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 with funds and stock certiﬁcates needed by securities companies for delivery andsettlement of margin transactions.
This margin loan business can be transacted solely by securities ﬁnance companies
licensed in accordance with the Financial Instruments and Exchange Law.
As Japan’s largest securities ﬁnance company designated by the Tokyo, Sapporo, andFukuoka Stock Exchanges, JSF is contributing signiﬁcantly to improving the fairness ofstock price formation and liquidity of stocks in the secondary equity markets.

CONTENTS
Financial Highlights ･･･････････････････････････････････････････････････････････････････････････････････････ 2
Message From The President ･ ･･････････････････････････････････････････････････････････････････････････ 4
Business Review ･ ･･･････････････････････････････････････････････････････････････････････････････････････････ 5Management Policy ･･････････････････････････････････････････････････････････････････････････････････････ 10
Our Business Development ････････････････････････････････････････････････････････････････････････････ 13
Our Business Field ････････････････････････････････････････････････････････････････････････････････････ 14
Corporate Governance ･･････････････････････････････････････････････････････････････････････････････････ 21
Risk Management ･ ･･･････････････････････････････････････････････････････････････････････････････････････ 30
Financial Section ･･････････････････････････････････････････････････････････････････････････････････････････ 35
Outline Of JSF Group ････････････････････････････････････････････････････････････････････････････････････ 75
Corporate Data ････････････････････････････････････････････････････････････････････････････････････････････ 76

1

FINANCIAL HIGHLIGHTS

Thousands of
U.S. dollars*Millions of yen*
2016

2017

2018

2019

2020

2020

Operating Results:
Operating revenues￥

22,035￥23,066￥26,333￥24,321￥

29,101＄

267,408

Operating income

2,558

2,802

3,881

3,981

4,130

37,949Net income

2,645

3,078

4,225

3,765

3,556

32,675

Total assets￥ 3,249,170￥ 4,645,051￥ 4,960,928￥ 5,291,372￥ 9,814,495＄90,181,889

Net assets

142,031

139,712

143,811140,793

126,687

1,164,082

4.37

3.00

2.90

2.70

1.29

1.29

Financial Position:

Shareholders' equity ratio (%)
Per Share Data:
Net income￥

Net assets

26.90

￥

31.91

￥

44.25

￥

40.03

￥

38.47

＄

0.25

1,467.01

1,452.64

1,518.78

1,519.31

1,381.22

12.69

16

18

26

22

22

0.20

Cash dividend* except per share amountOperating revenues

Operating income(millions of yen)(millions of yen)

4,500

35,00029,101
28,00023,0662,700

14,000

1,800

7,000

900

16

17

18

19

4,129

24,321

21,000

0

3,981

3,600

26,33322,035

3,881

18

19

0

20

2

2,558

16

2,802

17

20

FINANCIAL HIGHLIGHTSNet income

Net income per share(millions of yen)

(yen)

6,000

70
60

5,000
4,225
3,765

4,000

50
40

3,078
3,000

2,645

20

1,000

26.9

10

16

17

18

19

0

20

16

17

18

19

20

Cash dividend per share

(yen)

(yen)

1,600

30
1,519

1,519

26

1,467

25
1,453

1,400

20
1,381
15

1,200

10

1,100

5

16

17

18

19

22

22

19

20

18
16

1,300

1,000

38.5

31.9

Net assets per share

1,500

40.0

30

2,000

0

44.3

3,556

0

20

16

17

18

Note: 1. Yen amounts have been translated into United States dollars, solely for the convenience of the reader, at the rate of￥108.83=U.S.$1 in effect on March 31, 2020.
2. Net income per share is calculated based on the weighted average number of shares outstanding during each
respective year. Net assets per share is calculated based on the number of shares outstanding at the end of each
respective year.
3. Shareholders’ equity ratio is calculated by using following formula.Total net assets / Total liabilities* and net assets*except for securities accounts such as Collateral securities deposited3

MESSAGE FROM THE PRESIDENT

Thank you very much for your continued support.
The fiscal period ended March 2020 (110th period) was the
final fiscal year of the Fifth Mid-Term Management Plan,
and we continued promoting efforts for strengthening therevenue base. With regard to loan for margin transactions(or margin loan business), while the stock market condition
has remained strong since last summer, loan balance wasunfavorable as seen in its decrease year on year toward thethird quarter, whereas the stock lending balance remained
generally strong at a level exceeding that of the previous
year. As for loans of funds other than loan transactions,the use of cash- collateral equity borrowing and lendingtransactions (equity repo transactions) also increased,
Shigeki Kushida
President

and the Bond Service Section remained favorable in the
Securities Lending Business. In addition, as a result of theincrease in revenue of JSF Trust and Banking Co., Ltd., our subsidiary, consolidated operating revenue was 29.1 billion yen(year-on-year increase of 19.7%) and consolidated operating income was 4.1 billion yen (year-on-year increase of 3.7%), bothexceeding the results for the previous fiscal period. Consolidated recurring income was 4.8 billion yen (year-on-year decreaseof 3.0%) and consolidated net income was 3.5 billion yen (year-on-year decrease of 5.6%), but net income exceeded the estimate
at the beginning of the period (3.2 billion yen).
Since January 2020, COVID-19 is becoming rampant across the world. We are conducting measures such as the encouragementof staggered commuting, promotion of telework, and establishment of multiple business bases to continue our businesses
centering on Margin Loan to the maximum extent possible, while prioritizing the safety of our employees. In the fiscal period
ending March 2021, an unstable situation is expected to continue in the global financial and capital market due to the impactof the spread of COVID-19. Therefore, we expect consolidated operating income to be 3.1 billion yen (year-on-year decrease of
24.9%), consolidated recurring income to be 3.8 billion yen (year-on-year decrease of 22.4%) and consolidated net income to be
2.7 billion yen (year-on-year decrease of 24.1%).
We would like to fulfill our mission as a leader in infrastructure in the securities market through the reinforcement of thebusiness continuity system by also keeping in mind the prolongation of the current situation.
We have set the dividend forecast for the fiscal period ending March 2021 at 22 yen from the viewpoint of focusing on stable
return to shareholders under the policy of “maintaining a consolidated dividend payout ratio of no less than around 60%.”
While taking into account the status of revenue and stock price, we will continue to improve the return of profits to ourshareholders.
We thank you, our shareholders, for your continued support of JSF Group.

Shigeki Kushida
President

4

BUSINESS REVIEW

BUSINESS REVIEWBusiness environment

increasing concerns over the outlook of the global economy

As for the economic environment in the current fiscal year,

and the revitalization of movements to convert financial

overseas economies have continued to recover, as seen

assets into cash against the backdrop of the global spread

mainly in the U.S., and the Japanese economy also showedof COVID-19, falling on March 19 to 16,552 yen, the lowest

a moderate recovery through improvement in corporate

level since November 2016. After that, it rebounded due torevenue and the employment and income environments

urgent economic measures and monetary easing measuresdespite being temporarily impacted by the consumption

by governments and central banks, and transactions closed

tax hike. However, domestic and overseas economies haveat 18,917 yen at the end of the period.

contracted rapidly from the beginning of the year due to the

During this period, the average daily value traded on the

spread of COVID-19.

First Section of the Tokyo Stock Exchange was 2.6097

Looking at the stock market, the Nikkei stock average,

trillion yen, a year-on-year decrease of 245.3 billion yen.

which started at 21,509 yen at the beginning of the period,

Looking at the outstanding balance of standardized margin

remained stagnant with an upper limit centering on thebuying on the Tokyo market, the balance, which remained

21,000-yen range toward summer due to concerns over theat around 1.6 trillion yen at the beginning of the period,

U.S.-China trade friction. However, it turned to an increase

decreased to the 1.4-trillion-yen range in September, butfrom September due to the lowering of interest rates byshowed a recovery trend together with an increase in stock

the Federal Reserve Board (FRB) and expectations overprice after that, and recovered to the 1.7-trillion-yen range

progress in U.S.-China trade talks, reaching a period-highin late January. However, liquidation of longs increased

level of 24,083 yen on January 20 after the turn of thedue to a significant decrease in stock price after that, andyear. However, it dropped rapidly from late January due tothe balance decreased to the 1.27-trillion-yen range, a low

Nikkei Indexyen
27,00024,00021,00018,00015,000
Apr
2019

May

Jun

Jul

Aug

Sep

5

Oct

Nov

Dec

Jan
2020

Feb

Mar

Outstanding balance of Standardized Margin Transactions(billions of yen)

2.000

Margin Buying

Margin Selling

1.500

1.000

0.500

0.000
Apr
2019

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan
2020

Feb

Mar

for the period, at the end of March. On the other hand, the37.0%) due to the increase in fees on borrowing securities

selling balance, which was in the 660-billion-yen range atin the Margin Loan Business and interest on repurchasethe beginning of the period, peaked at the 750-billion-yen

agreement in the Securities Loan Business, and general

range in mid-September. However, the balance turned toadministrative expenses were 8,136 million yen (year-on-

a decrease from December, falling to the 460-billion-yen

year increase of 1.0%).

range, a low for the period, in mid-March as repurchasing

In addition, with the change in the holding category for partalso accelerated due to a sharp drop in stock prices fromof investment stock, consolidated operating income was

February. After that, the balance recovered rapidly with the

4,129 million yen (year-on-year increase of 3.7%) due to thetemporary stop in decline in stock price and reached theimpact of recording dividend income for the said stock not

660-billion-yen range at the end of March.

as non-operating revenue but as operating revenue (352million yen), while consolidated recurring income was 4,894

Business result of the JSF groupmillion yen (year-on-year decrease of 3.0%) and net income

Under these market trends, the total value of outstanding

attributable to owners of parent was 3,556 million yen

loans for the JSF Group (term average) was 766.4 billion(year-on-year decrease of 5.6%).

yen, a year-on-year decrease of 30.1 billion yen.
Consolidated operating revenues were 29,101 million
yen (year-on-year increase of 19.7%) due to increased

1) Securities finance business
Loan for Margin Transactions

revenue from fees on lending securities in the Margin Loan

In the margin loan business, operating revenues totaled

Business and interest on resale agreement in the Securities

12,517 million yen (year-on-year increase of 29.6%).

Loan Business. On the other hand, consolidated operating

While period average outstanding balance of margin loans

expenses were 16,835 million yen (year-on-year increase of

decreased by 64.2 billion yen year on year to 219.9 billion

6

BUSINESS REVIEW

yen and revenue from interest on loans decreased, period

7,308 million yen (year-on-year increase of 12.8%).

average outstanding balance of stock loan increased by 72.3

Although revenue from securities lending fees decreased

billion yen year on year to 333.9 billion yen, and premiumin the General Stock Lending Section, revenue increased

charges for over-lent issues also increased in addition to thesignificantly in the Bond Service Section mainly due to theincrease in revenue from lending fees.

growth of balance in gensaki transactions, and revenue inthe entire business also increased.

Bond financing and General loans
In the general loan business, operating revenues were 1,312

Other businessmillion yen (year-on-year increase of 5.7%). As for loans forIn other businesses, operating revenues totaled 4,230

financial instruments business operators, the overall results

million yen (year-on-year increase of 18.0%). Recording

fell below that for the previous period, although demand forof dividend income associated with the change in holding

funds from some business counterparties were incorporated,category and increase in distribution income including

and period average outstanding balance of loans in the said

investment trust contributed to the increase.

business decreased by 8.4 billion yen year on year to 72.6
billion yen as loans for individual and general business

2) Trust banking businesscorporations also remained weak. Moreover, the use of

In the trust banking business, operating revenues totaled

equity repo transactions increased.

2,832 million yen (year-on-year increase of 14.8%).
Although revenue from interest on loans decreased due toSecurities lending

the decline in loan interest rates, trust fee and gain on saleIn the securities loan business, operating revenues totaledof government bonds held increased.

Average outstanding balance of Loans for Margin Transactions(billions of yen)

450

Margin Loans

401
350

360

270

265

Stock Loans

366

291

333
284

261

227

219

180

90

0

16

17

18

7

19

20

Breakdown of JSF Group operating revenues
2020

2019

( ￥ million)( ￥ million)

25,36920,96912,517

9,661

Interest on loans

1,420

1,799

Interest on collateral money for securities borrowed

1,178

708

Fees on lending securities

9,662

6,819

Bond financing and general loans

1,312

1,242

Securities lending

7,308

6,480

Stocks

1,015

1,517

Bonds

6,293

4,962

Other business

4,230

3,586

Trust Banking Business

2,832

2,467

Interest on loans

50

58

Trust charges

784

746

Real Estate Leasing Business

899

884

Total Operating Revenues

29,101

24,321

Securities Finance Business
Loans for margin transactions

3) Real estate leasing businessthe same time, we worked to reinforce our revenue baseIn the real estate leasing business, operating revenues

by proactively addressing new domestic and overseas

totaled 899 million yen (year-on-year increase of 1.6%).

transaction needs. In addition, we shifted to a company
with a nominating committee, etc. last June, and also madeFuture challenges

efforts to further strengthen the governance system as a

As an institution specializing in securities finance, we havefinancial institution serving a public role.

a corporate philosophy of contributing to the development

Looking at the external environment, while rapid progressof the securities market by proactively meeting the diverse

in digitalization is seen, transaction needs are becoming

needs of the securities and financial sectors and enhancing

diverse with the combination of efforts to reconstruct

the long-term interests of users, while always maintaining afinancial services by utilizing new information technology

keen awareness of its public role.

including artificial intelligence (AI) and the impact of

To realize such corporate philosophy, during the Fifth Mid-the review of international financial regulations, etc.

Term Management Plan (FY 2017 to FY 2019), our Group

Furthermore, while the global spread of the impact ofworked to strengthen our existing business including the

COVID-19 has been seen since late January 2020, a sense

margin loan business, our core business, by leveraging

of uncertainty over the outlook of not only the Japanesethe management capabilities and creditworthiness that

economy but also the global economy is increasing rapidly,

we have acquired over time in finance and securities

and further prolongation of an ultra-low-interest-ratebusiness management as well as our market neutrality. At

environment is expected.

8

BUSINESS REVIEWThe 6th Mid-term Management Plan (FY2020～FY2022)
Management
Goals

Given that the margin loan business, JSF’s core business, is greatly aﬀectedby market ﬂuctuation, we will strengthen its base by steadily increasing ournumber of loanable stock issues and stabilize our role as part of the securities
market infrastructure by diversifying revenue sources and steadily increasing
our basic proﬁt (recurring income calculated based on the assumed grossoperating proﬁt of margin loan business)

Strategies

Enhancing the Margin Loan
Business as part of securities
market infrastructure

Expanding and enhancing
the “Securities Finance”
business

Developing and realizing
new business
Diversiﬁed management of
securities as an eﬃcientuse of capitalStrengthening business
management structure
Strengthening ourcompetitive base througheﬃcient business operation

Facilitating diverse work
styles and making JSF more
dynamic＜Framework to integrate management goals and strategies with risk management＞

Use of Risk Appetite Framework

In such business environment, we formulated the Sixth

through the enhancement of interdivisional cooperation in

Mid-Term Management Plan with a period from FY 2020

other “Securities Finance” businesses.

to FY 2022. In the new plan, we will strengthen the baseIn addition, we decided to newly introduce Risk Appetiteof the margin loan business by steadily increasing our

Framework (RAF) as a framework to operate business

number of loanable stock issues and stabilize our role as

management and risk management in an integrated mannerpart of the securities market infrastructure by diversifying

and develop an appropriate management system when it

revenue sources and steadily increasing our basic profit*.

comes to taking risks.

Specifically, we will further push forward the results of

Our Group intends to continue realizing securement of stable

the Fifth Mid-Term Management Plan, and make efforts torevenue and enriched shareholder return through efficient

improve our stock certificate procurement capability bybusiness operation by utilizing the capital we own, including

strengthening relations with issuing companies and businesshuman resources, more effectively, while maintaining thecounterparties of lending stocks in the loan transaction

financial soundness and high creditworthiness necessary forbusiness and aim to expand the domain of funds andan infrastructure in the securities market.

securities transaction business through the diversificationof business counterparties, trading methods, and targeted* Basic profit: Recurring income calculated under the assumed outstandingbalance of margin loans (assumption of the average over the past threecurrencies as well as promote strategic business activities

years)

9

MANAGEMENT POLICYMANAGEMENT POLICY
Corporate Philosophy

and securities business management as well as our market

As an institution specializing in securities finance, JSF has aneutrality; at the same time, we enhanced the fundamental

mission to contribute to the development of the securities

stability of our business by proactively addressing newmarket by proactively meeting the diverse needs of thedomestic and overseas transaction needs. During this time,

securities and financial sectors and to enhance the long-

we also worked to further strengthen our governanceterm interests of users, while always maintaining a keen

structure by transitioning to a company with a nominatingawareness of its public role.

committee, etc.

Management Principles

On the other hand, looking at the business environment(1) To practice sound business management by thoroughly

surrounding our Group, we are still in the midst of

implementing compliance, corporate governance,

drastic change. In other words, as ultra-low interest rates

and risk management under a new governanceremain and digitalization makes rapid progress, securities

structure and thereby establish solid credibility, while

companies and other financial institutions are restructuring

always maintaining a keen awareness of our social

the financial services business with new technologies forresponsibilities as a securities finance company.

information processing like artificial intelligence (AI). Under(2) T o enhance enterprise value while maintaining

such circumstances, combined with the impact of review ofsolid equity capital in order to ensure stability ininternational financial regulations and securities clearing

management and the financial health required of asystems, new financial transaction needs have emerged andcompany that is a key player in securities market

transaction needs have diversified.

infrastructure, to give comprehensive consideration to
the earnings environment, investment plans, etc., andCommitted to maintaining our financial soundness, required

to ensure profits are returned to shareholders.

as a key player in the securities market infrastructure,(3) To further enhance JSF’s core margin loan business

our Group hopes to respond to the trust of the market

while also striving to expand the finance-andand investors by using our resources, including humansecurities-related services provided by JSF and Group

resources, more effectively to further strengthen our margincompanies, develop new business, and to further growloan business, a licensed business, and diversify revenue

and solidify our base.

sources, as well as by building a quick and efficient business(4) To build a quick and efficient business management

management structure to enhance our competitiveness.

structure and strengthen our competitive base inorder to address changes in the business environment

Based on this, we have formulated a new mid-termin a flexible manner.

management plan beginning in FY2020.

Management Plan
Sixth Mid-term Management Plan

[Management Goals]
Given that the margin loan business, JSF’s core business, isgreatly affected by market fluctuation, we will strengthen[Concept]

its base by steadily increasing our number of loanable stock

Under the Fifth Mid-Term Management Plan formulated inissues and stabilize our role as part of the securities market

March 2017, our Group worked to strengthen our existing

infrastructure by diversifying revenue sources and steadilybusiness by leveraging the management capabilities andincreasing our basic profit (recurring income calculated based

creditworthiness that we have acquired over time in financeon the assumed gross operating profit of margin loan business)i

i

Assumed gross operating profit of margin loan business: The average gross operating profit of margin loan business over the past three years.

10

MANAGEMENT POLICY(5) Strengthening business management structure[Strategies](1) E nhancing the Margin Loan Business as part of

We will proactively address our social obligations andsecurities market infrastructure

ensure that compliance is positioned as a prerequisite of

We aim to pursue stable management of our margin

management in order to achieve our corporate philosophy.

loan business and improve profitability by appropriately

To establish unwavering social trust in our company, we

responding to changes in the stock market environment.

aim to secure the effectiveness of our internal auditing andMoreover, we aim to monitor trends among market

further enhance our risk management in response to theparticipants carefully, increase our number of lending issues

increasingly diverse and complex risks associated with thesteadily, promote the use of margin loans, enhance thefinance business.

provision of information relating to margin transactions andIn order to fulfill our role as part of the securities market

margin loans, and expand the range of investors.

infrastructure even in the event that a major disaster occurs,
we will continue to upgrade our business continuity system.

(2) E xpanding and enhancing the “Securities
Finance” business(6) S trengthening our competitive base throughefficient business operation

We aim to utilize the financial and securities transaction
expertise we have cultivated thus far to handle diverse

As our transaction volume increases and our business

transact ions w ith domest ic and overseas financial

becomes more complex, we will review our processes andinstruments businesses in a proactive manner and increase

actively promote the use of digital technologies such as RPA

business partners and applicable securities to enhance(robotic process automation) to build an efficient businessand expand our “Securities Finance” business, increasing

operation structure and strengthen our competitive base.

opportunities for profit.

(7) Facilitating diverse work styles and making JSF(3) D eveloping and realizing new businessmore dynamic

We will leverage our strengths as a company with a history

As work changes and diversifies with work-style reform,in the securities finance field, and develop and realize newdelayed retirement and more, we will increase thebusiness based on a long-term perspective in collaboration

productivity of individual personnel and make the company

with Group companies and domestic and foreign partners.

more dynamic by reviewing our employment system anddeveloping a rewarding and employee-friendly workplace.

(4) D iversified management of securities as anefficient use of capital[Use of Risk Appetite Framework]

We will secure stable revenues by responding to changes

We will introduce the risk appetite framework to integrate

in the external environment and revising our portfolio

management of the above goals and strategies with risk

in a flexible manner while maintaining appropriate risk

management.

controls. Moreover, we will move forward with expanding
management based on foreign currency-denominatedShareholder Return Policy

securit ies such as foreign government bonds and

To enhance enterprise value while maintaining solid equity

establishing funding methods for foreign currency in order

capital in order to ensure the management stability andto support the development of business using foreign

financial health required of a company that is a key player

currency.

in securities market infrastructure, to give comprehensive
consideration to the earnings environment, investment plans,etc., and to ensure profits are returned to shareholders.

11Our dividend policy is to return profits to shareholders[Dividend Payment Policy]

basically in accordance with the “consolidated payout ratio”

Our policy is that the consolidated payout ratio, as a

as a standard that reflect our business performance.

standard that reflects our business performance, shall not
fall below the 60% level and that we shall strive to provide[Basic Policy]

stable dividends that are not temporarily affected by

Solid equity capital to secure the financial health andearnings fluctuations.

management stability that society demands of the company
as the infrastructure of securities market, and provide[Share Buyback Policy]

stable long-term return of profits to shareholders byWith a view to offering even more rewarding returns tocomprehensively considering revenues environment orshareholders, we will buy back shares as appropriate while

investment plan, etc.

comprehensively considering the company’s financial
situation, equity capital levels, and stock price levels, and so

Based upon this policy, we will strive to place moreforth.

importance on shareholders return.

12

OUR BUSINESS DEVELOPMENT

Services for securities companies and ﬁnancial institutions
Funds loan
Loans for margintransactions

Loan funds needed to settle standardized margintransactions

Stock loan
Loan stock needed to settle standardized
margin transactions

General stock lending

Bond services

Loans for negotiablemargin transactions

Lending stock needed to settle stock trading

Brokerage between borrowers and lenders in bondborrowing and lending market

Loan funds needed to settle negotiable margintransactions

Bond ﬁnancing

Loan funds needed in bond underwriting, trading, etc.

General loans

Loan working funds, etc., to securities companies

Secured loans on securities for individual and corporate investors

COM - STOCK Loan

A loan aimed at individual investors, for which loan
applications are made through the Internet

Business Loan

A large loan aimed at people such as owners of listedcompanies

Peripheral services
Securities custody

Custody services for securities owned byinstitutional investors, etc.

Government bonddebt servicing

Designated by the Bank of Japan, repayment services
for principal and interest on government bonds

13

OUR BUSINESS FIELDLOANS FOR MARGIN TRANSACTIONSWhat is Margin Transactions?
In margin transactions, an investor trades stocks after

Apart from the purpose of obtaining margins as described(1) depositing a certain amount of collateral (margin

above, an investor can use margin transactions as a means

requirements) with a securities company and (2) borrowing

for hedging. In other words, in the event that, although anfunds for purchasing stock or stock for sale. Margin

investor expects that the stock price in hand may decline,transactions help investors to expand their trading volumes

the stock is not to be sold for some reasons, such as thatby enabling them to purchase stock which value is in excess

convertible bond is within its convertible period or that itof their available funds, or to sell stock that they do not own.

is a publicly-offered stock just purchased, the investor canThus, margin transactions broaden and strengthen stock

avoid loss with hedging sale by using margin transactions.

trading and contribute to the smooth circulation of stocks
and the fair stock prices formation.

There are two types of margin transactions, standardized
margin transactions and negotiable margin transactions. In

Margin transactions is used, for example, when an

standardized margin transactions, terms of repayment areinvestor considers that the stock price of a certain issue will

determined by stock exchanges, and a securities company

rise or decline sharply in a short period of time.

can borrow funds for purchasing and stock for sale needed
to settle transactions from a securities finance company

・When it is expected that the stock price will rise, an(loans for margin transactions).

investor borrows funds for purchasing stock from a

In negotiable margin transactions, which is limited to cases

securities company (margin buying), and if the stockin which a securities company can procure funds and stock

price rises as expected within a term of repayment (6to be lent to customers by internal matching (Note) ormonths), the investor sells the stock, repays the funds

external procurement without borrowing from a securities

borrowed (reversing transaction) and receives the margin.

finance company, the condition of margin transactions

The investor may also receive the stock (actual receipt)

may be decided freely in negotiations between a securities

by procuring funds separately and depositing it with acompany and its customer.

securities company.

(Note) This is a system of appropriating purchased stock received from buy
side as collateral to sell side's stock for sale within a company or,conversely, of appropriating sell side's proceeds of sale to buy side's

・Conversely, when it is expected that the stock price willfunds for purchasing stocks.

decline, an investor borrows stock from a securities
company and sells them (margin selling). If the stock
price declines as expected within the term of repayment(6 months), the investor buys back the stock, returns it
to a securities company and receives the margin. The
investor may also receive the equivalent money to stock
sold by procuring stock separately and offering them to asecurities company (actual delivery).

14

OUR BUSINESS FIELD

JSF receives loan applications for each issue from a

What is Loans for Margin Transactions?
Loans for margin transactions is a system in which asecurities company on the trading date of standardized

securities finance company receives a certain amount ofmargin transactions (5).To execute the loan, JSF, in place ofmargin (margin requirements) from a securities company,

the securities company, delivers funds or stock to clearing

who is a general trading participant of stock exchanges (3)facilities of stock exchanges (6). The stock purchased

and lends funds or stock necessary for margin transactions(collateral stock for loans) or proceeds from sale (collateral(4). This is executed through the clearing facilities of stockmoney for stock loans) are received by JSF (7), and thenexchanges. Loans for margin transactions is authorized only

each collateral is appropriated.

for the securities finance companies with a license given by
the Prime Minister. We, Japan Securities Finance Co., Ltd.
conduct loans for margin transactions through the stock
exchange in Tokyo, Sapporo, and Fukuoka.

Standardized margin transactions and Loans for margin transactions

Loans for margin transactions

Standardized margin transactions

Loan funds for purchasing
stock or stock to sell (2)Deposit collateral for margintransaction (3)JSF

Customer

Deposit brokerage margin (1)Loan funds for purchasing stock
or stock to sell (4)Receive purchased stockor sale proceeds
(6)

(7)

Stock exchange
clearing facilities

15

Japan Securities Finance

Submit application (5)Securities company

Place trade orderHandling of over-lent issues

and non-life insurance companies, banks and other sources.

JSF usually appropriates stock received as collateral for

The highest bidding rate becomes the lending rate (Premiumloans to stock loans. However, should the outstanding

Charges) of that issue. This premium charge is applied tostock loans exceed the outstanding loans, it is necessary to

all users of standardized margin transactions, and should

procure the stock needed for settlement by bidding withbe collected by all sell sides and paid to all buy sides or

securities companies or institutional investors such as life

successful bidders.

In case of Premium Charge may apply
Loans for margin transactions

Standardized margin transactions
Issue A
7,000shares

Funds loan application

2,000
shares5,000shares

7,000shares
Amount matchedwithin each ﬁrm

5,000
sharesMargin selling Margin buying
balancebalance2,000shares

Securities company A
Stock loanbalance

Margin loanbalanceJSF

10,000shares
Stock loan application
7,000
sharesStock procurement through bidding

3,000shares
Amount matchedwithin each ﬁrm

Stock loan application for bidding
Margin selling Margin buying
balancebalanceSecurities company B

Securities companies / Institutional investors

16

OUR BUSINESS FIELD

BOND SERVICES
In bond borrowing and lending transactions, a lender lends

credit risk to JSF. The arrangement also contributes tobonds to a borrower, and after mutually agreed period, thecreating fair and stable market by publicly disclosing

borrower repays the lender with bonds of the same typeindication via QUICK, Bloomberg, and other informationand quantity. JSF serves as a broker between borrowers andservices.

lenders.

Transaction types
REPO transactions

The bond borrowing and lending transactions market
was established in May 1990 for the purpose of covering

JSF borrows bonds after depositing cash collateral with abonds sold short, and was followed in April 1996 by thelender and then lends bonds after receiving cash collateral

introduction of REPO (cash-collateral bond borrowing andfrom a borrower. This transaction can be either a Special

lending transactions). JSF was the first company in Japan

Collateral transaction that specifies an issue or a General

to be authorized to offer such brokerage services, because

Collateral transaction that does not specify an issue.

JSF can link securities industries and financial industries
on neutral ground and is well versed in handling of bondGensaki transactionstransactions.

This transaction involves resale or repurchase of the same
type and quantity of bonds, etc., at a prescribed price after
a fixed period agreed upon in advance between transacting

JSF receives applications from both parties and, on

parties.

their behalf, lends and borrows bonds on the basis ofloan agreement. This type of arrangement has several
advantages, including helping to form a transaction that

Ordinary bond borrowing and lending transactions

matches the needs of both lender and borrower, maintaining

JSF, in principle, borrows bonds without collateral from ahigh confidentiality of information to ensure the complete

lender and then lends bonds after receiving collateral from a

privacy of both parities, and transferring all counterparty

borrower.

Types of bond transactions

Lender(Fund raising)

Borrowing rate

Lending rate

Cash collateral

Cash collateralInterest

Interest

Borrower

Bonds

Bonds

(Fund investment)

REPO transactions

Trading value

Bonds
Trading value

Buyer

Bonds

JSF

SellerGensaki transactions

Ordinary transaction

Lender

Bonds

Bonds
Securities collateral
Lending rate

Borrowing rate

17

Borrower(securities-collateral transaction)

GENERAL STOCK LENDING
This business lends stock needed to settle trades to

In February 2002, we implemented offer-bid borrowing

securities companies. A securities company would use

and lending transactions (e Stock Lending) by expanding theGeneral Stock Lending when it has no stock on hand, foronline network that is linked with securities companies, so

the purpose of hedge sale of convertible bonds or arbitrage

as to include institutional investors, such as life and non-lifetransactions with spots and futures, and so forth. JSF has

insurance companies.

done its utmost to increase the number of eligible issues
and shares for brokerage services since the business waslaunched in 1977.
JSF procures stock for lending from institutional
investors such as life and non-life insurance companies. JSF
also receives stock in advance for quick stock lending.

Mechanism of stock lending business
Stocks (deposit)

Stocklenders
Institutional
investors

Stocks (lend)

JSF
Borrowing fee

Collateral deposit
Lending fee

18

Securities
companies

OUR BUSINESS FIELDLOANS FOR NEGOTIABLE MARGIN
TRANSACTIONSWhat is Loans for Negotiable Margin Transactions?

Loan Period

Loans for negotiable margin transactions is a system

In principle, the due date of loan is the day following thewhich lends the necessary funds for securities companies

lending date, but it can be extended to the deferment

to purchase stocks in negotiable margin transactions on

deadline for repayment of negotiable margin transactions

behalf of its customer (3), receiving stock purchased (1) andfor securities companies.

certain margin requirement (2) as collateral for loans

Interest rate
The interest rate on loans is determined individually

Conditions of loans

Loanable stock Issues

between JSF and securities companies.

In principle, loanable stock issues are those listed on stock
exchange. (However, they can be limited to those we admit

Collateralavailable.) Newly listed stocks can be accepted from the 1st

JSF receive sto ck purchased in negot iable marg in

day of its listing.

transactions and certain margin requirement as collateralfor loans. Margin requirement can be substituted by acertain ratio of cash or by securities.

Negotiable margin transactions and Loans for negotiable margin transactions
Loans for negotiable margin transactions

Negotiable margin transactions
Place an order for negotiablemargin buying

JSF

Loan funds forpurchasing stocks

Deposit margin requirement (2)Loan funds (3)Deposit stock as collateral (1)Payment for the purchaseReceive purchased stock

Stock exchange
clearing facilities

19

Japan Securities Finance

Customer

Deposit margin requirement

Securities company

Application

BOND FINANCING
The aim of bond financing is to contribute to smoothutilizing investment securities for shares, etc. as collateral.

underwriting, circulation and fair price formation in bond

We are expanding "COM-STOCK Loans" for individuals,

markets. This business offers low-interest loans by using

which do not require applicants to come to a branch,government and other bonds as collateral to provide funds"Business Loans" aimed at owners of listed companies.

required by securities companies in bond operations.

COM-STOCK Loan

GENERAL LOANS

A loan aimed at individual investors, for which loan

This business loans working funds required by securities

applications can be made through the Internet, andcompanies by using stocks, bonds, and other securities as

for which investors do not need to come to a branch.

collateral, and aims to respond quickly and flexibly to theApplications can be made through a special JSF website.

needs of securities companies.

Business loan

SECURED LOANS ON SECURITIES FOR
INDIVIDUAL AND CORPORATE INVESTORS

A large loan aimed at people such as owners of listedcompanies.

We provide loans to individuals and companies for any use,

20

CORPORATE GOVERNANCECORPORATE GOVERNANCE
the extent designated in the Articles of Incorporation.

CORPORATE GOVERNANCE STRUCTURE
1. Management StructureWith the Basic Policy on Corporate Governance, theMultiple outside directors independent from theCompany has adopted “Company w ith Nominat ing

Company shall be appointed to constitute the Board ofCommittee, etc.” as the structure under the Companies

Directors where it is expected that, through their advice

Act since June 2019, based on which the Company strives

and comments based on abundant experience and expert

to clarify the separation of supervision and execution ofknowledge on business management and other issues,

business operations, to further strengthen supervision byappropriateness of the Company’s business operations ismainly outside directors for ensuring the soundness of

secured and business management supervisory functions

management, and to realize prompt business execution thatfrom external viewpoints are performed in an objective andresponds quickly to change in the business environment.

neutral manner.
In principle, the chairperson of the Board of Directors

2. Organization

1) Board of Directors

shall be an outside director.

The Board of Directors not only conducts the decisionmaking on basic management policy and other matters(Membership)

designated by laws and regulations, as well as important

Director Chairperson Naotaka Obata (Outside Director)

matters on business management, but also supervises the

Director Shoko Sugino (Outside Director)

status of execution of duties of directors and executive

Director Shuya Iimura (Outside Director)

officers.

Director Shigeki Kushida
Director Hiroshi Nasuno

In order to enhance efficiency of business management
and speed up execution of operations, the Board of Directors

2) Three Committeesdelegates the decisions on execution of operations other

The Nomination Committee not only determines the content

than the matters to be resolved by the Board of Directorsof election of director candidates pursuant to laws anddesignated by laws and regulations and the Articles ofregulations, but also deliberates and determines the content

Incorporation to representative executive officers.

of election and dismissal of directors, executive officers, thepolicy on election and dismissal of directors and executive

The Board of Directors comprises a variety of directors

officers, and other matters on election and dismissal ofwith different expertise, experiences and other qualifications.

directors, executive officers and corporate officers of the

The Company secures the appropriate number of the Board

Company in general.

of Directors members at which the functions of the Board of
The Audit Committee not only audits the execution of

Directors can be exerted most effectively and efficiently, toCommittee Membership
Nomination Committee

Audit Committee

Remuneration Committee

Chairperson

Naotaka Obata

Shuya Iimura

Naotaka Obata

MemberShoko Sugino

Shoko Sugino

Shoko Sugino

Shigeki Kushida

Hiroshi Nasuno

Shigeki Kushida・Naotaka Obata, Shoko Sugino and Shuya Iimura are each outside directors.

21

Corporate Governance System Structure
Decision Making of Management
General Meeting of Shareholders

External Financial Auditor

Board of Directors
Nomination Committee

Remuneration Committee
Cooperation

Survey/Report, etc.

Audit Committee

Audit

Cooperation

ReportExternal Reporting
Contact Desk

Representative ExecutiveOﬃcer & President
Cooperation

ReportCompliance Committee

Audit

Audit
Department

Compliance Department

Executive Oﬃcer

Management Administration& Report, etc.
Internal
Audit

Risk Management
Department

Mutual
Check

Internal
Audit

22

Business
Department

JSF Group Companies

Management Committee

Consultation and Report

Business
Operetion

Entrustment andSupervision ofbusiness execution

CORPORATE GOVERNANCE

duties of directors and executive officers, prepares audit

etc., it also discerns risk management and so forth throughreports and such, but also deliberates and determines

rigorous internal audits of the effectiveness and efficiency

the content of proposals on election and dismissal ofof operations, the accuracy and reliability of financial andaccounting auditors for submission to the general meeting

operational information, and the safeguarding/conservationof shareholders and such.

of assets. Through these activities, the Audit Department
verifies the appropriateness and effectiveness of the internal

The Remuneration Committee not only determines

management system in respect to control and management

the individual amounts of remuneration for directorsof risks and other factors in individual business units.

and executive officers and determines the policy on
determination thereof pursuant to laws and regulations,3) Status of Accounting Audits

but also deliberates and determines the matters on

Accounting audits of the Company are performed byremuneration for directors and executive officers of thecertified public accountants Wataru Kobayashi, Hidehiro

Company in general.

Goto and Nobuyuki Mito of Crowe Toyo & Co. Accounting
audits are assisted by 15 certified public accountants and
10 others, and care is taken to eliminate bias in years of

In principle, the chairperson of the Nomination/Audit/

experience.

Remuneration Committee shall be an outside director.

3) Executive Officers

The Company has entered into an agreement limiting

The representative executive officers and executive

liability with four non-executive directors, based on which

officers determine the execution of operations and executethe amount of liability for damages is limited to the amountoperations so delegated by the Board of Directors based

provided for in laws and regulations.

on the segregation of duties and hierarchy of commands
designated by the Board of Directors.

matters related to the execution of operations, among other[Policy on Determination of Amount of
Remuneration or Method of Calculation Thereof]
1. P olicy on Determination of Amount of Officers’
Remuneration and Such or Method of
Calculation Thereof

matters.

Remuneration and such for the officers of the Company

The Company has established the Management
Committee, which deliberates or determines important

shall be based on systems and standards in accordancewith the directors’ and executive officers’ roles and3. Status of Audit Committee Audits, Internal
Audits and Accounting Audits

expected functions, in order to achieve sustained growth

1) Status of Audit Committee Audits

and enhancement of corporate value over the medium

The Audit Committee comprises two outside directors andto long term based on the corporate philosophy andone internal director, one of which is appointed as a full-management policy. Specifically, the individual amounts

time Audit Committee member (outside director). The dutiesof the remuneration and such shall be determined by theof the Audit Committee are assisted by the corporate officer

Remuneration Committee based on the following policyin charge.

determined by the Remuneration Committee.

2) Status of Internal Audits

1) Directors

The internal audit structure consists of the Audit Department

With a view to having supervisory functions exerted,(approximately 10 members) that is independent of all otherdirectors shall receive only the fixed monthly remuneration

business units. Not only does it perform internal audits of(base remuneration), and remuneration linked to thecompliance with all applicable laws, regulations, contracts,business performance and such shall not be provided to23them.

P erformance-based remunerat ion (share-based
remuneration): 15%

Individual directors’ remuneration shall be determinedin accordance with responsibilities as directors, such as

3. P olicy on Determination of PerformanceBased Remuneration

whether full-time or part-time and acting as chairperson.

The following shall be the benchmark and such for the
performance-based remuneration (officers’ bonuses andDirectors concurrently serving as executive officers shallshare-based remuneration) portions of the remuneration

not receive remuneration as directors.

and such for the executive officers of the Company.

2) Executive Officers
With a view to enhancing the correlation with the Company’1) Officers’ Bonusess business performance and share value, the remuneration

In the same way that dividend is determined basedfor executive officers shall comprise a fixed monthly

on the consolidated payout ratio, a certain percentage

remuneration (base remuneration), officers’ bonuses linked(approximately 2%) of consolidated net income shall be theto business performance and share-based remuneration.

total amount of officers’ bonuses.

The fixed monthly remuneration (base remuneration)

The individual amounts of pay shall be determined inshall be determined in accordance with each executive

accordance with the executive officers’ roles and otherofficer’s position.

factors.

The officers’ bonuses shall be determined in accordance

Since the amount of allowance is decided based on thewith the business performance of each fiscal year, with theresults of the consolidated net income for the said fiscal

purpose of clarifying the responsibility of management.

year, no target value has been set in advance upon thepayment of directors’ bonuses.

As for the share-based remuneration, the Board Benefit
Trust (BBT) scheme shall be used to provide points, which

2) Share-Based Remuneration

are determined in correlation with medium- to long-term

The number of points serving as the basis shall bebusiness performances, to the executive officers, to whom

determined in accordance with each executive officer’s

the Company’s shares will be issued upon their retirement

position.

from office in accordance with the points.
From the number of points serving as the basis, addition
shall be made if the average amount of consolidated

2. Policy on Determination of Breakdown of
Pay of Performance-Based Remuneration
and Remuneration and Such Other than
Performance-Based Remuneration

ordinary income or loss over the past three years including
the fiscal year under review is above the basis andsubtraction shall be made if below.

Executive officers’ remuneration and such shall be based on
the following breakdown of pay by type of remuneration in

The reason for using consolidated ordinary income

the case of pay based on the business performance serving

as the benchmark is enhancing the correlation with theas the basis.

interests of shareholders over the medium to long termby using business performance excluding the effect ofBase remuneration: 65%

infrequently occurring income or loss.

Performance-based remuneration (officers’ bonuses):
20%

24

CORPORATE GOVERNANCE

Appendixof shareholders can execute their rights at the general

Basic Policy on Corporate Governance

1) Appropriately set the schedules related to the general

The Company has established the Basic Policy onenhancement of dialogue with shareholders and provisionCorporate Governance as follows in order to achieve itsof accurate information for that purpose.

sustained growth and enhancement of its corporate value2) Send and disclose a notice of convocation of theover a medium to long term.

general meeting of shareholders as early as possible inmeeting of shareholders.
meeting of shareholders from such viewpoints asorder to secure enough time for shareholders to study
1. Fundamental Views on Corporate Governancethe content.

As an institution specializing in the securities finance3) Provide information (such as information on thebusiness, the Company is keenly aware of its public role

Company’s operating results) that is necessary forat all times, and makes it a mission to contribute to theshareholders to make proper judgments at the generaldevelopment of the securities market by proactively

meeting of shareholders on its website and through otheraddressing the diverse needs of the securities andmeans.

financial circles and working to enhance the long-term4) Establish an environment in which all shareholders

interests of the securities market participants and users.

including those who do not attend the general meeting

Based on this thinking, the Company aims to gain the firmof shareholders can exercise their voting rights

trust of the society through sound business operations.

appropriately, such as utilizing the Electronic Voting
Platform for Foreign and Institutional Investors.

With this corporate philosophy, the Company has
adopted “Company with Nominating Committee, etc.”

In addition, when there are a large number of votes

as the structure under the Companies Act, based on

against any of the agendas proposed by the Company atwhich the Company will strive to clarify the separation

the general meeting of shareholders, the Company shallof supervision and execution of business operations,analyze the reasons and report the analysis results toto further strengthen supervision by mainly outside

the Board of Directors as well as investigate necessary

directors for ensuring the soundness of management,

responses.

and to realize prompt business execution that responds(3) Protecting the rights of shareholders

quickly to change in the business environment.

When implementing the capital policies that may
2. Securing the Rights, Etc. of Shareholders

cause changes in the controlling interest or cause a(1) Securing the rights and equality of shareholders

significant share dilution, the Company shall investigate

The Company shall take appropriate measures tothe necessity and rationality of implementing them andeffectively secure the rights of its shareholders, andsecure appropriate procedures so that they should cause

endeavor to establish an environment in which the rights

no unjust harm to the interests of existing shareholders,of shareholders are effectively secured.

and shall appropriately disclose the details of the policies
to be implemented.

Moreover, the Company recognizes that every
shareholder is equal in accordance with his/her equity

As for introducing and conducting anti-takeoverinterest, and will secure the substantial equality ofmeasures, the Company shall investigate the necessity

shareholders

and rationality of such measures and secure appropriate
procedures as well as provide sufficient explanations to(2) General meeting of shareholders

the shareholders.

The Company shall endeavor to set schedules related
to the general meeting of shareholders and expand

If the Company’s shares become subject to a takeover

the means for shareholders to execute their voting

bid, the Company shall appropriately disclose the view ofrights, etc., as provided below, so that a larger number

the Board of Directors regarding the takeover bid to the25shareholders. Moreover, the Company shall not unduly

Directors regarding the investment efficiency andpreclude the shareholders’ rights to sell the Company’s

medium- to long-term economic rationality of strategic

shares they own in response to the takeover bid.

shareholdings and verify them.

(4) Dialogue with shareholders, etc.

As a result of our examination, we will reduce such

The Company shall respond to requests for dialogue fromholdings that we determine deficient in necessity.

its shareholders and investors (hereinafter referred to as
the “shareholders, etc.”) to the extent and by the methods

With regard to the exercise of voting rights of sharesconsidered to be appropriate by the Company.

the Company holds in strategic shareholdings, theCompany shall exercise the rights for all agendas as a

Policies on establishing a system and implementing

rule.

measures for promoting constructive dialogues with theshareholders, etc. are as follows:

Judgment of approval or disapproval for each agenda

1) Dialogues with the shareholders, etc. shall be managed

shall be made by comprehensively considering suchby the Corporate Planning Department and supervised

factors as whether the subject will contribute to theby the officer in charge of the Corporate Planningmedium- to long-term enhancement of the corporate

Department.

value of the relevant company and common interests of2) When conducting dialogues with the shareholders,

its shareholders, and whether the subject will not lessen

etc., the Corporate Planning Department shall be central

the significance of holding the relevant shares by thein making appropriate coordination with internal

Company.

departments, including the Business Development
Department, and affiliate companies through information

In particular, in the event of a serious scandal or aexchange and other measures.

proposal that could significantly damage shareholder

3) The Company shall hold operating results briefing

value, the Company shall make a careful decision.

sessions on a regular basis, among other measures,in order to enhance the means of dialogues with the(6) Transactions among related parties

shareholders, etc.

When the Company conducts transactions with its4) Opinions, etc. obtained through dialogues with theofficers and principal shareholders, etc., the Company

shareholders shall be reported to the Board of Directors,

shall submit the matter as agenda to the Board ofetc. on a regular basis.

Directors in advance and have it approved by the Board

5) Dialogues with the shareholders, etc. shall beof Directors so that the relevant transaction will not harm

conducted in compliance with laws and regulations as

the Company’s interests and common interests of thewell as internal rules, and the insider information shall beshareholders, except for cases where it is evident thatmanaged appropriately.

the transaction is conducted under the similar terms and6) The Company shall endeavor to understand theconditions as ordinary transactions in general.

shareholder structure through shareholder identification
surveys and other means in order to promote constructive

3. Relationship with Stakeholders other thanShareholders

dialogues with the shareholders, etc.

In order to achieve sustained growth and enhancement(5) Strategic shareholdingsof its corporate value over medium to long term, the

The Company may hold the shares of the companies

Company shall respect not only the shareholders but alsothat are considered to be necessary for such purposesa variety of its stakeholders including customers, officers

as strengthening the business relationship with them, inand employees and local communities, and endeavors toorder to achieve sustained growth and enhancement ofmaintain good and smooth relationships with them.

its corporate value over the medium to long term.
The Company shall establish the “Code of Conduct
The Company shall make a report to the Board of

for Officers and Employees” and make all of its officers

26

CORPORATE GOVERNANCE

and employees understand that they are to respect theimportant matters related to the execution of operations,stakeholders’ positions.

among other matters.
(2) Board of Directors

Moreover, in view of the importance of the issues
related to sustainability, the Company shall endeavor to

The Board of Directors comprises a variety of directors

take appropriate measures to address such issues, andw ith different expert ise, experiences and otherwork to secure diversity, including promotion of women’squalifications. The Company secures the appropriate

active engagement.

number of the Board of Directors members at which thefunctions of the Board of Directors can be exerted mosteffectively and efficiently, to the extent designated in the

4. Information Disclosure

F r o m t h e p e r s p e c t i ve o f e n s u r i n g m a n a g e m e n t

Articles of Incorporation.

transparency, the Company shall endeavor to proactively
make fair, t imely and appropriate disclosure ofMoreover, multiple outside directors independent

management information by using its website andfrom the Company shall be appointed to constitute thethrough other means, not limited to information

Board of Directors where it is expected that, through theirdisclosure based on the Companies Act, the Financial

advices and comments based on abundant experiences

Instruments Exchange Act and listing rules of the security

and expert knowledge on business management andexchange, etc.

other issues, appropriateness of the Company’s business
operations is secured and business management

In making information disclosure, the Company shallsupervisory functions from external viewpoints iswork to provide plain and concrete descriptions.

performed in an objective and neutral manner.
In principle, the chairperson of the Board of Directors

5. Corporate Governance System(1) Board of Directors and other systems

shall be an outside director.

The Board of Directors not only conducts decisionmaking on basic management policies and other matters(3) Nomination, Audit and Remuneration Committees

designated by laws and regulations, as well as important

The Nomination Committee not only determines thematters on business management, but also supervises thecontent of election of director candidates pursuant tostatus of execution of duties of directors and executive

laws and regulations, but also deliberates and determines

officers.

the content of election and dismissal of directors,
executive officers and corporate officers, the policy on

In order to enhance efficiency of business management

election and dismissal of executive officers and corporate

and speed up execution of operations, the Board of

officers, and other matters on election and dismissal of

Directors delegates the decisions on execution of

directors, executive officers and corporate officers of theoperations other than the matters to be resolved by theCompany in general.

Board of Directors designated by laws and regulations
and the Articles of Incorporation to representative

The Audit Committee not only audits the execution of

executive officers.

duties of directors and executive officers, prepares audit
reports and such, but also deliberates and determines

The representative executive officers and executive

the content of proposals on election and dismissal

officers determine the execution of operations andof accounting auditors for submission to the general

execute operations so delegated by the Board of Directors

meeting of shareholders and such.

based on the segregation of duties and hierarchy ofcommands designated by the Board of Directors.

The Remuneration Committee not only determines
the individual amounts of remuneration for directors,

The Company will establish the Management

executive officers and corporate officers and determines

Committee, which shall deliberate and determine

the policy on determination thereof, but also deliberates

27and determines the matters on remuneration forthe share-based remuneration, the Board Benefit Trust

directors, executive officers and corporate officers of the(BBT) scheme shall be used to provide points, which are

Company in general.

determined in correlation with medium-term businessperformance, to the executive officers, to whom theIn principle, the chairperson of the Nomination/Audit/

Company’s shares will be issued upon their retirement

Remuneration Committee shall be an outside director.

from office in accordance with the points.

(4) Appointment and Dismissal of directors, executive

With a view to having supervisory functions exerted,

officers and corporate officers

directors (excluding those concurrently serving as

The Company elects persons who are believed to

executive officers) shall receive only the fixed monthly

contribute to achieving its sustained growth andremuneration (base remuneration), and remuneration

enhancement of its corporate value over a medium tolinked to the business performance and such shall not

long term as candidates for the directors, auditors andbe provided to them. Individual directors’ remuneration

executive officers, taking into account their personality,

shall be determined in accordance with responsibilities

knowledge, capacity and experiences, etc. and with theiras directors, such as whether full-time or part-time andfiduciary duties to the shareholders in mind.

acting as chairperson. Directors concurrently serving
as executive officers shall not receive remuneration as

For the outside directors, the Company shall electdirectors.

persons who, on top of the above, satisfy the criteria for
independence the Company sets forth separately.

The remuneration for corporate officers shall be inaccordance with that for executive officers.

In the event of a serious incident resulting in a loss ofcredibility or substantial damage, or a serious violation of

The individual amounts of the remuneration forcompliance by executives (meaning directors, executive

the directors, executive officers and corporate officers

officers and corporate officers; the same shall apply

shall be determined by the Remuneration Committee.

hereinafter), the Nomination Committee shall consider

Modifications to the remuneration framework and thewhether or not it is necessary to dismiss the relevant

remuneration system, etc. shall also be determined by the

executives.

Remuneration Committee.
(6) Operation of the Board of Directors

Election of candidates for executives and dismissal of
executives shall be determined pursuant to the provisions

The agendas and deliberation time of the Board ofof laws and regulations after consideration by the

Directors shall be set in a manner that should allow

Nomination Committee.

deliberations necessary and sufficient for deciding onimportant execution of operations and supervision of(5) Remuneration of directors, executive officers andexecution of operations.

corporate officers
With a view to enhancing the correlation with the

As a rule, materials for the Board of Directors meeting

Company’s business performance and share value, theshall be delivered in advance, taking into account the

remuneration for executive officers shall comprise a fixed

time required for the attendees of the meeting to makemonthly remuneration (base remuneration), officers’

prior preparations, in order to help deepen deliberations

bonuses linked to business performance and share-basedat the meeting. In addition, prior explanations may beremuneration. The fixed monthly remuneration (basegiven to them depending on the content of the agendas.

remuneration) shall be determined in accordance witheach executive officer’s position. The officers’ bonuses

Schedules of holding the Board of Directors

shall be determined in accordance with the businessmeeting and assumed agendas for the meeting shall be

performance of each fiscal year, with the purpose ofdetermined and notified in advance.

clarifying the responsibilities of management. As for28

CORPORATE GOVERNANCE

Aside from the Board of Directors meeting and theto provide them, when they take office, with informationcommittees meeting, a meeting by outside directors shallregarding the Company’s operations, finance, organization

be held periodically to exchange information and shareand others as well as knowledge on laws and regulations,recognitions, so that they can exert functions from theiretc., taking into account the careers and experiences,

standpoint that is independent from the Company.

etc. of the directors or the Audit & Supervisory Board
members who are taking office. Moreover, the Company(7) Evaluation and assessment of effectiveness of theshall provide opportunities, as needed, to continuously

Board of Directors

update such information or knowledge.

The Company shall make self-assessment as to theeffectiveness of the Board of Directors once a year, and(9) Accounting Auditor

disclose the outline of the results. Furthermore, the

The Company shall understand the responsibilities

Company shall make appropriate review of the Board of

the accounting auditor owes to the shareholders andDirectors based on the assessment.

investors, and endeavors to secure appropriate audits asstated below.

(8) Support system and training policies for directors
In order for the directors to effectively perform their roles(1) The Audit Committee shall establish criteria toand responsibilities, related departments and sections ofappropriately assess the accounting auditor. Moreover,

the Company, including the Corporate Planning Division

the Audit Committee shall check whether the accountingof the Corporate Planning Department that is in charge

auditor has independence and expertise required for anof the work related to the Board of Directors, shallaccounting auditor.

coordinate with each other to exchange information and(2) The Company shall endeavor to provide theconduct other tasks.

accounting auditor with an audit environment thatshould allow high-quality audits, including provision of

When it is necessary to make communications

opportunities to interview directors, executive officers,

and adjustments between the outside directors andthe Audit Committee and other departments required

the management team, the secretariat of the Board offor auditing and securing sufficient time for conducting

Directors shall be central in addressing such matters.

audits.

In order for the directors and the Audit & Supervisory

When the accounting auditor points out injustice,

Board members to effectively perform their roles andflaws or problems, etc., the Company shall accept what is

responsibilities, the Company shall set the opportunity

pointed out in earnest and take appropriate measures.

29

RISK MANAGEMENTRISK MANAGEMENT
Basic policies in risk management

Method of risk management

With environmental changes such as financial deregulation

We classify expected risks broadly into 5 categories andand globalization as well as striking advances in information

then set these categories as management objectives; credit

technologies, risks which financial institutions face haverisks, market risks, liquidity risks, processing risks, andbecome diversified and more complicated. Accordingly,

system risks. Among these categories, for credit risks

risk management has become more important in theand market risks, we are striving to secure profits while

management of financial institutions than ever before.

quantitatively grasping the risks and controlling themwithin proper levels as feasible for our management vitality

In this situation, in order to increase profitability while(integrated risk management).

maintaining sound management, we have positioned risk
management at the highest priority and have establishedOn the other hand, for liquidity risks, processing risks

basic policies in risk management at our Board of Directors.

and system risks, we are taking preventive measures against
occurrences of these risks by executing proper management

More precisely, we have established basic policies

according to risk characteristics.

for risk management; “Keeping all employees informedof company’s emphasis on risk management”, “Proper
management of each category of risk”, “Promotion of
integrated risk management”, “Establishing a system ofmutual checks and balances”, and so forth.

Risk Categories
Risk Category
Credit Risk

Risk Description
Credit risks are risks to suffer losses by decreasing or losing the values of the assets due tocredit events such as deterioration in the financial standing of counterparty.
Market risk refers to the risk that owned assets (bonds, stocks) or derivative values will fluctuateMarket Risk

and losses will be incurred due to fluctuations in various market risk factors such as interest
rates, securities prices, and exchange rates.
Liquidity risks are risks to suffer losses caused by failures of raising necessary funds or by

Liquidity Risk

procurement of funds with unusually high interest rates or risks caused by halt of transactions
due to market disruptions or by forced transactions with unusually unfavorable prices.

Processing Risk

Processing risks are risks to suffer losses from failed processing due to negligence, accidents or
fraud by officers and employees.
System risks are risks to suffer losses due to system defects such as failures or malfunctions,

System Risk

etc., of computer systems or due to unauthorized uses (including cyberattacks) of computer
systems, etc.

30

RISK MANAGEMENT

Integrated risk management

said amounts for transaction limitation. In addition, eachIntegrated risk management is a method to quantify various

department implements rigid self-assessment of those assets

risks with unified methodology and to manage the total

for which they hold jurisdiction.

amount of risks within the realm of management vitality.
For credit risks and market risks, after allocating risk

Additionally, for each loan transaction, as a general

capital to each risk operation department by risk category

rule, we take adequate collateral. By implementing a

within the realm of our own capital, we quantify risks withdaily marking to the market of the relevant collaterals, we

the methodology of Value at Risk (VaR) and manage thesuppress occurrences of impaired loans. In a case where

calculated volume of risks within the range of that allocateda borrower falls into bankruptcy, by selling off collateralrisk capital. With corresponding to Basel II regulation

securities and so forth, we collect receivables in an

enforced in March 2008, operational risks, which consists

expeditious manner.

of processing risks and system risks, is measured by basic
method and we allocate risk capital amounts on it.

Market risk management
In our company, the Risk Management Department

Allocated amounts of risk capital are determined as final

quantifies and manages market risks, and to complement

at the Management Committee, with prior deliberation at

management by quantification, it implements stress tests.

regular “Risk Capital Meeting” in every March.

Furthermore, to validate the reliability of the market
risk quantification model we are adapting, we are also
implementing back testing to compare the calculated VaR

Each risk operation department controls the risks

with the portfolio-fixed virtual profit and loss

within the realm of the allocated risk capital. The Risk
Management Department, which is independent of risk
operation departments, quantifies the risks, monitors risk

Liquidity risk management

operation conditions, and report to board members.

In our company, the Treasury Department has jurisdiction
over the management of liquidity risks and attempts

In case a possible rise for a risk may exceed the allocatedto diversify procurement methods and to secure stableamount of the risk capital, an extraordinary “Risk Capital

supplies. As for cash flow management, while we are

Meeting” will be held to deliberate responses to the case andimplementing development of cash flow projection, graspingthen consult the Management Committee.

the amount which can be procured or liquidity of assets,
and paying attention to concentrated settlement dates for

Credit risk management

large capital, we have a system to report to our management

We try to sustain and improve the soundness of the assets

with daily cash flow status. Furthermore, to be preparedby strictly managing overall credit risks.

for unforeseeable circumstances, we take measures tosupplement liquidity such as possessing a certain amount ofMore precisely, the Risk Management Department

government bonds with high liquidity.

assesses credit risks according to in-house ratings, andquantifies and manages credit risks using a default rate

In addition, at the “ALM Committee” held in every

for each in-house rating. Furthermore, to complement

quarter, we develop cash flow projection based on forecasts

management by quantification, we implement stress tests.

of loans outstanding, deliberate policies for ALM (Asset

On the other hand, for credit control, the Risk Management

Liability Management) such as revenue management for

Department screens client companies and loan transactions

assets and liabilities of the company as a whole and thus

and sets the amounts for transaction limitation for eachreport to the Management Committee.

client, while business operation department manages the31Processing risk managementmonitoring system is facilitated. Moreover, in preparation

In our company, each department has jurisdiction over theagainst the threat of cyberattacks, countermeasures for

management of processing risks. To lessen processing risks,computer systems and cybersecurity measures have been

through facilitation of regulations and manuals and also

implemented. In addition, concerning the protection ofthrough trainings, all employees are familiarized with proper

our own information assets (information and information

handling of operational work. In addition, by ensuring thatsystems), necessary regulations are consolidated and alleach department implements its own voluntary inspection

officers and employees are familiarized with handlingon a regular basis, we endeavor to prevent occurrence of

information assets. Furthermore, to minimize the effects ofaccidents and improve our business processing system.

system failures, measures are taken such as the facilitationof various handling manuals, implementation of drills, etc.

System risk management
In our company, the Information Systems Planning

Internal auditing system

Department holds jurisdiction over system risks

In our company, the Audit Department, which is independent

management. To ensure stable operations of our computerfrom other departments, implements strict internal auditing

systems, the department takes preventive measures againstof overall business operation on management status of eachsystem failures such as duplicating networks and equipment.

category of risk along with regulatory compliance status and

To develop and operate our computer systems safely andvalidates the appropriateness and efficacy of our internal

effectively, all of our operation procedures are clear and ourcontrol system in each department.

32

RISK MANAGEMENT

Appendix

In-house rating system

We introduced a rating system which segmentalizes credit
ratings of client companies into 6 ranks, based on ratings
by external credit rating agencies, quantitative assessmentof financial standing, obligor classifications used in selfassessment, and so forth. With this system, we assess thelevels of credit risks properly, quantify credit risks, and set
up amount for transaction limitation.

Risk capital

Risk capital is capital necessary to cover losses caused byrisks generated from business operation.

Value at Risk (VaR)

VaR is the maximum expected loss on an asset calculatedwith a certain period (holding period) and a certain
probability (confidence level). This is calculated based ondata in the past with statistical method. In our company,
VaR is calculated based on confidence level of 99% andholding period of one year.

Stress tests

Since VaR is statistical estimated figure, it cannot include
possible losses, which can be caused by extreme market
fluctuation such as Black Monday or economic crisis (stressevent). In this situation, to be prepared for unforeseeable
circumstances, we implement stress tests to calculate amountof losses in a case of occurrence of stress event based ondata in the past or on hypothetical scenarios and assess thesoundness of our financial management.

Risk Management Committee

The meeting is organized by the officers in charge of the
Risk Management Department, Business Development
Department, Corporate Planning Department, Treasury
Department, Margin Loan Department, Institutional Sales
Department and Retail Business Department, managers of
the Risk Management Department, Business Development
Department and Corporate Planning Department and, whenconcerned with the deliberation matters of the meeting,the managers of the Treasury Department, Margin Loan
Department, Institutional Sales Department and Retail
Business Department. The meeting is supervised by theofficer in charge of the Risk Management Department.

ALM Committee

This is a committee to deliberate ALM (asset liability
management), such as development of fund procurement
and management plans and revenue management, for assets
and liabilities of the company as a whole. The committee
is organized by the officer in charge of the Treasury
Department (serving as chairperson), officers in charge ofthe concerned departments and managers of respective
departments.

33

Risk Management System

Board of Directors

Management Committee

Executive Oﬃcer incharge of Treasury
Department

ALM
Committee

Executive Oﬃcer in charge of
Risk Management
Department and Information
Systems Planning Department

Executive Oﬃcer
in charge of Audit
Department

Liquidity
Risk

MarketRisk

CreditRisk

SystemRisk

Processing
Risk

Treasury
Department

Risk
Management
Department

Risk
Management
Department

Information
Systems
Planning
Department

Each
Department

Treasury
Department

・Treasury
Department
・Margin Loan
Department

Each
Department

Each
Department

・Institutional
Sales
Department
・Retail Business
Department
・Margin Loan
Department
・Tresury
Department
・Branch34

Internal Audit Sector

Risk Management
Department

Audit Department

Risk
Categories
Risk Management
SectorRisk Operation Sector

Executive Oﬃcer incharge of Each
Department

Risk
Management
Committee

Integrated Risk
Management Sector

Meeting

Management

President

FINANCIAL SECTION

Consolidated Financial Statements ･･････････････････････････････････････････････････････････････････ 36
Consolidated Balance Sheet ･ ･･･････････････････････････････････････････････････････････････････････ 36
Consolidated Statement of Income ･･･････････････････････････････････････････････････････････････ 38
Consolidated Statement of Other Comprehensive Income ･････････････････････････････････ 38
Consolidated Statement of Changes in Net Assets ･ ･･････････････････････････････････････････ 39
Consolidated Statement of Cash Flows ･･････････････････････････････････････････････････････････ 40
Notes to Consolidated Financial Statements ･･･････････････････････････････････････････････････ 41
Independent Auditors' Report ･････････････････････････････････････････････････････････････････････････ 73

35

CONSOLIDATED BALANCE SHEETJapan Securities Finance Co., Ltd. and Consolidated Subsidiaries
As of March 31, 2020

AssetsCurrent assets:
Cash (notes 3 and 15)
Call loans
Short-term investments (notes 4 and 15)
Short-term loans receivable (note 15)
Receivables under resale agreements
Collateral money for securities borrowed
Other current assets (note 15)
Allowance for doubtful receivables
Total current assets

Millions of yen
2020
2019

Thousands of
U.S. dollars(note 2)2020

¥ 1,299,936 ¥ 990,670
75,000100,000
68,292
238,644687,679
668,894
2,747,397
546,5433,877,827
2,137,590
259,806
94,802(663)(736)
9,015,274
4,776,407$ 11,944,648
689,148627,511
6,318,837
25,244,850
35,631,967
2,387,264(6,092)
82,838,133

Property, plant and equipment:
Buildings and structures
Tools, furniture and fixtures
Land (note 6)

8,826
1,490
3,265
13,581(7,782)
5,799

8,819
1,491
3,265
13,575(7,561)
6,014

81,09913,691
30,001
124,791(71,506)
53,285

2,407

3,451

22,117790,182981(148)
791,015505,163570(233)
505,500

7,260,700
9,014(1,360)7,268,354¥ 9,814,495 ¥ 5,291,372$ 90,181,889

Accumulated depreciation
Net property, plant and equipment
Intangible assets, net
Investments and other assets:
Investments in securities (notes 4, 5 and 15)
Other investments and other assets
Allowance for doubtful receivables
Total investments and other assets
Total assets

See accompanying notes to consolidated financial statements.

36

Liabilities and Net Assets
Current liabilities:
Call money (notes 7 and 15)
Short-term borrowings and current installments oflong-term borrowings (note 7)
Commercial paper (note 7)
Payables under repurchase agreements
Accrued income taxes (note 9)
Collateral money received for securities lent
Other current liabilities
Total current liabilities
Non-current liabilities:
Long-term borrowings (note 7)
Deferred tax liabilities (note 9)
Deferred tax liabilities for land revaluation (note 6)
Liability for retirement benefits (note 8)
Other non-current liabilities
Total non-current liabilities
Total liabilities
Stockholders’ equity:
Common stock (note 10):
Authorized 200,000,000 shares;
issued 100,000,000 shares in 2020 and 2019
Capital surplus (note 10)
Retained earnings (note 11)
Treasury stock, at cost; 8,278,844 shares in 2020
and 7,330,865 shares in 2019
Total stockholders’ equity
Accumulated other comprehensive income (loss):
Net unrealized gain on other securities(note 4)
Deferred loss on hedges (note 17)
Gain on revaluation of land (note 6)
Remeasurements of defined benefit plans (note 8)
Total accumulated other comprehensive
income (loss)
Total net assets

Millions of yen
2020
2019

Thousands of
U.S. dollars(note 2)2020

¥ 1,176,796 ¥ 1,016,460
101,473
16,547$ 10,813,158
932,399

366,000
3,923,415
663
3,104,029
976,215
9,648,591

214,000
1,453,352
368
1,563,430
850,955
5,115,112

3,363,043
36,050,859
6,092
28,521,814
8,970,091
88,657,456

3,000
5,464
74
1,625
29,054
39,2174,000
10,07574
1,381
19,93735,46727,56650,207680
14,932
266,966
360,351

9,687,808

5,150,579

89,017,807

10,00010,00091,886

11,326111,193

11,326109,688

104,071
1,021,713(4,866)
127,653(4,382)
126,632(44,712)
1,172,958

20,27829,171

186,327(20,309)168(1,103)(14,133)168(1,045)(186,612)
1,544(10,135)(966)

14,161(8,876)

126,687

140,793

1,164,082

Commitments and contingencies (note 18)
Total liabilities and net assets¥ 9,814,495 ¥ 5,291,372

37$

90,181,889

CONSOLIDATED STATEMENT OF INCOME
Japan Securities Finance Co., Ltd. and Consolidated Subsidiaries
For the year ended March 31, 2020

Operating revenues
Operating expenses
Operating profit¥

Millions of yen
2020
2019
29,102 ¥24,322
16,835
12,284
12,267
12,038General and administrative expenses (note 12)
Operating income
Other income (deductions):
Interest income
Dividend income
Interest expenses
Equity in earnings of affiliates
Gain on bad debt recovered
Loss on sale of investments in securities
Loss on disposal of property, plant and equipment
Other, net
Income before income taxes andnon-controlling interests
Income taxes (note 9):
Current
Deferred
Net income
Net income attributable to non-controllinginterests
Net income attributable to owners of parent¥

Thousands of
U.S. dollars(note 2)
2020$
267,408
154,691
112,717

8,137
4,130

8,056
3,982

74,76837,949

227
191
(0)
307
22
(37)
–

229
547
(0)
248
22
–
(41)

2,086
1,755
(0)
2,821
202
(340)
–

18
728
4,858

19
1,024
5,006

166
6,690
44,639

1,260
42
1,302
3,556

842
398
1,240
3,766

11,578386
11,96432,675

–

–

–

3,556

¥

3,766

$

32,675

See accompanying notes to consolidated financial statements.

CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME (LOSS)
Japan Securities Finance Co., Ltd. and Consolidated Subsidiaries
For the year ended March 31, 2020

Net income
Other comprehensive income (loss) arising during
the year (note 13):
Net unrealized gain (loss) on other securities (note 4)
Deferred loss on hedges
Remeasurements of defined benefit plans (note 8)
Share of other comprehensive loss of affiliates accounted
for by the equity method
Total other comprehensive loss arising during the year
Comprehensive income (loss)
Comprehensive income (loss) attributable to:
Owners of parent
Non-controlling interests
See accompanying notes to consolidated financial statements.

38

¥

¥
¥

Millions of yen
2020
2019
3,556 ¥
3,766

Thousands of
U.S. dollars(note 2)
2020$
32,675(8,880)(6,175)(64)

4,700(6,891)(637)(81,595)(56,740)(588)(8)(15,127)(11,571) ¥(2)(2,830)936(74)(138,997)$ (106,322)(11,571) ¥
–

936
–

$ (106,322)–

CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS
Japan Securities Finance Co., Ltd. and Consolidated Subsidiaries
For the year ended March 31, 2020

Millions of yen

Stockholders’ equity

Commonstock(note 10)
Balance at March 31, 2018

Capitalsurplus(note 10)Retainedearnings(note 11)

Treasurystock

Accumulated other comprehensive income (loss)
RemeasureNet-mentsunrealizedofgain on Deferred Gain on
definedotherloss on revaluation benefit
securities hedgesof landplans
Total(note 4) (note 17) (note 6)(note 8)

Total

¥ 10,000 ¥ 11,326 ¥ 108,588 ¥ (3,094) ¥ 126,820¥ 24,484 ¥ (7,243) ¥168 ¥Total net
assets(418) ¥ 16,991 ¥ 143,811

Changes arising during year:
Cash dividends
Net income attributable to ownersof parent
Purchase of treasury stock
Disposition of treasury stock
Net changes other thanstockholders’ equity
Total changes during the year
Balance at March 31, 2019

(2,666)(2,666)(2,666)

3,766

3,766

3,766

(1,305)(1,305)(1,305)

17

17

(0)

17
4,687

(6,890)(627)(2,830)(2,830)

–

(0)

1,100

(1,288)

(188)

4,687

(6,890)–(627)(2,830)(3,018)10,00011,326109,688(4,382)

126,632

29,171(14,133)168(1,045)

14,161

140,793

Changes arising during year:
Cash dividends
Net income attributable to ownersof parent
Purchase of treasury stock(2,051)
3,556

Disposition of treasury stock
Net changes other thanstockholders’ equity
Total changes during the year
Balance at March 31, 2020

(0)
–

(0)

1,505

(2,051)(2,051)

3,556

3,556

(507)

(507)

(507)

23

23

(484)

23

1,021

¥ 10,000 ¥ 11,326 ¥ 111,193 ¥ (4,866) ¥ 127,653(8,893)(6,176)(8,893)(6,176)¥ 20,278 ¥ (20,309) ¥

–

(58)

(15,127)(15,127)(58)(15,127)(14,106)168 ¥ (1,103) ¥(966) ¥126,687

Thousands of U.S. dollars(note 2)
Stockholders’ equity

Commonstock
Balance at March 31, 2019$

CapitalsurplusRetainedearnings

Accumulated other comprehensive income (loss)

Treasury
stock

Total

91,886 $ 104,071 $ 1,007,884 $ (40,265) $ 1,163,576

Net
unrealized
Deferred Gain on
gain onloss on revaluation
otherof landsecurities hedges$ 268,042 $ (129,863) $Remeasure-mentsofdefinedbenefitplans

1,544 $

Total

Total net
assets(9,602) $ 130,121 $ 1,293,697

Changes arising during year:
Cash dividends(18,846)

Net income attributable to owners of parent

32,675Purchase of treasury stock
Disposition of treasury stock(0)(18,846)(18,846)

32,67532,675(4,659)(4,659)(4,659)

212

212

212

Net changes other than stockholders’ equity
Total changes during the year
Balance at March 31, 2020

–
$

(0)

13,829(4,447)

9,382

91,886 $ 104,071 $ 1,021,713 $ (44,712) $ 1,172,958(56,749)(81,715)(56,749)$ 186,327 $ (186,612) $See accompanying notes to consolidated financial statements.

39(81,715)–(533)(138,997)(138,997)(533)(138,997)(129,615)

1,544 $ (10,135) $(8,876) $ 1,164,082

CONSOLIDATED STATEMENT OF CASH FLOWSJapan Securities Finance Co., Ltd. and Consolidated Subsidiaries
For the year ended March 31, 2020

Cash flows from operating activities:
Income before income taxes and non-controlling interests
Adjustments to reconcile income before income taxes andnon-controlling interests to net cash provided by operating
activities:
Depreciation and amortization
Loss on sale/disposal of property, plant and equipment
Gains (losses) relating to short-term investments andinvestments in securities
Allowance for doubtful receivables
Increase in liabilities for retirement benefits
Interest and dividend income
Interest expenses
Equity in earnings of affiliates(Increase) decrease in short-term loans receivable(Increase) decrease in call loans
Increase in receivables under resale agreements(Increase) decrease in collateral money for securities
borrowed
Increase in call money
Increase in short-term borrowings
Increase (decrease) in commercial paper
Increase in payables under repurchase agreements
Increase (decrease) in collateral money received for
securities lent
Increase in collateral money received for loan transactions
Purchase of short-term investments and investments insecurities
Proceeds from sale/redemption of short-term investments
and investments in securities
Other, net
Sub totalInterest and dividend received
Interest paid
Income taxes paid
Income taxes refunded
Net cash provided by operating activities
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 used in investing activities
Cash flows from financing activities:
Dividends paid to stockholders
Purchase of treasury stock
Other, net
Net cash used in financing activities
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)

Millions of yen
2020
2019
¥

¥

4,858

5,006

$

44,638

1,399
2

1,380
32

12,855
18

214
(159)
244
(12,555)
2,874
(307)
(18,785)
25,000(2,200,854)

(441)
(827)
940
(9,727)2,162(248)
334,037(5,000)(546,543)

1,966(1,461)
2,242(115,363)
26,408(2,821)(172,609)
229,716(20,222,861)(1,740,237)
160,336
83,926
152,000
2,470,062

30,581
245,046
2,037(245,000)
1,453,352(15,990,416)
1,473,270
771,166
1,396,674
22,696,518

1,540,599
3,762(941,705)
15,80914,156,014
34,568(467,450)(115,870)(4,295,231)

345,013(81,813)
268,129
11,847(2,743)(3,727)1,533
275,039

235,014(238,518)
221,517
9,539(2,108)(2,596)–226,352

3,170,201(751,750)
2,463,742
108,858(25,205)(34,246)
14,086
2,527,235(8,863)
4,329
(26)
(235)
1
(4,794)(10,664)
2,682
(44)
(631)
4
(8,653)(81,439)
39,778(239)(2,159)9(44,050)(2,051)(507)
0(2,558)267,687
985,198
1,252,885(2,666)(1,305)
1(3,970)213,729
771,469
985,198(18,846)(4,659)0(23,505)
2,459,680
9,052,633
11,512,313

See accompanying notes to consolidated financial statements

40¥

Thousands of
U.S. dollars(note 2)
2020

¥

$

Notes to Consolidated Financial Statements

Japan Securities Finance Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2020
(1)

Summary of Significant Accounting Policies(a) Basis of Presenting Consolidated Financial Statements
Japan Securities Finance Co., Ltd. (the Company) and its consolidated subsidiaries maintain their booksof account and prepare their financial statements in conformity with financial accounting standards of Japan.
The accompanying consolidated financial statements have been prepared in accordance with theprovisions set forth in the Japanese Financial Instruments and Exchange Law and its related accounting
regulations, and in conformity with accounting principles and practices generally accepted in Japan, which
may differ in certain respects from accounting principles and practices generally accepted in countries andjurisdictions other than Japan.
In preparing the accompanying consolidated financial statements, certain reclassifications have been
made in the financial statements issued domestically in Japan in order to present them in a form which ismore familiar to readers outside Japan.

In addition, the notes to the consolidated financial statements

include information which is not required under accounting principles generally accepted in Japan but ispresented herein as additional information.
(b)

Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its 2

subsidiaries.
All significant intercompany accounts and transactions have been eliminated in consolidation.
Investments in affiliates are accounted for by the equity method.
The Accounting Standards for Consolidation require the control or influence concept for the consolidation
scope of subsidiaries and affiliates.

Under the control or influence concept, a company in which the parent

company or its consolidated subsidiaries, directly or indirectly, are able to exercise control over operations isfully consolidated, and a company over which the parent company and/or its consolidated subsidiaries havethe ability to exercise significant influence is accounted for by the equity method.
(c) Cash and Cash Equivalents
For the purpose of the statement of cash flows, the Company considers all highly liquid investments withinsignificant risk of changes in value which have maturities of generally three months or less whenpurchased to be cash equivalents.
(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 recordedin the consolidated statement of income. Securities classified as “held-to-maturity securities” are stated atamortized cost.

Securities classified as “other securities” with fair value are stated at fair value andunrealized gains or losses, net of related taxes, are excluded from earnings and recorded in a separate
component of net assets.
average method.

Realized gains or losses on the other securities are determined by the moving

Securities classified as “other securities” for which fair value is not available are stated at

the moving-average cost.
Resale/repurchase transactions originate in the Japanese financial markets, and involve theselling/purchasing of commercial paper, certificates of deposit, Japanese government bonds and various otherdebt securities to/from an institution wishing to make a short-term investment, with the Company agreeing
to repurchase/resell them from/to the institution on a specified date at a specified price. Under the“Accounting Standards for Financial Instruments”, resale/repurchase transactions are accounted for as
financing transactions.

Resale/repurchase transactions are carried at their contractual amounts.

41

(e)

Property, Plant and Equipment
Property, plant and equipment are carried at cost.

Depreciation is provided principally by the

declining-balance method based on the estimated useful lives, except for the buildings acquired on or after
April 1, 1998 and the leasehold improvements and structures acquired on or after April 1, 2016, which are
depreciated based on the straight-line method.
The estimated useful lives are as follows:
Buildings and structures(f)

3–50 years

Intangible Assets
Intangible assets are carried at cost less accumulated amortization.

Software development expenses

are deferred and amortized by 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 rates based on theestimated useful lives of the respective assets.
(g)

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 the possibility of specific liabilities.
(h)Retirement and Severance Benefits
The Company and its consolidated subsidiaries have retirement benefit plans covering substantially all

employees.
Liability for retirement benefits have been made in the accompanying consolidated financial statements
based on the present value of the projected future retirement benefits attributable to employee services
rendered by the end of the year, less amounts funded under contributory and noncontributory pension plans.
The retirement benefit obligation is attributed to each period by the benefit formula basis.
Actuarial gain or loss is amortized in the subsequent year that it occurs by the declining-balance method
within the average remaining years (15 years) of service of the employees.

Consolidated subsidiaries calculate retirement benefit obligation based on a simplified method, which ispermitted for small size companies in conformity with the Accounting Standard for Retirement Benefits forcalculating retirement benefit liability and retirement benefit expenses.
(i)LeasesAll finance lease transactions are capitalized.
Leased assets related to finance lease transactions without title transfer are depreciated on astraight-line basis, with the lease periods as their useful lives and no residual value.
(j)

Income Taxes
The Accounting Standards for Deferred Income Taxes require that deferred income taxes should 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 which those temporary differences are expected to be
recovered or 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.
(k) Directors’ Bonus
Directors’ bonuses are accounted for as an expense when such bonuses are accrued.

42

(l)

Provision for Share Remuneration Plan
Provision for share remuneration plan is provided for delivery of the Company’s shares to directors andexecutive officers at an amount of estimated obligation for share remuneration based on the internal rule.
(m) Accounting standards issued but not yet applied
1. Accounting Standard for Revenue Recognition etc.
・・Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020)
Implementation Guidance on Accounting Standard for Revenue Recognition (ASBJ Guidance No.
30, March 31, 2020)(1)

Overview
The International Accounting Standards Board (IASB) and US Financial Accounting Standards

Board (FASB) co-developed a new comprehensive revenue recognition standard and published“Revenue from Contracts with Customers” in May 2014 (IFRS No. 15 in IASB, Topic 606 in FASB).
Given that IFRS No. 15 will be applied from the fiscal year starting on or after January 1, 2018 andTopic 606 from the fiscal year starting after December 15, 2017, the Accounting Standards Board ofJapan (ASBJ) has developed comprehensive accounting standards for revenue recognition andpublished them together with implementation guidance.
The ASBJ basic policy in developing accounting standards for revenue recognition is thought to be
setting accounting standards, with the incorporation of the basic principles of IFRS No. 15 as a starting
point, from a standpoint of comparability between financial statements, which is one of the benefits ofensuring consistency with IFRS No. 15, and to be adding alternative accounting treatments without
losing the comparability if there is an item that we should take into account in practices, etc. that havebeen conducted in Japan.
(2)

Planned applicable date
The accounting standards are to be applied from the beginning of the year ending March 31, 2022.

(3)

Impact of application on these accounting standards
The Company is currently evaluating the impact of application of these accounting standards to theconsolidated financial statements.
2. Accounting Standard for Fair Value Measurement etc.
・Accounting Standard for Fair Value Measurement (ASBJ Statement No. 30, July 4, 2019)

・

Accounting Standard for Financial Instruments (ASBJ Statement No. 10, July 4, 2019)

・

Implementation Guidance on Accounting Standard for Fair Value Measurement (ASBJ Guidance
No. 31, July 4, 2019)

・

Implementation Guidance on Disclosures about Fair Value of Financial Instruments (ASBJ
Guidance No. 19, March 31, 2020)(1)

Overview
The International Accounting Standards Board (IASB) and US Financial Accounting Standards

Board (FASB) each have established detailed guidance regarding fair value measurements that arenearly identical (IFRS No. 13 in IASB, Topic 820 in FASB). In order to improve the comparability
mainly about guidance and disclosures for fair value of financial instruments with such international
accounting standards, the Accounting Standards Board of Japan has published “Accounting Standard
for Fair Value Measurement “etc.
The basic approach taken by the ASBJ in development of accounting standards for fair value
measurement was to adopt generally all principles of IFRS No. 13, from a standpoint of comparability
between financial statements of domestic and overseas companies.

However, for any item that weshould take into account in accounting practices, etc. that have been conducted in Japan, otheraccounting treatments without impairing comparability shall be determined.
(2)

Planned applicable date
The accounting standards are to be applied from the beginning of the year ending March 31, 2022.

(3)

Impact of application on these accounting standards
The Company is currently evaluating the impact of application of these accounting standards to the43consolidated financial statements.
3. Accounting Standard for Disclosure of Accounting Estimates・

Accounting Standard for Disclosure of Accounting Estimates” (ASBJ Statement No. 31 issued on
March 31, 2020)(1) Overview
In 2003, the International Accounting Standards Board (IASB) issued “Presentation of Financial
Statements” (International Accounting Standards 1 (IAS 1)) with paragraph 125 of the standard
requiring disclosure regarding key sources of uncertainty in accounting estimates.

The ASBJ

developed and issued “Accounting Standard for Disclosure of Accounting Estimates” in response torequests to consider requiring similar disclosure under Japanese GAAP as such footnote information isconsidered extremely useful to users of financial statements.
The basic approach taken by the ASBJ in the development of this Standard was , rather than toexpand individual notes, to state the general principle (purpose of disclosure), and then allow thecompany to make a decision on specific content to be disclosed in light of the purpose of disclosure.

In

the development, the ASBJ made it its policy to refer to the provisions of paragraph 125 of IAS 1.
(2) Planned applicable date
The accounting standards will be applied from the end of the year ending March 31, 2021.
4. Accounting Standard for Accounting Policy Disclosures, Accounting Changes and Error Corrections
・

Accounting Standard for Accounting Policy Disclosures, Accounting Changes and Error
Corrections” (ASBJ Statement No. 24 issued on March 31, 2020)(1) Overview
It was recommended that ASBJ would consider improvement of disclosure for the notes to “Theaccounting policies and methods which has been adopted in the cases where the relevant accounting
standards were not clear”. In order to respond to the recommendations, the ASBJ made necessary
amendments and issued the revised “Accounting Standards for Accounting Policy Disclosures,
Accounting Changes and Error Corrections”.
In addition, this Standard provides that when the company improves disclosure of the notes for“The accounting policies and methods which has been adopted in the cases where the relevant
accounting standards were not clear”, it should refer to the provisions of “Note 1-2 of explanatory noteson corporate accounting principles” in order not to effect on accounting practices in the cases where therelevant accounting standards are clear.
(2) Planned applicable date
The accounting standards will be applied from the end of the year ending March 31, 2021.
(n)

Reclassifications
Certain reclassifications have been made to the prior years’ consolidated financial statements to conformto the presentation used as of and for the year ended March 31, 2020.

44

(2)

Financial Statement Translation
The translations of the yen amounts into U.S. dollars are included solely for the convenience of thereader, using the prevailing exchange rate as of March 31, 2020, which was ¥108.83 to U.S. $1.

Thistranslation 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
Reconciliation between “Cash” in the accompanying consolidated balance sheet and “Cash and cash

equivalents” in the accompanying consolidated statement of cash flows as of March 31, 2020 and 2019 are as
follows:
Thousands of
U.S. dollars
2020

Millions of yen
2020
2019
Cash

¥

1,299,936

Time deposits with maturities of over threemonthsCertificate of deposits with maturities of overthree months
Cash and cash equivalents
(4)

¥

¥

990,670$

11,944,648(43,048)(1,470)(395,553)(4,003)(4,002)(36,782)

1,252,885¥

985,198$

11,512,313

Short-term Investments and Investments in Securities
No trading securities were held both as of March 31, 2020 and 2019.
Balance sheet amount, gross unrealized gain or gross unrealized loss and fair value of held-to-maturity

securities as of March 31, 2020 and 2019 are summarized as follows:

March 31, 2020
Government bond securities

Millions of yen
Gross
Gross
unrealized
unrealized
gain
loss

Balancesheet
amountFair value

¥

1,513

¥

209

¥

－

¥

1,722

¥

1,513

¥

209

¥

－

¥

1,722

¥

1,514

¥

244

¥

－

¥

1,758

¥

1,514

¥

244

¥

－

¥

1,758

March 31, 2019
Government bond securities

March 31, 2020
Government bond securities

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

Balancesheet
amountFair value$

13,902

$

1,921

$

－

$

15,823$

13,902

$

1,921

$

－

$

15,82345

Acquisition cost, gross unrealized gain or gross unrealized loss and balance sheet amount of othersecurities with fair value as of March 31, 2020 and 2019 are summarized as follows:

Acquisition
cost

March 31, 2020
Equity securities

Millions of yen
Gross
Gross
unrealized
unrealized
gain
loss

¥

4,978

¥

7,468

¥

Balancesheet
amount(269) ¥

12,177

Bond securities:
Government bond securities

492,117

28,981(2,269)518,829

Corporate bond securities

254,1857(574)

253,618

38,491122(2,058)36,555

15,621692(2,370)13,943

Other
Other securities¥

805,392¥

37,270¥(7,540) ¥835,122

¥

5,205

¥

8,138

¥

(19) ¥

13,324

March 31, 2019
Equity securities
Bond securities:
Government bond securities

589,471

33,538(0)623,009

Corporate bond securities

41,39333(2)41,424Other

31,257116(971)

30,402Other securities

9,790
¥

677,116

1,269¥

43,094¥(132)

10,927(1,124) ¥719,086

Thousands of U.S. dollars

March 31, 2020
Equity securities$

45,741$

Balancesheet
amountGrossunrealized
loss

Gross
unrealized
gain

Acquisition
cost

68,621$(2,472) $111,890

Bond securities:
Government bond securities

4,521,887

266,296(20,849)

4,767,334

Corporate bond securities

2,335,615

64(5,274)2,330,405

Other
Other securities$

353,680

1,121(18,910)

335,891

143,536

6,359(21,777)

128,118(69,282) $7,673,638

7,400,459$

342,461$

Securities classified as other securities for which fair value is not available are summarized as follows:
Thousands ofMillions of yen
U.S. dollars
2020
2019
2020
Unlisted equity securities

¥

2,038

¥

2,900

$

18,726

Unlisted REITs

14,577

14,588133,943

Investments in investment limited partnership

1,291

897

11,863

－

1,050

－

Beneficial interests

46

For the years ended March 31, 2020 and 2019, proceeds from sale of other securities, the gross realized
gains and the gross realized losses are summarized as follows:

Thousands of
U.S. dollars
2020

Millions of yen
2020
2019
Proceeds from sale of other securities¥

78,299¥146,904$

719,462

Gross realized gains

851

647

7,820

Gross realized losses

396

85

3,639

Financial assets received as collateral on which the Company has a right of disposal as of March 31, 2020
and 2019 are as follows:

Thousands of
U.S. dollars
2020

Millions of yen
2020
2019
The fair value of the securities received ascollateral:
Securities lent¥

119,168

Collateral provided¥

169,491

On hand

1,007,183¥

1,295,842

178,891$

1,094,992

232,234

1,557,392

1,129,584¥

1,540,709

9,254,645$

11,907,029

Balance sheet amount of securities lent under loan for consumption agreement, etc. as of March 31, 2020
and 2019 are as follows:

Thousands of
U.S. dollars
2020

Millions of yen
2020
2019
Short-term investments¥

44,081

Investments in securities¥

346,296

209,335$

379,548

405,045
3,181,990

The fair value of the securities borrowed under loan for consumption agreement, etc. as of March 31,
2020 and 2019 was as follows:

Thousands of
U.S. dollars
2020

Millions of yen
2020
2019
The fair value of the securities borrowed:
Securities loaned¥

6,614,961¥

2,680,144$

60,782,514

Securities pledged as collateral

163,101

108,232

1,498,677

On hand23,967

27,819220,224¥47

6,802,029¥

2,816,195$

62,501,415

(5) Investments in Affiliates
The aggregate carrying amount of investments in affiliates as of March 31, 2020 and 2019 are ¥3,934
million ($36,148 thousand) and ¥3,773 million, respectively.
(6) Land Revaluation
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 gain

was reported in a separate component of net assets, net of related taxes, and the related taxes are reported inliabilities as deferred tax liabilities for land revaluation as of March 31, 2002.
(7) Debt
The composition of debt and the weighted average interest rate on debt as of March 31, 2020 and 2019are as follows:
Millionsof yenMarch 31, 2020
Short-term borrowings¥

100,473 $Long-term borrowings

Thousandsof U.S.
dollars

Weighted
averagerate

923,2100.471%

4,000

36,7550.535

1,176,796

10,813,158(0.065)366,000

3,363,043

0.001

¥

1,647,269 $

15,136,166¥

16,5470.982%

4,000

0.535

1,016,460(0.036)

214,000(0.001)

Call money
Commercial paper

March 31, 2019
Short-term borrowings
Long-term borrowings
Call money
Commercial paper¥

1,251,007(8) Retirement and Severance Benefits
The Company has defined benefit retirement and pension plans, which consist of a defined benefit
corporate retirement and pension plan and an unfunded retirement and severance plan that provide forlump-sum payment of benefits, and a defined contribution plan. The Company has established a retirement
benefit trust to cover the defined benefit retirement and pension plans.
Consolidated subsidiaries’ main retirement plans are unfunded retirement and severance plans thatprovide for lump-sum payment of benefits as defined benefit retirement and pension plans.

The simplified

method has been adopted for the calculation of liability for retirement benefits and retirement benefit
expenses for the plans.
Defined benefit plans
Followings are the information for the Company’s and the consolidated subsidiaries’ defined benefit
plans as of March 31, 2020 and 2019 and for the years then ended.

48

(1) Reconciliation of changes in retirement benefit obligation (the following table excludes certain plans
mentioned in (3))
Thousands of
U.S. dollars
2020

Millions of yen
2020
2019
Retirement benefit obligation at beginning of year
Service cost¥

Interest cost
Actuarial gains and losses
Benefits paid
Retirement benefit obligation at end of year

¥

9,689

¥

8,798

$

89,029

355

325

3,262

20

26

184

(226)

880

(2,077)

(367)

(340)

(3,372)

9,471

¥

9,689

$

87,026(2) Reconciliation of changes in plan assets (the following table excludes certain plans mentioned in (3))
Thousands of
U.S. dollars
2020

Millions of yen
2020
2019
Plan assets at beginning of year
Expected return on plan assets

¥

¥

173

Actuarial gains and losses
Employer contributions
Benefits paid
Plan assets at end of year

8,658

$

79,555

173

1,590

(542)

(83)

(4,980)

186

172

1,709

(265)
¥

8,657

8,210

(261)
¥

8,658

(2,435)$75,439(3) Reconciliation of changes in liability for retirement benefits whose plans adopted the simplified method
Thousands of
U.S. dollars
2020

Millions of yen
2020
2019
Liability for retirement benefits at beginning of year ¥Retirement benefit expenses
Benefits paid
Contributions
Liability for retirement benefits at end of year

161

¥

49

$

1,479

18

15

166

－

(13)

－

(0)
¥

160

179

(1)
¥

161

(0)
$

1,645

(4) Reconciliation between retirement benefit obligation and plan assets and liability for retirement benefit
and asset for retirement benefit recognized in consolidated balance sheet

Thousands of
U.S. dollars

Millions of yen
2020
Funded retirement benefit obligation¥

Plan assets
Unfunded retirement benefit obligation

2019

9,471

¥

9,689

2020
$

87,026(8,210)(8,658)(75,439)

1,261

1,031

11,587

179

161

1,645

Net liability for retirement benefit recognized inconsolidated balance sheet

¥

1,440

¥

1,192

$

13,232

Liability for retirement benefit

¥

1,440

¥

1,192

$

13,232Net liability for retirement benefit recognized inconsolidated balance sheet

¥

1,440

¥

1,192

$

13,232(5) The components of retirement benefit expenses

Thousands of
U.S. dollars
2020

Millions of yen
2020
2019
Service cost
Interest cost

¥

355

¥

325

$

3,262

20

27

184

Expected return on plan assets

(173)

(173)

(1,590)

Amortization of actuarial gains or losses
Retirement benefit expenses calculated by thesimplified method
Retirement benefit expenses

182

53

1,672

¥

18
402

¥

15
247

$

166
3,694

(6) Remeasurements of retirement benefit plans before related tax effects
Thousands ofMillions of yen
2020

U.S. dollars
2019

2020

Actuarial gains or losses

¥

(134)

¥

(910)

$

(1,231)

Total

¥

(134)

¥

(910)

$

(1,231)(7) Accumulated remeasurements of retirement benefit plans before related tax effects
Millions of yen

2020

Thousands of
U.S. dollars

2019

2020

Unamortized actuarial gains or losses

¥

1,417

¥

1,283

$

13,020

Total

¥

1,417

¥

1,283

$

13,02050

(8) Plan assets(a) Percentage by major category of plan assets

Debt securities
Equity securities
General account
Other
Total

2020

2019

24.9%
29.7
11.4
34.0

48.9%
31.1
11.0
9.0

100.0%

100.0%

Plan assets as of March 31, 2020 and 2019 include the retirement benefit trust contributed for the years
ended March 31, 2020 and 2019 which are 10.2% and 10.0% of total plan assets, respectively.
(b) Determination procedure of long-term expected rate of return on plan assets
In determining long-term expected rate of return on plan assets, the Company considers the current
and projected asset allocation, as well as current and future long-term rate of returns for various categoriesof the plan assets.
(9) Basis for calculation of actuarial assumptions
The assumptions used in accounting for the above plans as of March 31, 2020 and 2019 are as follows:(a) Discount rate(b) Long-term expected rate of return(c) Expected salary increase rate

2020

2019

0.3%
2.0%
5.2%

0.2%
2.0%
5.2%

Defined contribution plans
For the years ended March 31, 2020 and 2019, the amount to be paid by the Company and its
consolidated subsidiaries to the defined contribution plans was ¥36 million ($331 thousand) and ¥36 million,
respectively.
Liability for retirement benefits (directors and corporate auditors)
Directors and corporate auditors are not covered by the plans described above. The Company and all
consolidated subsidiaries had abolished retirement benefit system for directors and corporate auditors.
Directors and corporate auditors were entitled to lump-sum payment up to the date of the abolishment when
they leave the Company or subsidiaries.
As of March 31, 2019, the liability for retirement benefits related to the plans were ¥42 million which
include the lump-sum payments mentioned above.
(9)

Income Taxes
The Company and its consolidated subsidiaries are subject to Japanese corporate, inhabitant andbusiness taxes based on income which, in the aggregate, result in a statutory tax rate of approximately 30.6%
both in 2020 and 2019.

51

The reconciliation of the statutory tax rate and the effective tax rate as a percentage of income before
income taxes and non-controlling interests for the years ended March 31, 2020 and 2019 is follows:
2020

2019

30.6%

30.6%

Equity in earnings of affiliates

(1.9)

(1.5)

Expenses not deductible for tax purposes

1.1

1.0

Statutory tax rate

Valuation allowance

(2.7)

(5.1)

Income not credited for tax purposes

(2.5)

(2.3)

Other
Effective tax rate

2.2

2.0

26.8%

24.8%

Significant components of deferred tax assets and liabilities as of March 31, 2020 and 2019 are as follows:
Thousands ofMillions of yen
2020

U.S. dollars
2019

2020

Deferred tax assets:
Accrued business tax¥

Accrued bonuses
Liability for retirement benefits (employees)
Liability for retirement benefits (directors andcorporate auditors)
Allowance for doubtful receivables
Tax loss carryforward

89

¥

66

$

818

152

205

1,397

1,211

1,106

11,128

－

13

－

76

245

698

2

120

18

Deferred loss on hedges

10,415

7,182

95,700Net unrealized loss on other securities

2,027

344

18,625

265

314

2,435

14,237

9,595

130,819(4,430)(3,124)(40,706)

9,807

6,471

90,113Gain on evaluation of subsidiaries’ assets

(155)

(155)

(1,424)

Net unrealized gain on other securities(11,139)(13,208)(102,352)

(166)

(359)

(1,525)

Other
Valuation allowance
Deferred tax liabilities:

Gain on transfer of investment in an affiliate
Gain on evaluation of acquired assets by merger
Deferred loss on hedges
Other
Net deferred tax liabilities

¥

52

(580)

(580)

(5,330)(3,172)(2,204)(29,147)

(59)

(40)

(542)

(15,271)(16,546)(140,320)(5,464)¥(10,075)$(50,207)(10) Common Stock
Under the Companies Act, the entire amount of the issue price of shares is required to be designated asstated common stock account although a company in Japan may, by resolution of its Board of Directors,

account for an amount not exceeding 50% of the issue price of new shares as additional paid-in capital, whichis included in capital surplus.
(11) Retained Earnings and Dividends
The Companies Act provides that an amount equal to 10% of distributions from retained earnings paid by
the Company and its Japanese subsidiaries be appropriated as a legal reserve. No further appropriations
are required when the total amount of the additional paid-in capital and the legal reserve equals 25% of theirrespective stated capital. The Companies Act also provides that capital surplus and legal reserve areavailable for appropriations by the resolution of the stockholders. Balances of the legal reserve are included
in retained earnings in the accompanying consolidated balance sheet.

Cash dividends charged to retained earnings for the years ended March 31, 2020 and 2019 represent
dividends paid out during those years. The amount available for dividends is based on the amount recordedin the Company’s non-consolidated books of account in accordance with the Companies Act.
(a) Dividends paid during the year ended March 31, 2019
The following was approved by the general meeting of stockholders held on June 22, 2018.
(a) Total dividends(b) Cash dividends per common share¥1,621 million¥17(c) Record date

March 31, 2018(d) Effective dateJune 25, 2018

The following was approved by the Board of Directors held on November 5, 2018.
(a) Total dividends(b) Cash dividends per common share¥1,046 million¥11(c) Record date

September 30, 2018(d) Effective date

December 4, 2018(b) Dividends paid during the year ended March 31, 2020
The following was approved by the general meeting of stockholders held on June 25, 2019.
(a) Total dividends(b) Cash dividends per common share¥1,027 million ($9,437 thousand)¥11 ($0.10)(c) Record date

March 31, 2019(d) Effective dateJune 26, 2019

The following was approved by the Board of Directors held on November 11, 2019.
(a) Total dividends(b) Cash dividends per common share¥1,024 million ($9,409 thousand)¥11 ($0.10)(c) Record date

September 30, 2019(d) Effective date

December 6, 2019(c) Dividends to be paid after the balance sheet date but the record date for the payment belongs to the year
ended March 31, 2020
The following was approved by the Board of Directors held on May 18, 2020.
(a) Total dividends¥1,016 million ($9,336 thousand)(b) Dividend source

Retained earnings(c) Cash dividends per common share¥11 ($0.10)(d) Record date

March 31, 2020(e) Effective dateJune 2, 202053

(12) General and Administrative Expenses
Significant components of general and administrative expenses are as follows:
Thousands ofMillions of yen
2020
Salaries¥

Retirement benefit expenses
Depreciation

2,945

U.S. dollars
2019

¥

2020

3,038

$

27,061

438

283

4,025

1,399

1,380

12,855(13) Other Comprehensive Income (Loss)
The reclassification adjustment and the related income tax effects allocated to each component of othercomprehensive income (loss) for the years ended March 31, 2020 and 2019 are as follows:
Millions of yen
2020
2019

Thousands of
U.S. dollars
2020(11,749) ¥

7,330

$

(491)

(562)

(4,512)(12,240)

6,768(112,469)

Tax benefit (expense)

3,360(2,068)30,874Net-of-tax amount(8,880)4,700(81,595)(8,030)(8,843)(73,785)

632

205

5,807

(7,398)(8,638)(67,978)

Net unrealized gain (loss) on other securities:¥

Arising during the year
Reclassification adjustment
Before tax amount(107,957)

Deferred gain (loss) on hedges:
Arising during the year
Reclassification adjustment
Before tax amountTax benefit (expense)

1,223

1,747

11,238Net-of-tax amount(6,175)(6,891)(56,740)

(316)

(963)

(2,903)Remeasurements of defined benefit plans:Arising during the year
Reclassification adjustment

182

53

1,672

Before tax amount

(134)

(910)

(1,231)

Tax benefit (expense)

70

273

643

Net-of-tax amount

(64)

(637)

(588)

Share of other comprehensive income (loss) of affiliates accounted for by equity method:
Arising during the year

(28)

(21)

(258)

Reclassification adjustment

20

19

184

(8)

(2)

(74)

¥

Total other comprehensive income (loss)

54(15,127) ¥(2,830)$(138,997)

(14) Per Share Information(a)

Net Income per Share
Basic net income per share, and reconciliation of the numbers and the amounts used in the basic net

income per share computations for the years ended March 31, 2020 and 2019 are as follows:
Yen

U.S. dollars

2020
Basic net income per share

¥

38.47

2019
¥

40.02

2020
$

0.35

Thousands ofMillions of yen
2020
Net income attributable to owners of parent¥

Net income not applicable to common stockholders

3,556

U.S. dollars

2019
¥

3,766

－

2020
$

32,675－－

Net income attributable to owners of parent
applicable to common stockholders

¥

3,556

¥

3,766

$

32,675

Number of shares (Thousands)
2020

2019

Weighted average number of shares outstanding
92,429on which basic net income per share is calculated

94,075The Company’s own stocks which are held by the trust are included in the treasury stocks which are
excluded from the calculation of weighted average number of shares outstanding on which basic net income
per share is calculated.
(b) Net Assets per Share
Net assets per share, and reconciliation of the numbers and the amounts used in the net assets per sharecomputations as of March 31, 2020 and 2019 are as follows:
Yen

U.S. dollars

2020
Net assets per share¥

1,381.22

2019¥

1,519.30

2020
$

12.69

Thousands ofMillions of yen
2020
Total net assets¥

Amount deducted from total net assets

126,6872019¥－

Net assets applicable to common stockholders¥

55

126,687

U.S. dollars

¥

2020

140,793$ 1,164,082－－

140,793$ 1,164,082

Number of shares (Thousands)
2020

2019

Number of shares outstanding at end of year
91,721

on which net assets per share is calculated

92,669The Company’s own stocks which are held by the trust (BBT) are included in the treasury stocks which
are excluded from the calculation of number of shares outstanding at end of year on which net assets per
share is calculated.
(15) Pledged Assets
The carrying value and classification of assets owned by the Company that have been pledged tocounterparties as of March 31, 2020 and 2019 are as follows:
Thousands ofMillions of yen
2020
Short-term investments¥

21,011

U.S. dollars

2019¥19,102

2020$

193,063

Short-term loans receivable

440,811

360,834

4,050,455

Investments in securities

322,233

69,6492,960,884

Assets in the above table were pledged for the followings:
Thousands ofMillions of yen
2020
Call money¥

67,000U.S. dollars

2019¥

205,000

2020$

615,639

In addition to the above, followings are deposited for the Clearing Fund of Japan Securities Clearing
Corporation and Japan Government Bond Clearing Corporation, etc.
Thousands ofMillions of yen
2020
Cash

¥

Other current assets
Investments in securities

56

25

U.S. dollars

2019
¥

25

2020
$

230

188,31170,515

1,730,323

－

1,661

－

(16) Financial Instruments
Conditions of Financial instruments(1) Management policy
The Company and a consolidated subsidiary, JSF Trust and Banking Co., Ltd. (“JSFTB”) mainly deal infinancial instruments.
transactions.

The Company is engaged in providing loan services, mainly loans for margin

The loans for margin transaction are loan services which are money lending or stock loan forsettlement of standardized margin transactions.

The transaction is strongly effected by security market

condition, therefore, the Company raises money flexibly from short-term finance market, primarily from callmarket.

The Company owns securities such as Japanese Government Bonds to manage the funds

efficiently.
A consolidated subsidiary, JSFTB is engaged in providing credit services such as loans as banking
business and finance and securities activities. JSFTB invests in highly liquid and safe-and-secure securities
such as government bonds, local government bonds, public corporation bonds and government-backed bonds
as securities investment activities and usually raises money through a trust account.
(2) Financial instruments and risks
Main financial instrument that the Company holds are trade loans receivable, collateral money forsecurities borrowed, short-term investments and investments in securities such as government bonds andequity securities.

Collateral money for securities borrowed is the collateral for cash-secured bond lendingtransaction, cash-secured stock lending transaction and securities borrowed of loan on margin transactions.
Main financial instrument that JSFTB holds are loans to government, other credit granting and securities
such as government bonds, local government bonds, public corporation bonds and government-backed bonds.
Trade loans receivable held by the Company and JSFTB are exposed to credit risks that caused fromcounterparties’ default of contract.

Securities are exposed to market risks.

Regarding raising money suchas call money and short-term borrowings of the Company and JSFTB, the liabilities are exposed to liquidity
risks that caused from turmoil in the financial markets or a credit rating down.
The Company has entered into forward exchange contract for hedging currency exchange risk of bonds
denominated in foreign currency and interest rate swaps for hedging interest rate risk of fixed-rate bonds.
Hedge accounting is applied to the derivatives and the Company regularly monitors the hedge effectiveness
whether the relationship between hedging derivatives and hedged assets are appropriate and the currency
exchange risk and the interest rate risk of hedged items are offset by hedging derivatives.
JSFTB has entered into interest rate swaps for hedging fixed-rate loans, bonds and borrowings as a partof interest risk control (ALM).

Hedge accounting is applied to the derivatives held for ALM purpose, and theCompany regularly monitors the hedge effectiveness whether the relationship between hedging derivatives
and hedged assets or liabilities are appropriate and the interest rate risk of hedged items are offset byhedging derivatives.
(3) Financial instruments risk management
The Company places risk management as top priority of management. Basic policy of risk management
is approved at the Board of Directors, and various rules for risk management according to the basic policy are
established for concrete risk management method or system.

The Company regularly receives a report fromJSFTB concerning its risk management.
1) Integrated risk management
The Company quantizes the risk by Value at Risk (VaR) approach after allocating risk capital withinequity capital, and controls the quantized risk amount within the allocated risk capital.

Each business

operation department controls a risk within the allocated risk capital, risk management department that is
independent from each operational section quantizes the risk, monitors the risk management and reports tothe management.

572) Credit risk
The Company manages all of the credit risk strictly to maintain and improve assets quality.

The RiskManagement Department evaluates credit risks according to the in-house rating and quantizes and controls
the credit risk using the default rate by each in-house rating category. Stress tests are also performed forcompensating the quantization control. The Risk Management Department evaluates customers or loans,and sets up the credit limits, while business operation department monitors the credit limit. Assets owned
by business operation departments are assessed by themselves strictly.

The Company receives collateral

securities for each loan and revaluates the securities daily to mitigate the collectability issues, and theCompany collects the claims quickly through sale of the collaterals when the customer bankrupts.
3) Market risk
The Risk Management Department quantizes and controls market risks, and performs stress tests tocompensate the quantization control. Back-testing which is the test compared calculated VaR andestimated profit or loss by using the fixed portfolio is performed to test the reliability of the Company’smarket risk quantization model.
4) Quantitative information of market risk
The Company calculates VaR of short-term investments and investments in securities by using Deltamethod (holding period: 10-120 days (depending on purposes in holding), confidence interval: 99%,
observation period: 1 year). Market risk amount (possible losses) of the Company is ¥17,749 million($163,089 thousand) as of March 31, 2020.
Because VaR is a statistical estimate of market risk amount at a particular probability using past market
movement data, VaR may not capture the risk during radical market movements that are extreme in nature.
5) Liquidity risk
The Treasury Department of the Company seeks to diversify financing channels and to secure stablefinancing sources.

For sound cash flow management, the Company develops cash flow forecast, understands

the amount can be raised or future liquidity and also understands dates of a large payment concentration, theCompany has a system to report to the management with daily cash flow status.

The Company tries to holdenough liquidity, for example, to possess a certain amount of government bonds, makes a contingency planand builds a company-wide emergency response system against contingencies.

Liquidity stress tests are

performed monthly for ascertaining whether consolidated liquidity held by the Company and JSFTB is
adequate.

At the “ALM Committee” held in every quarter, the Company develops cash flow forecast basedon estimates of loans outstanding, studies policies for ALM (Asset Liability Management) such as revenue
management for assets and liabilities of the Company and the Company has a system to report to the
management.
6) Subsidiary’s risk control system
JSFTB basic policy of risk management is approved at the Board of Directors, and various rules for risk
management according to the basic policy are established for concrete risk management method or system,and the Risk Management Department controls the risks totally.

The Risk Management Department

measures and monitors the risk quantity, collects and analyzes information and reports the risk condition to
the management for maintaining the proper risk management.
JSFTB calculates market risk amount for all market transactions.

Interest rate risk amount which is amajor risk variable is calculated by VaR (Delta method; holding period: 1 year, confidence interval: 99%,
observation period: 5 years). JSFTB market risk amount is ¥7,807 million ($71,736 thousand) as of March
31, 2020.

58

(4) Supplemental explanation regarding fair value of financial instruments
Fair value of financial instruments are measured based on the quoted market price, if available, or
reasonably assessed value if a quoted market price is not available. Fair value of financial instruments
which quoted market price is not available is calculated based on certain assumptions, and the fair value
might differ if different assumptions are used.
Fair value of financial instruments
The carrying value on the consolidated balance sheet, fair value, and differences as of March 31, 2020
and 2019 are as follows.
Financial instruments, of which it is extremely difficult to measure the fair value, are not included.
(Please see “<2> Financial instruments of which the fair value is extremely difficult to measure”)
Millions of yen
2020
Carrying
value

Assets:(1) Cash¥ 1,299,936(2) Call loan *1

74,906(3) Trade loans receivable

687,679

Allowance for doubtfulreceivables *1

Fair value

Differences¥ 1,299,936 ¥－

74,906－¥990,670

Fair value¥

99,883

990,670

Differences¥－

99,883－

668,894

(136)

(72)

687,543

687,55310

668,822

668,822－

2,747,329

2,747,329－

546,510546,510－

3,877,538

3,877,538－

2,137,118

2,137,118

－

1,513

1,722

209

1,514

1,758

(244)

835,122835,122－719,086

719,086－¥ 9,523,887¥ 9,524,106 ¥219¥ 5,163,603¥ 5,163,847

¥

(244)

¥ 1,176,796¥ 1,176,796 ¥－¥ 1,016,460¥ 1,016,460¥－(4) Receivables under resaleagreements *1(5) Collateral money for securities
borrowed *1(6) Short-term investments andinvestments in securities
Held-to-maturity securities
Other securities
Total

2019
Carrying
value

Liabilities:(1) Call money(2) Short-term borrowings

100,473

100,473－

16,547

16,547－(3) Commercial paper(4) Payables under repurchaseagreements(5) Collateral money received for
securities lent
(6) Long-term borrowings *2

366,000

366,000－

214,000

214,000－

3,923,415

3,923,415－

1,453,352

1,453,352－

3,104,029
4,000

3,104,029
4,000

－
－

1,563,430
4,000

1,563,430
4,000

－
－

Total

¥ 8,674,713¥ 8,674,713 ¥－¥ 4,267,789¥ 4,267,789¥－

Derivative transactions *3

¥

(－)

¥

¥

¥

(－)

(27,613) ¥(27,613) ¥59(19,024)(19,024)

Thousands of U.S. dollars

Fair value$ 11,944,648$ 11,944,648 $Assets:(1) Cash(2) Call loan *1

688,284(3) Trade loans receivable
Allowance for doubtfulreceivables *1

Differences－

688,284－(1,250)6,317,587

6,317,679

92

25,244,225

25,244,225－

35,629,312

35,629,312－

13,902

15,822

1,920

7,673,638

7,673,638－

6,318,837(4) Receivables under resaleagreements *1(5) Collateral money for securities
borrowed *1(6) Short-term investments andinvestments in securities
Held-to-maturity securities
Other securities
Total

2020

Carryingvalue$ 87,511,596$ 87,513,608 $2,012$ 10,813,158$ 10,813,158 $－Liabilities:(1) Call money(2) Short-term borrowings(3) Commercial paper(4) Payables under repurchaseagreements(5) Collateral money received for
securities lent
(6) Long-term borrowings *2

923,211923,211－

3,363,043

3,363,043－

36,050,859

36,050,859－

28,521,814
36,75428,521,814
36,754－－

Total$ 79,708,839$ 79,708,839 $－Derivative transactions *3

$

$

(－)

(253,726)(253,726) $*1 Allowance for doubtful accounts associated with trade loans receivable is deducted.

Carrying value of callloan and collateral money for securities borrowed is net amount of related allowance for doubtful accounts,
because the allowance for doubtful accounts for these accounts is not material.
*2 Long-term borrowings include current installment of long-term borrowings.
*3 Derivative receivables and payables are on net basis. Items that are net payables are shown inparenthesis.
<1> Fair value measurement of financial instruments
Assets:(1) Cash and (2) Call loan
The fair value approximates carrying amount because of the short maturity of these instruments.
(3) Trade loans receivable
The fair value of trade loans receivable with variable interest rate approximates carrying amountbecause the fair value is reflected a fluctuation of interest market in a short period and unless credit status of
the borrower does not change so much from when the Company lent.

Allowance for doubtful receivables are

estimated based on collectable amounts by collaterals and guarantee and thus the fair value approximatesthe carrying amount minus allowance for doubtful receivables amounts.
(4) Receivables under resale agreements and (5) Collateral money for securities borrowed
The fair value approximates carrying amount because of the short maturity of these instruments.

60

(6) Short-term investments and investments in securities
The fair value of equity securities are calculated by quoted market price and bond securities arecalculated by quoted market price or quotes from information venders. The fair value of government bonds
with variable interest rate held by the Company is estimated based on quotes from information venders inaccordance with the “Practical Solution on Measurement of Fair Value of Financial Assets” (ASBJ Practical
Issue Task Force (PITF) No. 25, October 28, 2008), because based on our determination that their market
prices cannot be deemed fair value due to the market situation where the number of transactions is extremely
small. The pricing model used by the information vendors is forward pricing model, and the pricedeterminant variables are the spot rate for Japanese government bonds and the swaption volatility.
The fair value of investment trust is calculated by quoted market price.
Please see note “(4) Short-term Investments and Investments in Securities” for information by category.
Liabilities:(1) Call money, (2) Short-term borrowings, (3) Commercial paper, (4) Payables under repurchase agreementsand (5) Collateral money received for securities lent
The fair value approximates carrying amount because of the short maturity of these instruments.
(6) Long-term borrowings
The fair value of long-term borrowings with variable interest rate approximates carrying amountbecause the fair value is reflected a fluctuation of interest market in a short period and credit status of theCompany does not change very much from when the Company borrowed.
Derivatives:
Please see note “(17) Derivative Financial Instruments.”<2> Financial instruments of which the fair value is extremely difficult to measure

Thousands ofMillions of yen
2020

U.S. dollars

2019

2020

Unlisted equity securities
Other securities¥

Investments in affiliates
Unlisted REITs
Investments in investment limited partnershipBeneficial interests

2,038

¥

2,900

$

18,726

3,934

3,773

36,148

14,577

14,588133,943

1,291

897

11,863

－

1,050

－

Above securities have no market value and the fair value is extremely difficult to measure, therefore are
not included in “Assets: (6) Short-term investments and investments in securities.”61

<3> Projected future redemption of monetary claim and securities with maturities as of March 31, 2020
Millions of yen
Due after
Due after
five years
one year
Due after
through ten
through fiveDue within
ten years
years
years
one year(1) Cash(2) Call loan¥

(3) Trade loans receivable(4) Receivables under resaleagreements(5) Collateral money for securities
borrowed(6) Short-term investments andinvestments in securities
Held-to-maturity securities(Government bonds)
Other securities withmaturities
Bond securities
Government bonds
Corporate bonds
Other
Total

¥

1,299,936¥(2) Call loan$

(3) Trade loans receivable(4) Receivables under resaleagreements(5) Collateral money for securities
borrowed(6) Short-term investments andinvestments in securities
Held-to-maturity securities(Government bonds)
Other securities withmaturities
Bond securities
Government bonds
Corporate bonds
Other
Total

－

¥

－

－

－

－

21,189－－2,747,397－－－

3,857,827

20,000

－

－

－

－

－

1,500

48,00038,67043,600356,000

20,200160,501

71,017－－

21,463

12,520－8,714,850¥

11,944,648

261,823¥

127,137¥

Thousands of U.S. dollars
Due after
Due after
five years
one yearthrough ten
through five
years
years
$

－

$

－

357,500

Due after
ten years$－

689,148－－－

6,124,139

194,698－－

25,244,850

－

－

－

35,448,194

183,773

－

－

－

－

－

13,783441,055

355,325400,625

3,271,157

185,610

1,474,786

652,550－

197,216－$¥

666,490

Due within
one year(1) Cash－

75,00080,077,644$

62

2,405,798$

115,042－

1,168,217$ 3,284,940

<4> The annual maturities of the long-term borrowings, lease liabilities and other interest bearing liabilities
as of March 31, 2020

Millions of yen

Due within
one yearCall money
Short-termborrowings
Commercial paper
Payables under
repurchaseagreements
Collateral money
received for
securities lentLong-term
borrowings
Total

－

100,473
366,000

－
－

－
－

－
－

－
－

－
－

3,923,415

－

－

－

－

－

3,104,029

－

－

－

－

－

1,000
¥ 8,671,713 ¥－－$ 10,813,158¥

923,211
3,363,043

－

－
－

¥

－

－
－

¥

¥

Thousands of U.S. dollars
Due after
Due after
three
two years
years
throughthroughthreefour years
years

Due after
one yearthrough
two years$－¥

Due after
five years¥ 1,176,796 ¥Due within
one yearCall money
Short-termborrowings
Commercial paper
Payables under
repurchaseagreements
Collateral money
received for
securities lentLong-term
borrowings
Total

¥

Due after
four years
throughfive years

Due after
three
years
throughfour years

Due after
two years
through
three
years

Due after
one yearthrough
two years

$

－

$

－

－

－
－

¥

¥

Due after
four years
throughfive years
$

－

－

3,000
3,000

Due after
five years
$

－

－
－

－
－

－
－

－
－

－
－

－

－

－

－

－

28,521,814

－

－

－

－

－

9,189
79,681,274
$

－
－

－
－

－
－

－
－

27,566
27,56636,050,859

$

$

63

$

$

$

(17) Derivative Financial Instruments
1. Derivative transactions to which hedge accounting are not applied as of March 31, 2020 and 2019 aresummarized as follows:
Exchange rate derivatives

Nature oftransaction
Off-market

Forward exchangetransaction

contract:
Sell:
U.S. dollars
Euro

Millions of yen
2020

Contract ornotional
amounts

Fair value¥¥

22,021190

Buy:
U.S. dollars

Gains orlosses on
valuation(47) ¥

(47)

(0)

(0)

10,74774

2019

Contract ornotional
amounts¥－

74

Fair value¥－

Gains ornotional

losses ontransaction
Off-market

Forward exchangetransaction

contract:

amounts

Fair value

－

5,536

2

2

valuation

Sell:
U.S. dollars$

202,343(432) $

(432)

1,746

(0)

(0)

98,750

680

680

Euro

$

Buy:
U.S. dollars

The fair value is estimated based on quotes from counterparties.
2.

Derivative transactions to which hedge accounting are applied as of March 31, 2020 and 2019 aresummarized as follows:(a) Exchange rate derivatives
Millions of yen
Hedge
accounting
method*1

Nature of transaction

Hedged items

2019
Contract ornotional
amounts
Fair value

Investments
in securities¥

Forward exchange
contract:
Sell:
Euro

5,690 ¥

*1 Deferred hedge accounting is applied.
The fair value is estimated based on quotes from counterparties.

64

93

－

－

2020
Contract or¥－Thousands of U.S. dollars

Nature ofGains orlosses on
valuation

(b)Interest rate derivatives
Millions of yen
2020

Nature of transaction

amounts

Hedged items

amounts

Fair value

Fair value

Interest rate swaps:
Variable rate received
for fixed rate*2

notional

notional

accounting*1

Contract orContract or

Hedge
method2019

Investments
in securities

Interest rate swaps:¥

627,178 ¥ (24,836)¥

294,417 ¥(19,102)

Variable rate received
for fixed rate

Trade loans

Variable rate paid forLong-term

variable rateborrowings

17,508*3

35,262

*3

3,000

*3

3,000

*3

Thousands of U.S. dollars
Hedge
accounting
methodNature of transaction*1

Interest rate swaps:*2

Variable rate received
for fixed rate
Interest rate swaps:
Variable rate received
for fixed rate
Variable rate paid forvariable rate

Hedged items

2020
Contract ornotional
amounts
Fair value

Investments
in securities$ 5,762,915 $ (228,209)

Trade loans
Long-term
borrowings

160,875*3

27,566*3*1 Deferred hedge accounting is applied.
*2 The difference in amounts to be paid or received on interest rate swaps is recognized over the life of theagreements as an adjustment to interest expense.
*3 For the assets and liabilities for which interest rate swap contracts are used to hedge the interest rate
fluctuations, fair value of derivative financial instrument is included in fair value of the respective assets
and liabilities as hedged items.
The fair value is estimated based on quotes from counterparties or calculated by using discounted
present value.

65

(c)

Bond derivatives

Millions of yen
2020

*1

notional

notional

accounting
method2019
Contract orContract or

Hedge
Nature of transaction

amounts

Hedged items
Investments
in securities¥

3,477 ¥

(27)

Thousands of U.S. dollars
2020
Contract or

Hedge

notional

accounting*1

Nature of transaction

amounts

Hedged items

Fair value

Bond futures:
Sell

Investments
in securities$

31,949 $(248)*1 Deferred hedge accounting is applied.
The fair value is calculated by quoted market price.
(d)Stock derivatives
Millions of yen
2020

Hedge

Contract or

accounting

notional

method*1

Nature of transaction

Hedged items

amounts

Fair value

Stock index futures:
Sell

Investments
in securities¥

18,629 ¥(2,778)

Thousands of U.S. dollars
2020
Hedge

Contract or

accounting

notional

method*1

Fair value

Bond futures:
Sellmethodamounts

Fair value

Nature of transaction

Hedged items

amounts

Fair value

Stock index futures:
Sell

Investments
in securities*1 Deferred hedge accounting is applied.
The fair value is calculated by quoted market price.

66$

171,175 $(25,526)¥

1,896 ¥

(19)

Millions of yen
2019
Hedge

Contract or

accounting

notional

method*2

Nature of transaction

Hedged items

Total return swap

Investments
in securities

amounts¥

Fair value

121 ¥

2

*2 Deferred hedge accounting is applied.
The fair value is estimated based on quotes from counterparties.

(18) Commitments and Contingencies
As of March 31, 2020 and 2019, undrawn amount of general loan for securities companies and customers,
overdraft loan and loan commitment line are as follows:
Thousands ofMillions of yen
2020
Total credit line
Drawn amount¥

822,108¥

788,498¥

827,808¥

795,448

33,610

Undrawn amount

U.S. dollars
2019

2020
$

7,554,057$

7,245,227

32,360308,830

Since some of these contracts expire without the rights exercised, the undrawn amount itself does notnecessarily affect future cash flows.
(19) Segment Information
The reported segments of the Company are the business units for which the Company is able to obtainrespective financial information separately in order for the Board of Directors to conduct periodic
investigation to determine distribution of management resources and evaluate their business results.
“Securities finance business” conducted by the Company, “Trust banking business” conducted by JSF
Trust and Banking Co., Ltd. and “Real estate leasing business” conducted by Nihon Building Co., Ltd. are theCompany’s reported segments. JSF Trust and Banking Co., Ltd. and Nihon Building Co., Ltd. areconsolidated subsidiaries of the Company.

“Securities finance business” is engaged in providing loan services, which are loans for margintransaction, bond financing and general loans, bond lending and stock lending. “Trust banking business” isengaged in providing trust services such as securities trust and banking services such as deposit or loan.
“Real estate leasing business” is mainly engaged in providing services for leasing and managing real estate
owned by JSF Group.
Segment revenues, income, assets, liabilities and others are calculated by accounting methods similar to
those employed to prepare the accompanying consolidated financial statements. Segment income iscalculated based on “Keijo-soneki.” Under accounting principles generally accepted in Japan, an ordinary
income or loss, “Keijo-soneki” should be disclosed in the income statement.

The ordinary income or loss isan income or loss figure with certain adjustments, which are categorized as extraordinary items inaccordance with accounting principles generally accepted in Japan, made to income or loss before income
taxes and non-controlling interests.

Therefore, ordinary income or loss is operating income or loss plus

non-operating income from interest and dividend income and other items less non-operating expenses, suchas interest expenses.

Intersegment revenue and transfer are based on arms-length transactions.

67

The reported segment information for the Company and its consolidated subsidiaries for the years ended
March 31, 2020 and 2019 was summarized as follows:
Millions of yen
2020
Securities

Real estate

finance

Trust banking

leasing

Total

Revenues:
Revenues to third parties¥

25,370

¥

2,833

¥

899

¥

29,102

Intersegment revenues andtransfers

14

113

384

511

Total

¥

25,384

¥

2,946

¥

1,283

¥

29,613

Segment income

¥

3,433

¥

621

¥

728

¥

4,782

Segment assets¥

8,836,290¥

1,065,020¥

10,327¥

9,911,637

¥

1,203

¥

87

¥

109

¥

1,399

Others:Depreciation andamortization
Interest income

227

－

15

242

Income taxes

943

124

233

1,300

Thousands of U.S. dollars
2020
Securities

Real estate

finance

Trust banking

leasing

Total

Revenues:
Revenues to third parties$

233,116$

26,031

$

8,261

$

267,408

Intersegment revenues andtransfers

129

1,038

3,528

4,695

Total

$

233,245$

27,069$11,789$272,103

Segment income$

31,545

$

5,706

$

6,689

$

43,940

Segment assets$

81,193,513$

9,786,088$

94,891$

91,074,492$

11,054

$

799

$

1,002

$

12,855

Others:Depreciation andamortization
Interest income

2,086

－

138

2,224

Income taxes

8,665

1,139

2,141

11,94568

Millions of yen
2019
Securities

Real estate

finance

Trust banking

leasing

Total

Revenues:
Revenues to third parties¥

20,970

¥

2,467

¥

885

¥

24,322

Intersegment revenues andtransfers

1

72

390

463

Total

¥

20,971

¥

2,539

¥

1,275

¥

24,785

Segment income

¥

3,655

¥

614

¥

673

¥

4,942

Segment assets¥

4,379,472¥

933,757¥

10,064¥

5,323,293

¥

1,183

¥

78

¥

119

¥

1,380

Others:Depreciation andamortization
Interest income

229

－

12

241

Income taxes

937

75

228

1,240

Reconciliation between total segment revenues in the table above and revenues in the accompanying
consolidated statement of income for the years ended March 31, 2020 and 2019 are as follows:
Thousands ofMillions of yen
2020
Total segment revenues¥

Intersegment revenues

29,613

U.S. dollars
2019

¥

(511)

24,785

2020
$

(463)

272,103(4,695)

Revenues in the accompanying consolidated
statement of income¥

29,102¥

24,322$

267,408

Reconciliation between total segment income in the table above and ordinary income for the years ended
March 31, 2020 and 2019 are as follows:
Thousands ofMillions of yen
2020
Total segment income

¥

4,782

U.S. dollars
2019

¥

4,942

2020
$

43,940Intersegment income

(194)

(143)

(1,783)Equity in earnings of affiliates

306

248

2,812

Ordinary income

¥

4,894

69

¥

5,047

$

44,969

Reconciliation between total segment assets in the table above and assets in the consolidated
accompanying balance sheet as of March 31, 2020 and 2019 are as follows:
Thousands ofMillions of yen
2020
Total segment assets¥

U.S. dollars
2019

9,911,637¥

5,323,293

2020$

91,074,492

Intersegment accounts(74,344)(8,822)(683,121)Intersegment investments(26,269)(26,269)(241,376)

3,471

3,170

31,894

Other
Assets in the accompanying consolidatedbalance sheet¥

9,814,495¥

5,291,372$

90,181,889

Reconciliation between others in the table above and amounts in the consolidated financial statements asof and for the years ended March 31, 2020 and 2019 are as follows:
Millions of yen
Amounts intheconsolidated
financialstatements

Adjustments

Segment total
March 31, 2020
Depreciation and amortization

¥

1,399

¥

0

¥

1,399

Interest income

242

(15)

227

Income taxes

1,300

2

1,302

March 31, 2019
Depreciation and amortization

¥

1,380

¥

0

¥

1,380

Interest income

241

(12)

229

Income taxes

1,240

0

1,240

Thousands of U.S. dollars
Amounts intheconsolidated
financialstatements

Adjustments

Segment total
March 31, 2020
Depreciation and amortization$

12,855$0$

12,855Interest income

2,224

(138)

2,086

Income taxes

11,945

19

11,96470

Related Information(a)

Information by services

Sales by services for the years ended March 31, 2020 and 2019 are as follows:
Thousands ofMillions of yen
2020

Loans for margin transaction¥

12,518

U.S. dollars
2019

¥

9,661

2020
$

115,024

Bond lending

6,294

4,963

57,833Other

10,2909,698

94,551¥(b)

29,102¥

24,322$

267,408

Geographic information
Because revenues from customers inside Japan are over 90% of revenues in the consolidated statement ofincome and no property, plant and equipment located outside Japan, the geographic information is notdisclosed for the years ended March 31, 2020 and 2019.
(c) Information by major customers

Because no particular third party whose revenues are over 10% of revenues in the consolidated
statement of income exists, the information by major customers is not disclosed for the years ended March 31,
2020 and 2019.

Information of impairment loss on fixed assets by reported segments

The information is not applicable for the years ended March 31, 2020 and 2019.

Goodwill by reported segments

The information is not applicable for the years ended March 31, 2020 and 2019.

Negative goodwill incurred by reported segments

The information is not applicable for the years ended March 31, 2020 and 2019.

(20) Transactions of Delivering the Company’s Own Stock to Directors through Trust
The Company has introduced a performance-based share remuneration plan called “Board Benefit Trust(BBT)” in order to further clarify the linkage between remuneration for directors (other than outside
directors) and executive officers (collectively “directors”) and the performance and share value of theCompany, thereby enhancing their awareness of the need to contribute to the efforts to archive improved
business performance and greater enterprise value in the medium to long term.
1. Outline of the plan
The Plan is a performance-based share remuneration plan under which the Company’s shares will beacquired through a trust using money contributed by the Company and the Company’s shares and the money
equivalent to the market value of the shares will be delivered by the Trust to directors pursuant to the “Rules
for Delivery of Shares to Directors” to be established by the board of directors.
In principle, the Shares, etc. will be delivered when he/she resigns as director.
2. Stock remaining in the trust
In accordance with the “Practical Solution on Transactions of delivering the Company’s Own Stock to
Employees etc. through Trust (ASBJ Practical Issue Task Force (PITF) No. 30, March 26, 2015)”, theCompany recorded assets and liabilities of the trust on the Company’s balance sheet as assets and liabilitiesof the Company.

The Company recorded own stocks in the trust as treasury stocks under net assets at bookvalue in the trust excluding associated costs. The book value of the own stocks was ¥258 million ($2,371

71

thousand) and the number of the stocks was 592 thousand shares as of March 31, 2020, and ¥282 million andthe number of the stocks was 645 thousand shares as of March 31, 2019.

72

INDEPENDENT AUDITORS' REPORT

73

74

OUTLINE OF JSF GROUP

Japan Securities Finance Co., Ltd.

Subsidiaries

Aﬃliates

JSF Trust and Banking Co., Ltd.

Japan Information Processing
Service Co., Ltd.

Nihon Building Co., Ltd.

JSF Information Technology Co., Ltd.

Name

(millions of yen)

Ratio ofshareholding

14,000100

Trust service, Banking services

100

100

Real estate ownership and leasing
Real estate trading and brokerage

2,460

20.00

Information processing services
Software development and sales

100

20.75

Information processing services
Software development and sales

CapitalBusiness overview

Subsidiaries
JSF Trust and Banking Co., Ltd.
Nihon Building Co., Ltd.
Affiliates
Japan Information Processing Service Co., Ltd.
JSF Information Technology Co., Ltd.

75

CORPORATE DATA

(as of March 31, 2020)

Establishment

President

July 1927

Shigeki Kushida

Head office

Capital1-2-10 Nihonbashi-Kayabacho, Chuo-ku, Tokyo￥10 billion

103-0025
Tel: +81-3-3666-3184

Number of employees

Fax: +81-3-3666-1403

245

Share Information
Shares outstanding

Stock exchange listing

100,000,000 shares（as of March 31, 2020）

Tokyo Stock Exchange, 1st section (Code:8511)

Number of shareholders

Transfer agent

12,389（as of March 31, 2020）

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

Major shareholders

Number ofshares held(Thousands)

Ratio ofshareholding

Japan Trustee Services Bank, Ltd. (Trustaccount)

5,555

6.01

Japan Trustee Services Bank, Ltd. (Trustaccount 9)

4,761

5.15

The Master Trust Bank of Japan, Ltd. (Trustaccount)

4,725

5.11

Shihon-Shijo Shinko Foundation

4,654

5.04

Mizuho Bank, Ltd.

3,536

3.83

Japan Trustee Services Bank, Ltd. (Trustaccount 4)

3,013

3.26

State Street London Care Of State Street BankAnd Trust, BOSTON SSBTC A/C UK LONDONBRANCH CLIENTS-UNITED KINGDOM

2,442

2.64

Northern Trust Co.(AVFC) RE NVl01

2,170

2.35

State Street Bank And Trust Company
505227

1,893

2.05

State Street Bank West Client-Treaty
505234

1,880

2.03

76

Composition of shareholders(by number of shares)Securities
Companies
6.4%

Other JapaneseCompanies
7.6%

Individuals
20.9%

Financial
Institutions
33.1%
ForeignInvestors
25.3%

CORPORATE DATA

Executives(As of June 23, 2020)

Directors
Director

Chairperson
Director

Executive Officers
Naotaka Obata *Chairperson

Shoko Sugino *Officer & President

Representative Executive

Shuya Iimura *Vice President

Shigeki Kushida **Senior Managing Executive
Officer

Hiroshi Nasuno

Eizo Kobayashi
Shigeki Kushida
Shunichiro Higuchi
Kenji Fukushima
Kazuo Maeda

Yutaka Okada

Managing Executive Officer(* Outside Director)

Yutaka Okada(** Serves concurrently as Executive Offer)

Corporate Officers
Senior Corporate Officer

Yasuhiro Hirama

Corporate Officer

Morikuni Shimoyamada
Shincihi Sugiyama
Yutaka Osonoi
Masaru Sekiguchi

Rating Information
Long-term rating

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

A

A-1

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

AA －

a-1+

Japan Credit Rating Agency (JCR)

AA －

J-1+

77

ORGANIZATION

General Meeting of Shareholders

Board of Directors
Nomination Committee

Audit Committee

Remuneration Committee

Representative ExecutiveOﬃcer & PresidentManagement Committee
Executive Oﬃcers in Charge

Compliance Committee
Audit Department
Compliance Department

ALM Committee
Risk Management Department

Risk Management Committee

Human Resources Department

System Committee

Corporate Planning Department
Business Development Department
Treasury Department
Margin Loan Department
Institutional Sales Department
Retail Business Department
Settlement & Custody Department
Information SystemsPlanning Department
Osaka Branch78