ANNUAL REPORT 2004

JAPAN SECURITIES FINANCE CO., LTD.

PROFILE

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

CONTENTS
Financial Highlights

1

A Message from the Management

2

Business Results

4

Financial Section

8

Independent Auditors’ Report

21

Outline of the Corporate Group22

Corporate Data

23

FINANCIAL HIGHLIGHTS
Japan Securities Finance Co., Ltd. and Consolidated Subsidiaries

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

2004

2003

2004

(April 1, 2003 –March 31, 2004)(April 1, 2002 –March 31, 2003)(April 1, 2003 –March 31, 2004)

30,897¥ 28,661$ 292,336

4,002

1,746

37,865

114,201

118,362

1,080,528

Consolidated financial results
Operating revenues¥

Net income
Shareholders’ equity (period end)

Yen

U.S. dollars (note)

2004

2003

2004

Amounts per share
Net income

¥

38.76

Shareholders’ equity

1,151.52¥

15.86$ 0.37

1,169.05

10.90

Note: U.S. dollar amounts in this annual report are translated from Japanese Yen, for convenience only, at the rate of ¥105.69=US$1,the approximate exchange
rate at March 31,2004.

Operating revenues

Net income(Millions of yen)

(Millions of yen)

40,0005,000

31,56831,686
28,661

30,00030,897

4,002

4,000

3,326

25,5843,000

2,837 2,989

20,000

1,746

2,000
10,000

1,000

0

0

00

01

02

03

04

00

Net income per share

01

03

04

Shareholders’ equity per share

(Yen)

(Yen)
1,600

50

38.76

40
30

02

1,169 1,151

1,200

986

28.12
24.17

1,045 1,089

26.75
800

20

15.86
400

10

0

0

00

01

02

03

04

00

1

01

02

03

04

A MESSAGE FROM THE MANAGEMENT

Kunio Kojima
ChairmanMinoru Masubuchi
President

It is my sincere hope that the Annual Report 2004 for the fiscal year ended March 31, 2004 will be of use toshareholders, investors and other supporters of Japan Securities Finance Company.
billion yen at the beginning of the fiscal year and continued
to rise in line with the bullish stock market. It hasremained at a level of around 2 trillion yen since October
2003, rising to 2.1 trillion yen at the end of the fiscal year.
The outstanding balance of standardized margin selling, on
the other hand, started at approximately 500 billion yen at
the beginning of the fiscal year, stayed at between 600
billion and 800 billion yen, and then ended the fiscal year
at the level of 700 billion yen.

BUSINESS REVIEW
General Market Conditions
In the stock market, the Tokyo Stock Price Index (TOPIX),
which started the fiscal year at 788, began to rise from theend of May 2003 and recovered 1,000 in August. This is
primarily because the capital from overseas investors flew
into the Japanese stock market after the anxiety about theJapanese financial system diminished and the US stock
market recovered. Subsequently, fluctuations in the US
stock market and in the foreign exchange market led totemporary rises and falls in TOPIX. However, the TOPIX
progressed well with rising expectations of economic
recovery resulting from improvements in various economic
index after January 2004 and the optimistic assessments ofcyclical issues. It ended the fiscal year at 1,179, the highest
figure since the previous year.
Stock trading activity increased, as evidenced by the factthat the average daily trading volume on the first section of
the Tokyo Stock Exchange during the fiscal year increased
by 536 million shares from the previous fiscal year to a
total of 1,388 million shares. The average daily trading
value also increased by 416.2 billion yen from the previous
fiscal year, to reach 1,145.6 billion yen.
Meanwhile, the outstanding balance of standardized
margin buying in the Tokyo market figured about 800

Business results
The average balance of loans for margin transactions in thefiscal year increased by 241.2 billion yen from the previous
fiscal year to 650.7 billion yen, due primarily to a recoveryof the outstanding balance of the standardized margin
buying. In trust banking business, the average balance ofloans also increased dramatically by 808.9 billion yen fromthe previous fiscal year, reaching 868.8 billion yen. This isdue to the aggressive participation in the bidding for loansby the Deposit Insurance Corporation of Japan. Total loans
thus increased by approximately 180%, to 1,574.1 billion
yen. In securities lending business, although the revenues
from general stock lending was satisfactory, the revenues
from bond trading fell, due to weak demands for raisingand investing funds through bond borrowing and lending2

A M ESSAGE FROM THE M ANAGEMENT

transaction, and the trading volume for the fiscal year
decreased from the previous fiscal year.
Performance during the fiscal year rose in terms of theoperating revenues, due to increased interest on loans for
margin transactions as well as to the inclusion in theaccounts of revenues from coupon income and profits onsale of government bonds .The net income rose byapproximately 130%, due primarily to the removal fromthe accounts of devaluation losses of investment securities,
which had been booked in the previous fiscal year.

In the securities financing business, following the
introduction of standardized margin transactions in the
JASDAQ market in April 2004, JSF has been authorized
as a securities financing company to conduct margintransactions in the JASDAQ. We intend to provide
securities financing services of high quality, just as we havein standardized margin transactions and in loans for margintransactions, with the aim of further revitalizing the market.
JSF Trust and Banking provides services by using to its
full capacity as a trust bank in the securities industry,including segregated customers’ money trusts andsecurities trusts. The company is endeavoring to expand
into new areas of business, with the aim of further
strengthening its profit base.
In the information processing services business, we will
work to increase orders by concentrating management
resources into areas where it can demonstrate superiority,
including the systems development in the securities andfinance segments, and will focus on outsourcing services.
JSF repurchased 2,106 thousand common stock andcancelled them during the fiscal year ended March 31,
2004. The Articles of Incorporation have been revised at
the annual general meeting of shareholders in June toauthorize the repurchase of common stock to theresolution of the Board meeting. We will repurchasecommon stock in view of stock price and trend ofmajor shareholders.
As a specialized financial institution in the securities
market, the JSF Group will respond in timely andappropriate manner to the various needs of the securities
and financial industries in co-operation with groupcompanies.

OUTLOOK
Earnings Outlook
As overseas economy maintains a relatively high rate of
growth, and the export and investment in plant andequipment continue their favorable trends, we expect thatthe positive economic cycle will be gradually strengthened
as the improvements in company earnings influence
employment opportunity and individual income. In thesecircumstances, we anticipate that the outstanding balanceof standardized margin buying on the Tokyo market will
maintain the current higher level and that margintransactions in the JASDAQ market, which started in April
2004, may encourage an increase in loans for margintransactions. The securities lending business is expected toachieve the trading volume similar to the previous term.
One of the consolidated subsidiaries, JSF Trust andBanking, which has recorded favorable performances
during the fiscal year ended March 31 2004, is expected toachieve good results.
Current challenges (strategy)
The reform of the securities clearing and settlement system
is under way, with on-going efforts to revise the legislation
relating to dematerialization of stocks or to investigate thepossibilities for shortening of settlement cycle (T+1).
Under this background, the redesign of online system,with which JSF has been working since 2001, took shapein the form of a new online system, JSFNET, which waslaunched early in May 2004. This new system is designed
to be convenient to customers and to make it easier to
respond flexibly to the anticipated reform of clearing andsettlement system. With JSFNET, as a cornerstone of ourbusiness, we will be able to respond more promptly andeffectively to various needs which may arise in the financial
and securities markets.

Kunio Kojima
ChairmanMinoru Masubuchi
President

3

BUSINESS RESULTS

The consolidated operating revenues for the fiscal year ended March 31, 2004 increased by 7.8% from theprevious fiscal year to 30,897 million yen, due to the increased interest on loans and the coupon income
from government bonds, although the fees on lending securities in the margin loan business has declined.
On the other hand, as the number of overlent issues in margin transactions decreased and the fees onborrowing securities fell in concert with the fees on lending securities which constitutes operating revenues,
the consolidated operating expenses increased by 4.7% from the previous fiscal year to 16,483 million yen,
due to the inclusion of losses on sale of government bonds.
As a result, the consolidated operating income increased to 5,995 million yen (up 24.7% from the previous
fiscal year). Regarding other revenues, with the inclusion of equity in earning of affiliates of 152 million yen
and of 341 million yen from sales of investment securities, the consolidated net income, after the deductionof corporation and other taxes, was 4,002 million yen (up 129.2% from the previous fiscal year).

Breakdown of JSF group operating revenues

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

4

2004
April 1, 2003 – March 31, 2004
Amount(¥ million)

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

27,52014,146
4,061

25,296
16,681
2,535

1,239
8,455
959
16
943
1,517
725
792
622

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

170
4,680
229
963
5,255
3,377
3,148
155
74
30,897

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

B USINESS R ESULTS

SECURITIES FINANCING BUSINESSThe operating revenues from securities finance business increased to 27,520
million yen (up 8.8% from the previous term).

Loans for Margin Transactions
In the fiscal year, average balance of loans forThis refers to a lending of funds andmargin transactions increased dramatically bystock certificates needed to settle
241.2 billion yen from the previous year tostandardized margin transactions
650.7 billion yen, due to the recovery of thethrough the clearing facilities of theoutstanding balance of standardized margin
Tokyo, Sapporo and Fukuoka Stockbuying. This resulted in increase of the interest
Exchanges or JASDAQ.
on loans. On the other hand, the fees on
lending securities fell dramatically, as the average balance of stock loans for margintransactions fell by 36 billion yen from the previous fiscal year to 503.7 billion yen and thenumber of overlent issues where the stock loan balance exceeds the fund loan balance
decreased. As a result, the operating revenues from loans for margin transactions were
14,146 million yen (down 15.2% from the previous fiscal year).

Average balance of loans

Average balance of stock loans(Billions of yen)
1,200(Billions of yen)
1,200

1,098.2

1,000

1,000

790.8

800

800

711.2

650.7
600

539.7

600

448.9 409.4

400

447.9

512.8

503.7

400

200

200

0

0

00

01

02

03

04

00

01

02

03

04

Bond Financing and General Loans
Bond Financing refers to a lending of funds required by securities companies forunderwriting and trading, et cetera, and of funds needed by other investors, by accepting
bond as collateral, with the aim of contributing to smoother circulation in the bond market.
General Loans refers to a lending of the working funds required by securities companies
for advances to customers and delivery funds in stock trading, et cetera, and of funds
required by other investors, with securities as collateral.

5B USINESS R ESULTS

In bond financing and general loans business, demands for loans from securities companies
and individual investors did not increase. As a result, the average balances of bondfinancing and of general loans for the fiscal year decreased to 3.7 billion yen and 42.5 billion
yen, respectively, and the operating revenues from both loans amounted to 959 million yen(down 22.6% from the previous fiscal year).
Average balances ofbond financing

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

100

100

80

80

81.2
72.0

61.6
60

55.8

60

52.8

40

45.7

42.5

03

04

40

20

20

7.1

7.9

02

03

3.7

0

0

00

01

04

00

01

02

Securities Lending
General stock lending refers to a lending of stock certificates required to settle trades, etcetera, mainly to securities companies.
In bond borrowing and lending transactions, JSF receives applications from both lenders
and borrowers, and lends and borrows bonds on the basis of a loan agreement. JSF serves asa broker between two parties in both transactions. In gensaki transactions, JSF buys and sells
bonds with repurchase agreements.

Trading volume
general stock lending

Trading volume
bond lending(Billions of yen)
2,000(Billions of yen)
100,000

1,846.6

88,410.5

1,600

80,00063,947.5

1,169.9

1,200

60,00046,975.4

821.9
800

680.2

41,052.7

40,000615.7

33,059.0

20,000

400
0

0

00

01

02

03

04

00

6

01

02

03

04

B USINESS R ESULTS

In general stock lending, the use of offer-bid stock lending brokerage transactions (matchingof stock borrowing and lending application on electronic screen) grew satisfactorily. In bondtrading, in spite of weak demands for raising and investing funds, the revenues from fees on
securities lending increased, thanks to the increase of trading volume with long term. As aresult, the operating revenues from securities lending amounted to 1,517 million yen (up7.7% from the previous year).

Trust Banking
The aggressive participation in the bidding for
JSF Trust and Banking Co., Ltd., wasloans by the Deposit Insurance Corporation of
established as a wholly owned
Japan dramatically increased loans by 808.9
subsidiary of JSF in November 1998.
billion yen from the previous fiscal year to
In addition to securities trusts, JSF
868.8 billion yen, and increased the interest on
Trust and Banking provides high quality
loans. The operating revenues also increased toservices of segregated customers’ money
4,680 million yen (up 49.9% from the previous
trusts as required by the Securities andfiscal year) because of increased coupon income Exchange Law.
from government bonds. In order to increase
shareholders equity and strengthen its financial base with a view to expanding business infuture, JSF Trust and Banking increased capital by 10 billion yen in November 2003 (ofwhich 5 billion yen was put into capital), all of which was underwrited by JSF.

Other Business
Other revenues amounted to 5,255 million yen, up 181.9% from the previous fiscal year,
primarily from the coupon income and profit on sale of government bonds.

INFORMATION PROCESSING BUSINESS
Orders for system operations and leasing services decreased. However, as the data entry
services achieved good results, with the acquisition of new major customers, primarily due totimely and appropriate responses to customers’ needs such as acquisition of the Privacy
Mark, the data processing business succeeded in achieving operating revenues of 3,377
million yen (up 0.3% from previous fiscal year).

7

FINANCIAL SECTION
Consolidated Balance Sheets
Japan Securities Finance Co., Ltd. and Consolidated Subsidiaries
As of March 31, 2004 and 2003
Thousands of
U.S. dollars (note 2)

Millions of yen

Assets

2004

2003

2004

Current assets:
Cash (note 3)¥

35,369¥23,699$334,649

Call loans

333,000

300,000

3,150,724

Short-term investments (notes 4 and 15)

857,590997,259

8,114,202

Short-term loans receivable (note 15)

2,480,333

645,762

23,468,001

Securities lent

639,825

493,340

6,053,789

Securities in custody (note 15)374,761

83,171

3,545,851

Securities in deposit (note 15)757,591

108,413

7,168,048

782

448

7,399

1,839,527

782,894

17,404,929

26,171

21,626247,620

(906)

(606)

(8,572)

7,344,043

3,456,006

69,486,640

7,680

7,227

72,6662

5

19

Tools, furniture and fixtures

2,433

2,746

23,020

Land

3,130

3,130

29,615

57

34

539

13,302

13,142

125,859(6,267)(6,236)(59,296)

7,035

6,906

66,563

4,116

4,193

38,9442,701,594

563,362

25,561,491

4,704

179

44,5079

985

Other investments and other assets

749

794

7,087

Allowance for doubtful receivables

(87)

(110)

(823)

2,706,969

564,234

25,612,347¥10,062,163¥4,031,339$95,204,494

Deferred tax assets (note 9)
Collateral money for securities borrowed (note 15)
Other current assets (note 15)
Allowance for doubtful receivables
Total current assets
Property, plant and equipment:
Buildings and structures
Machinery, equipment and vehicles

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

Total investments and other assets
Total assets
See accompanying notes to consolidated financial statements.

8

F INANCIAL S ECTION

Thousands of
U.S. dollars (note 2)

Millions of yen

Liabilities and Stockholders’ Equity

2004

2003

2004

Call money (notes 7 and 15)¥ 1,428,400¥ 918,500$13,514,997

Bills sold (notes 7 and 15)

2,461,600

297,500

23,290,756

Short-term borrowings (note 7)

1,223,820

674,820

11,579,336

Commercial paper (note 7)

210,000

85,1001,986,943

Payables under repurchase agreements (notes 7 and 15)

82,265

246,637

778,361

Accrued income taxes (note 9)

2,283

1,080

21,601

Collateral money received for securities lent (note 15)

2,009,415

893,461

19,012,347

Collateral securities deposited

1,100,666

332,139

10,414,098

Securities borrowed (note 15)

671,511352,785

6,353,590

Other current liabilities (note 7)

752,974

105,143

7,124,364

Total current liabilities

9,942,934

3,907,165

94,076,393

135

1,107

1,277

4,214

4,025

39,871

679

680

6,425

5,028

5,812

47,573

9,947,962

3,912,977

94,123,966

10,00010,00094,616

5,182

5,182

49,030101,927

99,494

964,396

(13)

(13)

(123)

(2,698)

3,895(25,527)

(197)

(196)

(1,864)

114,201

118,362

1,080,528¥10,062,163¥4,031,339$95,204,494

Current liabilities:

Non-current liabilities:
Deferred tax liabilities (note 9)
Liabilities for retirement and severance benefits (note 8)
Other non-current liabilities
Total non-current liabilities
Total liabilities
Stockholders’ equity:
Common stock (note 10):
Authorized 152,195,000 shares;
issued and outstanding 99,704,000 sharesin 2004 and 101,810,000 in 2003
Additional paid-in capital (note 10)
Retained earnings (note 11)
Loss on revaluation of land (note 6)
Net unrealized gain (loss) on other securities (note 4)
Treasury stock
Total stockholders’ equity
Commitments and contingencies (note 16)
Total liabilities and stockholders’ equity

9F INANCIAL S ECTION

Consolidated Statements of Income
Japan Securities Finance Co., Ltd. and Consolidated Subsidiaries for the years ended March 31, 2004 and 2003
Thousands of
U.S. dollars (note 2)

Millions of yen

Operating revenues
Operating expenses
Operating profit
General and administrative expenses (note 12)
Operating income
Other income (deductions):
Interest income
Dividend income
Interest expenses
Equity in earnings (losses) of affiliates
Reversal of allowance for doubtful receivables
Gain (loss) on sale of investments in securities (note 4)
Loss on devaluation of investments in securities (note 4)
Other, net
Net income before income taxes
Income taxes (note 9):
Current
Deferred

2004

2003

2004

¥ 30,897¥28,661$292,336

16,483
14,414
8,419
5,995

15,747
12,9148,108
4,806

155,956
136,380
79,65856,722

194
99
(5)
152
–
336
–
70
846
6,841

209
60
(8)
(460)
281
(336)

93
(1,344)
3,462

1,836
937
(47)
1,438
–
3,179
–
662
8,005
64,727

1,787
(71)
1,716
¥ 1,746

30,892(4,030)26,862$ 37,865(1,183)

3,265
(426)
2,839
¥ 4,002

Net income

Yen

Per share of common stock:
Net income—basic (note 13)
Cash dividends applicable to the year (note 11)

U.S. dollars (note 2)

2004

2003

¥0038.76
7.00¥ 15.86
7.00

2004

$

0.37
0.07

See accompanying notes to consolidated financial statements.

Consolidated Statements of Stockholders’ Equity
Japan Securities Finance Co., Ltd. and Consolidated Subsidiaries for the years ended March 31, 2004 and 2003
Thousands of
U.S. dollars (note 2)

Millions of yen

Common stock (note 10):
Balance at beginning of year
Balance at end of year
Additional paid-in capital (note 10):
Balance at beginning of year
Balance at end of year
Retained earnings (note 11):
Balance at beginning of year
Increase resulting from the merger of an affiliate and its subsidiary
Cash dividends
Bonuses to directors and corporate auditors
Net income
Retirement of treasury stock
Balance at end of year
Loss on revaluation of land at end of year
Net unrealized gain (loss) on other securities at end of year (note 4)
Treasury stock at end of year
Total stockholders’ equity at end of year
See accompanying notes to consolidated financial statements.

10

2004

2003

2004

¥ 10,000
10,000¥ 10,000
10,000

5,182
5,182

5,182
5,182

49,03049,03099,494
309
(713)
(77)
4,002
(1,088)
101,927(13)(2,698)(197)¥114,201

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

941,376
2,924(6,746)(729)
37,865(10,294)
964,396(123)(25,527)(1,864)$1,080,528$

94,616
94,616

F INANCIAL S ECTION

Consolidated Statements of Cash Flows
Japan Securities Finance Co., Ltd. and Consolidated Subsidiaries for the years ended March 31, 2004 and 2003
Thousands of
U.S. dollars (note 2)

Millions of yen

2004

Cash flows from operating activities:
Income before income taxes
Adjustments to reconcile income before income taxes to
net cash provided by operating activities:
Depreciation and amortization
Losses relating to short-term investments and investments
in securities
Allowance for doubtful receivables
Increase (decrease) in liabilities for retirement and severance benefits
Interest and dividend income
Interest expenses
Equity in (earnings) losses of affiliates(Increase) decrease in short-term loans receivable
Increase in call loans(Increase) decrease in collateral money for securities borrowed
Increase in call money
Increase in bills soldIncrease in short-term borrowings
Increase (decrease) in payables under repurchase agreements
Increase (decrease) in commercial paper
Increase (decrease) in collateral money received for securities lent
Increase in collateral money received for loan transactions
Purchase of short-term investments
Proceeds from sale/redemption of short-term investments
Other, net

¥

2003

6,841

¥

2004

3,462

$

64,727

840

882

7,948

2,925
278
188
(13,851)
1,340
(152)
(1,834,571)(33,000)(1,056,633)
509,900
2,164,100
549,000(164,372)
124,900
1,115,954
27,361(7,202,043)
5,774,180
26,666

512
(286)
(363)
(9,072)949
460
275,166(8,600)934,434
150,500
96,20097,169
246,637
32,100(1,177,534)
1,391(4,934,365)
4,273,582
22,514

27,6752,630
1,779(131,053)
12,679(1,438)(17,358,038)(312,234)(9,997,474)
4,824,487
20,475,920
5,194,437(1,555,228)
1,181,758
10,558,747
258,880(68,143,088)
54,633,172
252,304(149)
13,479(1,317)(2,061)

5,738
8,531
(960)
(1,213)(1,410)127,533(12,461)(19,500)

9,952

12,096

94,162

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

(373)
4,827
(669)
(273)
32

(4,695)825(435)(3,103)11(3,529)45,671(6,330)(2,583)303

Net cash provided by (used in) investing activities

3,544(7,397)33,532

Cash flows from financing activities:
Dividends paid to stockholders
Purchase of common stock for retirement
Other, net(713)(1,088)–(752)(2,252)
1(6,746)(10,294)–

Net cash used in financing activities(1,801)(3,003)(17,040)

Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year

11,69523,672

1,696
21,976110,654
223,976

Sub totalInterest and dividend received
Interest paid
Income taxes paid
Net cash provided by operating activities

Cash and cash equivalents at end of year (note 3)¥

See accompanying notes to consolidated financial statements.

11

35,367¥

23,672$

334,630

F INANCIAL S ECTION

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

(1) SUMMARY OF SIGNIFICANT ACCOUNTINGPOLICIES(a) Basis of Presenting Consolidated Financial Statements
Japan Securities Finance Co., Ltd. (the Company) and its
consolidated subsidiaries maintain their books of accountand prepare their financial statements in conformity withfinancial accounting standards of Japan.
The accompanying consolidated financial statements
have been prepared in accordance with the provisions set
forth in the Japanese Securities and Exchange Law and its
related accounting regulations, and in conformity withaccounting principles and practices generally accepted inJapan, which may differ in some material respects fromaccounting principles and practices generally accepted incountries and jurisdictions other than Japan.
In preparing the accompanying consolidated financial
statements, certain reclassifications have been made in thefinancial statements issued domestically in Japan in orderto present them in a form which is more familiar to readers
outside Japan. In addition, the notes to the consolidated
financial statements include information which is not
required under accounting principles generally acceptedin Japan but is presented herein as additional information.
(b) Principles of Consolidation
The accompanying consolidated financial statements
include the accounts of the Company and its subsidiaries(3 subsidiaries for 2004 and 2003).
All significant intercompany accounts and transactions
have been eliminated in consolidation.
Investments in affiliates are accounted for by theequity method.
The Accounting Standards for Consolidation require thecontrol or influence concept for the consolidation scope ofsubsidiaries and affiliates. Under the control or influence
concept, a company in which the parent company or its
consolidated subsidiaries, directly or indirectly, are able toexercise control over operations is fully consolidated, andanother company over which the parent company and/or
its consolidated subsidiaries have the ability to exercise
significant influence is accounted for by the equity method.
The excess of cost over the underlying net assets at thedates of investment in subsidiaries is being amortized over
5 years.
(c) Cash and Cash Equivalents
For the purpose of the statements of cash flows, theCompany considers all highly liquid investments withinsignificant risk of changes in value which have maturities
of generally three months or less when purchased to be
cash equivalents.

12

F INANCIAL S ECTION(l) Appropriation of Retained Earnings
Under the Commercial Code of Japan, the appropriationof retained earnings with respect to a given financial period
is made by resolution of stockholders at a general meeting
to be held subsequent to the close of such financial period.
The accounts for that period do not, therefore, reflect suchappropriation. (See note 11)(m) Data per Common Share
Net income per share is computed on the basis of theweighted average number of shares of common stock
outstanding during the respective years. (See note 13)
Cash dividends per share are computed based on
dividends actually paid during the year.
(n) Reclassifications
Certain reclassifications of the accompanying consolidated
financial statements as of and for the year ended March 31,
2003 have been made to conform to the 2004 presentation.

(k) Income Taxes
The Accounting Standards for Deferred Income Taxes
require that deferred income taxes should be accounted forunder 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 thefinancial statements or tax returns. Under this method,deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income inthe years in which those temporary differences are
expected to be recovered or settled, and the effect ondeferred tax assets and liabilities of a change in tax rates isrecognized in income in the period that includes the enactment date.

(2) FINANCIAL STATEMENT TRANSLATIONThe consolidated financial statements are expressed in Japanese yen. However, solely for the convenience of the reader, theconsolidated financial statements as of and for the year ended March 31, 2004 have been translated into United States dollars at the rate of ¥105.69=U.S.$1, the approximate exchange rate on the Tokyo Foreign Exchange Market on March 31,
2004. This translation should not be construed as a representation that the amounts shown could be converted into U.S.
dollars at such rate.
(3) CASH AND CASH EQUIVALENTS
A reconciliation of the cash and cash equivalents of consolidated balance sheets and that of consolidated statements of cash
flows at March 31, 2004 and 2003 is follows:
Millions of yen

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

Thousands of U.S. dollars

2004

2003

2004

¥35,369(2)¥35,367¥23,699(27)¥23,672$334,649(19)$334,630(4) SHORT-TERM INVESTMENTS AND INVESTMENTS IN SECURITIESBalance sheet amount, gross unrealized gain and unrealized loss and fair value of held-to-maturity as of March 31, 2004 and2003 are summarized as follows:
Millions of yen
Balance sheet amount Gross unrealized gain Gross unrealized loss Fair value

March 31, 2004
Government bond securities
Corporate bond securities
OthersMarch 31, 2003
Government bond securities
Corporate bond securities
Others

¥ 15
502
–
¥517
¥ 15
608
–
¥623

¥

¥
¥

¥

–
2
–
2

¥ –
–
–
¥ –

¥ 15
504
–
¥519

–
1
–
1

¥ –
5
–
¥ 5

¥ 15
604
–
¥619

13

Thousands of U.S. dollars
Balance sheet amount Gross unrealized gain Gross unrealized loss Fair value

$ 142
4,750
–
$4,892

$ –
19
–
$19

$ –
–
–
$ –

$0,142
4,769–$4,911

F INANCIAL S ECTION

Acquisition cost, gross unrealized gain and gross unrealized loss and balance sheet amount of other securities with fairvalue as of March 31, 2004 and 2003 are summarized as follows:
Acquisition cost

March 31, 2004
Equity securities
Bond securities:
Government bond securities
Corporate bond securities
OthersOther securities
March 31, 2003
Equity securities
Bond securities:
Government bond securities
Corporate bond securities
OthersOther securities

Balance sheet amount¥0,001,149¥2,470¥00000,–¥0,003,619

3,307,907
242,072–
34¥3,551,162

2,032
130
–
9
¥4,641

11,87865––¥011,943

3,298,061
242,137–
43¥3,543,860¥00005,480¥00307¥000,139¥,0005,648

1,320,080
215,541–
22¥1,541,123

5,585
331
–
–
¥,6,223262
68––¥000,469

1,325,403
215,804–22¥1,546,877

Acquisition cost

March 31, 2004
Equity securities
Bond securities:
Government bond securities
Corporate bond securities
OthersOther securities

Millions of yen
Gross unrealized gain
Gross unrealized loss

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

Balance sheet amount$000,10,872$23,370$00000 –$00,034,242

31,298,202
2,290,396–
322$33,599,792

19,2261,230–
85$43,911112,385
615––$113,000

31,205,043
2,291,011–
407$33,530,703

It is not practicable to estimate the fair value of securities as of March 31, 2004 and 2003 described bellow because of lackof market price and difficulty in estimating fair value.
Millions of yen

Unlisted equity securities

Thousands of U.S. dollars

2004

2003

2004

¥634

¥334

$5,999Projected future redemption of other securities with maturities and held-to-maturity securities at March 31, 2004 are summarized as follows:
Due within one year

Bond securities:
Government bond securities
Corporate bond securities
OthersMillions of yen
Due after one year through five years
Due after five years through ten years¥757,583
100,007–¥857,590¥2,225,980
140,332–¥2,366,312

14¥304,604
2,300–¥306,904

Due after ten years¥9,909––¥9,909F INANCIAL S ECTION

Due within one year

Bond securities:
Government bond securities
Corporate bond securities
Others$7,167,972
946,230—$8,114,202

Thousands of U.S. dollars
Due after one year through five years
Due after five years through ten years$21,061,406
1,327,770—$22,389,176$2,882,051
21,762—$2,903,813

Due after ten years$93,755——$93,755

For the years ended March 31, 2004 and 2003, proceeds from sale of other securities are ¥3,919,247 million($37,082,477 thousand) and ¥1,653,057 million, the gross realized gains are ¥2,070 million ($19,586 thousand) and¥1,378 million, and the gross realized losses are ¥3,302 million ($31,242 thousand) and ¥707 million, respectively.
(5) INVESTMENTS IN AFFILIATES
The aggregate carrying amounts of investments in affiliates as of March 31, 2004 and 2003 are ¥14,172 million ($134,090
thousand) and ¥12,788 million, respectively.
(6) LAND REVALUATIONAs of March 31, 2002, the Company revaluated its land at fair value, pursuant to the Enforcement Ordinance for the Law
Concerning Land Revaluation and its amendments (the “Law”). According to the Law, net unrealized loss is reported in a
separate component of stockholders’ equity net of related taxes, and the related deferred tax assets are reported in assets asdeferred tax assets for land revaluation.
The book value of the land of ¥978 million before the revaluation was revaluated at ¥956 million at March 31, 2002. The
value of the land at March 31, 2004 decreased by ¥185 million ($1,750 thousand) in comparison with the book value of theland after the revaluation.
(7) SHORT-TERM DEBT
The composition of short-term debt and the weighted average interest rate on short-term debt at March 31, 2004 and 2003
are as follows:
March 31, 2004
Short-term borrowings
Call money
Bills soldCommercial paper
Payables under repurchase agreements
Other

March 31, 2003
Short-term borrowings
Call money
Bills soldCommercial paper
Payables under repurchase agreements
Other

Millions of yen

Thousands of U.S. dollars

Weighted average rate

¥1,223,820
1,428,400
2,461,600
210,000
82,265
3,297¥5,409,382$11,579,336
13,514,997
23,290,756
1,986,943
778,361
31,195$51,181,588

0.057%
0.011
0.009
0.018
0.001
1.375

Millions of yen

Weighted average rate

¥0,674,820
918,500
297,500
85,100246,637
4,202¥2,226,759

0.121%
0.019
0.010
0.032
0.004
1.375

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

15

F INANCIAL S ECTION

The funded status of the pension plans at March 31, 2004 and 2003 is outlined as follows:
Millions of yen

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

Thousands of U.S. dollars

2004

2003

2004

¥(7,688)
3,086(4,602)
1,186(3,416)55¥(3,471)¥(7,215)
2,682(4,533)
1,177(3,356)42¥(3,398)$(72,741)
29,199(43,542)
11,221(32,321)
520$(32,841)

Net periodic pension cost for the years ended March 31, 2004 and 2003 consists of the following components:
Millions of yen

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

2004

2003

2004

¥254
176
(46)
163
¥547

¥238
196
(50)
63
¥447

$2,404
1,665
(435)
1,542
$5,176Significant assumptions of pension plans used to determine these amounts in fiscal 2004 and 2003 are as follows:
Periodic allocation method for projected benefit
Discount rate
Expected rate of return on plan assets
Period for amortization of unrecognized actuarial loss

2004

2003

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

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

Plan assets of the welfare pension fund at March 31, 2004 and 2003 are estimated to be ¥4,139 million ($39,162 thousand)and ¥3,352 million, respectively.
Directors and corporate auditors are not covered by the plans described above. For such persons, the Company andcertain subsidiaries have unfunded defined benefit pension plans. Under the plans, directors and corporate auditors areentitled to lump-sum payments based on the current rate of pay and length of service when they leave the Company. The
Company provides for the amount of the vested benefits to which directors and corporate auditors are entitled if they wereto retire or sever immediately at the balance sheet dates. As of March 31, 2004 and 2003, the liabilities for retirement andseverance benefits related to the plans were ¥743 million ($7,030 thousand) and ¥627 million, respectively.
(9) INCOME TAXESThe Company and its consolidated subsidiaries are subject to Japanese corporate, inhabitant and business taxes based on
income which, in the aggregate, result in a statutory tax rate of approximately 42.1% in 2004 and 2003.
Amendments to Japanese tax regulations were enacted on March 31, 2003. As a result of these amendments, the normal
income tax rate is to be reduced from approximately 42.1% to 40.7% effective from the Company’s fiscal year beginning
April 1,2004. Deferred income tax assets and liabilities as of March 31, 2003 which were expected to be eliminated after
April 1, 2004 were revaluated at a rate of 40.7%. The effect of the income tax rate reduction on net deferred tax assets as ofMarch 31, 2003, which amounted to ¥55 million, was charged to income.

16

F INANCIAL S ECTION

A reconciliation of the statutory tax rate and the effective tax rate as a percentage of income before income taxes andminority interests for the years ended March 31, 2004 and 2003 is follows:
Statutory tax rate
Equity in losses (gains) of affiliates
Expenses not deductible for tax purposes
Income not credited for tax purposes
Effect of change in the tax rate
Tax credit for information technology investment
Other
Effective tax rate

2004

2003

42.1%
(0.9)
0.2
(0.3)
0.6
(0.4)
0.2
41.5%

42.1%
5.6
0.3
(0.4)
1.4
–
0.6
49.6%

Significant components of deferred tax assets and liabilities at March 31, 2004 and 2003 are as follows:
Millions of yen

2004

2003

Deferred tax assets:
Accrued business tax¥0,(214 ¥0,108
Accrued bonuses
262
238
Liabilities for retirement and severance benefits (employees)
1,231
1,159
Liabilities for retirement and severance benefits (directors and corporate auditors)
302
255
Allowance for doubtful receivables
389–
Net unrealized loss on other securities
4,597
91
Other
206
371
¥07,201 ¥2,222
Deferred tax liabilities:
Gain on evaluation of subsidiaries’ assets and liabilities
(182)
(182)
Net unrealized gain on other securities(1,625) (2,513)
Other
(43)
(7)
(1,850) (2,702)
Net deferred tax assets (liabilities)¥05,351 ¥0(480)Thousands of U.S. dollars

2004$002,025
2,479
11,6472,857
3,681
43,495
1,949$068,133(1,722)(15,375)(407)(17,504)$050,629

Net deferred tax assets and liabilities as of March 31, 2004 and 2003 are reflected in the accompanying consolidated balance
sheets under the following captions:
Millions of yen

2004

Current assets—Deferred tax assets
Investments and other assets—Deferred tax assets
Non-current liabilities—Deferred tax liabilities

2003¥(0,782 ¥0,448
4,704
179
(135) (1,107)

Thousands of U.S. dollars

2004$(7,399
44,507(1,277)(10) COMMON STOCK
Under the Commercial Code of Japan, at least 50% of the issue price of new shares is required to be designated as statedcommon stock. The actual portion to be designated as stated common stock is determined by resolution of the Board of
Directors. Proceeds in excess of the amount designated as stated common stock are credited to additional paid-in capital.
(11) RETAINED EARNINGS AND DIVIDENDS
The Commercial Code of Japan provides that an amount equal to at least 10% of appropriations paid in cash should beappropriated as a legal reserve until an aggregated amount of additional paid-in capital and the legal reserve equal 25% ofcommon stock.
This legal reserve and additional paid-in capital may be used to reduce a deficit by approval at the meeting of stockholders
or may be transferred to stated common stock by resolution of the Board of Directors. On condition that the total amount oflegal reserve and additional paid-in capital remains equal to or exceeds 25% of stated common stock, they are available for
distribution by approval at the meeting of stockholders.
Balances of the legal reserve are included in retained earnings in the accompanying consolidated balance sheets.
The amount available for dividends is based on the amount recorded in the Company's non-consolidated books of accountin accordance with the Commercial Code of Japan.
17

F INANCIAL S ECTION

In accordance with the Commercial Code of Japan, proposed appropriations of retained earnings have not been reflectedin the financial statements at the end of each fiscal year. The proposed appropriation of retained earnings at March 31, 2004
was cash dividends of ¥698 million ($6,604 thousand).
(12) GENERAL AND ADMINISTRATIVE EXPENSES
Significant components of general and administrative expenses are as follows:
Salaries
Pension cost
Provision for retirement and severance benefits (directors and corporate auditors)
Administrative and computer expenses
Depreciation

Millions of yen

Thousands of U.S. dollars

2004

2003

2004

¥3,046
505
173
1,156
824

¥3,030
420
175
1,149
864

$28,820
4,778
1,637
10,9387,796(13) NET INCOME PER SHARE INFORMATION
Reconciliation of the numbers and the amounts used in the basic net income per share computations for the years ended
March 31, 2004 and 2003 are as follows:
Millions of yen

Net income
Net income not applicable to common stockholders:
Directors’ and corporate auditors’ bonuses
Net income applicable to common stockholders

Thousands of U.S. dollars

2004

2003

2004

¥4,002¥1,746$37,865

(115)
3,887

(76)
1,670

(1,088)36,777

Number of shares(Thousands)

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

2004

2003

100,274

105,251(14) LEASES
Finance leases, except for those where the legal title of the underlying property is transferred from the lessor to the lessee atthe end of the lease term, are accounted for similarly to operating leases under accounting principles generally accepted inJapan.
Certain key information about such lease contracts of the Company and its consolidated subsidiaries for the years ended
March 31, 2004 and 2003 are as follows:(a) Lessee(i) Acquisition cost, accumulated depreciation and net book value of leased assets, if they had been capitalized:
Millions of yen

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

18

Thousands of U.S. dollars

2004

2003

2004

¥(492
(265)
¥(227

¥487
(145)
¥342

$4,655(2,507)$2,148Millions of yen

Thousands of U.S. dollars

2004

2003

2004

¥120

¥083

$1,135

¥108
119
¥227

¥119
223
¥342

$1,022
1,126$2,148

F INANCIAL S ECTION(b) Lessor(i) Acquisition cost, accumulated depreciation and net book value of leasing assets:
Millions of yen

Thousands of U.S. dollars

2004
Furniture and fixtures

Acquisition cost
Accumulated depreciation
Net carrying amount

¥(342
(216)
¥(126

Others

2003
Total

Furniture and fixtures¥(77 ¥(419(23) (239)¥(54 ¥(180

¥(485
(274)
¥(211

2004
Others

Total

Furniture and fixtures¥(81 ¥(566(32) (306)¥(49 ¥(260$(3,236(2,044)$(1,192

OthersTotal$(728 $(3,964(217) (2,261)$(511 $(1,703(ii) Lease income, depreciation and future minimum lease payments including interest income:Millions of yen

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

Thousands of U.S. dollars

2004

2003

2004

¥135
69

¥195
116

$1,277
653

¥091
116
¥207

¥132
159
¥291

$( (861
1,098$1,959(15) PLEDGED ASSETS
The carrying value and classification of assets owned by the Company and its consolidated subsidiaries that have been
pledged to counterparties at March 31, 2004 and 2003 are as follows:
Millions of yen

Sources of collateral
Short-term investments
Short-term loans receivable
Securities in custody
Securities in deposit
Collateral money for securities borrowed
Other current assets
Investments in securities
Uses of collateralCall money
Bills soldPayables under repurchase agreements
Collateral money received for securities lent
Securities borrowed

Thousands of U.S. dollars

2004

2003

2004

¥00828,561
1,186,046
305,600
298,922262,627–
1,960,394¥0,889,842
237,736
50,80042,443
173,328
3,999
482,717$07,839,540
11,221,932
2,891,475
2,828,290
2,484,880–
18,548,529¥00987,500
2,461,600
82,265
659,655
262,627¥0,703,500
297,500
246,6372,000
173,328$09,343,363
23,290,756
778,361
6,241,414
2,484,880

In addition to the above, securities received as collateral for loans receivable amounting to ¥521,582 million ($4,935,018
thousand) and ¥303,599 million were deposited as guarantee at March 31, 2004 and 2003, respectively.
The fair value of the securities received as collateral for cash collateral bond borrowing and lending transaction andsecurities borrowed under loan for consumption agreement at March 31, 2004 and 2003 was as follows:
Millions of yen

Securities loaned
Securities pledged as collateral
Securities on hand

19

Thousands of U.S. dollars

2004

2003

2004

¥1,479,921
1,004,270
142,055¥696,934
236,156
32,646$14,002,469
9,502,034
1,344,072

F INANCIAL S ECTION(16) COMMITMENTS AND CONTINGENCIESAs of March 31, 2004 and 2003, undrawn amount of general loan for securities companies and customers and overdraft loan
are as follows:
Millions of yen

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

Thousands of U.S. dollars

2004

2003

2004

¥572,280(45,335)¥526,945¥556,818(30,639)¥526,179$5,414,703(428,943)$4,985,760

Elimination/corporate

Consolidated

Millions of yen

2004

Revenues from outside customers
Inter-segment revenues
Operating expenses
Operating income (loss)
AssetsDepreciation and amortization
Capital expenditures

Securities finance

Data processing service

27,52017
27,53721,503¥
6,034¥10,059,902
639
881¥ 3,377
119
3,496
3,531
¥ (35)¥ 2,288
205
66

Securities finance

Data processing service

Total

Elimination/corporate

Consolidated

25,2961725,313
20,485¥
4,828¥ 4,029,100
647
3,314

¥ 3,365
107
3,472
3,489
¥ (17)¥ 2,268237
60¥000028,661
124
28,78523,974¥000004,811¥,04,031,368
884
3,374

¥0( –
(124)
(124)
(119)
¥0.00(5)¥0.0(29)(2)(5)¥00,028,661–
28,661
23,855¥00,004,806¥04,031,339
882
3,369

Total

Elimination/corporate

Consolidated

292,336
1,287
293,623
236,863$
56,760$95,204,750
7,986
8,906

$
–
(1,287)(1,287)(1,249)$ (38)$ (256)
(38)
(47)

¥

Total

¥

30,897
136
31,03325,034¥
5,999¥10,062,190
844
947

¥

–
(136)
(136)
(132)
¥ (4)
¥ (27)(4)(5)¥

30,897–30,897
24,902¥
5,995¥10,062,163
840
942

2003

Revenues from outside customers
Inter-segment revenues
Operating expenses
Operating income (loss)
AssetsDepreciation and amortization
Capital expenditures¥

Thousand of U.S. dollars

2004

Revenues from outside customers
Inter-segment revenues
Operating expenses
Operating income (loss)
AssetsDepreciation and amortization
Capital expenditures

Securities finance

Data processing service

260,384
161
260,545
203,454$
57,091$95,183,102
6,046
8,336

$31,952
1,126
33,07833,409$ (331)$21,648
1,940
624

$

$

Notes: 1. Business segments reflect the actual business contents.
2. Major revenues of each business segment
Securities finance segment: interest income on loans, securities lending fees, etc.
Data processing service segment: service fees for computer processing
3. All of the assets are allocated to both segments.

(b) Geographic Segments
The Company does not have any overseas subsidiaries for the years ended March 31, 2004 and 2003.
(c) Overseas Sales
Not applicable.
20$

292,336–
292,336
235,614$56,722$95,204,494
7,948
8,913

INDEPENDENT AUDITORS’ REPORTTo the Stockholders and Board of Directors ofJapan Securities Finance Co., Ltd.

We have audited the accompanying consolidated balance sheets of Japan Securities Finance Co., Ltd. and consolidated
subsidiaries as of March 31, 2004 and 2003, and related consolidated statements of income, stockholders’ equity andcash flows for the years then ended, all expressed in Japanese yen. These financial statements are the responsibility of theCompany’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis forour opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of Japan Securities Finance Co., Ltd. and consolidated subsidiaries as of March 31, 2004 and 2003, and the resultsof their operations and their cash flows for the years then ended in conformity with accounting principles generally acceptedin Japan.
The accompanying consolidated financial statements as of and for the year ended March 31, 2004 have been translated into
United States dollars solely for the convenience of the reader. We have recomputed the translation and, in our opinion, theconsolidated financial statements expressed in yen have been translated into United States dollars on the basis described in
Note 2 to the consolidated financial statements.

Toyo & Co.
Tokyo, Japan
June 25, 2004

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

21

OUTLINE OF THE CORPORATE GROUP

Securities Finance BusinessInformation Processing Business
Other BusinessSubsidiary

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

Subsidiary

Nihon Building Co., Ltd.

JSF Information
Technology Co., Ltd.

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

Japan
Securities
Finance Co., Ltd.

Affiliate

Affiliate

Japan Information
Processing Service Co., Ltd.

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

JSF Group
Affiliate

Affiliate

Japan Information
System Co., Ltd.

Nihon Kyoei
Securities Co., Ltd.

•Production of credit cards, etc.
•Information input and output services•Securities business

22

CORPORATE DATAJapan Securities Finance Co., Ltd.

Board of Directors and Corporate Auditors

Address
1-2-10 Nihonbashi-Kayabacho, Chuo-ku, Tokyo 103-0025
Tel: +81-3-3666-3184 Fax: +81-3-3666-1403

Directors
Chairman

Kunio Kojima

Established
July 1927

President

Minoru Masubuchi

Executive Vice President

Hiroshi Saito

Senior Managing Director

Tasuku Horiguchi

Managing Directors

Hisao Harada
Yoshiyuki Kazama

Directors

Sadamu Shimomura
Akira Onoda
Junji Kato
Takashi Imai*
Akira Kanno*
Eiichiro Okumoto*

Capital¥10 billion
Branch offices
Sapporo Branch
4-5 Minami Ichijo Nishi, Chuo-ku, Sapporo 060-0061
Tel: +81-11-241-1291
Fukuoka Branch
2-14-2 Tenjin, Chuo-ku, Fukuoka, 810-0001
Tel: +81-92-741-1861
Web site
http://www.jsf.co.jp*Outside Directors

Stock exchange listing
Tokyo Stock Exchange, 1st Section

Corporate Auditors
Munetaka Tada
Yoshiyasu Arai*
Yasukuni Watanabe*Toshio Kamiyama*

Shares outstanding
99,704,000 shares (as of March 31, 2004)*Outside Corporate Auditors

Number of shareholders
7,811 shareholders (as of March 31, 2004)
Transfer agent
Japan Securities Agents, Ltd.
1-2-4 Nihonbashi-Kayabacho, Chuo-ku, Tokyo 103-8202
Tel: +81-3-3668-9211

Rating Information
Long-term Rating

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

A-

A-2

Moody’sA3

P-2

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

AA-

a-1+

Japan Credit Rating Agency ( JCR)

AA-

J-1+

23

C ORPORATE D ATA

Organization

Planning Department

Inspection Department

General Affairs Department

General Meetingof Shareholders

Treasury Department

Board of Directors

Loan Department
ChairmanMargin Loan Department

President
Vice President

Bond Trading Department
Directors

Credit Supervision Department

Settlement & Custody Department
Corporate Auditors
Board of Auditors

Information Systems Planning Department

Sapporo Branch

Fukuoka Branch

24

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