

2,180
565
–
–
$3,902

11,026,647
1,795,375–
183$12,869,193

It is not practicable to estimate the fair value of securities as of March 31, 2003 and 2002 described bellow because of lackof market price and difficulty in estimating fair value.
Millions of yen

Unlisted equity securities

Thousands of U.S. dollars

2003

2002

2003

¥334

¥118

$2,779Projected future redemption of other securities with maturities and held-to-maturity securities at March 31, 2003 are summarized as follows:
Due within one year

Debt securities:
Government bond securities
Corporate bond securities
Other debt securities
14¥819,477
177,782–¥997,259

Millions of yen
Due after one year through five years
Due after five years through ten years¥372,702
36,374–¥409,076¥123,372
2,256–¥125,628

Due after ten years¥9,866––¥9,866Due within one year

Debt securities:
Government bond securities
Corporate bond securities
Other debt securities$6,817,612
1,479,052—$8,296,664

Thousands of U.S. dollars
Due after one year through five years
Due after five years through ten years$3,100,682
302,613—$3,403,295$1,026,389
18,769—$1,045,158

Due after ten years$82,080——$82,080

For the years ended March 31, 2003 and 2002, proceeds from sale of other securities are ¥1,653,057 million($13,752,554 thousand) and ¥45,855 million, the gross realized gains are ¥1,378 million ($11,464 thousand) and ¥120
million, and the gross realized losses are ¥707 million ($5,882 thousand) and ¥341 million, respectively.
(5) INVESTMENTS IN AFFILIATES
The aggregate carrying amount of investments in affiliates as of March 31, 2003 and 2002 is ¥12,788 million ($106,389
thousand) and ¥13,484 million, respectively.
(6) LAND REVALUATIONAs of March 31, 2002, the Company revaluated its land at fair value, pursuant to the Enforcement Ordinance for the Law
Concerning Land Revaluation and its amendments (the “Law”). According to the Law, net unrealized loss is reported in a
separate component of stockholders’ equity net of related taxes, and the related deferred tax assets are reported in assets asdeferred tax assets for land revaluation.
The book value of the land of ¥978 million before the revaluation was revaluated at ¥956 million at March 31, 2002. The
value of the land at March 31, 2003 decreased by ¥106 million ($882 thousand) in comparison with the book value of theland after the revaluation.
(7) SHORT-TERM DEBT
The composition of short-term debt and the weighted average interest rate on short-term debt at March 31, 2003 and 2002
are as follows:
March 31, 2003
Short-term borrowings
Call money
Bills soldCommercial paper
Borrowings on Gensaki transaction
Other

March 31, 2002
Short-term borrowings
Call money
Bills soldCommercial paper
Borrowings on Gensaki transaction
Other

Millions of yen

Thousands of U.S. dollars

Weighted average rate

¥0,674,820
918,500
297,500
85,100246,637
4,202¥2,226,759$05,614,143
7,641,431
2,475,042
707,987
2,051,888
34,958$18,525,449

0.121%
0.019
0.010
0.032
0.004
1.375

Millions of yen

Weighted average rate

¥0,577,651
768,000
201,300
53,000–5,202¥1,605,153

0.183%
0.013
0.001
0.142
–
1.375

(8) RETIREMENT AND SEVERANCE BENEFITSThe Company and consolidated subsidiaries have defined benefit retirement and pension plans, which consist of unfunded
retirement and severance plans that provide for lump-sum payment of benefits, tax qualified noncontributory pension plans
and contributory benefit plans provided under the Welfare Pension Insurance Law of Japan.

15

The funded status of the pension plans at March 31, 2003 and 2002 is outlined as follows:
Millions of yen

Projected benefit obligation
Plan assets at fair value
Funded status
Unrecognized actuarial loss
Amount recognized in the consolidated balance sheets
Prepaid retirement and severance benefits
Accrued retirement and severance benefits

Thousands of U.S. dollars

2003

2002

2003

¥(7,215)
2,682(4,533)
1,177(3,356)42¥(3,398)¥(6,652)
2,820(3,832)428(3,404)20¥(3,424)$(60,025)
22,313(37,712)
9,792(27,920)350$(28,270)

Net periodic pension cost for the years ended March 31, 2003 and 2002 consists of the following components:
Millions of yen

Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial loss
Net periodic pension costThousands of U.S. dollars

2003

2002

2003

¥238
196
(50)
63
¥447

¥244
193
(64)
36
¥409

$1,980
1,631
(416)
524
$3,719Significant assumptions of pension plans used to determine these amounts in fiscal 2003 and 2002 are as follows:
Periodic allocation method for projected benefit
Discount rate
Expected rate of return on plan assets
Period for amortization of unrecognized actuarial loss

2003

2002

Straight-line
Mainly 2.5%
Mainly 2.0%
Mainly 15 years

Straight-line
Mainly 3.0%
Mainly 2.5%
Mainly 15 years

Plan assets of the welfare pension fund at March 31, 2003 and 2002 are estimated to be ¥3,352 million ($27,887 thousand)and ¥3,397 million, respectively.
Directors and corporate auditors are not covered by the plans described above. For such persons, the Company and its
certain subsidiaries have unfunded defined benefit pension plans. Under the plans, directors and corporate auditors areentitled to lump-sum payments based on the current rate of pay and length of service when they leave the Company. The
Company provides for the amount of the vested benefits to which directors and corporate auditors are entitled if they wereto retire or sever immediately at the balance sheet dates. As of March 31, 2003 and 2002, the liabilities for retirement andseverance benefits related to the plans were ¥627 million ($5,216 thousand) and ¥965 million, respectively.
(9) INCOME TAXESThe Company and its consolidated subsidiaries are subject to Japanese corporate, inhabitant and business taxes based on
income which, in the aggregate, result in a statutory tax rate of approximately 42.1% in 2003 and 2002.
Amendments to Japanese tax regulations were enacted on March 31, 2003. As a result of these amendments, the normal
income tax rate is to be reduced from approximately 42.1% to 40.7% effective from the Company’s fiscal year beginning
April 1, 2004. Deferred income tax assets and liabilities as of March 31, 2003 which expected to be eliminated after April 1,
2004 were revaluated at a rate of 40.7%. The effect of the income tax rate reduction on net deferred tax assets as of March
31, 2003, which amounted to ¥55 million ($458 thousand), was charged to income.

16

A reconciliation of the statutory tax rate and the effective tax rate as a percentage of income before income taxes for theyears ended March 31, 2003 and 2002 is follows:
Statutory tax rate
Equity in losses (gains) of affiliates
Expenses not deductible for tax purposes
Income not credited for tax purposes
Effect of change in the tax rate
Other
Effective tax rate

2003

2002

42.1%
5.6
0.3
(0.4)
1.4
0.6
49.6%

42.1%
(10.1)
0.4
–
–
(0.7)
31.7%

Significant components of deferred tax assets and liabilities at March 31, 2003 and 2002 are as follows:
Millions of yen

2003

2002

Deferred tax assets:
Accrued business tax¥0,(108 ¥0,059
Accrued bonuses
238
196
Liabilities for retirement and severance benefits (employees)
1,159
1,163
Liabilities for retirement and severance benefits (directors and corporate auditors)
255
406
Unrealized profit on sale of inventories eliminated on consolidation
91
346
Other
371
237
2,222
2,407
Deferred tax liabilities:
Gain on evaluation of subsidiaries’ assets and liabilities
(182)
(189)
Net unrealized gain on other securities(2,513)
(694)
Other
(7)
(13)
(2,702)(896)
Net deferred tax assets (liabilities)¥0,(480) ¥1,511

Thousands of U.S. dollars

2003$0(0,898
1,980
9,642
2,121
757
3,087
18,485(1,514)(20,907)(58)(22,479)$0(3,994)

Net deferred tax assets and liabilities as of March 31, 2003 and 2002 are reflected in the accompanying consolidated balance
sheets under the following captions:
Millions of yen

2003

Current assets—Deferred income taxes
Investments and other assets—Deferred income taxes
Non-current liabilities—Other non-current liabilities(10) GENERAL AND ADMINISTRATIVE EXPENSES
Significant components of general and administrative expenses are as follows:
Salaries
Pension cost
Provision for retirement and severance benefits (directors and corporate auditors)
Administrative and computer expenses
Depreciation

2002

Thousands of U.S. dollars

2003¥(0,448 ¥0,248
179
1,263
(1,107)–$(3,727
1,489(9,210)Millions of yen

Thousands of U.S. dollars

2003

2002

2003

¥3,030
420
175
1,149
864

¥2,854
391
202
1,154
740

$25,208
3,494
1,456
9,559
7,188

(11) COMMON STOCK
Under the Commercial Code of Japan, at least 50% of the issue price of new shares is required to be designated as statedcommon stock. The actual portion to be designated as stated common stock is determined by resolution of the Board of
Directors. Proceeds in excess of the amount designated as stated common stock are credited to additional paid-in capital.

17

(12) RETAINED EARNINGS AND DIVIDENDS
The Commercial Code of Japan provides that an amount equal to at least 10% of appropriations paid in cash be appropriatedas a legal reserve until an aggregated amount of additional paid-in capital and the legal reserve equal 25% of common stock.
This legal reserve and additional paid-in capital may be used to reduce a deficit by approval at the meeting of stockholders
or may be transferred to stated common stock by resolution of the Board of Directors. On condition that the total amount oflegal reserve and additional paid-in capital remains equal to or exceeds 25% of stated common stock, they are available for
distributions by approval at the meeting of stockholders.
Balances of the legal reserve are included in retained earnings in the accompanying consolidated balance sheets.
The amount available for dividends is based on the amount recorded in the Company’s non-consolidated books of accountin accordance with the Commercial Code of Japan.
In accordance with the Commercial Code of Japan, proposed appropriations of retained earnings have not been reflectedin the financial statements at the end of each fiscal year. The proposed appropriation of retained earnings at March 31, 2003
was cash dividends of ¥712 million ($5,923 thousand).
(13) NET INCOME PER SHARE INFORMATION
Reconciliation of the numbers and the amounts used in the basic net income per share computations for the year ended
March 31, 2003 are as follows:
Net income
Net income not applicable to common stockholders:
Directors’ and corporate auditors’ bonuses
Net income applicable to common stockholders

Millions of yen

Thousands of U.S. dollars¥1,746$14,526(76)¥1,670(632)$13,894
Number of shares(Thousands)

Weighted average number of shares on which basic net income per share is calculated

105,251(14) LEASES
Finance leases, except for those where the legal title of the underlying property is transferred from the lessor to the lessee
at the end of the lease term, are accounted for similarly to operating leases under accounting principles generally acceptedin Japan.
Certain key information about such lease contracts of the Company and its consolidated subsidiaries for the years ended
March 31, 2003 and 2002 are as follows:(a) Lessee(i) Acquisition cost, accumulated depreciation and net book value of leased assets, if they had been capitalized:
Millions of yen

Furniture and fixtures:
Acquisition cost
Accumulated depreciation
Net book value(ii) Lease expense and future minimum lease payments including interest expense:
Lease expense
Future minimum lease payments:
Within one year
Over one year

18

Thousands of U.S. dollars

2003

2002

2003

¥(487
(145)
¥(342

¥177
(59)
¥118

$(4,051(1,206)$(2,845

Millions of yen

Thousands of U.S. dollars

2003

2002

2003

¥083

¥042

$0,691

¥119
223
¥342

¥042
77
¥119

$0,9901,855$2,845(b) Lessor(i) Acquisition cost, accumulated depreciation and net book value of leasing assets:
Millions of yen

Thousands of U.S. dollars

2003
Furniture and fixtures

Acquisition cost
Accumulated depreciation
Net carrying amount

¥(485
(274)
¥(211

Others2002
Total¥(81 ¥(566(32) (306)¥(49 ¥(260

Furniture and fixtures

¥(736
(418)
¥(318

2003
Others

Total

Furniture and fixtures¥(91 ¥(827(25) (443)¥(66 ¥(384$(4,035(2,280)$(1,755

OthersTotal$(674 $(4,709(266) (2,546)$(408 $(2,163(ii) Lease income, depreciation and future minimum lease payments including interest income:Millions of yen

Lease income
Depreciation
Future minimum lease payments:
Within one year
Over one year

Thousands of U.S. dollars

2003

2002

2003

¥195
116

¥234
119

$1,622
965

¥132
159
¥291

¥188
256
¥444

$1,0981,323$2,421(15) PLEDGED ASSETS
The carrying value and classification of assets owned by the Company that have been pledged to counterparties at March 31,
2003 and 2002 are as follows:
Millions of yen

Sources of collateralCall money
Bills soldBorrowings on Gensaki transaction
Collateral money received for securities lent
Short-term borrowings
Securities borrowed
Uses of collateral
Short-term investments
Short-term loans receivable
Securities in custody
Securities in deposit
Collateral money for securities borrowed
Other current assets
Investments in securities

Thousands of U.S. dollars

2003

2002

2003

¥703,500
297,500
246,6372,000–
173,328¥0,587,000
201,300––
28,668
1,656,548$5,852,745
2,475,042
2,051,888
16,639–1,441,997¥889,842
237,736
50,80042,443
173,328
3,999
482,717¥0,510,606–
105,600
435,216
1,717,328–
192,830$7,403,012
1,977,837
442,629
353,103
1,441,997
33,2704,015,948

In addition to the above, securities received as collateral for loans receivable amounting to ¥303,599 million ($2,525,782
thousand) and ¥314,449 million were deposited as guarantee at March 31, 2003 and 2002, respectively.
The fair value of the securities received as collateral for cash-collateral bond borrowing and lending transaction and securities
borrowed under loan for consumption agreement at March 31, 2003 and 2002 was as follows:
Millions of yen

Securities loaned
Securities pledged as collateral
Securities on handThousands of U.S. dollars

2003

2002

2003

¥696,934
236,156
32,646¥1,856,880
111,354
18,311$5,798,120
1,964,692
271,597

In addition, the fair value of the securities received for loans on Gensaki transaction at March 31, 2002 was ¥327,254 million.

19

(16) COMMITMENTS AND CONTINGENCIESAs of March 31, 2003 and 2002, undrawn amount of revolving loan for securities companies, revolving loan for customers,
and overdraft loan are as follows:
Millions of yen

Total revolving credit line
Drawn amount
Undrawn amount(17) SEGMENT INFORMATION(a) Industry Segments
Operations by business group are summarized as follows:

Thousands of U.S. dollars

2003

2002

2003

¥556,818(30,639)¥526,179¥549,700(33,190)¥516,510$4,632,429(254,900)$4,377,529

Elimination/corporate

Consolidated

Millions of yen

2003

Revenue from outside customers
Inter-segment revenue
Operating expenses
Operating income
AssetsDepreciation and amortization
Capital expenditures

Securities finance

Information processing service

Total¥0,025,296
17
25,313
20,485¥0,004,828¥4,029,100
647
3,314

¥3,365
107
3,472
3,489
¥ (17)¥2,268237
60¥0,028,661
124
28,78523,974¥0,004,811¥4,031,368
884
3,374

Securities finance

Information processing service

Total¥0,028,093
17
28,11025,794¥0,002,316¥6,875,630
514
2,513

¥3,593
127
3,720
3,718
¥0,002¥2,697243
344¥0,031,686
144
31,83029,512¥0,002,318¥6,878,327
757
2,857

¥

–
(124)
(124)
(119)
¥00(5)¥0(29)(2)(5)¥0,028,661

Elimination/corporate

Consolidated

28,661
23,855¥0,004,806¥4,031,339
882
3,369

2002

Revenue from outside customers
Inter-segment revenue
Operating expenses
Operating income
AssetsDepreciation and amortization
Capital expenditures

¥

–
(144)
(144)
(134)
¥0(10)¥0(18)––¥0,031,686–
31,686
29,378¥0,002,308¥6,878,309
757
2,857

Thousand of U.S. dollars

2003

Revenue from outside customers
Inter-segment revenue
Operating expenses
Operating income
AssetsDepreciation and amortization
Capital expenditures

Securities finance

Information processing service

Total

Elimination/corporate

Consolidated$00,210,449
142
210,591
170,424$00,040,167$33,519,967
5,383
27,571$27,995
890
28,88529,027$ (142)$18,868
1,972
499$00,238,444
1,032
239,476
199,451$00,040,025$33,538,835
7,355
28,070$–(1,032)(1,032)(990)$ (42)$ (241)(17)(42)$00,238,444–
238,444
198,461$39,983$33,538,594
7,338
28,028Notes: 1. Business segments reflect the actual business contents.
2. Major revenues of each business segment
Securities finance segment: Interest income on loans, securities lending fees, etc.
Data processing service segment: service fees for computer processing
3. All of the assets are allocated to both segments.

(b) Geographic Segments
The Company does not have any overseas subsidiaries for the years ended March 31, 2003 and 2002.
(c) Overseas Sales
Not applicable.
20Independent Auditors’ Report

To the Stockholders and Board of Directors ofJapan Securities Finance Co., Ltd.

We have audited the accompanying consolidated balance sheets of Japan Securities Finance Co., Ltd. and consolidated
subsidiaries as of March 31, 2003 and 2002, and related consolidated statements of income, stockholders’ equity andcash flows for the years then ended, all expressed in Japanese yen. These financial statements are the responsibility of theCompany’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan and, accordingly, our audits
included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial statement presentation. We believethat our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of Japan Securities Finance Co., Ltd. and consolidated subsidiaries as of March 31, 2003 and 2002, and the resultsof their operations and their cash flows for the years then ended in conformity with accounting principles generally acceptedin Japan.
The accompanying consolidated financial statements as of and for the year ended March 31, 2003 have been translated into
United States dollars solely for the convenience of the reader. We have recomputed the translation and, in our opinion, theconsolidated financial statements expressed in yen have been translated into United States dollars on the basis described in
Note 2 to the consolidated financial statements.

Toyo & Co.
Tokyo, Japan
June 25, 2003

See Note 1(a) to the consolidated financial statements which explains the basis of preparing the consolidated financial statements of Japan Securities
Finance Co., Ltd. and consolidated subsidiaries under Japanese accounting principles and practices.

21

Board of Directors and Corporate Auditors

Directors
President
Kunio Kojima

Executive Vice President
Tetsuya Hiraoka

Senior Managing Director
Tasuku Horiguchi

Managing Directors
Hisao Harada
Yoshiyuki Kazama

Directors
Sadamu Shimomura
Akira Onoda
Junji Kato
Takashi Imai*
Masashi Suzuki*
Akira Kanno**Outside Directors

Corporate Auditors
Koji Takahashi*
Munetaka Tada
Yasukuni Watanabe*Toshio Kamiyama**Outside Corporate Auditors

22

Corporate Data

Japan Securities Finance Co., Ltd.
Address
1-2-10 Nihonbashi-Kayabacho, Chuo-ku, Tokyo 103-0025
Tel: +81-3-3666-3184 Fax: +81-3-3666-1403
Established July 1927
Capital ¥10 billion

Stock exchange listing
Tokyo Stock Exchange, 1st Section
Shares outstanding
101,810,000 shares (as of March 31, 2003)
Number of shareholders
8,822 shareholders (as of March 31, 2003)

Branch offices
Sapporo Branch
4-5 Minami Ichijo Nishi, Chuo-ku, Sapporo 060-0061
Tel: +81-11-241-1291
Fukuoka Branch
2-14-2 Tenjin, Chuo-ku, Fukuoka, 810-0001
Tel: +81-92-741-1861

Transfer agent
Japan Securities Agents, Ltd.
1-2-4 Nihonbashi-Kayabacho, Chuo-ku, Tokyo 103-8202
Tel: +81-3-3668-9211

Web site
http://www.jsf.co.jp

Rating Information
Long-term Rating

Short-term RatingStandard and Poor’s (S&P)

A-

A-2

Moody’sA3

P-2

Rating and Investment Information, Inc. (R&I)

AA-

a-1+

Japan Credit Rating Agency ( JCR)

AA-

J-1+

23

Business Outline

Major Business Activities
JSF is licensed by the Prime Minister, in accordance with the Securities and Exchange Law, as afinancial institution specializing in securities-related financing. Its principal business operations are
outlined below
Loans for margin transactions
This refers to the lending of the funds and securities needed to settle
standardized margin transactions through the clearing facilities of theexchange securities markets provided in the Tokyo, Sapporo and Fukuoka
Stock Exchanges or through the clearing facility of the over-the-countersecurities market provided by Japan Securities Dealers Association.

Bond financing
This refers to the lending of funds required by securities companies forunderwriting and trading, et cetera, and of funds needed by other investors,
by accepting bond collateral, with the aim of contributing to smoothercirculation in the bond market.

General loans
This refers to the lending of the working funds required by securities
companies for advances to customers and delivery funds in stock trading, etcetera, and of funds required by other investors, with securities as collateral.

Bond lending and borrowing brokerage andtransactions of gensaki, et cetera.
In bond lending and borrowing transactions, JSF receives applications fromboth lenders and borrowers (securities company, bank, or others) and lends
and borrows bonds on the basis of a lending and borrowing contract. JSF
serves as broker between two parties in both transactions. In gensaki
transactions, JSF buys and sells treasury bills and financing bills and transfersand purchases government bonds, with reverse repurchase and repurchaseagreements.

General stock lending
This refers to the lending of stocks required to settle trades, et cetera, mainly
to securities companies.
24

Organization

Planning Department

Inspection Department

General Affairs Department

General Meetingof Shareholders

Board of Directors

Treasury Department

Loan Department
President
Vice President

Margin Loan Department

Bond Trading Department
Directors

Credit Supervision Department

Settlement & Custody Department
Corporate Auditors
Board of Auditors

Information Systems Planning Department

Sapporo Branch

Fukuoka Branch

25

JAPAN SECURITIES FINANCE CO., LTD.
1-2-10 Nihonbashi-Kayabacho, Chuo-ku, Tokyo, 103-0025
Printed in Japan