Prof ile of

JFM
Name

Japan Finance Organization for Municipalities (JFM)

Establishment

1 August 2008 (Reorganized on 1 June 2009)

Governing Law

Japan Finance Organization for Municipalities Law(Act No. 64 of 2007, as amended)

Address

Shisei Kaikan, 1-3 Hibiya Koen, Chiyoda-ku, Tokyo

President and CEO

Yuji Watanabe

CapitalUSD 137.9 million

Number of Employees

89 (as of 2 April 2015)

Outstanding Loans
as of 31 March 2015

USD 194.7 billion

Outstanding Bonds andBank Loans
as of 31 March 2015

USD 163.2 billion

Credit Ratings
as of 31 March 2015

S&P: AAMoody's: A1
R&I: AA+DISCLAIMER
By reading these materials, you agree to be bound by the following limitations:
No representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy,completeness or correctness of the information, or opinions contained herein. Neither the company nor any of the company’s advisors or
representatives shall have any responsibility or liability whatsoever (for negligence or otherwise) for any loss howsoever arising from any
use of these materials or their contents or otherwise arising in connection with these materials. The information set out herein may besubject to updating, completion, revision, verification and amendment and such information may change materially.
These materials are based on the economic, regulatory, market and other conditions as in effect on the date hereof. It should beunderstood that subsequent developments may affect the information contained in these materials, which neither the company nor its
advisors or representatives are under an obligation to update, revise or affirm.
Forward-looking statements, including the company’s plans in these materials, are based on information available to the company at thetime they were prepared and involve potential risks and uncertainties. Actual results, therefore, may differ from those described in thesematerials due to changes in a variety of factors, such as market trends, economic conditions and regulations. Accordingly, investors areadvised to use their own discretion and exercise great caution when making investment decisions.
These materials and the information contained herein do not constitute or form part of any offer for sale or subscription of or solicitation
or invitation of any offer to buy or subscribe for any securities of the company. Securities of the company not registered under the U.S.
Securities Act of 1933, as amended (the “Securities Act”), may not be offered, sold or delivered within the United States or to U.S.
persons absent registration under or an applicable exemption from the registration requirements of the United States securities laws.
These materials and the information contained herein are being furnished to you solely for your information and may not be reproduced
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hereof may be, directly or indirectly, taken or transmitted into or distributed in the United States, Canada, Australia, Japan, Hong Kongor any other jurisdiction which prohibits the same except in compliance with applicable securities laws. Any failure to comply with thisrestriction may constitute a violation of U.S. or other national securities laws. No money, securities or other consideration is being
solicited, and, if sent in response to this presentation or the information contained herein, will not be accepted.

Message from the President and CEO---------------- 02
Management Philosophy---------------------------------- 03
JFM at a Glance--------------------------------------------- 04
Outline of JFM Operations-------------------------------- 06

Review and Plan

Management Structure

Corporate Governance------------------------------------- 36
1. Corporate Governance------------------------------- 36
2. Internal Control over Financial Reporting------- 38
3. Internal Audit-------------------------------------------- 38
General Account and Management Account-------- 39
Risk Management------------------------------------------- 41

Review of Operations for Fiscal 2014----------------- 10

Compliance---------------------------------------------------- 46

1. Lending Operations----------------------------------- 10

Disclosure----------------------------------------------------- 47

Operations

Capital---------------------------------------------------------- 07

CONTENTS

Review and Plan

JFM Annual Report 2015

2. Funding Operations ---------------------------------- 12
Management Plan for Fiscal 2015---------------------- 16
1. Lending Operations----------------------------------- 16
2. Funding Operations----------------------------------- 16
3. Scheduled Payment to
the National Treasury-------------------------------- 17

Lending Operations----------------------------------------- 20
1. Outline---------------------------------------------------- 20
2. Loan Interest Rates ---------------------------------- 22
3. Credit Check System--------------------------------- 24
4. Trends in Lending Operations--------------------- 24
5. Lending Operations by Business------------------ 27
Funding Operations----------------------------------------- 30
1. Issue Type----------------------------------------------- 30
3. Features of JFM Bonds------------------------------ 32
4. Trends in Funding Operations--------------------- 33

2. Local Government Finance Program------------- 49
3. Local Allocation Tax---------------------------------- 50
4. Local Government Borrowings--------------------- 50
5. Security of Local Government Borrowings----- 50
6. Local Government Borrowing Program---------- 51
7. JFM Funds in Local Government Borrowing
Program-------------------------------------------------- 52

Financial Section

Financial Statements--------------------------------------- 54
Independent Auditor’s Report---------------------------- 94

Appendix / JFM Data

Appendix------------------------------------------------------- 96
JFM Data---------------------------------------------------- 107
Organization History------------------------------------ 107
Organization Chart-------------------------------------- 108

Financial Section

2. Basic Funding Policy--------------------------------- 31

1. Japanese Local Government System------------ 48

JFM’s Role in
Local Government FinanceOperations

JFM’s Role in Local
Government FinanceManagement Structure

3. Financial Review--------------------------------------- 14

Directors and Corporate Auditors/
Contact Information------------------------------------- 109
Appendix / JFM Data

Note to Financial Statements
The translation of the Japanese yen amounts into U.S. dollars is included solely for the convenience of readers outside Japan,
using the prevailing exchange rate as of 31 March 2015, the final day of the fiscal year, which was JPY 120.37 to USD 1. Thistranslation should not be construed as a representation that all amounts shown could be converted into U.S. dollars at such rate.

Message from the President and CEO
Yuji Watanabe President and CEO, Japan Finance Organization for Municipalities June 2015

Initiative for Fiscal 2015

For fiscal 2015, the lending volume is planned to be

JPY 1.83 trillion (USD 15.2 billion) based on the Local
Government Borrowing Program prepared by thenational government. In response to funding needs bymunicipal enterprises for longer tenor projects such as
water supply and sewage, JFM resolved that the maximum term to loans for these projects would be

Review of Fiscal 2014

increased to 40 years from fiscal 2015.

In fiscal 2014, Japanese economy suffered slump in

In order to implement this lending plan, we believe

the first half mainly due to a decline of householdthat more flexible funding approaches are required

spending after the national consumption tax rise in April

under the volatile market conditions. We will continue to2014, but some positive outcomes were observed infocus on ensuring stable and low-cost funding by

the second half such as improved corporate earnings

further expanding funding options as well as respond-

contributed by exporters and hike in stock prices.

ing to market needs.
Furthermore, in light of JFM’s solid business opera-

In terms of lending activities, JFM continued to beattions, a portion of JFM’s reserves will be transferred to

low-interest rate to the needs of the regions andthe national treasury over a period of three years fromdisbursed a total of JPY 1.93 trillion (USD 16.0 billion)

fiscal 2015 through fiscal 2017, with the aim of transfer-loans including social infrastructure projects and disas-ring up to JPY 600 billion (USD 5.0 billion). JFM plans

ter management and mitigation projects.

to pay JPY 300 billion (USD 2.5 billion) to the national

responsibleforprovidinglong-term

funding

On the funding front, we continued diversification oftreasury during fiscal 2015. All of our payment will be a

our funding sources and raised a total of JPY 2.08

part of local allocation tax and contribute to the local

trillion (USD 17.5 billion) during the fiscal year. We

governments for regional revitalization.

focused more on flexible funding operations which arehighlighted by issuing super long tenors bonds subject
to domestic market conditions and investor demands.

JFM for Local Governments

JFM's objective is to contribute to the sound opera-

In addition to our domestic funding activities, wetion of local government financing by providing long-

successfully completed our inaugural non-government

term funding at low interest rates, improving the welfare

guaranteed Euro denominated bonds with EUR 1

of local residents. JFM will continue to be committed tobillion size, which marked the largest EUR denomi-

fulfill this mission with concerted efforts by our manage-nated bonds by a Japanese government related issuer.

ment and employees.
Thank you for your understanding and continued

We believe that high profile of JFM name among theinternational investors supported the strong outcome.

support for our endeavors.

JFM Annual Report 2015 | 02

Management Philosophy
The Japan Finance Organization for Municipalities (JFM), as a
joint funding organization of local governments, by local governments and for local governments, sets forth the following three policies as its management philosophy.

1

Ensuring Responsible Corporate Governanceas a Joint Organization of Local Governments

2

Being Responsive to
Local Government Financial Needs

3

Building Market Confidence toward JFM

JFM ensures responsible corporate governance through prudent
risk management, monitoring and recommendations by the Supervisory Committee, as well as audits by external accounting auditors.

As a reliable provider of long-term and low-interest funds for local
governments, JFM closely supports local government funding basedon their need as well as the environment.

JFM aims to build market conﬁdence through proactive disclosure
as required in capital markets, as well as its sound ﬁnancial standing
maintained through prudent risk management, thereby securinglow-cost funding. Furthermore, JFM, as a leading public-sector bondissuer, is committed to contributing to the sound development of
capital markets.

JFM Annual Report 2015 | 03

at a Glance
The Joint Funding
Organization for All Japanese
Local Governments■ Wholly owned by Japanese local governments, with

Capital Contribution*1
Towns, villages
and local
government
associations

Prefectures

USD 8.6 mm

USD 52.9 mm

6.3%

the capital contribution from 1,789*1 local governments*2

38.4%

USD
137.9 mm

■ Operates as a non-profit organization with the objec-

tive to provide long-term and low-interest rate loans
exclusively to Japanese local governments■ Originally established in 1957 as a government

financial institution. In 2008, as part of a policy-based
financial reform conducted by the Japanese national
government, the new JFM was established under the
special law by succeeding to substantially all rights
and obligations of the predecessor

Japanese Local Governments

Governmentdesignatedcities (2)USD 23.9 mm

USD 52.5 mm

17.3%

38.1%

Contributed by 1,789 Japanese local governments(1) Excludes government-designated cities.
(2) Government-designated cities:
Cities with populations of 500,000 or more designated in accordancewith Paragraph 1, Article 252-19 of the Local Autonomy Act.
Such government-designated cities are allowed to administer certain
matters such as social welfare, food safety, urban planning and so on,
for which prefectures are responsible in principle.

Financial Highlights
Financial Highlights FY2014*1■ Japanese local governments include 47 prefectures

and a total of 1,741 cities and special wards of Tokyo,
government-designated cities, as well as towns andvillages■ Revenue sources for the local governments are(JPY mm)

YoY(JPY mm)(USD bn)

YoY(USD bn)

24,524,279+422,948

204

+3.5

23,437,630+354,654

195

+2.9

24,350,790+392,234

202

+3.3

Bonds

19,542,864+119,121

162

+1.0

Reserves underSpecial Laws

3,608,067+149,44030+1.2

Capital16,6020

0.1

0Ordinary Income

180,499-7,552

1.5

-0.1

2013

2014

2015(e)*Total Assets
Loans
Total Liabilities

secured by the national government●

The national government allocates a part of nationaltax revenue to the local governments, in order toadjust the imbalance of revenue sources among the
local governments●

The national government also prepares the Local
Government Borrowing Program each fiscal year,
which specifies the amount of local government
funding as well as funding sources●

In the case of each local government funding,consent or approval must, in principle, be obtained
from the relevant authorities●

Financial conditions of the local governments aremonitored under the legal framework for early
warning and reconstruction of fiscal soundness■ Thus, none of the local governments has defaulted■ BIS 0% risk weight for Japanese local governments*3

JFM Annual Report 2015 | 04

Cities (1) andspecial wardsof Tokyo

Annual Lending Volume(USD bn)
20
18
16
14
12
10
8
6
4
2
0

FY 2009

2010

2011

2012

*Planned amount; subject to change depending on market
conditions and other factors.

Funding■ Leading issuer in the Japanese bond market with an

Funding Plan

average annual funding volume of JPY 2 tn (USD 17 bn)

Type of Bonds■ Aiming to diversify its funding sources and expand its

investor base – continues to access the international

Non-Guaranteedmarket through benchmark transactions as well as

Domestic Issuance

private placements, making use of its MTN Program

FY 2014(achieved)

USD 10.8 bn

USD 12.1 bn

USD 7.6 bn

USD 9.6 bn

MTN■ In the international market, only non-government

USD 2.6 bn（2）Benchmarkguaranteed bonds will be issued

USD 1.8 bn

Private Placements■ In FY2014, JFM issued a total of USD 2.6 bn worth of

Uridashi Bonds

USD 222 mm

USD 1.4 bn

Guaranteed

3 private placements and an issuance of Uridashi

USD 2.3 bn

NZD 105 mm

Open Issuance(3)international bonds through 2 benchmark transactions,
Bonds

FY 2015(plan)(1)

USD 6.0 bn

USD 5.2 bn(1) Planned amount; subject to change depending on lending status,
market conditions and other factors.
(2) Includes AUD denominated private placement and Uridashi Bonds,
each converted at the exchange rate at the time of pricing.
(3) Details of issuance such as tenor, issue size and issue market will
be determined as necessary based on the lending status,
market conditions and other factors.

Support Structure■ Under the JFM Law, if JFM is to be dissolved and its

obligations cannot be satisfied in full with its assets,

Bond Issuance(USD bn)local governments bear all costs necessary to satisfy

16

the relevant obligations in full via payment to JFM

14■ Along with the solid institutional framework to support

12

the local governments, we believe JFM bonds are
generally regarded as a secure investment

Bonds without government guarantee
Bonds with government guarantee

1086Credit Ratings42■ A1 (Moody’s), AA- (S&P)■ The ratings of JFM are the same as those of theJapanese sovereign■ BIS risk weight*3 : 10% for JFM bonds (non-guaranteed)0

FY 2009

2010

2011

2012

2013

2014

2015(e)* Planned amount; subject to change depending on lending status,
market conditions and other factors.

denominated in JPY
Note : A rating is not a recommendation to buy, sell or hold securities and may be subject
to suspension, reduction or withdrawal at any time by the assigning rating agencies.

Notes: 1. As of 31 March 2015.
2. Local governments comprise all of the prefectures, cities and special wards, government-designated cities, towns and villages, as well as some local government associations.
3. Value for investors in Japan. For overseas bonds, the value is determined by respective authorities in each country.

JFM Annual Report 2015 | 05

Financial Markets

Funding(JFM Bonds)
Outstanding
Bonds
JPY 19.6 tn(USD 163 bn)

Japan Finance
Organization for
Municipalities(JFM)
Reserve forInterest Rate
Volatility, etc.
JPY 3.6 tn(USD 30 bn)

Fund forLending Rate
Reduction
JPY 0.9 tn(USD 8 bn)
Proceeds from
Public Races*

Lending(Long-term/low
interest rates)
Outstanding
Loans
JPY 23.4 tn(USD 195 bn)

Reduction ofLending Rates

Local Governments

Outline of JFM Operations* A portion of the earnings from municipally operated racing(horse, bicycle, motorcycle and speedboat).

(As of 31 March 2015)

Public Institution Wholly Owned by Japanese Local Governments
JFM is a joint funding organization for all local governments, wholly owned by Japanese local
governments under the Japan Finance Organization for Municipalities Law (Act No. 64 of 2007, as
amended; the “JFM Law”).
JFM loans are provided exclusively to local governments, and local governments must receive theconsent or approval of the Minister for Internal Affairs and Communications or their respective prefectural
governors when they borrow from JFM. Within this structure, JFM has never had a default since its
establishment.

Joint Funding Organization for All Local Governments
JFM contributes to the sound financial operation of local governments and improves the welfare of local
residents with the aim of efficiently and effectively complementing local government fund-raising by
providing long-term funding at low-interest rates to local governments.
For social infrastructure improvements to be implemented by local governments, long-term funding is
usually desirable given that it takes a long time to recoup such capital expenditures, and also the cost

JFM Annual Report 2015 | 06

burden should be shared across generations. However, local governments generally raise funds in capital
markets for terms of 10 years or less.
In response to this situation, JFM issues bonds in capital markets with a wide variety of maturities ranging
from medium-term to super long-term to provide stable and low-interest funds to local governments.
Under the JFM Law (Article 52, Paragraph 1), local governments have an obligation to bear the cost
necessary to satisfy all JFM obligations in the event JFM is to be dissolved and its obligations remain
unpaid.

Solid Financial Foundation
JFM primarily issues 10-year bonds to raise funds and extends long-term(from fiscal 2015, maximum
maturity is extended from 30 years to 40 years) loans to local governments, which creates a duration gap
between lending and funding. To cope with the interest rate risk associated with bond refinancing (anegative margin caused by the interest payable exceeding the interest receivable), JFM maintains reserves
for interest rate volatility.

Reduction of Lending Rates by Utilizing the Fund for Lending Rate Reduction
JFM receives a portion of the earnings from various racing events (horse, bicycle, motorcycle andspeedboat) operated by local governments, which is directed to the Fund for Lending Rate Reduction.
The investment gains from the fund are used to lower interest rates on JFM loans.

Capital
As of 31 March 2015, JFM's capital was USD

Capital Contribution by
Local Government Group137.9 million contributed by 1,789 Japanese
local governments, i.e., all of the prefectures,cities, special wards of Tokyo, governmentdesignated cities, towns and villages, as well assome local government associations.

Towns, villages
and local
government
associations

USD 52.9 mm

6.3%

The amount of capital contribution from each
local government is decided based on 1) outstanding JFM loans to each local government, and 2) theamount of revenue of each local government(mainly comprised of local taxes, local allocation
taxes and temporary financial countermeasuresfunding).

Prefectures

USD 8.6 mm

Governmentdesignatedcities *2

USD 23.9 mm

17.3%

38.4%

USD
137.9 mmCities *1 andspecial wardsof Tokyo

USD 52.5 mm

38.1%(As of 31 March 2015)

Notes: 1. Excludes government-designated cities.
2. Government-designated cities:
Cities with populations of 500,000 or more designated in accordance with Paragraph 1, Article 252-19 of the Local Autonomy Act. Suchgovernment-designated cities are allowed to administer certain matters such as social welfare, food safety, urban planning and so on, for which
prefectures are responsible in principle.

JFM Annual Report 2015 | 07

Review and Plan
Review of Operations for Fiscal 2014
1. Lending Operations

10

2. Funding Operations

12

3. Financial Review

14

Management Plan for Fiscal 2015
1. Lending Operations

16

2. Funding Operations

16

3. Scheduled Payment to
the National Treasury

17

Review
andPlan

Review and Plan

1

Review of Operations for Fiscal 2014

Lending Operations

In fiscal 2014, JFM provided loans totaling USD 16.0 billion, which exceeded the initial plan by USD 1.0
billion, mainly as a result of actual lending surpassing plan by USD 0.3 billion in public projects, by USD
0.2 billion in national disaster prevention, by USD 0.2 billion in disaster management and mitigation, andby USD 0.3 billion in temporary financial countermeasures funding*.
General account-related loans totaled USD 4.5 billion, or 28% of the total lending volume, mainly
represented by the special municipal mergers. Loans for temporary financial countermeasures funding
were USD 6.1 billion (38%), followed by municipal enterprise-related loans in the amount of USD 5.4
billion (34%), of which sewerage and water supply businesses were the main contributors.
Note: Represents local government funding to cover shortfalls in local government revenue sources pursuant to the provisions of the
Local Government Finance Law (Act No. 109 of 1948, as amended).

Lending Operations by Business in Fiscal 2014
Number ofLoans Made

Business

Loan Amount (USD in millions)% of total

General Account-related Loans
Public Projects, etc.

560

801

5.0

Public Housing

178

152

1.0

Disaster Management and Mitigation (Previous)

283

546

3.4

National Disaster Prevention

284

317

2.0

Educational Facilities Development

173

110

0.7

Social Welfare Facilities Development

140

109

0.7

General Waste Dispoal

4

2

0.0

General Projects

71

31

0.2

Regional Revitalization

155

74

0.5

Disaster Prevention

237

183

1.1

Local Road Development

329

254

1.6

Special Municipal Mergers

634

1,219

7.6

Disaster Management and Mitigation

940

749

4.7

3,988

4,546

28.4

Subtotal
Municipal Enterprise–related Loans

1,146

1,176

7.3

Industrial Water Supply

Water Supply

91

80

0.5

Transportation

44

273

1.7

Electricity and Gas Supply

62

106

0.7

Port Facilities

39

27

0.2

Hospitals and Elderly Care Services

376

714

4.5

Markets and Slaughterhouses
Sewerage
Tourism and Others
Subtotal
Refinancing Loans for Facilities Affected by Earthquake
Temporary Financial Countermeasures Funding
Total
Note: Totals may not add up due to rounding.

JFM Annual Report 2015 | 10

57

98

0.6

2,047

2,903

18.1

16

9

0.1

3,878

5,384

33.7

6

2

0.1

758

6,061

37.9

8,630

15,994100.0

FY2014 Loans Extended by Business

Total

USD

0.1％ (USD 0.01 bn)

Others

16.0 bn

2% (USD 0.3 bn)
Transportation

2% (USD 0.3 bn)
Hospitals and Elderly
Care Services

Municipal Enterpriserelated Loans

5% (USD 0.7 bn)

34％ (USD 5.4 bn)

Sewerage

18% (USD 2.9 bn)

28％ (USD 4.5 bn)

Special Municipal Mergers

8% (USD 1.2 bn)
Public Projects, etc.

5% (USD 0.8 bn)
Disaster Management and
Mitigation

5% (USD 0.7 bn)
Others11% (USD 1.8 bn)
Temporary Financial Countermeasures Funding

Operations

Water Supply

7% (USD 1.2 bn)

General Account-related Loans

Review and Plan

Refinancing Loans for
Facilities Affected by Earthquake

38％ (USD 6.1 bn)
FY2014 Loans Extended by Borrower

USD

Local Government Associations

7％ (USD 1.1 bn)

3％ (USD 0.4 bn)

16.0 bn

Prefectures

22％ (USD 3.6 bn)

Management Structure

Total

Towns and Villages

Government-designated Cities

57％ (USD 9.1 bn)
Note: Totals may not add up due to rounding.

11％ (USD 1.8 bn)

JFM’s Role in
Local Government Finance

Cities and Special
Wards of Tokyo

Financial Section
Appendix / JFM Data

JFM Annual Report 2015 | 11

Review
and
Plan

Review and Plan

2

Review of Operations for Fiscal 2014

Funding Operations

1. Overview*1
In fiscal 2014, JFM raised a total of USD 17.5 billion including USD 12.1 billion in JFM bonds (nonguaranteed), and USD 5.2 billion in government-guaranteed bonds for the repayment of existing bonds
issued by Japan Finance Corporation for Municipal Enterprises (the “Predecessor”).
With regard to JFM bonds, a total of USD 9.6 billion was raised by the regular issuance of 5-year, 10year and 20-year domestic bonds, as well as opportunistic issuances through JFM’s Flexible Issuance
Program (“FLIP”) and the MTN Program. The amount raised by JFM bonds exceeded from the initialfunding plan (USD 9.1 billion) mainly due to the growth in the lending volume.
As for domestic public offerings, a total of USD 7.1 billion was issued in the year. In order to cope withhighly volatile market condition through the year, JFM reduced 10-year bond issuance from the initialplan while increasing opportunistic issuance.
In overseas offerings, JFM issued its inaugural Euro denominated benchmark bonds in 7-year tenor(EUR 1 billion) in September 2014, followed by another first 10-year issuance (USD 1 billion) in February
2015. In addition to these successful benchmark transactions, JFM issued a total of USD 222 million
through three private placements denominated in multiple currencies and also an offering of NZD 105
million Uridashi Bonds targeting Japanese retail investors. Through these activities, the total volume ofinternational bonds issued amounted to USD 2.6 billion*2.
The private placements of 10-year bonds with the Pension Fund Association for Local Government
Officials were USD 2.5 billion.
Furthermore, JFM also utilized bank loans as a complementary means of funding, financing USD 0.1
billion through long-term loans.
As a result, as of the end of fiscal 2014, JFM’s outstanding bonds were USD 162.5 billion, including thePredecessor’s bonds to which JFM succeeded. Outstanding long-term bank loans totaled USD 0.7 billion.
Notes: 1. Issued amounts are calculated based on issue prices.
2. Includes an offering of EUR denominated benchmark bonds, two AUD denominated private placements, and an offering of
NZD denominated Uridashi Bonds, each converted at the exchange rate at the time of pricing.
Flexible Issuance Program (“FLIP”)
FLIP is JFM’s own framework for domestic bond issuance. Bond maturities range from 3 years to 30 years (except for 5-year, 10-year
and 20-year fixed rate bullet bonds) with minimum and maximum issue sizes of JPY 3 billion (USD 25 million) and JPY 20 billion (USD
166 million), respectively.

Funding in Fiscal 2014
1. JFM bonds (non-guaranteed)(2) P rivate placements with Pension Fund
Association for Local Government Officials(1) Domestic and overseas offerings
Type of Bonds

Plan (Initial)

Achieved

Domestic Public Offerings

USD 6.1 bn

USD 7.1 bn

10-year

USD 3.0 bn

USD 2.9 bn

20-year

USD 1.0 bn

USD 1.1 bn

5-year

USD 0.2 bn

USD 0.2 bn

Opportunistic Issuance

USD 1.8 bn

USD 2.7 bn

Overseas Offerings - MTN

USD 1.8 bn

USD 2.6 bn

Open Issuance

*3

Total

USD 1.2 bn
USD 9.1 bn

Type of Bonds

Plan

Achieved

10-year

USD 2.5 bn

USD 2.5 bn

2. Government-guaranteed domestic bonds
Type of Bonds

Plan

Achieved

10-year

USD 3.6 bn

USD 3.6 bn-

6-year

USD 1.7 bn

USD 1.7 bn

USD 9.6 bn

Total

USD 5.2 bn

USD 5.2 bn

Notes: 1. Figures in Plan (Initial) column show initially planned
amounts. In December 2014, the above plan wasrevised to a total of USD 9.6 billion.
2. In addition to the total achieved figure above, USD 0.1
billion was raised through long-term bank loans.

3. Details of issuance such as tenor, issue size andissue market will be determined as necessary basedon the lending status, market conditions and otherfactors.

JFM Annual Report 2015 | 12

Issue Conditions of 10-Year JFM Bonds(bp)
16

Spread over major local government bonds (bp)Spread over JGB yield curve (bp)*

14

(%)
1.6

Management Structure

Note: See pages 102-104 for the terms of issuances in fiscal 2014.

Operations

In the domestic market, on the back of the heightened volatility in the Japanese bond market due tothe Bank of Japan’s quantitative and qualitative easing announced in April 2013, the spreads of JFM
bonds over JGB yield curve and major local government bonds had continuously widened, and thepremium of 10-year JFM bonds to JGB yield curve peaked at 12 bp and those to major local government
bonds at 6 bp in November 2013. As the market environment improved, the premium had tightened to 3.5
bp over JGB yield curve and 1.0 bp over those major local government bonds in October 2014. However,as volatility increased in the Japanese bond market after the Bank of Japan’s additional quantitative andqualitative easing at the end of October, the premium for JFM bonds widened again to 6.5 bp over JGB
yield curve and 4.0 bp over major local government bonds in November 2014 and reached 9.0 bp over
JGB yield curve and 2.5 bp over major local government bonds in March 2015.
20-year JFM bonds had captured solid demands for higher yields under low interest rate market
throughout the year which contributed to tighten the premium for JFM bonds.
JFM’s international bonds have been issued based on investor demand and market conditions byreferring to credit spreads observed in the international primary or secondary markets at the time ofpricing.

Review and Plan

2. Issue Spreads

1.4

JFM bonds (%)
12.0 12.0

10
0.887
0.813

8

0.841

6

2

0.831

0.739

0.778
0.783

0.730
6.0 6.0

0.5

0.5

Apr

May

Jun

0.724

0.690

5.0

5.0

4.5

6.5

4.0

2.0

6.5
0.589

0.581

0.574
0.535
4.5
4.0
4.0
3.5

5.0

3.0

2.5

0.5

0.729

0.631

5.5

4.5

4.0

0.739
0.739

8.5

1.0

1.0

1.0

Aug

Sep

Oct

9.0

0.8

6.5

0.6

0.501
4.0

0.514

0.478

0.4

4.0
0.355

2.0

1.0

9.0

2.5

2.5

Feb

Mar

0.2
0.0

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

FY2013Jul

FY2014

Note: Spreads over the JGB curve are theoretical values calculated by JFM.

Nov

Dec

Jan

Financial Section

0

1.0
9.0

0.576

2.5

10.5 10.5

8.5

6.0

2.5

1.2
11.0 11.0

0.922

7.0

4

11.5

JFM’s Role in
Local Government Finance12

Appendix / JFM Data

JFM Annual Report 2015 | 13

Review
and
Plan

Review and Plan

3

Review of Operations for Fiscal 2014

Financial Review

1. Income Statement
In fiscal 2014, JFM’s income was USD 3.6 billion, a decrease of USD 0.2 billion from the previous year.
This is mainly due to a downward trend in long-term interest rates in Japan, which led to lower interest
income from loans. Expenses experienced a similar trend, decreasing USD 0.1 billion to USD 2.1 billion,on the back of reduced interest expenses with respect to bonds. Ordinary income was thus down USD 0.1
billion to USD 1.5 billion, though still maintaining JFM’s income stability.
Pursuant to the relevant laws, a portion of the revenue generated by the refinancing of bonds andborrowed money of JFM* is to be directed into reserves for interest rate volatility. As a result of suchprovisions as well as other factors, net income amounted to USD 0.3 billion, up USD 0.03 billion.
*This revenue is calculated based on the difference between JFM’s funding rates at the time the loans were made and the current
refinancing rates.

2. Balance Sheet
As of 31 March 2015, JFM’s total assets amounted to USD 203.7 billion, up USD 3.5 billion from theprevious year. This mainly resulted from an increase in loans by USD 2.9 billion due to the amount of newloans for local governments exceeding that of loans repaid.
Total liabilities were up USD 3.3 billion to USD 202.3 billion. This increase primarily reflected
an increase of USD 1.0 billion in outstanding bonds as a result of the issue amount exceeding theredemption amount as well as an increase of USD 1.2 billion in cash collateral received for financial
instruments.
Total net assets were USD 1.4 billion, up USD 0.3 billion. This reflected net income of USD 0.3 billion in
the general account being recorded as the general account surplus reserve.
Financial highlights since fiscal 2012 are as follows.

JFM Annual Report 2015 | 14

1. Income Statement(USD Millions)
FY2012FY2013

FY2014

YoY

Income

4,047

3,808

3,610

-198

Expenses

2,277

2,246

2,111

-135

Ordinary Income

1,770

1,562

1,500

-63

173

220

257

37

Net Income

Operations(USD mm)
6,000

Review and Plan

Financial Highlights

IncomeExpenses
Ordinary Income

4,000

2,000

FY20122013

2014

2. Balance Sheet(USD Millions)
End of FY2012

End of FY2013

End of FY2014

YoY

196,934

200,227

203,741

3,514

Loans

188,325

191,767

194,713

2,946

Others

Bonds
Cash collateral received forfinancial instruments

8,609

8,460

9,028

567

195,991

199,041

202,299

3,259

155,158

161,367

162,357

990

-

362

1,514

1,152

7,664

7,664

7,645

-19

Reserves under special laws

32,791

28,73329,975

1,242

9,138

10,966

12,794

1,828

23,022

17,221

16,711

-510

630

546

470

-76

Others

377

915

809

-106

Total Net assets

943

1,186

1,441

255

Reserve for interest rate
volatility
Management account reservefor interest rate volatility
Reserve for interest rate
reduction(USD mm)210,000

Financial Section

Fund for lending rate reduction

JFM’s Role in
Local Government FinanceTotal Assets

Total Liabilities

Management Structure0

Total Assets
Total Liabilities
Appendix / JFM Data

200,000

190,000

FY2012

2013

2014

Note: Totals may not add up due to rounding.

JFM Annual Report 2015 | 15

Review
and
Plan

Review and Plan

1

Management Plan for Fiscal 2015

Lending Operations

JFM’s lending plan is formulated based on the amount of local government borrowing for which theconsent or approval is scheduled to be given by the Minister for Internal Affairs and Communications or
the respective prefectural governors, under the Local Government Borrowing Program (the “LGBP”).
Based on the LGBP, JFM plans to extend loans in the amount of USD 15.2 billion in fiscal 2015, anincrease of 1.7% from fiscal 2014. This mainly reflects increased budgets for national disaster prevention
projects and disaster management and mitigation projects and newly budgeted optimization of the
public facilities.
The amount of JFM funds booked in the LGBP decreased by 3.9% from fiscal 2014 to USD 16.4 billion.
This decrease is primarily due to a decreased budget for temporary financial countermeasures funding.
In response to funding needs by municipal enterprises for longer tenor projects such as water supply
and sewage, JFM resolved that the maximum term to loans for water supply and sewage projects would
be increased to 40 years from fiscal 2015.

Lending Plan

Planned Amount

FY2015FY2014YoY

USD 15.2 bn

USD 15.0 bn

1.7%

JFM Funds in Local Government Borrowing Program
FY2015FY2014YoY

USD 16.4 bn

USD 17.0 bn-3.9%General Account-related Loans

USD 4.7 bn

USD 4.6 bn

0.5%Municipal Enterprise-related Loans

USD 6.3 bn

USD 6.0 bn

6.0%

Refinancing Loans for Facilities Affected by Earthquake

USD 0.01 bn

USD 0.01 bn

0.0%

Temporary Financial Countermeasures Funding

USD 5.4 bn

USD 6.4 bn-16.2%JFM Funds

Notes: 1. The amount of JFM funds in the LGBP does not match JFM’s lending plan due to the timing for consent or approval being
different from when JFM loans will actually be extended.
2. See page 52 for more information on JFM funds in the LGBP.

2

Funding Operations

In order to raise funds for lending operations, JFM primarily issues non-guaranteed bonds throughdomestic public offerings and overseas offerings. For fiscal 2015, JFM plans to issue USD 8.3 billion of
JFM bonds through these methods.
In addition, private placements with the Pension Fund Association for Local Government Officials areprojected to amount to USD 2.5 billion, at the same volume as last year.
As for government-guaranteed bonds, JFM plans to issue USD 6.0 billion, an increase of USD 0.7
billion from the amount issued in fiscal 2014 due to scheduled payment to the national treasury in fiscal
2015 from a portion of JFM’s reserves for interest rate volatility maintained in the management account.

JFM Annual Report 2015 | 16

1. JFM bonds (non-guaranteed)(1) Domestic and overseas offerings
FY 2015 (Plan)

FY2014 (Achieved)

Domestic Public Offerings

USD 5.1 bn

USD 7.1 bn

10-year

USD 2.2 bn

USD 2.9 bn

20-year

USD 0.8 bn

USD 1.1 bn

5-year

USD 0.2 bn

USD 0.2 bn

Opportunistic Issuance

USD 1.8 bn

USD 2.7 bn

Overseas Offerings - MTN

USD 1.8 bn

USD 2.6 bn

Open Issuance

USD 1.4 bn–

USD 8.3 bn

USD 9.6 bn

Total(2) Private placements with Pension Fund Association for Local Government Officials
Type of Bonds

FY 2015 (Plan)

FY2014 (Achieved)

USD 2.5 bn

USD 2.5 bn

Management Structure

Notes: 1. Subject to change depending on lending status, market conditions and other factors.
2. For Open Issuance, details of issuance such as tenor, issue size and issue market will be determined as necessary basedon the lending status, market conditions and other factors.
3. In addition to the above FY2014 figures, USD 0.1 billion was raised through long-term bank loans.

Operations

Type of Bonds

Review and Plan

Funding Plan for FY2015

2. Government-guaranteed domestic bonds
FY 2015 (Plan)

FY2014 (Achieved)

10-year

USD 4.2 bn

USD 3.6 bn

8-year

USD 0.8 bn–

6-year

USD 1.0 bn

USD 1.7 bn

USD 6.0 bn

USD 5.2 bn

Total

Scheduled Payment to the National Treasury

In accordance with Article 14 of Supplementary Provisions of the JFM law, it was decided that USD
5.0 billion in total of JFM’s reserves for interest rate volatility in the management account would betransferred to the national treasury over three-year period from fiscal 2015 through fiscal 2017. In fiscal
2015, USD 2.5 billion shall be transferred to the national treasury to secure financial resources of thelocal allocation tax for regional revitalization.

Financial Section

3

JFM’s Role in
Local Government Finance

Type of Bonds

Appendix / JFM Data

JFM Annual Report 2015 | 17

Operations
Lending Operations
1. Outline

20

2. Loan Interest Rates

22

3. Credit Check System24

4. Trends in Lending Operations 24
5. Lending Operations by
Business

27

Funding Operations
1. Issue Type30

2. Basic Funding Policy

31

3. Features of JFM Bonds

32

4. Trends in Funding Operations 33

Operations

Lending Operations

JFM’s primary objective is to contribute to the sound operation of the local
government financing and to improve the welfare of local residents by providing longterm funding at low interest rates to local governments.

1

OutlineOperations

As public funds included in the LGBP, JFM loans are offered to local governments which have theconsent or approval of the Minister for Internal Affairs and Communications or the respective prefectural
governors.

1. Eligible Borrowers
JFM provides loans exclusively to local governments.

2. Types of Loans
JFM classifies general loans into the following three categories depending on the term.

• Long-Term Loans	Loans provided to local governments that have the consent or approval, and mature in orafter the second fiscal year.
• Pre-Consent or Pre-Approval Loans	Bridge loans to cover the period up to the disbursement of Long-Term Loans for projects forwhich the consent or approval is assured.
• Short-Term Loans	Loans to be repaid with revenues in the same fiscal year.

JFM Annual Report 2015 | 20

Review and Plan

3. Lending Scopes and Maturities of Loans
JFM lends mainly to the following local government businesses with respective loan maturities.
Loans for Fiscal 2015
Fixed Lending Rate

Business Type

Grace Period
for Principal
Repayment

Within (Years)
20

Within (Years)
5

Within (Years)
20

Within (Years)
5

25

5

25

5

Educational Facilities Development

25

3

25

3

Social Welfare Facilities Development

20

3

20

3

General Waste Disposal

15

3

15

3

General Projects

20

5

20

5

Regional Revitalization

30

5

30

5

Disaster Prevention

30

5

30

5

Local Road Development

20

5

20

5

Special Municipal Mergers

30

5

30

5

Disaster Management and Mitigation

30

5

30

5

Public Facilities Optimization

30

5

30

5

Water Supply

30

5

40

5

Industrial Water Supply

30

5

40

5

Transportation

30

5

40

5

Electricity Supply

30

5

30

5

Gas Supply

25

5

25

5

Port Facilities

30

5

40

5

Hospitals

30

5

30

5

Markets

30

5

40

5

Slaughterhouses

30

5

30

5

Sewerage

30

5

40

5

–

–

30

3

–

–

20

3

Public Housing
National Disaster Prevention*2
Educational andSocial Welfare
Facilities Projects

Unsubsidized
Projects

Municipal
Enterprise-related Loans

Prefectures and GovernmentTemporary Financial
Designated Cities
Countermeasures Funding
Cities, Towns and Villages

Financial Section

Notes: 1. Adjustable lending rates are reviewed depending on the maturity of the loan every 5 years, every 10 years or every 15
years or 20th, or 30th anniversary of the initial disbursement. Lending rates for Temporary Financial Countermeasures
Fundings are reviewed every 5 years or 10 years.
2. Maturities for the national disaster prevention business are determined based on the business category to which actual
facilities planned for construction belongs.

JFM’s Role in
Local Government FinanceMaturity

Management Structure

Grace Period
for Principal
Repayment

Operations

Maturity

Public Projects, etc.

General Account-related Loans

Adjustable Lending Rate*1

Appendix / JFM Data

JFM Annual Report 2015 | 21

Operations

2

Lending Operations

Loan Interest Rates

JFM sets standard lending rates, which are determined to balance its funding cost, and also offers
special lending rates at a discount to the standard rates by making use of its Fund for Lending Rate
Reduction.

1. Loan Interest Rates
Operations

JFM offers two types of loan interest rates: the standard lending rate and the special lending rate.
The standard lending rate is calculated in order to balance JFM’s funding cost with interest income
from its lending. Specifically, this rate is determined in a manner that the discounted present value of the
cash flows of the funds raised to make the loans equals the discounted present value of the cash flows to
be generated by those loans with their respective terms to maturity, grace period for principal repayment
and repayment methods.
The special lending rate is set at 0.35% per annum below the standard rate. At the end of fiscal 2014,
approximately 99% of outstanding JFM loans consisted of special interest rate loans.
The trends of JFM loan interest rates since April 2013 are shown below. The special lending rate has
been at the same level as the national government’s lending rates that are applicable to loans for specificpublic projects (the Fiscal Loan Fund). This is due to the floor rates of the special lending rates being set
equal to respective lending rates of the Fiscal Loan Fund which have identical terms on redemptions tothose of JFM loans.

Trends of Lending Rates
2.00%

Standard Lending Rate
Special Lending Rate = Fiscal Loan Fund interest rates

1.80%

1.60%

1.40%

1.20%

1.00%

0.80%

Jun

2013

Sep

Dec

Mar

Jun
2014

Sep

Dec

Note: T he lending rates above represent a 30-year fixed rate loan with a 5-year grace period for principal repayment.

JFM Annual Report 2015 | 22

2015

Mar

The interest rate differentials between the special lending rates and the standard lending rates arecovered by investment gains in the Fund for Lending Rate Reduction*, which consists of contributions
from local governments of a portion of the earnings from municipally operated racing, and also JFM’s
own funds.

Review and Plan

2. Lending Rate Reduction*From the viewpoint of equal revenue sharing among all local governments, local governments that operate horse, bicycle,
motorcycle and speedboat racing contribute a portion of their earnings from the races to the Fund.
Operations

0.15%

Reduction using investment gains

0.20%

Reduction using JFM’s own funds

0.20%

Reduction
0.35%

General Account-related Loans• Public housing
Municipal Enterprise-related Loans
SpecialLending Rate • Industrial water supply • Gas supply• Elderly care services • Markets• Slaughterhouses • Parking facilities

0.15%

General Account-related Loans(excluding public housing)Temporary Financial
Countermeasures Funding
Municipal Enterprise-related Loans• Water supply • Transportation• Hospitals • Sewerage • Electricity supply

JFM’s Role in
Local Government FinanceNotes: 1. The minimum interest rates for JFM loans are set at the same level as the interest rates of the Fiscal Loan Fund.
2. The discount rates using the investment gains (0.15% or 0.20%) applicable to each business category are determined by
the Minister for Internal Affairs and Communications, pursuant to the Ministerial Ordinance on Finance and Accounting of
the Japan Finance Organization for Municipalities (Ordinance No. 87 of the Ministry of Internal Affairs and Communications,2008).

Management StructureStandard
Lending Rate(funding costs)

Financial Section
Appendix / JFM Data

JFM Annual Report 2015 | 23

Operations

3

Lending Operations

Credit Check System

JFM conducts the following credit check process for all loans on the assumption that the details
and legality of each project as well as assurance of loan repayment have been confirmed during theconsultation and checking process to obtain the consent or approval for loans.

Operations

1) JFM checks the financial and operational status of local governments and municipal enterprises
to which it plans to lend, in light of the fiscal indicators as stipulated in the Law Relating to the
Financial Soundness of Local Governments of Japan (Act No. 94 of 2007). This credit checkprocess may include an interview of the staff of prefectures, cities, towns, and villages.
2) JFM reviews loan applications submitted by local governments to determine if conditions are met.
The conditions include the consent or approval, any required resolution by the local government
assembly and budget appropriation for loans.
3) After a loan is disbursed, JFM conducts an onsite review to verify the use of funds and to check theoperational status of the project and the financial and operational status of the borrower.
1 Check of local

governments/municipal
enterprises applying
for loans•Check financial andoperational status•Conduct interviews

4

2 Verification at the timeof lending
Check of the loan
application documents•Verify the consent or approval
for the loan amount•Check the loan application
documents

3 Subsequent review
Onsitecredit review

Disbursementof loans•Check the status of loans
and projects•Check financial andoperational status

Trends in Lending Operations

1. Overview
JFM’s annual lending volume has risen since fiscal 2009 as a result of the expansion of its lending
scope to overall general account-related loans, the introduction of the Great East Japan Earthquakerelated loans, and so on.
In fiscal 2014, the lending volume amounted to USD 16.0 billion. At year-end, outstanding loans were
USD 194.7 billion.
Annual Lending Volume

Outstanding Loans(USD bn)
25(USD bn)
210

200

20
17.7
15.2 15.0 15.7

15

194.7
191.8

16.0
190
183.0

10.7
10

180

5

170

0
FY2009 2010 2011 2012 2013 2014

JFM Annual Report 2015 | 24

184.7

186.0

188.3

0
FY2009 2010 2011 2012 2013 2014

Operations

In fiscal 2009, JFM has become eligible to extend loans for general account related businesses andtemporary financial countermeasures funding. As a result, the proportion of the annual lending amountby business types has changed significantly.
In fiscal 2014, loans for temporary financial countermeasures funding were USD 6.1 billion, accounting
for the largest share of lending, at 38% of the total. Ranked next were USD 2.9 billion in the seweragebusiness, representing 18% of the total, and USD 1.2 billion in the special municipal mergers, for 8% of
the total.
Amount of JFM loans extended to local governments during fiscal 2014 totaled USD 16.0 billion. Cities
and special wards of Tokyo represented the highest share at 57% of the total, followed by prefectures at
22% and government-designated cities at 11%.

Review and Plan

2. Annual Lending Volume by Business and Borrower

Long-Term Loans Extended by Business
Total
FY (USD bn)

Water Supply Hospitals

2010 15.2

8%

3% 3%

Sewerage

General Account-related Loans
20%

20%

2

2012 15.7732013 17.7

712014 16.0

7

2

3

18
5

4

22

17
16

5

18

27

37

33

33

4
6
38

28

6

2

FY2014 Loans Extended by Borrower

Total

Local Government Associations

7％ (USD 1.1 bn)

3％ (USD 0.4 bn)

16.0 bn

Prefectures

22％ (USD 3.6 bn)
Cities and Special
Wards of Tokyo

57％ (USD 9.1 bn)

Government-designated Cities

11％ (USD 1.8 bn)

Financial Section

USD

Towns and Villages

JFM’s Role in
Local Government FinanceNotes: 1. Pre-consent or pre-approval loans are accounted for in the year when they are converted into long-term loans.
2. “Others” includes refinancing loans for municipal enterprise-related projects, and refinancing loans for facilities andspecified local governments affected by earthquake.
3. Totals may not add up due to rounding.

Management Structure

84%

Temporary Financial Countermeasures Funding
41

Transportation2011 15.0

Others42%

Note: Totals may not add up due to rounding.
Appendix / JFM Data

JFM Annual Report 2015 | 25

Operations

Lending Operations

3. Outstanding Loans by Business and Borrower
At the end of fiscal 2014, the outstanding loans were USD 194.7 billion, of which the seweragebusiness accounted for the largest share at 35%, followed by temporary financial countermeasuresfunding at 17% and water supply at 16%.
There were a total of 2,146 local governments with outstanding loans from JFM, including all
prefectures. Cities and special wards of Tokyo accounted for the largest portion at 52% of the total,
followed by prefectures at 20% and government-designated cities at 18%. Towns, villages as well as
local government associations and corporations represented the remaining 10.3%.
Operations

Outstanding Loans by Business (as of 31 March 2015)
Public Housing

2% (USD 3.2 bn)

Industrial Water Supply

1% (USD 1.7 bn)

Others6% (USD 11.7 bn)

Disaster Management
and Mitigation

2% (USD 4.0 bn)

Total

USD

Sewerage

35% (USD 68.3 bn)

Hospitals

3% (USD 6.3 bn)

194.7 bn 4

Special Municipal Mergers% (USD 7.0 bn)

Transportation

5% (USD 10.1 bn)
Local Road Development (Previous)

10％ (USD 19.1 bn)

Temporary Financial
Countermeasures Funding

17% (USD 33.0 bn)
Water Supply

16% (USD 30.4 bn)

Outstanding Loans by Borrower (as of 31 March 2015)
Local Government Corporations

0.3% (USD 0.6 bn)[24]

Local Government Associations

3% (USD 5.3 bn)
Total

USD
[2,146]Prefectures

20% (USD 38.3 bn)
[47]

[339]

194.7 bn 7

Towns and Villages% (USD 14.4 bn)[925]

Cities and Special Wards of Tokyo

52% (USD 101.2 bn)[791]*Figures in square brackets represent the number of borrowers.

Note: Totals may not add up due to rounding.

JFM Annual Report 2015 | 26

Government-designated
Cities18% (USD 35.0 bn)[20]

Lending Operations by Business

JFM provides loans to local government businesses specified in the LGBP that the national
government formulates each fiscal year.
The major JFM-funded businesses are as follows.

Review and Plan

5

Sewerage Business(Number of loans)

4.0

5,000
Number of Loans

4,000

Loan Amount

3,000

2.0

2,000

1.0

1,000

0

FY2010 11

12

13

0

14

JFM’s Role in
Local Government Finance

Sewage Sludge
Gasification System
in Kiyose Water
Reclamation Center(Tokyo)3.0Management Structure(USD bn)

5.0

Operations

At the end of fiscal 2013, the sewerage system covered 75.6% of people in cities, towns and villages
with a population of less than 50,000, or 88.9% of the nation’s total population. There were 3,640 projects
involved, with a total annual sewerage processing capacity (combined storm water and seweragetreatment, excluding river basin sewerage) of around 14.9 billion cubic meters serving areas with apopulation of 102.4 million people.
In fiscal 2014, loans extended to the sewerage business totaled USD 2.9 billion.

Water Supply Business(Number of loans)(USD bn)

2.0

Financial Section

At the end of fiscal 2012, the water supply coverage was 97.7% of the population. The water supply
business (including small-scale water supply) operated by local governments totaled 2,112 projects andprovided about 18.4 billion cubic meters of water annually for approximately 124.49 million people.
In fiscal 2014, loans extended to the water supply business amounted to USD 1.2 billion.
2,000

Number of Loans

1.5

1,500

Shiramizu Raw Water
Reservoir (Ishigaki City,
Okinawa Prefecture)

1.0

1,000

0.5

500

0
JFM Annual Report 2015 | 27

FY2010 11

12

13

14

0

Appendix / JFM Data

Loan AmountOperations

Lending Operations

Hospitals BusinessAt the end of fiscal 2013, hospital projects managed by local governments totaled 643 with 839
hospitals, which included 806 general hospitals, one tuberculosis hospital and 32 mental hospitals.
In fiscal 2014, loans extended to the hospitals business (including those run by local independentadministrative institutions) totaled USD 0.7 billion.
(USD bn)(Number of loans)

500

1.0
Operations

0.8

Uwajima City
Hospital(Ehime Prefecture)

Number of Loans
Loan Amount

400

0.6

300

0.4

200

0.2

100

0

FY2010 11

12

13

14

0

Transportation BusinessAt the end of fiscal 2013, the transportation projects managed by local governments totaled 91
projects, which were operated by 74 entities, and public transportation is used by approximately 4.1
billion people annually (11.22 million people on an average daily basis).
In fiscal 2014, loans extended to the transportation business amounted to USD 0.3 billion.
(USD bn)

0.5(Number of loans)

100

Loan Amount

0.4

80
Number of Loans

Sendai City Subway
Tozai Line (Sendai
City, Miyagi
Prefecture)

JFM Annual Report 2015 | 28

0.3

60

0.2

40

0.1

20

0

FY2010 11

12

13

14

0

(USD bn)

(Number of loans)

1,200

8.0
Loan Amount
Number of Loans

6.0

1,000

4.0

800

2.0

600

0

FY2010 11

12

13

14

Operations

Temporary financial countermeasures funding represents thefunding for local governments in order to cover general resource
shortfalls pursuant to the provisions of the Local Government
Finance Law.
In order to secure the payments of the principal and interestof funds borrowed by local governments under temporar yfinancial countermeasures funding, the national government
includes the entire amount of such payments in the total amountof local allocation tax grants, which are to be allocated to local
governments in subsequent years.
In f iscal 2014, loans ex tended for tempor ar y f inancial
countermeasures funding amounted to USD 6.1 billion.

Review and Plan

Temporary Financial Countermeasures Funding

400

Management Structure
JFM’s Role in
Local Government Finance
Financial Section
Appendix / JFM Data

JFM Annual Report 2015 | 29

Operations

Funding Operations

As a joint funding organization for local governments, JFM raises funds in aconsistent manner to provide local governments with long-term and low-interest funds,
while endeavoring to reduce its funding costs.

1

Issue TypeOperations

JFM primarily issues non-guaranteed bonds (i.e., JFM bonds) through public offerings in order toraise funds for its lending operations. Private placements with the Pension Fund Association for Local
Government Officials are also taken as a means of fund-raising.
JFM issues government-guaranteed bonds only for refinancing the existing government-guaranteedbonds of the Predecessor in order to manage the Predecessor’s assets to which JFM has succeeded.

JFM Bonds

To be issued by JFM without government guarantees. Under Article 40,
Paragraph 2 of the JFM Law, all holders of JFM bonds have a preferential
right to be paid prior to other unsecured indebtedness.

Domestic
Bonds
Public•Regular issuance of 5-year, 10-year and 20-year bonds

Offerings•Opportunistic bond issuance (maturities except for 5-year, 10-year and 20-year)

Private Placements with Pension Fund Association
for Local Government Officials

International
Bonds

Bonds issued in international markets through the MTN Program

Government-Guaranteed Bonds

To be issued only for the purpose of refinancing existing governmentguaranteed bonds of the Predecessor.

JFM Annual Report 2015 | 30

Basic Funding Policy

To secure stable and low-cost funding, JFM pursues diversified funding options and strives tobuild confidence in capital markets by proactively disclosing information and thoroughly fulfilling
responsibilities. JFM also endeavors to seek more flexible funding operations than ever in response tocurrent low interest rate environment and movement of investor demands.

Review and Plan

2

1. Diversification of Funding Methods

Management Structure

2. Proactive Disclosure and Investor Relations

Operations

From the viewpoint of stable funding, JFM endeavors to issue bonds with various maturities andstructures, including medium-term and super-long-term bonds in response to the market environment
and market needs, in order to broaden its investor base, while also considering funding costs and risk
management.
JFM’s basic means of funding is the issuance of bonds. JFM accesses the domestic market throughthe regular issuance of 5-year, 10-year and 20-year bonds, and also continues to take advantage of
its Flexible Issuance Program (FLIP) for opportunistic funding as well as bank loans. JFM also utilizes
the MTN Program, being committed to the regular issuance of benchmark bonds to the international
investors and Uridashi Bonds to Japanese retail investors.

JFM proactively discloses information on its operations, financial conditions and risk management
status in order to support investment decisions by investors. In this context, JFM announces its annual
funding plan prior to the start of the new fiscal year and its second half-year funding plan in September.
In addition, JFM performs investor relations activities, including presentation meetings and/or oneon-one meetings with investors in both domestic and international markets. JFM thereby helps investors
correctly understand JFM’s management and bonds as well as strengthens market confidence toward
JFM.

JFM’s Role in
Local Government Finance3. Contribution to the Sound Development of Capital Markets

Financial Section

While capturing funding opportunities in response to the needs of capital markets, JFM will further
strengthen its role as a leading public-sector bond issuer and be committed to contributing to the sounddevelopment of capital markets.

Appendix / JFM Data

JFM Annual Report 2015 | 31

Operations

3

Funding Operations

Features of JFM Bonds

JFM bonds are generally recognized as having high credit standing with the following features.

•	J FM’s assets can be deemed to be highly stable based on the fact that JFM lends
exclusively to local governments, and no local governments have ever defaulted.
Operations•	JFM has a solid financial foundation, backed by its reserve for interest rate volatility and theFund for Lending Rate Reduction prescribed in the JFM Law.
•	JFM is a joint funding organization established with a capital contribution from Japanese
local governments encompassing all prefectures, cities, special wards of Tokyo, governmentdesignated cities, towns and villages, as well as some local government associations.
•	Under the JFM Law, local governments have an obligation to bear the costs necessary tosatisfy all JFM obligations in the event JFM is to be dissolved and its obligations remain
unpaid.

JFM has received the highest credit rating among the Japanese public-sector bond issuers fromStandard and Poor’s (S&P), Moody’s Investors Service (Moody’s) and Rating and Investment Information,
Inc. (R&I). The BIS risk weighting is 10% for JFM bonds denominated in yen.
In addition to JGBs and local government bonds, interest received by foreign investors (non-residents,
foreign corporations, etc.) on JFM’s domestic bonds in book-entry form as well as JFM’s internationalbonds (both of which include government-guaranteed bonds) shall be exempted from Japanese income
tax, subject to certain procedural requirements.

(as of 31 March 2015)

S&P: AA-

Issuer Credit Rating

Moody's: A1
R&I: AA+BIS Risk Weighting(denominated in yen)

JFM bonds:

For reference:

10%

Japanese Government Bonds: 0%
Japanese Government-Guaranteed Bonds: 0%
Local Government Bonds: 0%

All holders of JFM bonds (as well as JFM’s government-guaranteed bonds) have a

Preferential Rights
for JFM Bonds

preferential right to be paid prior to other unsecured indebtedness, and such preferential
right shall rank immediately after the general preferential rights as provided for in the
Civil Code of Japan (Law No. 89 of 1896, as amended). (Article 40, Paragraph 2 andParagraph 3 of the JFM Law)

Note: The risk weights are values for investors in Japan. For oversea bonds, the values are determined by respective authorities ineach country (as of 31 March 2015).

JFM Annual Report 2015 | 32

Trends in Funding Operations

Outstanding Bonds and Bank Loans(USD bn)
30(USD bn)
200
25.1

25
21.8
20
16.9
5.4

10
5
0

8.6

0.7

3.3

7.5

FY2010

5.9
2.5

0.2
2.5
0.9

2.7

8.1

7.8

2011

2012

0.4
2.5
3.2

17.5

2013

103.4

100

5.2

131.0

0.1
2.5
2.6

8.4

162.2 163.2

92.8

110.5

118.8

50

7.1

0

2014

21.4

FY2010

45.0

32.6

2011

2012

58.8

2013

70.4

2014

Management Account

Government-guaranteed domestic bonds

General AccountPrivate placements with Pension Fund Association for
Local Government Officials
JFM bonds (international bonds)
JFM bonds (domestic bonds)
Non-guaranteed bonds

JFM Annual Report 2015 | 33

Appendix / JFM Data

Government-guaranteed international bonds

Long-term bank loans

Financial Section

15

0.8

17.3

150

12.4
10.6

152.4 151.4 155.5

JFM’s Role in
Local Government FinanceFunding Volume

Management Structure

Note: FILP stands for Fiscal Investment and Loan Program, which is prepared by the national government and determines the
allocation of funds and extent of government guarantees available for certain institutions. FILP agency bonds are nonguaranteed bonds issued under the FILP.

Operations

JFM issues JFM bonds (non-guaranteed bonds to be issued through domestic public offerings orunder the MTN Program, or private placements with the Pension Fund Association for Local Government
Officials) and government-guaranteed bonds for the purpose of refinancing existing governmentguaranteed bonds of the Predecessor.
Historically, the Predecessor had issued government-guaranteed bonds and private placement
bonds subscribed by the Pension Fund Association for Local Government Officials and, for the period
from fiscal 2001 to fiscal 2008, non-guaranteed FILP agency bonds*. Then, since JFM commenced its
operations in fiscal 2008, JFM has issued JFM bonds. In recent years, the issuance of JFM bonds has
been increasing, and this trend is expected to continue for the future. On the other hand, aside from anincrease over the last two years due to the scheduled payment to the national treasury, the issuance ofguaranteed bonds will gradually decrease.
In fiscal 2014, JFM raised a total of USD 17.5 billion, a decrease of USD 7.6 billion from the previous
year. This decrease was mainly due to completion of the scheduled payment to the national treasury,
which JFM funded USD 5.4 billion through government guaranteed bonds in fiscal 2013, and also adecrease in the annual lending volume.
At year-end, outstanding bonds were USD 162.5 billion. Outstanding bank loans totaled USD 0.7
billion. The total amount of outstanding bonds and bank loans was USD 163.2 billion, which wascomprised of USD 70.4 billion in the general account and USD 92.8 billion in the management account.
While the outstanding bonds and bank loans in the general account have been increasing, themanagement account has been decreasing. JFM expects the amount of the management account togradually decrease as no new bonds have been issued since October 2008 and will be issued going
forward for new loan except for refinancing outstanding Predecessor’s bonds.

Review and Plan

4

Management
Structure
Corporate Governance1. Corporate Governance36

2. Internal Control overFinancial Reporting38

3. Internal Audit

38

General Account andManagement Account39

Risk Management

41

Compliance46

Disclosure

47

Management
Structure

Corporate GovernanceJFM ensures responsible corporate governance through the participation of external
experts on the Representative Board and the Supervisory Committee and audits byexternal accounting auditors.

1

Corporate GovernanceCorporate Governance System

Representative Board

Management StructureMembers: (1) Representatives at local governments*(2) External experts*
Number of Members: 6 (3 from (1) above and 3 from (2) above)
Term of Office: 3 years
Appointmentof members

Supervisory
Committee
Members: External experts
Number of Members: 6
Term of Office: 2 years

Appointment
and dismissal of
the President
and CEO

Appointment of
Accounting Auditors
and Corporate
Auditors

Decisions onimportant matters,
including budgets
and accounts

Accounting
Auditors

Consultation andpropositions

President and CEO,
Deputy President, etc.

Audits(Certified public
accountants or an
audit corporation)

AuditsCorporate Auditors
Budgetsubmissions

Approval of changes to thearticles of association
Demand for correction ofillegal activities

National Government*Elected by the national associations of prefectural governors, mayors of cities, and mayors of towns and villages.

JFM Annual Report 2015 | 36

Operations

As an organization autonomously managed by local governments, JFM has the Representative Board
as its supreme decision-making body.
To ensure independence and transparency, the Representative Board consists of one prefectural
governor, one city mayor, one town/village mayor and three members from among experts in local
administration, economics, finance, law or accounting.
The Representative Board has the authority to make decisions on important matters related to theoverall management of JFM, including budgets, settlement of accounts and business plans. As its
supervisory function, the Board also has the authority to order the President and CEO to report on theorganization’s business, assets and liabilities, and to take corrective actions with respect to any illegal orother inappropriate activities.

Review and Plan

1. Representative Board

2. Supervisory Committee

4. Audits by External Accounting Auditors

JFM Annual Report 2015 | 37

Appendix / JFM Data

As JFM raises funds in capital markets, the proper disclosure of information and external checks on
accounting procedures are essential in order to build market confidence toward JFM and raise funds at
low cost.
From this viewpoint, JFM has its financial statements audited not only by corporate auditors but also
by external accounting auditors (certified public accountants or an audit corporation) appointed by the
Representative Board.

Financial Section

The Corporate Auditors are responsible for auditing the accounts of JFM, and may, at their discretion,
submit reports to the Representative Board, the President and CEO and the Minister for Internal Affairs
and Communications.

JFM’s Role in
Local Government Finance

3. Audits by Corporate Auditors

Management Structure

JFM has focused on establishing highly transparent management that incorporates unbiased opinions
of external parties, and responsible corporate governance. To ensure such a governing structure, JFM
has the Supervisory Committee as a deliberative committee comprising external experts.
The Representative Board appoints the members of the Supervisory Committee from among experts
in local administration, economics, finance, law or accounting, and other experts in the academic world.
The Supervisory Committee has the function of monitoring the operations of JFM and may offer its
opinions on important matters such as JFM’s operations including budgets, settlement of accounts
and business plans. The Committee may also, if necessary, request that the President and CEO reporton those matters. The President and CEO must respect and report the Committee’s opinions to theRepresentative Board.

Management
Structure2

Corporate GovernanceInternal Control over Financial Reporting

Pursuant to the Ministerial Ordinance on Finance and Accounting of the Japan Finance Organization
for Municipalities (Ordinance No. 87 of the Ministry of Internal Affairs and Communications, 2008; the“Ordinance”), JFM has a system of internal control over financial reporting to ensure the reliability of
its financial statements, and also maintains and implements this system appropriately. In accordancewith the Ordinance, JFM prepares the Internal Control Report, the base date of which is the end of the
fiscal year (March 31), and it is audited by the external auditors and released together with the financial
statements.
In the fiscal 2014 Internal Control Report, JFM viewed its internal controls on financial reporting
as effective. In the Auditors’ Report on Internal Controls, the accounting auditors gave their opinion(unqualified audit opinion pursuant to Ministerial Ordinance Article 32, Paragraph 4, Clause 1) that, in allmaterial respects, evaluation results of JFM’s internal controls over financial reporting were in conformity
with the standards of evaluation for internal controls over financial reporting generally accepted inJapan.

Management Structure

3Internal Audit

An internal auditor, who is independent from other departments, divisions and offices, examines andassesses the appropriateness and effectiveness of JFM’s internal control systems, thereby helping
ensure reliable financial reporting and appropriate and efficient operations.
On completing this task, the internal auditor submits a report to the president and CEO.
If the internal auditor identifies deficiencies, related divisions and offices must immediately take therequired corrective actions. The internal auditor will then submit to the president and CEO an internal
audit report that includes the progress of corrective actions.
The internal auditor also performs follow-up audits and reports the results to the president and CEO
as necessary.

Internal Audit System

President and CEO
Deputy President

SeniorExecutive
Directors
Departments
DivisionsInternal Audits

JFM Annual Report 2015 | 38

Internal
Auditors

Management
Structure

General Account and Management AccountBegan operations on
1 October 2008

Reorganized on
1 June 2009

Japan Finance
Organization for
Municipalities (JFM)

Established by capital
contributions only from Japanese local
governments

The lending scope was expanded tooverall general account-related loans
Succeeded to assets
and liabilities

Established on
1 June 1957

Japan Finance Corporation
for Municipal Enterprises(the “Predecessor”)

Abolished(and its capital returned to
the national government)

When JFM was founded, it succeeded to the Reserve for Losses on the Refinancing of Bonds in theamount of approximately JPY 3.4 trillion (USD 28 billion) to ensure its future stable management.
Of this amount, the JPY 2.2 trillion (USD 18 billion) needed to ensure the future continuity of JFM’soperations was to be transferred to the general account in equal installments over 10 years, with theremainder to be transferred to the management account to ensure a sufficient financial foundation toappropriately manage the Predecessor’s bonds and loans and prepare for the risk with refinancing
bonds of the Predecessor.

Japan Finance Organization for Municipalities (JFM)
Ensure a financial
foundation needed to sustain
the businesses into the future

General AccountReserve for JPY 2.2 tn
Interest Rate Volatility (USD 18 bn)
Management Account

Ensure a financial foundationthat can withstandthe refinancing risk posed by thegovernment-guaranteed bonds, etc.

FY2008-2017
JPY 220 bn (USD 1.8 bn)
transferred each year

Management Account Reservefor Interest Rate Volatility

JFM Annual Report 2015 | 39

Appendix / JFM Data

Reserve for Losseson the Refinancingof Bonds
JPY 3.4 tn(USD 28 bn)

Financial Section

Predecessor

JFM’s Role in
Local Government FinanceSpecial governmental institution(wholly owned by the national government)

Management Structure

Japan Finance
Organization for
Municipal Enterprises

Operations

Established on
1 August 2008

Review and Plan

The Japan Finance Organization for Municipal Enterprises was established on 1 August 2008,
with capital contributed by all prefectures, cities, special wards of Tokyo, government-designatedcities, towns and villages, as well as some local government associations, to provide funds to local
governments. JFM commenced its operations after succeeding to the assets and liabilities of thePredecessor on 1 October 2008.
As a result of the reorganization on 1 June 2009, JFM’s lending scope was extended to overall generalaccount-related loans.
New loans made and bonds issued since JFM’s operations began are accounted for in the generalaccount of JFM, whereas operations to administer loans carried over from the Predecessor are
accounted for in the management account.
With regard to the management account, JFM issues government-guaranteed bonds solely for the
purpose of refinancing government-guaranteed bonds of the Predecessor.

Management
Structure

General Account and Management AccountIf any assets remain when the asset management operations of the Predecessor are completed andthe management account is closed, those assets shall be returned to the national treasury.
Even before the management account is closed, in the event that the businesses of JFM aredetermined to have been executed smoothly in light of the condition of the management of JFM, theMinister for Internal Affairs and Communications and the Minister of Finance shall, if the management
account reserve for interest rate volatility and so on are determined to exceed the amount necessary
for the smooth operation of the asset management operations of the Predecessor in the future, cause
the amount that is determined to be in excess to belong to the national treasury (Article 14 of the
Supplementary Provisions of the JFM Law).
In accordance with this provision, the Ministers decided to transfer a portion of JFM’s reserve forinterest rate volatility within the management account to the Japanese national government over thethree-year period from fiscal 2015 to fiscal 2017, with the aim of transferring up to JPY 600 billion (USD 5.0
billion). Such portion becomes financial resources for Local Allocation Tax and is distributed to the local
governments for regional revitalization.
During fiscal 2012 and 2013, JFM transferred a total of JPY 1 trillion (USD 8.3 billion) to the nationaltreasury.

Management Structure
JFM Annual Report 2015 | 40

Management
Structure

Risk Management

Overall Risk Management

Review and Plan

1

1. Risk Management System

Operations

JFM adopts an integrated risk management approach to respond to various risks, while pursuing for ahigher level of risk analysis and management.
Accordingly, JFM has developed a system for appropriate risk management, including theestablishment of the Integrated Risk Management Committee, which supervises JFM’s overall risk
management, and the Risk Management Office to ensure comprehensive risk management. Risk
management can then be appropriately reflected in management decisions.

Risk Management System

President and CEO

Senior Executive
Director in Charge

ALM Committee

Risk Management
OfficeLoan
Department

Administration
Department

JFM’s Role in
Local Government Finance

Finance
Department

Management Structure

Integrated Risk
Management
Committee

2. Characteristics of JFM’s Risks

Appendix / JFM Data

JFM Annual Report 2015 | 41

Financial Section

JFM lends to local governments with the maximum maturity of 40 years while JFM raises funds
primarily by issuing 10-year bonds. Among other risks, JFM considers the interest rate risk associatedwith bond refinancing as its major risk (the risk of the negative margin caused by the interest payable
exceeding the interest receivable).
To address such interest rate risk, JFM maintains reserves for interest rate fluctuations (the Reservefor Interest Rate Volatility) and has set up the ALM Committee to comprehensively analyze and manage
JFM’s assets and liabilities in a timely and appropriate manner.
The ALM Committee conducts medium-term and long-term management and risk analysis throughscenario, Value at Risk, duration, and other analyses. JFM reflects the findings in its bond issuance plansand other aspects of management and endeavors to lower interest rate risk.

Management
Structure2

Risk Management

Management of Specific Risks

1. Credit Risk
Credit risk is the risk of loss arising from deterioration in the financial condition of a borrower andother situations, which could cause an asset to lose value or become worthless. Loans and financialtransactions involve credit risk.

1) Credit risk associated with loans
JFM lends exclusively to local governments. Local government bonds and loans have a zero risk
weighting under the regulations of the Bank for International Settlements (as of 31 March 2015). For thereasons outlined below, JFM does not expect any default on loans made to local governments. In fact,
JFM and its Predecessor have never experienced any loan losses.

Management Structure2) Credit risk associated with market transactions
JFM is, however, exposed to the risk of loss arising from credit events, such as deterioration in thefinancial condition of a counterparty, which causes an asset to lose value or become worthless. JFM
works to appropriately manage credit risk of this type by constantly monitoring counterparties’ financial
standings and taking measures including suspension of new deals and cancellation of transactions withcounterparties that have come to poor credit standings. Moreover, JFM limits counterparties to financial
institutions that meet the credit rating and other criteria, and conducts transactions within the credit lines
for each counterparty in order to diversify risks.
In addition, JFM entered into the ISDA Master Agreement and the CSAs (Credit Support Annexes) withits derivatives counterparties to reduce the credit risk resulting from fluctuations in the value of derivativetransactions.

2. Market Risk
Market risk is the risk of losses resulting from changes in the value of assets and liabilities due tofluctuations in risk factors such as interest rates, securities prices and foreign exchange rates, or therisk of loss resulting from changes in earnings generated from assets and liabilities. Market risk includes
interest rate risk, foreign exchange risk, inflation risk and price fluctuation risk.

1) Interest rate risk

• Interest rate risk associated with bond refinancing
JFM is exposed to the interest rate risk resulting from a duration gap between lending and funding. To
address such risk, JFM takes measures described on page 43.

• Interest rate risk associated with a gap in lending and funding schedules
JFM generally raises funds required to finance a loan by issuing bonds prior to the loan disbursements.
Proceeds from bond issuances may not be earmarked for a particular loan. Thus, fluctuations ininterest rates in the period where lending and funding schedules differ affect the profitability of loans(“pipeline” risk). In order to hedge against pipeline risk, JFM utilizes interest rate swaps.

JFM Annual Report 2015 | 42

• JFM maintains reserves to prepare for interest rate risk associated with bond refinancing.
At the end of fiscal 2014, the total amount of the reserves stood at USD 29.5 billion, which
consisted of USD 12.8 billion in the general account and USD 16.7 billion in the management
account.

(2) Extending funding duration – Utilizing its FLIP and Open Issuance scheme, JFM aims toextend the funding duration by carefully choosing maturities of bonds to be issued e.g.,continuously issuing long-dated bonds with maturities over 10 years.
• At the end of fiscal 2014, the duration gap in the general account was 1.15 years, staying
within the management target.

• In the management account, which manages assets transferred from the Predecessor, JFM
maintains USD 16.7 billion of the management account reserve for interest rate volatility as
described above. As no new lending from the management account has been made since
October 2008, JFM expects that the interest rate risk in the management account will decline
overall as the size of the account declines over time.

Appendix / JFM Data

JFM Annual Report 2015 | 43

Financial Section• Pursuant to Article 14 of the Supplementary Provisions of the JFM Law, a portion of JFM’s
management account reserve for interest rate volatility was set to be transferred to thenational government over the three-year period from fiscal 2015 to fiscal 2017, with the aimof transferring up to JPY 600 billion. The amount of transfer is to be within the amount which
the Minister for Internal Affairs and Communications and the Minister of Finance deem as
an amount exceeding the requisite amount of reserve necessary for the smooth operationof JFM’s management account at the time of transfer and in the future, in light of JFM’s
financial condition. In fiscal 2015, JFM plans to transfer JPY 300 billion (USD 2.5 billion) to
the national treasury. Even after these transfers, JFM does not expect the transfers to have amaterial effect on JFM’s business, results of operations or financial condition, due primarily
to sufficient amount of the reserve for this account.

JFM’s Role in
Local Government Finance• Although JFM resolves to extend its maximum loan maturity from 30 years to 40 years will
increase the duration gap, JFM’s stable operations are secured by sufficient amount of thereserves. In addition, JFM will revise its lending rate by 30th year at the latest for its loans
with maturities longer than 30 years.

Management Structure(1) Controlling lending duration – Lending rates for loans for temporar y financial
countermeasures funding, which account for approximately 40% of JFM’s outstandingloans in the general account, are revised every 5 years or 10 years depending on loans,while maturities of the loans are set to be a maximum of 30 years.

Operations• As assets and liabilities in the general account are expected to expand as a result of anincrease in loans and fund-raising, JFM carries out an ALM analysis of this account in orderto further enhance the effectiveness of its interest rate risk management. Furthermore, JFM
has established a medium-term management target of five years from fiscal 2013, in which
the duration gap is maintained below two years. In order to implement the managementtarget, JFM takes the following measures:

Review and Plan

Managing interest rate risk associated with bond refinancing

Management
Structure

Risk Management

Maturity Ladder (JFM Loans, Bonds and Bank Loans)
General Account(as of 31 March 2015)

12,00010,0008,000
6,000

USD mm

4,000
2,000
0

-2,000Interest Receipt (Lending)-4,000Principal Redemption (Lending)-6,000Principal Redemption (Funding)-8,000Interest Payment (Funding)-10,000

Gap-12,000

FY2015 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44

Management Account(as of 31 March 2015)

20,00015,00010,0005,000
USD mmManagement Structure• Lending duration 8.98 years • Funding duration 7.83 years • Duration gap 1.15 years (YoY change: +0.08 years)

0-5,000Interest Receipt (Lending)Principal Redemption (Lending)-10,000

Principal Redemption (Funding)Interest Payment (Funding)Gap-15,000-20,000

FY2015 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44• Lending duration 6.33 years • Funding duration 4.46 years • Duration gap 1.87 years (YoY change: -0.18 years)
JFM as a whole• Lending duration 7.53 years • Funding duration 5.92 years • Duration gap 1.61 years (YoY change: -0.14 years)

2) Foreign exchange and other risks
Various risks associated with bond principal and interest payments are generally hedged by swap
transactions. These risks include foreign exchange risk related to foreign currency denominated bonds,
interest rate risk related to floating rate bonds and the risk of fluctuations in the amounts of principal
and interest of inflation-indexed bonds. JFM’s investments of surplus funds are exposed to the risk oflosses on the sale of securities resulting from price declines and the risk of realized losses on foreign
currency denominated deposits resulting from fluctuations in foreign exchange rates. Accordingly, inprinciple, JFM reduces the price fluctuation risk by holding investments until maturity and hedges foreignexchange risk by using forward foreign exchange contracts.

JFM Annual Report 2015 | 44

Operational risk is the risk of loss resulting from inadequate operation processes, inadequate activities
by management and staff, and inadequate computer systems, or from external events.

Management Structure

4. Operational Risk

Operations

Liquidity risk is the risk that JFM would incur losses because of difficulty in funding, or because offunding at far higher interest rates than under ordinary conditions. It also includes the risk that JFM
would incur losses because of the inability to conduct market transactions or because of transactions at
prices far more unfavorable than under normal conditions due to market disruption or other situations.
However, JFM’s current exposure to liquidity risk is low because loans are made based on a pre-set
schedule, and the daily cash and liquidity management is carried out. Moreover, JFM has entered into
overdraft agreements with a wide range of financial institutions to prepare for unexpected fund shortfalls,
and invests surplus funds only in short-term financial products.
In addition, although JFM is not required to comply with the liquidity coverage ratio requirements ofBasel III, as a coluntary measure, JFM has implemented a policy to maintain a certain amount of liquid
assets so that, in the event of market disruption, JFM may continue to timely make its payments ofinterest and principal on the bonds and other dent securities.

Review and Plan

3. Liquidity Risk

1) Administrative risk

2) Systems risk

5. Contingency Measures

JFM Annual Report 2015 | 45

Appendix / JFM Data

JFM has prepared the Contingency Plan to minimize the scope of losses and the impact on operations
and restore normal operations promptly and efficiently in the event that computer systems break down
or cannot be used due to unexpected incidents, disasters or malfunctions. Furthermore, in order toprepare for a contingency, JFM has a backup server outside JFM so that its business operations can becontinued.

Financial Section

Systems risk is the risk of the confidentiality, integrity and availability of information assets being
impaired as a result of computer system inadequacies or the fraudulent use of computer systems.
JFM has established and implemented the Systems Risk Management Policy and the Systems Risk
Management Standard to appropriately manage systems risk and ensure smooth business operations.

JFM’s Role in
Local Government Finance

Administrative risk is the risk of loss resulting from the neglect or inadequacy of attention by
management and employees to properly conduct administrative work, accidents and/or violation oflaws caused by them in the course of the administrative work process. JFM endeavors to mitigate its
exposure to administrative risk by preparing operational manuals, holding educational seminars andtraining sessions, and reducing operational workload through systematization.

Management
Structure1

Compliance

Basic Policy

JFM has prepared the Compliance Rules to ensure that operations are conducted in accordance withlaws and regulations and indicate what actions management and staff should take when a breach oflaws or regulations is identified. The rules include the following basic policy on compliance.

• Management and employees must be aware of JFM’s social responsibility and public mission
and realize that a breach of laws or regulations would cause a great hindrance to JFM’sbusiness operations, such as a loss in credibility of JFM as a whole. Management and staff
must also observe laws and regulations and fulfill their duties with integrity and fairness.
• Management and employees must strive to earn the trust of society by appropriately
disclosing information on JFM’s operations.

Management Structure2Compliance System

Based on the Compliance Rules, JFM has the Compliance Committee.
JFM’s deputy president serves as the chairman of the committee, with senior executive directors anddepartment heads serving as committee members. The committee deliberates on important complianceissues, such as the formulation, revision and abolition of compliance-related rules and regulations andthe preparation of guidelines and action plans for compliance.
JFM has also established the compliance division to oversee compliance arrangements. This unit
deploys compliance-based initiatives (providing system guidance and training or producing manuals) in
keeping with the committee’s guidelines.

Compliance System

President and CEO
Appointment
Compliance Committee
Instruction

ReportCompliance Division (Administration Department)
Instruction and training

ReportEmployees

JFM Annual Report 2015 | 46

Management
Structure

Disclosure

Basic Stance on Information Disclosure

From the viewpoint of investor protection, JFM strives to ensure the transparency of JFM’s
management by disclosing information on its financial conditions and other relevant information.

2

Review and Plan

1

Materials for Disclosure
Operations

The following materials are available on JFM’s website (www.jfm.go.jp/en/).

1. Materials for Disclosure Pursuant to Laws and Regulations• Budgets, business plans, funding plans, and medium-term plans on income and expenditures• Management plan
• Funding plan
• Brochure• Annual Report• JFM News magazine

JFM’s Role in
Local Government Finance2. Other Documents for DisclosureManagement Structure• Financial statements• Business reports and statement of accounts (in Japanese only)• Explanatory documents based on Article 36, Paragraph 3 of the JFM Law (Documents corresponding
to annual securities reports specified in the Financial Instruments and Exchange Act and the Internal
Control Report) (in Japanese only)

Financial Section
Appendix / JFM Data

Website (http://www.jfm.go.jp/en/)

Annual Report

JFM Annual Report 2015 | 47

JFM’s Role in Local Government Finance1

Japanese Local Government System

Local governments are responsible for extensive areas of public administration for the welfare of
citizens.
While the national government focuses on administrative affairs for the state as a member of theinternational community, local governments engage in administration that relates to the daily lives ofcitizens. Local governments are responsible for social welfare, education, fire defense, and infrastructuresuch as road and waterways.
Japanese local government system adopts a two-tier system with prefectures serving broader
geographic areas, and cities, special wards of Tokyo, as well as government-designated cities, towns
and villages providing local services.

National Government
Prefectures
Local Government

Cities, Towns, Villages,
and Special Wards

Number of Japanese Local Governments

JFM’s Role in
Local Government FinancePrefectures
Cities, special wards, etc.

47
1,741

Government-designated cities

20

Cities

770

Special wards

23

Towns

745

Villages

183

Total

1,788
(as of 1 April 2015)

JFM Annual Report 2015 | 48

Local Government Finance Program
Local Government Finance Program(Initial Plan for FY2015)

Annual Expenditure(USD 729.1 bn)

Annual Revenue(USD 729.1 bn)

Local TaxUSD 334.4 bn

Local Allocation Tax
USD 144.1 bn
Local Government
Bonds and Loans
USD 81.2 bn

Management Structure- Social welfare- Education- Fire defense- Infrastructure, etc.

Operations

OthersUSD 169.5 bn
Note: The above program includes Great East Japan
Earthquake related budgets.

JFM’s Role in
Local Government Finance

Each local government is unique in terms of its
natural and historic situations, industrial structures,
population sizes, and other attributes. As a result,each local government handles diverse administration.
The term “local government finance” collectively refers
to funding for individual local governments engaging insuch administration. Just as with national finance, local
government finance plays a major role in the nation’s
economy and the lives of citizens. In fiscal 2015, local
government finance will total JPY 87.8 trillion (USD
729.1 billion) (based on the Local Government Finance
Program (the “LGFP”), while the nation’s General
Account Budget for the year is JPY 96.3 trillion (USD
800.4 billion)).
Because local governments engage in numerous
activities that closely relate to residents, they need toprovide stable public services regardless of regional
dif ferences stemming from var ying populations,industry densities, and/or tax revenue fluctuations overyears. Accordingly, the national government formulates
the LGFP each fiscal year based on assessments ofthe scales of local government finance and forecastsof overall revenues and expenditures. In response toannual national budget plans, the national government
balances the total amount of local gover nment
revenues and expenditures in the LGFP. Under thisprogram, revenue sources for all local governments,
including local allocation tax grants as well as bonds
and loans to be issued or borrowed, are secured sothat local governments can ensure uniform public
service standards.

Review and Plan

2

Financial Section
Appendix / JFM Data

JFM Annual Report 2015 | 49

JFM’s Role in Local Government Finance3

Local Allocation Tax

Local governments would ideally cover the expenditures necessary to provide public services with
their local tax revenues. In reality, however, tax revenues are distributed unevenly. In order to adjust
disparities and secure funds for local governments that have low tax revenues, the national government
distributes Local Allocation Tax, which comprises certain percentages of national taxes, including
personal and corporate income taxes and consumption taxes. Local Allocation Tax is an importantsource of funds for local governments to maintain an appropriate level of public services.

Local Allocation Tax System
Example: City A
Standard
Financial
Requirements*1

Shortage—Standard
Local
Tax revenue*2

Allocation Tax= Local for
City A

Notes: 1. Standard financial requirements are the amount of funds necessary to provide standard public services. The requirements
are calculated for each local government according to the standard specified by the Ministry of Internal Affairs andCommunications.
2. Local governments have taxation rights in Japan, but there are regional imbalances in tax revenues.

JFM’s Role in
Local Government Finance4

Local Government Borrowings

Local government borrowings are bonds and loans to be issued by local governments for securing
necessary external funds, and mature no earlier than the first fiscal year. In principle, a local government
should cover expenditures with its revenues other than local government borrowings. However, local
governments can finance through borrowings in the case that it is desirable to share costs with future
residents such as for constructions of facilities, or that large temporary expenses are required due todisasters.

5

Security of Local Government Borrowings

The following framework secures principal and interest payments of local government borrowings. On
the back of this framework, the BIS risk weighting for local government borrowings is 0%, based on thestandardized approach (as of 31 March 2015).

1) Secured funds for repayments of local government borrowings
The national government effectively secures revenue sources for repayments of local government
borrowings from both macro and micro perspectives.

JFM Annual Report 2015 | 50

2) Issuance restriction

Operations

Note: In (ii), (iii) and (iv) above, only the local government borrowings to which the consent or approval has been given arecovered.

Review and Plan(i) Local tax revenues are secured by taxation rights of local governments(ii) The national government includes repayments of local government borrowings (i.e., principal andinterest payments) in the amount of expenditures in the LGFP(iii) The total amount of Local Allocation Tax grants is set aside so that the total amount of local
government expenditures, including the principal and interest payments, is equivalent to the total
amount of local government revenues in the LGFP(iv) In the calculation of Local Allocation Tax grants to be allocated to an individual local government, aportion of the principal and interest payments are included in the Standard Financial Requirementsof an individual local government

Local governments with a real debt payment ratio 18% or higher, or those with a real deficit ratio
exceeding specified levels, are restricted from additional borrowings under the Local Government
Finance Law.

The Law Relating to the Financial Soundness of Local Governments of Japan, which was promulgatedin June 2007, requires local governments the following measures in order to securely manage their fiscal
soundness:

6

JFM’s Role in
Local Government Finance(i) Specified fiscal indicators to be disclosed(ii) Local governments with those fiscal indicators exceeding certain early warning limits to restore
fiscal soundness through their own efforts(iii) Local governments with those fiscal indicators exceeding certain reconstruction limits to takenecessary actions under the supervision of the national government or the respective prefectural
governments, in order to restore their fiscal soundness

Management Structure3) Supervision of financial soundness

Local Government Borrowing Program*See page 33.

Financial Section

The LGBP is an annual plan that the national government prepares for local government funding. The
LGBP is closely linked to the LGFP and the FILP* prepared by the national government with its budgetmaking. The LGBP plays the following crucial roles in terms of local government finance.

1) Consent (approval) based on LGBP

2) Secured funding sources for local government borrowings
The national government balances the amount of local government funding needs and the amount offunding sources, and specifies funding sources for each business under the LGBP.
JFM Annual Report 2015 | 51

Appendix / JFM Data

The LGBP specifies the total scheduled amount of local government borrowings including the amountby business type. Typically, the consent or approval for local government borrowings is given based on
the LGBP.

JFM’s Role in Local Government Finance

7

JFM Funds in Local Government Borrowing Program

The sources for local government funding are classified into national government funds, JFM funds
and private funds.

Local Government Borrowing Program
FY2014FY2015
Share

Publicly Offered Bonds

USD 35 bn

USD 33 bn

33%

Other Private Sectors

USD 27 bn

USD 25 bn

24%

JFM

USD 17 bn

USD 16 bn

16%

National Government

USD 29 bn

USD 27 bn

27%

USD 108 bn

USD 101 bn

100%

1. Private Funds

2. Public Funds
Total

Note: The figures above are the planned numbers originally published by the Ministry of Internal Affairs and Communications andnot the actual numbers.

Since fiscal 2012, JFM funds have accounted for around 16% of the LGBP. JFM plays a major role inJapanese local government finance, making a substantial contribution to project implementation andfinancial management of local governments.

JFM’s Role in
Local Government Finance

LGBP Volume by Funding Source (Initial Plan)(USD bn)

(%)

180

18
15.9

160
140
120
100

13.8

15.5

114

117

34.9

36.9

16.1

16
14

114
36.9

80
60

32.5

29.3

40

15.7

18.1

18.0

20

31.0

32.3

FY2011

2012

0

15.8

28.2

108
35.4

12
101
33.2

10
8

24.6

6

17.0

16.4

4

30.6

28.7

27.2

2013

2014

2015

26.7

Publicly Offered Bonds
Other Private Sectors
JFM
National Government
JFM Ratio

20

Source: The Ministry of Internal Affairs and Communications

JFM Annual Report 2015 | 52

Financial Section
Review and Plan
Operations
Management Structure
JFM’s Role in
Local Government Finance
Financial Section

Financial Statements
Balance Sheets
Statements of Appropriation of Profit[General account/Management account]Notes to Financial Statements

56
58
60
61

Independent Auditor’s Report94Statements of Changes in Net Assets
Statements of Cash Flows

Appendix / JFM Data

Statements of Income

54
54
55

Financial
SectionFinancial Statements

Balance Sheets(As of 31 March 2014 and 2015)
Item

Fiscal 2013
(31 March
2014)(Millions of yen) (Thousands of U.S. dollars)

Fiscal 2014
(31 March 2015)

Item

Fiscal 2013
(31 March
2014)

AmountFiscal 2014
(31 March 2015)
AmountLiabilities

Loans (Note 5) ¥23,082,976 ¥23,437,630 $194,713,218

Bonds (Notes 9 and 10)

Securities(Notes 19)

533,998

670,000

5,566,171

Borrowed money (Note 11)

95,50085,500710,310

Cash andbank deposits

467,175

399,2113,316,533

Cash collateral received
for financial instruments

43,530182,246

1,514,056

Cash collateral
paid for financial
instruments

370

437

3,630

Other liabilities

14,397

11,70097,204

Other assets

13,036

12,384

102,890

Reserve for bonuses (Note 12)

50

50

421

Tangible fixed
assets (Note 8)

2,836

2,840

23,598Reserve for bonuses
for directors and corporate
auditors (Note 12)

7

7

63

Intangible fixed
assets (Note 8)

938

1,776

14,757

Reserve for retirement
benefits (Notes 12 and 15)

116

41

348

Reserve for retirement
benefits for directors andcorporate auditors (Note 12)

22

22

190

Fund for lending rate
reduction

922,561

920,287

7,645,489

Basic fund for lending rate
reduction (Note 14)918,775

920,287

7,645,489

Additional fund for lending
rate reduction (Note 14)

3,785

-

-

Reserves under special laws

3,458,627

3,608,067

29,974,805

Reserve for interest rate
volatility (Note 13)

1,320,000

1,540,000

12,793,885

Management account reserve forinterest rate volatility (Note 13)

2,072,945

2,011,515

16,711,102

Reserve for interest rate reduction

65,68156,552469,818

23,958,556

24,350,790

202,299,494

Capital16,602

16,602

137,926

Retained earnings

76,732

107,703894,770

General account surplus
reserve

76,732

107,703894,770

Valuation, translation
adjustments and others(4,225)(4,482)(37,236)

Management accountsurplus reserve

53,666

53,666445,843

Total net assets

142,775

173,489

1,441,303

Financial Section

AssetsTotal liabilities¥19,423,743 ¥19,542,864 $162,356,608

Net Assets

Total assets¥24,101,331 ¥24,524,279 $203,740,797 Total liabilities and net assets ¥24,101,331 ¥24,524,279 $203,740,797

See notes to financial statements.

JFM Annual Report 2015 | 54

(For the years ended 31 March 2014 and 2015)
Item

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

Fiscal 2013
(1 April 2013 to
31 March 2014)

Fiscal 2014
(1 April 2014 to 31 March 2015)

AmountAmount428,977

3,563,822

Fees and commissions

117

112

936

Other operating income

0

0

3

3,112

5,479

45,523

3,084

5,467

45,42628

11

97

270,337

254,070

2,110,745

260,947

246,060

2,044,199

Fees and commissions

281

294

2,446

Other operating expenses

6,509

4,632

38,483General and administrative expenses

2,598

3,083

25,6170--

Ordinary income

188,051

180,499

1,499,539

Special gains

880,203229,129

1,903,547

Reversal of management account reserve forinterest rate volatility (Notes 6 and 13)

870,000

220,000

1,827,698

Reversal of reserve for interest rate reduction

10,2039,129

75,8491,041,744

378,658

3,145,787

-

88

732

Provision for reserve for interest rate volatility (Note 13)

220,000

220,000

1,827,698

Provision for management account reserve forinterest rate volatility (Note 13)

171,744

158,570

1,317,357

Payment to national treasury (Note 6)

650,000--¥26,510¥30,971$257,299

Other income
Contributions from fund for lending rate reduction(Note 14)
OthersExpenses
Interest expenses

Other expenses

Special losses
Loss on disposal of fixed assets

Net income

Financial Section

455,158

Interest income

JFM’s Role in
Local Government Finance$3,610,284

Management Structure¥434,569

Operations¥458,388

Review and Plan

Statements of Income

See notes to financial statements.
Appendix / JFM Data

JFM Annual Report 2015 | 55

Financial
SectionFinancial Statements

Statements of Appropriation of Profit [General account](For the year ended 31 March 2014)(Millions of yen)

1 Profit available for appropriation¥26,510Net income¥26,510

Accumulated deficit brought forward-

2 Profit appropriatedSurplus reserve

26,51026,510Statements of Appropriation of Profit [General account](For the year ended 31 March 2015)(Millions of yen)

1 Profit available for appropriation¥30,971

Net income¥30,971

Accumulated deficit brought forward-

2 Profit appropriatedSurplus reserve

30,97130,971(Thousands of U.S. dollars)

1 Profit available for appropriation$257,299

Net income$257,299

Accumulated deficit brought forward-

2 Profit appropriatedSurplus reserve257,299257,299

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

Financial Section
JFM Annual Report 2015 | 56

(For the year ended 31 March 2014)(Millions of yen)

1 Profit available for appropriation¥-

Net income

Review and Plan

Statements of Appropriation of Profit [Management account]¥-

Accumulated deficit brought forward-

2 Profit appropriatedSurplus reserve-

Operations

Statements of Appropriation of Profit [Management account](For the year ended 31 March 2015)(Millions of yen)

1 Profit available for appropriation¥¥-

Accumulated deficit brought forward-

2 Profit appropriatedSurplus reserve--

Management Structure

Net income(Thousands of U.S. dollars)

1 Profit available for appropriation$$-

Accumulated deficit brought forward-

2 Profit appropriatedSurplus reserve-

See notes to financial statements.

-

JFM’s Role in
Local Government Finance

Net income

Financial Section
Appendix / JFM Data

JFM Annual Report 2015 | 57

Financial
SectionFinancial Statements

Statements of Changes in Net Assets(For the year ended 31 March 2014)(Millions of yen)

Valuation,translation
Stockholders’ equity
adjustments
and others Management
account
Retained earnings
Unrealized
surplusgain/
Total
reserve
GeneralTotal
stockholders’ (loss) fromaccount
retainedhedging
equitysurplusearnings
instruments
reserve

Total
net
assets¥16,602¥50,221¥50,221¥66,824¥(6,970)¥53,666¥113,520

Net income-

26,51026,51026,510--26,510Net changes duringaccounting period
in items other thanstockholders’ equity

-

-

-

-

2,744

-

2,744

-

26,51026,51026,5102,744-

29,255¥16,602¥76,732¥76,732¥93,334¥(4,225)¥53,666¥142,775

CapitalBalance as of 1 April 2013
Changes duringaccounting period

Net changes duringaccounting period
Balance as of 31 March2014

Financial Section
JFM Annual Report 2015 | 58

(For the year ended 31 March 2015)(Millions of yen)

¥76,732¥76,732¥93,334¥(4,225)¥53,666¥142,775

Net income-

30,97130,97130,971--30,971

Net changes duringaccounting period
in items other thanstockholders’ equity

-

-

-

-

(256)

-

(256)

-

30,97130,97130,971(256)-

30,714¥16,602¥107,703¥107,703¥124,305¥(4,482)¥53,666¥173,489

Balance as of 1 April 2014
Changes duringaccounting period

Net changes duringaccounting period
Balance as of 31 March
2015(Thousands of U.S. dollars)$137,926$637,471$637,471$775,397$(35,103)$445,843$1,186,137

Net income-

257,299257,299257,299--257,299

Net changes duringaccounting period
in items other thanstockholders’ equity

-

-

-

-

(2,133)-(2,133)-

257,299257,299257,299(2,133)-

255,166$137,926$894,770$894,770$1,032,696$(37,236)$445,843$1,441,303

CapitalBalance as of 1 April 2014
Changes duringaccounting period

Net changes duringaccounting period
Balance as of 31 March2015
See notes to financial statements.

JFM Annual Report 2015 | 59

Appendix / JFM Data

Total
net
assetsFinancial Section

Valuation,translation
Stockholders’ equity
adjustments
and others Management
account
Retained earnings
Unrealized
surplusgain/
Total
reserve
GeneralTotal
stockholders’ (loss) fromaccount
retainedhedging
equitysurplusearnings
instruments
reserve

JFM’s Role in
Local Government Finance(For the year ended 31 March 2015)

Management Structure¥16,602

CapitalOperations

Total
net
assets

Review and Plan

Valuation,translation
Stockholders’ equity
adjustments
and others Management
account
Retained earnings
Unrealized
surplusgain/
Total
reserve
GeneralTotal
stockholders’ (loss) fromaccount
retainedhedging
equitysurplusearnings
instruments
reserveFinancial
SectionFinancial Statements

Statements of Cash Flows(For the years ended 31 March 2014 and 2015)
Item(Millions of yen) (Thousands of U.S. dollars)

Fiscal 2013
(1 April 2013 to
31 March 2014)

Fiscal 2014
(1 April 2014 to 31 March 2015)

AmountAmountⅠ Cash flows from operating activities

Net income
Depreciation and amortization
Interest income
Interest expenses
Increase/(decrease) in reserve for bonuses
Increase in reserve for bonuses for directors
and corporate auditors
Decrease in reserve for retirement benefits
Decrease in reserve for retirement benefits for
directors and corporate auditors
Decrease in fund for lending rate reduction
Increase in reserve for interest rate volatility
Decrease in management account reserve forinterest rate volatility
Decrease in reserve for interest rate reduction
Net (increase)/decrease in loans
Net increase/(decrease) in bonds
Net increase/(decrease) in borrowed money
Interest received
Interest paid
Others¥26,510294(455,158)
260,9473¥30,971480(428,977)
246,060(0)$257,299
3,993(3,563,822)
2,044,199
(1)

1

0

2

(25)

(74)

(618)

(4)

(0)

(0)

(3,084)220,000(5,467)220,000(45,426)
1,827,698(48,255)(61,429)(510,341)(10,203)(414,341)
743,787
65,500455,628(214,605)
3,025(9,129)(354,653)
116,129(10,000)
429,619(245,338)
138,435(75,849)(2,946,362)
964,774(83,077)
3,569,162(2,038,200)
1,150,084

630,020

66,626

553,5154,189,000(4,123,929)
(37)
(558)
335

3,300,000(3,435,994)(396)(1,393)-

27,415,469(28,545,274)(3,297)(11,573)-

64,809(137,784)(1,144,675)(650,000)

-

-

3,105

3,193

26,534(28)--(646,923)

3,193

26,534---47,907(67,964)(564,626)

Ⅵ Cash and cash equivalents at beginning of year

419,267

467,175

3,881,159

Ⅶ Cash and cash equivalents at end of year

¥467,175¥399,211$3,316,533

Net cash provided by operating activities
Ⅱ Cash flows from investing activities

Financial Section

Proceeds from redemption of securities
Purchases of securities
Purchases of tangible fixed assets
Purchases of intangible fixed assets
Proceeds from sales of tangible fixed assets
Net cash provided by/(used in) investing activities
Ⅲ Cash flows from financing activities

Payment to national treasury
Revenue from contributions made frommunicipally operated racing
Refund of contributions made frommunicipally operated racing
Net cash provided by/(used in) financing activities
Ⅳ Effect of exchange rate changes on cash andcash equivalents

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

equivalents

See notes to financial statements.
JFM Annual Report 2015 | 60

1. Basis of Presentation

Operations

Japan Finance Organization for Municipalities (hereinafter, “JFM”) has prepared financial statements in accordancewith the Japan Finance Organization for Municipalities Law (Law No. 64, 2007; hereinafter the “Law”), the ordinances
based on the Law and other regulations applicable to JFM and accounting principles generally accepted in Japan,
which are different in certain respects as to the application and disclosure requirements of International Financial
Reporting Standards.
Since JFM does not have any subsidiaries or affiliates, it does not prepare consolidated financial statements.
Amounts less than 1 million yen have been omitted. As a result, the totals in Japanese yen shown in the financial
statements do not necessarily agree with the sum of the individual amounts.
The translation of the Japanese yen amounts into U.S. dollars is included solely for the convenience of readers
outside Japan, using the prevailing exchange rate as of 31 March 2015, the final day of the fiscal year, which was¥120.37 to U.S. $1. This translation should not be construed as a representation that all amounts shown could be
converted into U.S. dollars at such rate.

Review and Plan

Notes to Financial Statements

2. Summary of Signiﬁcant Accounting Policies

JFM’s Role in
Local Government Finance
Financial Section
Appendix / JFM Data

JFM Annual Report 2015 | 61

Management Structure(1) Securities
Held-to-maturity securities are carried at amortized cost (straight-line method).
(2) Derivative transactions
Derivative transactions are carried at fair value with changes in unrealized gain or loss charged or credited toincome, except for those which meet the criteria for hedge accounting.
(3) Depreciation and amortization(a) Tangible fixed assets
Depreciation of tangible fixed assets is calculated by the straight-line method based on the estimated useful
lives and the residual value determined by management. The estimated useful lives of major items are as
follows:
Buildings: 20 to 47 years
Others: 2 to 19 years(b) Intangible fixed assets
Amortization of intangible fixed assets is calculated by the straight-line method based on the estimated useful
lives and the residual value determined by management. Software for internal use owned by JFM is amortizedover 5 years.
(4) Deferred assets
Bond issuance costs are expensed in full when incurred.
(5) Translation of assets and liabilities denominated in foreign currencies into Japanese yen
Monetary assets and liabilities denominated in foreign currencies, for which foreign currency swaps or foreignexchange forward contracts are used to hedge the foreign currency fluctuation, are translated at the contracted
rate as these swap contracts or the forward contracts qualify for deferral hedge accounting.
(6) Reserves(a) Reserve for possible loan losses
JFM has never experienced any loan losses. Accordingly, no reserve for possible loan losses has been
maintained.
(b) Reserve for bonuses
The reserve for bonuses is provided for payment of bonuses to employees, in the amount of estimatedbonuses, which are attributable to the fiscal year.
(c) Reserve for bonuses for directors and corporate auditors
The reserve for bonuses for directors and corporate auditors is provided for payment of bonuses to directors
and corporate auditors, in the amount of estimated bonuses, which are attributable to the fiscal year.
(d) Reserve for retirement benefits
The reserve for retirement benefits is provided for payment of retirement benefits to employees, in the amountdeemed accrued at the fiscal year-end, based on the projected retirement benefit obligation and fair value ofplan assets at the fiscal year-end. The reserve for retirement benefits and pension expenses are calculatedusing the simplified method, which assumes JFM’s retirement benefit obligation to be equal to the benefits
payable if all eligible employees voluntarily terminated their employment at the fiscal year-end.
(e) Reserve for retirement benefits for directors and corporate auditors
The reserve for retirement benefits for directors and corporate auditors is provided for payment of retirement
benefits to directors and corporate auditors, in the amount deemed accrued at the fiscal year-end based on
the internal policies.

Financial
SectionFinancial Statements

Financial Section(7) Hedge accounting(a) Hedge accounting method
Interest rate swaps used to hedge the risk of interest rate fluctuations that qualify for hedge accounting andmeet specific matching criteria are not measured at fair value, but the differential paid or received under theswap agreements is recognized and included in interest expense or income. If swap contracts or forward
contracts used to hedge the risk of foreign currency fluctuation qualify for deferral hedge accounting, the foreign
currency-denominated assets and liabilities are translated at the contracted rate.
(b) Hedging instruments and hedged items(ⅰ) Hedging instruments・・・Interest rate swaps
Hedged items・・・・・・・・・Bonds and long-term borrowed money(ⅱ) Hedging instruments・・・Currency swaps
Hedged items・・・・・・・・・Foreign currency-denominated bonds(ⅲ) Hedging instruments・・・Foreign exchange forward contracts
Hedged items・・・・・・・・・Foreign currency-denominated bank deposits(c) Hedging policy
JFM uses hedging instruments as a means of hedging exposure to interest rate risk and foreign exchange risk.
Hedged items are identified by each individual contract.
As a means of hedging foreign exchange fluctuation risks associated with the receipt of interest and principalof foreign currency-denominated bank deposits, a foreign exchange forward contract is entered into at the timeof each deposit by JFM.
(d) Assessment of hedge effectivenessJFM ensures hedging instruments and hedged items have the same major terms when entering into hedgetransactions to offset market fluctuation risks associated with bonds and long-term borrowed money.
Accordingly, JFM deems these to be highly effective and thus does not assess effectiveness. Moreover, aperiodic assessment of hedge effectiveness for interest rate swaps and currency swaps and forward contracts
that qualify for deferral hedge accounting is omitted when the exceptional accrual method is applied.
(8) Cash and cash equivalents
Cash and cash equivalents in the statement of cash flows consist of “Cash and bank deposits” on the balance
sheets.
(9) Fund for lending rate reduction
In accordance with the provisions of Article 46, Section 1 of the Law, JFM has established the fund for lending
rate reduction to reserve contributions as stipulated in Article 32-2 of the Local Government Finance Law (Law No.
109, 1948). Also, pursuant to the provisions of Article 46, Section 5 of the Law, income arising from the investmentof the fund (hereinafter, “investment income”) is used to reduce interest rates of the loans to municipalities, andif there is any surplus in the investment income after this interest rate reduction process, the surplus amount is
added to the fund. Further, pursuant to the provisions of Article 46, Section 6 of the Law, if there is any shortfall
after the interest rate reduction process, the shortfall is covered by withdrawal of the fund within the limits of thetotal of the additional portion to the fund made up to the previous fiscal year and the contributions made in themost current fiscal year.
(10) Reserve for interest rate volatility and management account reserve for interest rate volatility
The reserve for interest rate volatility is set aside to prepare for interest rate risk associated with refinancing of
JFM bonds (excluding the bonds issued by the former Japan Finance Corporation for Municipal Enterprises;
hereinafter, the “Predecessor”) pursuant to the provisions of Article 38, Sections 1 and 3 of the Law, and Article
9, Sections 8 and 10 of the Supplementary Provisions of the Law, and is calculated and accounted for based on
the provisions of Article 34 of the Ministerial Ordinance on Finance and Accounting of Japan Finance Organization
for Municipalities (Ordinance No. 87 of the Ministry of Internal Affairs and Communications, 2008; hereinafter,“Ordinance on Finance and Accounting”) and Article 22 and 23 of the Government Ordinance on preparation of
relevant government ordinances and provisional measures for the abolishment of the Japan Finance Corporation
for Municipal Enterprises Law (Government Ordinance No. 226, 2008; hereinafter, “Preparation Ordinance”).
The management account reserve for interest rate volatility is set aside to manage interest rate risk associatedwith refinancing of bonds issued by the Predecessor pursuant to the provisions of Article 9, Sections 9 and 10,
and Article 13, Sections 5 and 7 of the Supplementary Provisions of the Law, and is calculated and accounted forbased on the provisions of Articles 1 through 3 of the Ministerial Ordinance on the operations of the Management
Account at Japan Finance Organization for Municipal Enterprises (Ordinance No. 2 of the Ministry of Internal
Affairs and Communications, and the Ministry of Finance, 2008; hereinafter, “Management Account Operations
Ordinance”) and Articles 3 and 5 of the Supplementary Provisions of the above ordinance.
(11) Reserve for interest rate reduction
Reserve for interest rate reduction is set aside to reduce interest rates on the loans made by the Predecessor
to local governments pursuant to the provisions of Article 9, Section 13, and Article 13, Section 8 of the
Supplementary Provisions of the Law, and Article 26, Sections 1, 3 and 4 of the Preparation Ordinance, andis calculated and accounted for based on the provisions of Article 5 of the Management Account Operations
Ordinance.

JFM Annual Report 2015 | 62

Review and Plan

(12) Management account surplus reserve
Profits generated in the management account are accounted for as the management account surplus reserve
separately from retained earnings in accordance with the provisions of Article 13, Section 8 of the Supplementary
Provisions of the Law and Article 26, Section 2 of the Preparation Ordinance.
(13) Consumption taxes
National and local consumption taxes are accounted for using the tax exclusion method.

3. Change in Presentation

4. Additional Information

Operations

Effective fiscal 2013, JFM has adopted “Accounting Standard for Retirement Benefits” (Accounting Standards Boardof Japan (ASBJ) Statement No. 26, issued May 17, 2012, hereinafter “Retirement Benefits Standard”) and “Guidanceon Accounting Standard for Retirement Benefits” (ASBJ Guidance No. 25, issued May 17, 2012, hereinafter “Retirement
Benefits Guidance”), excluding Clause 30 of the Retirement Benefits Standard and Clauses 52 to 60 of the Retirement
Benefits Guidance. Due to this adoption, the presentation in the notes with regard to employee retirement benefits
has been changed from fiscal 2013.

JFM obtained the approval of the Minister of Health, Labour and Welfare, dated 1 October 2014, for the transfer to
the Japanese national government of the payment obligation of the substitutional portion of the Employees’ Pension
Fund established under the Japanese Welfare Pension Insurance Law. The total amount of the refund (minimum policy
reserve) measured in the Employees’ Pension Fund as of 31 March 2014 was 55,980 million yen. JFM estimates thatits profit and loss will not be affected in the event that Clause 46 of Retirement Benefits Guidance is applied.

JFM’s Role in
Local Government Finance

There are no bankrupt loans, non-accrual loans, past due loans (three months or more), or restructured loans. Since
JFM has never experienced loan losses in the past, it does not record a reserve for possible loan loss.
Bankrupt loans represent loans to borrowers as defined in Article 96, Section 1, Clause 3 (a) through (e) and
Clause 4 of the Enforcement Ordinance of the Corporate Income Tax Law (Government Ordinance No. 97, 1965), andon which accrued interest is not accounted in revenue as there is no expectation of collection of either principal orinterest because they are past due for a considerable period of time or for other reasons (excluding loans on which
bad debts are written off; hereinafter, “Non-accrual loans”).
Non-accrual loans represent loans on which accrued interest is not accounted in revenue, excluding loans tobankrupt borrowers and loans with grace periods for interest payments to assist in corporate reorganization or to
support business.
Past due loans (three months or more) represent loans on which payment of principal or interest is in arrears formore than three months, calculated from the day following the contractual due date, excluding bankrupt loans andnon-accrual loans.
Restructured loans represent loans, given certain favorable terms and conditions, such as reduction or exemptionof interest, grace periods for interest or principal payments, and debt waivers, to assist borrowers in corporate
rehabilitation or to support business, excluding bankrupt loans, non-accrual loans and past due loans (three months
or more).

Management Structure

5. Loans

6. Payment to the National Treasury of a Portion of JFM’s Management Account Reserve for Interest Rate Volatility

7. Financial Instruments(1) Status of financial instruments(a) Policy for financial instruments
In order to maintain a sound and good financial standing as well as the solid confidence of capital markets,
JFM needs to appropriately manage various risks including interest rate risks.
JFM adopts an integrated risk management approach to appropriately respond to various risks while
endeavoring to further advance its risk analysis and management.

JFM Annual Report 2015 | 63

Appendix / JFM Data

For the three years from fiscal 2015 through fiscal 2017, a portion of JFM’s reserve for interest rate volatility within
the management account is to be attributed to the Japanese national government, with the aim of transferring up to
600 billion yen over this period. In fiscal 2015, 300 billion yen is scheduled to be transferred to the national treasury
by JFM, pursuant to Article 14 of the Supplementary Provisions of the Law for fiscal 2015 (Ordinance No. 1 of the
Ministry of Internal Affairs and Communications, and the Ministry of Finance, 2015).

Financial Section

In accordance with the Supplementary Provisions of the Law, a portion of JFM’s management account reserve forinterest rate volatility is being attributed to the Japanese national government over a period of three years from fiscal
2012 through fiscal 2014, with the aim of transferring 1 trillion yen over this period.
In fiscal 2013, 650,000 million yen was transferred to the national treasury by JFM, pursuant to Article 14 of
the Supplementary Provisions of the Law for fiscal 2013 (Ordinance No. 1 of the Ministry of Internal Affairs andCommunications, and the Ministry of Finance, 2013).

Financial
SectionFinancial Statements

Financial Section

Accordingly, JFM has developed a system for appropriate risk management, including the establishment of
the Integrated Risk Management Committee, which supervises JFM’s overall risk management, and the Risk
Management Office, which monitors the risks in each department. The content of risk management can thenbe appropriately reflected in management decisions.
(b) Details and risks of financial instruments
JFM makes loans to local governments. The maximum term to maturity is 30 years (extended to 40 years from
April 2015), but the majority of the funds for these loans are raised mainly through issuance of 10-year bonds.
Therefore, a large duration gap is created between lending and funding, and JFM is exposed to the interest
rate risk associated with bond and long-term borrowed money refinancing.
JFM has set aside reserves for interest rate fluctuations (the reserve for interest rate volatility), and has set up
the ALM Committee separately from the Integrated Risk Management Committee to comprehensively analyze
and manage JFM’s assets and liabilities in a timely and appropriate manner. At the meeting, medium- and longterm management analysis as well as risk analysis and evaluation are conducted through scenario analysis,
VaR analysis, and duration analysis, among other methods. In addition, JFM reflects the findings in its bondissuance plans and other aspects of management and endeavors to reduce interest rate risk.
(c) Risk Management for Financial Instruments(ⅰ) Credit risk
Credit risk is the risk of loss arising from a credit event, such as deterioration in the financial condition of aborrower, which causes an asset to lose value or become worthless. In addition to credit risk associatedwith loans, market transactions also involve credit risk.
A. Credit risk on loans
JFM extends loans exclusively to local governments. Local governments have a zero Bank ofInternational Settlements (BIS) risk weighting and JFM does not expect any default on loans made to
local governments for the reasons outlined below. JFM and the Predecessor have never experienced any
loan losses.
• The Japanese national government includes principal and interest payments of local government
bonds and loans in the expenditure of the Local Government Finance Program, and secures thetotal amount of local allocation tax which balances local governments’ total expenditures including
principal and interest payments, and total revenue. Thus, the national government effectively securesrevenue sources for principal and interest payments by local governments. The national government
also secures revenue sources for principal and interest payments by individual local governments by
including a portion of such principal and interest in the Standard Financial Needs when calculating local
allocation tax.
• Under the consultation system for local government bonds and loans, credit reviews must include
checks on the repayment status of local governments, and tax revenue and necessary revenue sources
to be secured. Additionally, under the Early Warning System, the local governments whose principal
and interest payments or financial deficits exceed a certain level must apply for approval to issue bonds
or obtain loans, so that the credit standing of local government bonds and loans is maintained.
• Under the Law Relating to the Financial Soundness of Local Governments, which was promulgatedin June 2007 (No. 94), local governments whose fiscal indicators exceed the early warning limits
must make their own efforts toward achieving fiscal soundness, and local governments whose fiscal
indicators exceed the reconstruction limits must take necessary actions to restore their finances under
the supervision of the national government or the respective prefectural governments with regard toredemption of local government bonds and loans, and other operations.
JFM is not subject to the “Banking Law” (1981, No. 59) or the “Financial Reconstruction Law” (1998,
No. 132) but performs self-assessment of loans in accordance with the “Financial Inspection Manual”
of the Financial Services Agency (FSA).
B. Credit risk on transactions
JFM is exposed to the risk of loss arising from credit events, such as deterioration in the financial
condition of a counterparty, which causes an asset to lose value or become worthless. However,JFM appropriately manages credit risk of this type by constantly monitoring counterparties’ financial
standing, taking measures including suspension of new deals and cancellation of transactions in caseof a deterioration of their credit standings. Moreover, JFM limits counterparties to financial institutions
that achieve a certain credit rating and other criteria, and conducts transactions within the credit lines
for each counterparty in order to diversify risks. In addition, JFM enters into ISDA (International Swaps
and Derivatives Association) Master Agreements and CSA (Credit Support Annex) with all derivatives
counterparties to reduce credit risk.
(ⅱ) Market risk
Market risk is the risk of loss resulting from changes in the value of assets and liabilities due to fluctuations
in risk factors such as interest rates, securities prices and foreign exchange rates, or the risk of loss resulting

JFM Annual Report 2015 | 64

Operations
Management Structure
JFM’s Role in
Local Government Finance
Financial Section
Appendix / JFM Data

JFM Annual Report 2015 | 65

Review and Planfrom changes in earnings generated from assets and liabilities. Market risk includes interest rate risk, foreignexchange risk, inflation risk and price change risk.
A. Interest rate risk
Interest rate risk is the risk of losses incurred or a decrease in profits due to fluctuations in interest rates
when there is an interest rate or duration gap between assets and liabilities. The interest rate risk at JFM
includes the interest rate risk associated with bond and borrowed money refinancing and pipeline risk.
- Interest rate risk associated with bond and borrowed money refinancing
JFM makes loans to local governments. The maximum term to maturity is 30 years (extended to 40
years from April 2015), but the majority of the funds for these loans are raised mainly through issuanceof 10-year bonds, which creates interest rate risk associated with bond refinancing. JFM takes thefollowing measures to address the interest rate risk resulting from a duration gap between lending andfunding.
• JFM maintains necessary reserves to cope with the interest rate risk resulting from a duration gap
between lending and funding.
• As assets and liabilities in JFM’s general account will expand as a result of lending to local governments
and funding, JFM carries out an ALM analysis of this account in a timely and appropriate manner tofurther enhance the effectiveness of its management of interest rate risk. In order to reduce exposure tointerest rate risk, JFM has established a medium-term management target for five years from fiscal 2013,
in which the duration gap is to be maintained below approximately two years.
• To achieve its objective, JFM has taken measures to decrease the duration gap by issuing longer than
10-year bonds to extend the duration on liabilities while pursuing the best bond conditions with flexible
funding operations.
• JFM’s lending for temporary financial countermeasures funding accounts for approximately 40% of theoverall outstanding loans in the general account with the same maturities as loans to other businesses
with a maximum maturity of 30 years. However, the interest rates for temporary financial countermeasuresfunding are revised every 10 years, which also contributes to moderate the duration on assets (lending).
• As mentioned above, JFM resolves to extend its maximum loan maturity from 30 years to 40 years,
which will increase the duration gap, but JFM’s stable operations are secured by a sufficient amountof reserves. In addition, JFM will revise its lending rate by the 30th year at the latest for its loans withmaturities longer than 30 years.
• The management account, which manages assets related to loans extended by the Predecessor, iscurrently exposed to greater interest rate risk than the general account. To address such risk, JFM
contributes to the required reserves for interest rate volatility as described above. In accordance with
Article 14 of the Supplementary Provisions of the Law, a portion of JFM’s reserve for interest rate volatility
within the management account is to be transferred to the Japanese national government. The transfer
is scheduled to occur over a period of three years from fiscal 2015 through fiscal 2017, with the aim oftransferring up to 600 billion yen.
- Pipeline risk
JFM is also exposed to pipeline risk, whereby losses would be incurred or profits decreased as aresult of interest rate fluctuations during the time from when JFM raises money until the point at which
the money is loaned to local governments. JFM, in principle, uses swap transactions to hedge against
pipeline risk.
B. Foreign exchange and other risks
Various risks associated with bond principal and interest payments are hedged by swap transactions.
These risks include foreign exchange risk related to foreign currency-denominated bonds, interest raterisk related to floating rate bonds, and risk of fluctuations in the amount of principal and interest of
inflation-indexed bonds.
JFM’s investments of surplus funds are exposed to the risk of losses on the sale of securities resulting
from price declines and the risk of realized losses on foreign currency-denominated deposits resulting
from fluctuations in foreign exchange rates. Accordingly, in principle, JFM minimizes the risk of pricefluctuation by holding investments until maturity, and hedges foreign exchange risk by using foreignexchange contracts.
C. Quantitative information on market risk
Loans, bonds and long-term borrowed money are primarily affected by interest rate risk, which is a majorrisk variable among the market risks.
With respect to loans, bonds and long-term borrowed money in the general account, JFM establishesa management target for the duration gap in order to manage interest rate risk appropriately. With regard
to the quantitative analysis of interest rate risk, while JFM does not have a management target for thequantitative figures, it reports the results of calculating the quantitative information, such as the “outlier
ratio”, to the ALM Committee and tracks the status of the interest rate risk.
The “outlier ratio” is calculated by dividing JFM’s “decline in economic value” as a result of hypotheticalFinancial
SectionFinancial Statementsinterest rate shocks by JFM’s net assets, including the reserve for interest rate volatility in the generalaccount and the fund for lending rate reduction. The “decline in economic value” is the largest possible
loss in net present market value of its loans and bonds and long-term borrowed money that JFM would
suffer following a hypothetical 200 basis point increase or decrease in market interest rates.
The outlier ratio is calculated based on the following conditions.
• Future Cash Flows
With respect to loans, future cash flows regarding such loans are calculated based on the type ofinterest rate of the loans. In addition, the advanced redemption in the future is not expected by JFM.
With respect to fixed-rate bonds and long-term borrowed money, future cash flows regarding such
fixed-rate bonds and long-term borrowed money are calculated based on the redemption schedule.
With respect to floating rate bonds hedged by interest rate swaps, that qualify for hedge accounting
and meet specific matching criteria, future cash flows corresponding to such floating rate bonds arecalculated in a manner similar to fixed-rate bonds.
• Indicative Interest Rate
For the assessment of loans, bonds and long-term borrowed money, the corresponding interest rate ofJapanese government bonds as of 31 March 2015 is used.
• Calculation of Outlier Ratio
Based on an assumption that risk variables, except for interest rate risk, are fixed as of 31 March
2015, the outlier ratio is calculated by dividing the change in fair value in the case where the indicativeinterest rate (government bonds) rises across-the-board by 200 basis points (2.00%) or the change
in fair value in the case such rate falls across-the-board by 200 basis points (2.00%), whichever isgreater, by net assets including the reserve for interest rate volatility and the fund for lending rate
reduction.
JFM calculates the outlier ratio reflecting a rise of 200 basis points of the indicative interest rate as
JFM understands that the change in fair value in the case of rising interest rates would be greater thanthat in the case of falling interest rates.
JFM monitors the movement of the outlier ratio on a regular basis, and the calculation as of 31
March 2015 is as follows.
Information on the outlier ratio as of 31 March 2015 is as follows:(Millions of yen) (Thousands of U.S. dollars)
Outlier
ratio(a)=-(b)/(e)Generalaccount

Change in fair value in the case of 200 basis points rise in interest rates
Total(b)=(c)+(d)

Loans
(c)

Bonds and long-termborrowed money(d)

Net assets including
reserve for interest rate
volatility and the fund for
lending rate reduction (e)22.4% ¥(578,975) $(4,809,970) ¥(1,855,809) $(15,417,538) ¥+1,276,833 $+10,607,568 ¥2,580,111 $21,434,834[+1.8%][(96,937)][(805,333)][(286,075)] [(2,376,630)][+189,137] [+1,571,297] [+248,440] [+2,063,969]

Note: Amounts posted in square brackets indicate the change from 31 March 2014.

Financial Section

With respect to loans and bonds in the management account, JFM raises funds by the issuanceof bonds as necessary in order to manage existing loans until their redemption. For this reason, while
JFM reports the calculation results of the quantitative information regarding the interest rate risk to the
ALM Committee and confirms the status of interest rate risk as is the case in the general account,
JFM does not establish a management target or use the quantitative analysis for the management
account.
With respect to these financial instruments in the management account, based on an assumptionthat the risk variables, except for interest rate risk, hold steady, for an indicative interest rate as of 31
March 2015 that is 10 basis points higher than the actual rate, it is assumed that the fair value of the
net amount (assets side), after offsetting such financial instruments with the financial liabilities, would
decline by 36,604 million yen (304,104 thousand U.S. dollars). On the contrary, for an indicative interest
rate as of 31 March 2015 that is 10 basis points lower than the actual rate, it is assumed that thefair value of the net amount (assets side), after offsetting such financial instruments with the financial
liabilities, would increase by 37,102 million yen (308,237 thousand U.S. dollars).
(ⅲ) Liquidity risk
Liquidity risk is the risk that JFM would incur losses due to difficulties in securing the necessary funds or
the necessity of obtaining funds at far higher interest rates than under normal conditions as a result ofa mismatch between the maturities of assets and liabilities or an unexpected outflow of funds (funding
liquidity risk). It also includes the risk that JFM would incur losses because it is unable to conduct market
transactions or is forced to conduct transactions at far more unfavorable prices than under normal
conditions due to market disruption or other difficult situations (market liquidity risk).

JFM Annual Report 2015 | 66

(Millions of yen)Book value(1) Loans

Fair value

533,998(0)467,175-

24,084,150

25,610,096

1,525,945

19,423,743

20,180,752

757,009(2) Borrowed money

95,50096,096596(3) Cash collateral received for financial instruments

43,53043,530-19,562,773

20,320,379

757,606

Derivative transactions
Hedge accounting applied

-

-

-

Total of derivative transactions

-

-

-

Total assets(1) Bonds

Total liabilities

The book value, fair value and difference between them as of 31 March 2015 are as follows:(Millions of yen)Book value(1) Loans

Fair value

Difference¥25,359,637¥1,922,007

670,000

670,000-(3) Cash and bank deposits

399,211399,211

-

437

437

-

Total assets

24,507,278

26,429,285

1,922,007(1) Bonds(4) Cash collateral paid for financial instruments

20,453,505

910,640

85,50087,373

1,873(3) Cash collateral received for financial instruments

182,246

182,246-

19,810,611

20,723,125

912,513

Derivative transactions
Hedge accounting applied

-

-

-

Total of derivative transactions

-

-

-

Total liabilities

JFM Annual Report 2015 | 67

Appendix / JFM Data

19,542,864(2) Borrowed money

Financial Section¥23,437,630(2) Securities
held-to-maturity securities

JFM’s Role in
Local Government Finance533,998
467,175

Management Structure¥1,525,946(3) Cash and bank deposits¥23,082,976

Difference¥24,608,923(2) Securities
held-to-maturity securities

Operations(2) Items related to fair value of financial instruments
The book value, fair value and difference between them as of 31 March 2014 are as follows:

Review and Plan

JFM’s exposure to liquidity risk is extremely low because loans are made to local governments according
to a pre-set schedule, and the daily cash and liquidity management is carried out based on a quarterly planfor fund management. Moreover, JFM has entered into overdraft agreements with several financial institutions
to prepare for the unexpected events, and invests surplus funds only in short-term financial products.
In addition, as new Basel III liquidity standards are being applied to Japanese financial institutions, JFM
has voluntarily implemented a plan to secure liquidity support assets in advance in order to prepare forpotential market disruption which may prevent JFM from securing the necessary funds for scheduled bondprincipal and interest payments.
(ⅳ) Supplemental remarks on fair value of financial instruments
In addition to the amount based on the market price, the fair value of illiquid financial instruments includes
a value that has been rationally calculated. Since certain assumptions were made when calculating the fairvalue, the value may differ in the event that the assumptions change.

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

Fair value

Difference$194,713,218$210,680,712$15,967,494(2) Securities
held-to-maturity securities

5,566,171

5,566,171-(3) Cash and bank deposits

3,316,533

3,316,533

-

3,630

3,630

-

Total assets

203,599,552

219,567,046

15,967,494(1) Bonds

162,356,608

170,135,591

7,778,983(4) Cash collateral paid for financial instruments(2) Borrowed money

710,310

725,873

15,563

1,514,056

1,514,056-

164,580,974

172,375,520

7,794,546

Derivative transactions
Hedge accounting applied

-

-

-

Total of derivative transactions

-

-

-

(3) Cash collateral received for financial instruments
Total liabilities

Note 1. Method for calculating fair value of financial instruments and items related to marketable securities and derivativetransactions

Financial Section
JFM Annual Report 2015 | 68

As of 31 March 2014

Review and Plan

Assets(1) Loans
The fair value of loans is calculated by discounting future cash flows assuming prepayment at the discount rate
calculated using the Japanese government bond rates as of 31 March 2014 and 2015.
(2) Securities
All bonds are held until maturity, and the fair value of treasury discount bills is the market price.
Since all negotiable certificates of deposit are short-term, the fair value approximates the book value. As a result,the book value is deemed to be the fair value.
(Millions of yen)
Type

Securities with fair values that
do not exceed the balance sheet
amountFair value

Difference

-

-

-

Sub total---

Treasury discount bills¥19,998¥19,998¥(0)

Negotiable certificatesof deposit

514,000

514,000-

Sub total

533,998

533,998(0)¥533,998¥533,998

¥(0)

Total

As of 31 March 2015

(Millions of yen)
Type

Securities with fair values that
do not exceed the balance sheet
amountFair value

Difference

-

-

-

-

Sub total---

Negotiable certificatesof deposit¥670,000¥670,000-

Sub total

670,000

670,000-¥670,000¥670,000-

Total(Thousands of U.S. dollars)
Type

Securities with fair values that
do not exceed the balance sheet
amountTotal

Fair value

Difference

-

-

-

-

Sub total---

Negotiable certificatesof deposit$5,566,171$5,566,171-

Sub total

5,566,171

5,566,171-$5,566,171$5,566,171-(4) Cash collateral paid for financial instruments
Cash collateral is associated with derivative transactions. The book value is used as the fair value of cash collateral
paid for financial instruments since both values are approximately equal as a result of each deposit period being
short term.

JFM Annual Report 2015 | 69

Appendix / JFM Data

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

Financial Section

Securities with fair values
exceeding the balance sheet
amountBook value

JFM’s Role in
Local Government Finance

Securities with fair values
exceeding the balance sheet
amountBook value

Management Structure-

Operations

Securities with fair values
exceeding the balance sheet
amountBook value

Financial
SectionFinancial Statements

Liabilities(1) Bonds
The fair value of bonds issued by JFM that have a market price is based on the market price. The fair value ofbonds without a market price is calculated by discounting the future cash flows using the interest rate that would
be applied when issuing similar bonds with the same total principal and interest and payment term.
Deferral hedge accounting is used for currency swaps, and the fair value of foreign currency-denominated bonds
is thus calculated using the total of the fair value of that bond and the fair value of the swap transaction.
Hedge accounting is used for interest rate swaps, and the fair value of floating rate bonds is thus calculated bydetermining the present value using the total of the corresponding interest rate swap accounted for together withthe principal and interest and discounting the future cash flows using the interest rate that would be applied whenissuing a similar bond.
(2) Borrowed money
The fair value of long-term borrowed money is calculated by discounting the future cash flows using the interest
rate that would presumably be applied when issuing bonds with the same total principal and interest and payment
term.
On the other hand, the book value is used as the fair value of short-term borrowed money since both values areapproximately equal as a result of each loan period being short term.
(3) Cash collateral received for financial instruments
Cash collateral is associated with derivative transactions. The book value is used as the fair value of cash collateral
received for financial instruments since both values are approximately equal as a result of each deposit period
being short term.
Derivative transactions
Transactions for which hedge accounting is applied
For derivative transactions for which hedge accounting is applied, the contractual amount or the amount equivalent
to the principal in the contract under each hedge accounting method as of 31 March 2014 is as follows:(Millions of yen)Hedge
accounting
methodContract amountFinancial Section

Type ofderivativetransactions

Primary
hedged items

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

Bonds
Long-term
borrowed money

Hedge
accounting forinterest rate
swaps

Interest rate swap
transactions
Receive/floating
and pay/fixed

Deferral hedge
accounting for
currency swaps
Deferral hedge
accounting forforeign exchange
contracts

-

-

Bonds

¥105,000¥105,000(*1)

Currency swap
transactions

Foreign currencydenominatedbonds

1,097,523

1,097,523(*2)

Foreign exchange
contracts

Foreign currencydenominateddeposits

103,000-(*2)¥1,305,523¥1,202,523

Total

JFM Annual Report 2015 | 70

Method for
calculating fair
value

Fair
value

Of which
1 year or
more

-

-

Based on prices
provided by
the counterparty
financial institution

(Millions of yen)Hedge
accounting
methodContract amountPrincipal
accounting
methodInterest rate swap
transactions

Bonds
Long-term
borrowed money

Hedge
accounting forinterest rate
swaps

Interest rate swap
transactions
Receive/floating
and pay/fixed

Bonds

Deferral hedge
accounting for
currency swaps

Currency swap
transactions

Deferral hedge
accounting forforeign exchange
contracts

Foreign exchange
contracts--¥95,000¥95,000(*1)

Foreign currencydenominatedbonds

1,243,804

1,243,804(*2)

Foreign currencydenominateddeposits

135,000-(*2)¥1,473,804¥1,338,804

Total

Method for
calculating fair
value

Fair
value

Of which
1 year or
more-

Based on prices
provided by
the counterparty
financial institution

Management StructurePrimary
hedged items

Operations

Type ofderivativetransactions

Review and Plan

For derivative transactions for which hedge accounting is applied, the contractual amount or the amount equivalent
to the principal in the contract under each hedge accounting method as of 31 March 2015 is as follows:-(Thousands of U.S. dollars)

Contract amountPrimary
hedged items

Principal
accounting
methodInterest rate swap
transactions

Bonds
Long-term
borrowed money

Hedge
accounting forinterest rate
swaps

Interest rate swap
transactions
Receive/floating
and pay/fixed

Bonds

Deferral hedge
accounting for
currency swaps

Currency swap
transactions

Deferral hedge
accounting forforeign exchange
contracts

Foreign exchange
contracts---$789,233$789,233(*1)

Foreign currencydenominatedbonds

10,333,177

10,333,177(*2)

Foreign currencydenominateddeposits

1,121,542-(*2)$12,243,952$11,122,410

Based on prices
provided by
the counterparty
financial institution-(*1) Since interest rate swaps for which hedge accounting is applied are accounted for together with the bondbeing hedged, the fair value is presented together with the fair value of the relevant bond.
(*2) Since currency swaps and foreign exchange contracts for which deferral hedge accounting is applied areaccounted for together with the foreign currency-denominated bond or foreign currency-denominated deposit
being hedged, the fair value is presented together with the fair value of the relevant hedged item.

JFM Annual Report 2015 | 71

Appendix / JFM Data

Total

Method for
calculating fair
value

Fair
value

Of which
1 year or
more

Financial Section

Type ofderivativetransactions

JFM’s Role in
Local Government FinanceHedge
accounting
methodFinancial
SectionFinancial Statements

Note 2. The repayment schedule for monetary claims and securities with maturities is as follows:
As of 31 March 2014
(Millions of yen)
Within1 yearAfter
1 yearthrough
2 yearsAfter
2 years
through
3 yearsAfter
3 years
through
4 yearsAfter
4 years
through
5 yearsAfter
5 years
through
10 years

After
10 years
through
20 years

After
20 years
through
30 years¥1,572,391¥1,626,590¥1,619,955¥1,571,660¥1,532,455¥6,673,031¥6,970,977¥1,515,913

Securities
held-tomaturity
securities

534,000

-

-

-

-

-

-

-

Deposits

467,175

-

-

-

-

-

-

-

Loans

As of 31 March 2015
(Millions of yen)
Within1 yearAfter
1 yearthrough
2 yearsAfter
2 years
through
3 yearsAfter
3 years
through
4 yearsAfter
4 years
through
5 yearsAfter
5 years
through
10 years

After
10 years
through
20 years

After
20 years
through
30 years¥1,636,841¥1,653,076¥1,633,833¥1,614,776¥1,582,109¥6,722,939¥6,990,554¥1,603,497

Securities
held-tomaturity
securities

670,000

-

-

-

-

-

-

-

Deposits

399,210

-

-

-

-

-

-

-

Loans

(Thousands of U.S. dollars)Within1 yearLoans

After
1 yearthrough
2 yearsAfter
2 years
through
3 yearsAfter
3 years
through
4 yearsAfter
4 years
through
5 yearsAfter
5 years
through
10 years

After
10 years
through
20 years

After
20 years
through
30 years$13,598,420 $13,733,296 $13,573,431 $13,415,108 $13,143,718 $55,852,281 $58,075,558 $13,321,407

Financial Section

Securities
held-tomaturity
securities

5,566,171

-

-

-

-

-

-

-

Deposits

3,316,533

-

-

-

-

-

-

-

JFM Annual Report 2015 | 72

Note 3. The repayment schedule for bonds and borrowed money is as follows:(Millions of yen)

Bonds
Borrowedmoney

Within1 yearAfter
1 yearthrough
2 yearsAfter
2 years
through
3 yearsAfter
3 years
through
4 years¥1,952,196¥1,730,970¥1,822,228

20,000--After
4 years
through
5 yearsAfter
5 years
through
10 years

After
10 years
through
20 years

After
20 years
through
30 years¥1,736,489¥1,804,268¥8,238,330¥1,959,780¥193,500-

30,00045,500--(Millions of yen)After
1 yearthrough
2 yearsAfter
2 years
through
3 yearsAfter
3 years
through
4 yearsAfter
4 years
through
5 yearsAfter
5 years
through
10 years

After
10 years
through
20 years

After
20 years
through
30 years¥1,730,970¥1,847,228¥1,745,824¥1,804,268¥2,055,327¥8,025,684¥2,159,110¥187,000---

30,00010,00045,500--Borrowedmoney(Thousands of U.S. dollars)After
1 yearthrough
2 years

Within1 yearAfter
3 years
through
4 yearsAfter
4 years
through
5 yearsAfter
5 years
through
10 years$14,380,410 $15,346,257 $14,503,821 $14,989,355 $17,075,081

Borrowed
money

-

-

-

249,232

83,077After
10 years
through
20 years

After
20 years
through
30 years$66,675,122 $17,937,277
378,001-$1,553,543-

8. Tangible and Intangible Fixed Assets
Tangible and intangible fixed assets as of 31 March 2014 consisted of the following:

JFM’s Role in
Local Government Finance

Bonds

After
2 years
through
3 years

Management Structure

Bonds

Within1 yearOperations

As of 31 March 2015

Review and Plan

As of 31 March 2014

(Millions of yen)

Increaseduringthe year

Buildings¥1,104

Land

1,994

Type of assets

Accumulated
Depreciation
depreciation
andand
amortizationamortization
duringas of 31
the yearMarch 2014

Balance asof 31 March2014(Acquisition
costs)¥20¥29¥1,094

¥244

¥54

¥850

-

335

1,659

-

-

1,659

114

282

19

377

52

18

325

3,213

302

384

3,132

296

73

2,836

1,351

11

725

637

444

218

193

482

262

-

744

-

-

744

¥1,834¥273¥725¥1,382

¥444

¥218

¥938

Balance asof 31 March
2014(Net bookvalue)

Tangible fixed assets

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

JFM Annual Report 2015 | 73

Appendix / JFM Data

Decreaseduringthe year

Financial Section

Balance asof 1 April
2013(Acquisition
costs)

Financial
SectionFinancial Statements

Tangible and intangible fixed assets as of 31 March 2015 consisted of the following:(Millions of yen)

Increaseduringthe year

Buildings¥1,094¥81-¥1,176

¥300

¥56

¥875

Land

1,659

-

-

1,659

-

-

1,659

377

36

¥26

388

83

57

305

3,132

118

26

3,224

384

114

2,840

Software

637

2,035

551

2,121

345

364

1,776

Other intangible fixed assets

744

279

1,024

0

-

-

0

¥1,382¥2,314¥1,576¥2,121¥345¥364¥1,776

Type of assets

Balance asof 31 March2015(Acquisition
costs)

Accumulated
Depreciation
depreciation
andand
amortizationamortization
duringas of 31
the yearMarch 2015

Balance asof 1 April
2014(Acquisition
costs)

Decreaseduringthe year

Balance asof 31 March
2015(Net bookvalue)

Tangible fixed assets

Other tangible fixed assets
Total tangible fixed assets
Intangible fixed assets

Total intangible fixed assets(Thousands of U.S. dollars)

Increaseduringthe year

Buildings$9,095$679-$9,775$2,500$473$7,275Land

13,789--13,789--13,789Other tangible fixed assets

3,140

307

$218

3,228

694

474

2,534

26,024986

218

26,792

3,194

947

23,598

Software

5,298

16,9094,584

17,623

2,867

3,028

14,756

Other intangible fixed assets

6,189

2,322

8,510

1

-

-

1

$11,487$19,231$13,094$17,624$2,867$3,028$14,757

Type of assets

Balance asof 31 March2015(Acquisition
costs)

Accumulated
Depreciation
depreciation
andand
amortizationamortization
duringas of 31
the yearMarch 2015

Balance asof 1 April
2014(Acquisition
costs)

Decreaseduringthe year

Balance asof 31 March
2015(Net bookvalue)

Tangible fixed assets

Total tangible fixed assets
Intangible fixed assets

Total intangible fixed assets
Financial Section

9. Assets Pledged as Collateral
Pursuant to the provisions of Article 40, Section 2 of the Law, JFM’s total assets are pledged as general collateral for
JFM bonds in the amount of 19,423,743 million yen and 19,542,864 million yen (162,356,608 thousand U.S. dollars)
as of 31 March 2014 and 2015, respectively.

JFM Annual Report 2015 | 74

10. Bonds(Millions of yen)
Maturity

Government-guaranteed bonds issued by JFM(domestic) 10-year bonds (Series 1-58)

6/15/20093/17/2014¥2,332,567¥3,013,475

0.541
to 1.5

10Y

Government-guaranteed bonds issued by JFM(domestic) 8-year bonds (Series 1-3)

9/26/20132/27/2014-

200,000

0.460
to 0.576

8Y

Government-guaranteed bonds issued by JFM(domestic) 6-year bonds (Series 1-12)

9/27/20113/10/2014

519,971

809,978

0.186
to 0.4

6Y

Government-guaranteed bonds issued by JFM(domestic) 4-year bonds (Series 1-6)

5/28/20128/29/2013

220,000

330,000

0.093
to 0.249

4Y

Government-guaranteed bonds issued by JFM(international) Global U.S. dollar bonds (Series 1)

1/13/2011

83,17083,170[USD 1,000 million]

4.0

10Y

Non-guaranteed bonds issued by JFM(domestic) 2-year bonds (Series 1)

2/19/2014-

50,0000.135

2Y

Non-guaranteed bonds issued by JFM(domestic) 3-year bonds (Series 1)

8/19/2013-

20,0000.170

3Y

Non-guaranteed bonds issued by JFM(domestic) 5-year bonds (Series 1-14)

5/25/201010/21/2013

230,000

275,000

0.230
to 0.639

5Y

Non-guaranteed bonds issued by JFM(domestic) 7-year bonds (Series 1)

8/20/2012

20,00020,0000.446

7Y

Non-guaranteed bonds issued by JFM(domestic) 10-year bonds (Series 1-58)

6/18/20093/24/2014

1,490,000

1,905,000

0.576
to 1.648

10Y

Non-guaranteed bonds issued by JFM(domestic) 15-year bonds (Series 1-3)

1/31/20131/22/2014

15,00050,0001.161
to 1.334

15Y

Non-guaranteed bonds issued by JFM(domestic) 20-year bonds (Series 1-35)

6/25/20093/24/2014

670,000

795,000

1.396
to 2.266

20Y

Non-guaranteed bonds issued by JFM(domestic) FLIP bonds (Series F1-F52, F54-F210)

7/22/20092/4/2014

1,003,000

1,304,514(23,000)

0.185
to 2.334

3Y
to 30Y

Non-guaranteed bonds issued by JFM(domestic) FLIP bonds (Floater, Series F53, F211)

2/1/20112/26/2014

15,00025,000Floatingrate

9Y
to 30Y

Non-guaranteed bonds issued by JFM(international) Private placements(Series 2, 3, 7, 14-16, 19, 28, 31, 33-35, 40-42)

1/12/20123/6/2014

196,197468,212[USD 4,832 million][AUD 210 million]

1.375
to 4.25Y
to 7Y

Non-guaranteed bonds issued by JFM(international) Private placements(Floater, Series 1, 4-6, 8-13, 17, 18, 20-27, 29,
30, 32, 36-39)

1/17/20127/22/2013

95,064

145,599[USD 1,548 million][NZD 40 million][AUD 120 million](20,526)

Floating
rate

1.5Y
to 7Y

Non-guaranteed bonds issued by JFM(domestic) Private placements with Pension
Fund Association for Local Government
Officials (Series A1-A50)

7/31/20093/24/2014

1,280,000

1,580,000

0.64
to 1.53

10Y

Bonds issued by JFM - Sub-total-

8,169,971

11,074,950(43,526)--

Government-guaranteed bonds issued by
Japan Finance Organization for MunicipalEnterprises (domestic) 10-year bonds (Series 1-8)

10/16/20085/25/2009

560,911561,186

1.3
to 1.6

10Y

Non-guaranteed bonds issued by Japan
Finance Organization for Municipal Enterprises(domestic) 5-year bonds (Series 1)

2/24/2009

29,998

-

1.01

5Y

Non-guaranteed bonds issued by Japan
Finance Organization for Municipal Enterprises(domestic) 10-year bonds (Series 1-4)

11/25/20085/28/2009

139,972

139,977

1.59
to 1.77

10Y

JFM Annual Report 2015 | 75

Appendix / JFM Data

Couponrate (%)

Financial Section

Balance as of 31
March 2014

JFM’s Role in
Local Government Finance

Balance
as of 1
April 2013

Management Structure

Date of
issue

Operations

Type of bond

Review and Plan

Bonds as of 31 March 2014 consisted of the following:Financial
SectionFinancial Statements

Financial Section

Non-guaranteed bonds issued by Japan
Finance Organization for Municipal Enterprises(domestic) 20-year bonds (Series 1, 2)

1/26/20094/30/2009

84,952

84,9552.07
to 2.29

20Y

Non-guaranteed bonds issued by Japan
Finance Organization for Municipal Enterprises(domestic) Private placements with Pension
Fund Association for Local Government
Officials (Series A1, A2)

4/30/20095/26/2009

120,000

120,000

1.69
to 1.73

10Y

Bonds issued by Japan Finance Organization
for Municipal Enterprises - Sub-total-

935,835

906,119--

Government-guaranteed bonds issued by
the Predecessor (domestic)
10-year bonds (Series 826-886)

4/23/20036/19/2008

4,912,647

3,518,536(1,136,460)

0.5
to 2.0

10Y

Government-guaranteed bonds issued by
the Predecessor (domestic)
15-year bonds (Series 1-5)

6/22/20057/18/2007

184,704

184,726

1.6
to 2.2

15Y

Government-guaranteed bonds issued by
the Predecessor (international)
Euro-sterling bonds (Series 4), Global-yen
bonds (Series 5), etc.

8/9/19996/25/2008

724,131594,406[GBP 150 million][USD 2,200 million][EUR 900 million](122,040)

1.9
to 5.75

10Y
to 20Y

Non-guaranteed bonds issued by
the Predecessor (domestic)
10-year bonds (Series 7-30)

9/19/20036/16/2008

929,908

809,940(220,000)

1.31
to 2.07

10Y

Non-guaranteed bonds issued by
the Predecessor (domestic)
20-year bonds (Series 1-25)

7/30/20026/16/2008

569,686

569,7101.03
to 2.58

20Y

Non-guaranteed bonds issued by
the Predecessor (domestic)
30-year bonds (Series 1-10)

1/29/20049/20/2006

189,867

189,873

2.39
to 2.95

30Y

Non-guaranteed bonds issued by
the Predecessor (domestic)
Floating rate bonds (Series 1)

10/31/2002

20,00020,000Floating
rate

15Y

Non-guaranteed bonds issued by
the Predecessor (domestic)
Inflation-indexed bonds (Series 1, 2)

3/2/20057/19/2005

40,00040,000(20,000)

0.45
to 0.47

10Y

Non-guaranteed bonds issued by
the Predecessor (domestic)
Bonds with scheduled repayment (Series 1-3)

2/14/20036/9/2004

39,15036,980(2,170)1.39
to 2.01

28Y

Non-guaranteed bonds issued by
the Predecessor (domestic)
CMS-linked floating rate bonds (Series 1)

9/13/2006

20,00020,000Floating
rate

10Y

Non-guaranteed bonds issued by
the Predecessor (domestic)
Private placements with Pension Fund
Association for Local Government Officials(Series Special No.1-5–No.1-31)

5/28/20037/31/2008

1,940,500

1,458,500(408,000)

0.67
to 2.18

10Y

Bonds issued by the Predecessor - Sub-total-

9,570,594

7,442,673(1,908,670)

-

-

Total

-

¥18,676,401¥19,423,743(1,952,196)--

Notes: 1. Pursuant to the provisions of Article 40, Section 2 of the Law, JFM’s total assets are pledged as generalcollateral for JFM bonds in the amount of 19,423,743 million yen as of 31 March 2014.
2. Amounts in square brackets under “Balance as of 31 March 2014” for “Government-guaranteed bonds
issued by JFM (international)—Global U.S. dollar bonds (Series 1),” “Non-guaranteed bonds issued by JFM(international)—Private placements (Series 2, 3, 7, 14-16, 19, 28, 31, 33-35, 40-42),” “Non-guaranteedbonds issued by JFM (international)—Private placements (Floater, Series 1, 4-6, 8-13, 17, 18, 20-27, 29,
30, 32, 36-39)” and “Government-guaranteed bonds issued by the Predecessor (international)—Euro-sterlingbonds (Series 4), Global-yen bonds (Series 5), etc.” are denominated in foreign currencies.
3. Amounts in parentheses under “Balance as of 31 March 2014” are to be repaid within one year.
4. Annual schedule of redemption within five years after the fiscal year-end:
JFM Annual Report 2015 | 76

Bonds as of 31 March 2015 consisted of the following:

Couponrate (%)

Maturity

Government-guaranteed bonds issued by JFM(domestic) 10-year bonds (Series 1-70)

6/15/20093/16/2015¥3,013,475¥3,444,382

0.32
to 1.5

10Y

Government-guaranteed bonds issued by JFM(domestic) 8-year bonds (Series 1-3)

9/26/20132/27/2014

200,000

200,000

0.460
to 0.576

8Y

Government-guaranteed bonds issued by JFM(domestic) 6-year bonds (Series 1-15)

9/27/20113/19/2015

809,978

1,009,984

0.167
to 0.4

6Y

Government-guaranteed bonds issued by JFM(domestic) 4-year bonds (Series 1-6)

5/28/20128/29/2013

330,000

330,000

0.093
to 0.249

4Y

Government-guaranteed bonds issued by JFM(international) Global U.S. dollar bonds (Series 1)

1/13/2011

83,17083,170[USD 1,000 million]

4.0

10Y

Non-guaranteed bonds issued by JFM(domestic) 2-year bonds (Series 1-2)

2/19/20143/20/2015

50,00075,000(50,000)

0.1
to 0.135

2Y

Non-guaranteed bonds issued by JFM(domestic) 3-year bonds (Series 1)

8/19/2013

20,00020,0000.170

3Y

Non-guaranteed bonds issued by JFM(domestic) 5-year bonds (Series 1-16)

5/25/201010/21/2014

275,000

305,000(90,000)

0.175
to 0.639

5Y

Non-guaranteed bonds issued by JFM(domestic) 7-year bonds (Series 1)

8/20/2012

20,00020,0000.446

7Y

Non-guaranteed bonds issued by JFM(domestic) 10-year bonds (Series 1-70)

6/18/20093/20/2015

1,905,000

2,260,000

0.355
to 1.648

10Y

Non-guaranteed bonds issued by JFM(domestic) 15-year bonds (Series 1-3)

1/31/20131/22/2014

50,00050,0001.161
to 1.334

15Y

Non-guaranteed bonds issued by JFM(domestic) 20-year bonds (Series 1-42)

6/25/20091/23/2015

795,000

930,000

0.999
to 2.266

20Y

Non-guaranteed bonds issued by JFM(domestic) 30-year bonds (Series 1)

6/26/2014-

15,0001.864

30Y

Non-guaranteed bonds issued by JFM(domestic) FLIP bonds (Series F1-F52, F54F210, F212-F243, F245-F264)

7/22/20091/28/2015

1,304,514

1,562,643

0.199
to 2.334

3Y
to 30Y

Non-guaranteed bonds issued by JFM(domestic) FLIP bonds (Floater, Series F53,
F211, F244)

2/1/20117/25/2014

25,00035,000Floatingrate

9Y
to 30Y

0.875
to 5.092

3Y
to 10Y

1/12/20123/18/2015

468,212755,784[USD 5,922 million][AUD 365 million][NZD 105 million][EUR 1,000 million]

Non-guaranteed bonds issued by JFM(international)
Private placements (Floater, Series 1, 4-6, 8-13,
17, 18, 20-27, 29, 30, 32, 36-39)

1/17/20127/22/2013

145,599

125,073[USD 1,348 million][NZD 40 million][AUD 120 million]

Floating
rate

1.5Y
to 7Y

Non-guaranteed bonds issued by JFM(domestic) Private placements with Pension
Fund Association for Local Government
Officials (Series A1-A62)

7/31/20093/19/2015

1,580,000

1,880,000

0.37
to 1.53

10Y

Bonds issued by JFM - Sub-total-

11,074,950

13,101,039(140,000)--Government-guaranteed bonds issued by Japan
Finance Organization for Municipal Enterprises(domestic) 10-year bonds (Series 1-8)

10/16/20085/25/2009

561,186

561,4611.3
to 1.610Y

JFM Annual Report 2015 | 77

Appendix / JFM Data

Non-guaranteed bonds issued by JFM(international)
Private placements (Series 2, 3, 7, 14-16, 19,
28, 31, 33-35, 40-48)

Financial Section

Balance as of 31
March 2015

JFM’s Role in
Local Government Finance

Balance
as of 1
April 2014

Management Structure

Date of
issue

Operations

Type of bond

Review and Plan

(Millions of yen)

Financial
SectionFinancial Statements

Non-guaranteed bonds issued by
Japan Finance Organization for MunicipalEnterprises (domestic)
10-year bonds (Series 1-4)

11/25/20085/28/2009

139,977

139,9811.59
to 1.77

10Y

Non-guaranteed bonds issued by
Japan Finance Organization for MunicipalEnterprises (domestic)
20-year bonds (Series 1, 2)

1/26/20094/30/2009

84,95584,9582.07
to 2.29

20Y

Non-guaranteed bonds issued by
Japan Finance Organization for MunicipalEnterprises (domestic)
Private placements with Pension Fund
Association for Local Government Officials(Series A1, A2)

4/30/20095/26/2009

120,000

120,000

1.69
to 1.73

10Y-

906,119

906,401--

Government-guaranteed bonds issued by
the Predecessor (domestic)
10-year bonds (Series 838-886)

4/26/20046/19/2008

3,518,536

2,383,168(914,080)

1.2
to 2.0

10Y

Government-guaranteed bonds issued by
the Predecessor (domestic)
15-year bonds (Series 1-5)

6/22/20057/18/2007

184,726

184,749

1.6
to 2.2

15Y

Government-guaranteed bonds issued by
the Predecessor (international)
Euro-sterling bonds (Series 4), Global-yen
bonds (Series 5), etc.

8/9/19996/25/2008

594,406

472,614[GBP 150 million][USD 2,200 million](129,720)

1.9
to 5.75

10Y
to 20Y

Non-guaranteed bonds issued by
the Predecessor (domestic)
10-year bonds (Series 10-30)

6/18/20046/16/2008

809,940589,966(190,000)

1.33
to 2.07

10Y

Non-guaranteed bonds issued by
the Predecessor (domestic)
20-year bonds (Series 1-25)

7/30/20026/16/2008

569,710569,735

1.03
to 2.58

20Y

Non-guaranteed bonds issued by
the Predecessor (domestic)
30-year bonds (Series 1-10)

1/29/20049/20/2006

189,873

189,879

2.39
to 2.95

30Y

Non-guaranteed bonds issued by
the Predecessor (domestic)
Floating rate bonds (Series 1)

10/31/2002

20,00020,000Floating
rate

15Y

Non-guaranteed bonds issued by
the Predecessor (domestic)
Inflation-indexed bonds (Series 1, 2)

3/2/20057/19/2005

40,00020,000(20,000)

0.45
to 0.47

10Y

Non-guaranteed bonds issued by
the Predecessor (domestic)
Bonds with scheduled repayment (Series 1-3)

2/14/20036/9/2004

36,98034,810(2,170)1.39
to 2.01

28Y

Non-guaranteed bonds issued by
the Predecessor (domestic)
CMS-linked floating rate bonds (Series 1)

9/13/2006

20,00020,000Floating
rate

10Y

Non-guaranteed bonds issued by
the Predecessor (domestic)
Private placements with Pension Fund
Association for Local Government Officials(Series Special No.1-10–No.1-31)

6/24/20047/31/2008

1,458,500

1,050,500(335,000)

1.32
to 2.18

10Y

Bonds issued by the Predecessor - Sub-total-

7,442,673

5,535,423(1,590,970)

-

-

Total

-

¥19,423,743¥19,542,864(1,730,970)--

Bonds issued by Japan Finance Organization
for Municipal Enterprises - Sub-total

Financial Section

JFM Annual Report 2015 | 78

Maturity

Government-guaranteed bonds issued by JFM(domestic) 10-year bonds (Series 1-70)

6/15/20093/16/2015$25,035,101$28,614,959

0.32
to 1.5

10Y

Government-guaranteed bonds issued by JFM(domestic) 8-year bonds (Series 1-3)

9/26/20132/27/2014

1,661,544

1,661,5440.460
to 0.576

8Y

Government-guaranteed bonds issued by JFM(domestic) 6-year bonds (Series 1-15)

9/27/20113/19/2015

6,729,071

8,390,670

0.167
to 0.4

6Y

Government-guaranteed bonds issued by JFM(domestic) 4-year bonds (Series 1-6)

5/28/20128/29/2013

2,741,547

2,741,547

0.093
to 0.249

4Y

Government-guaranteed bonds issued by JFM(international) Global U.S. dollar bonds (Series 1)

1/13/2011

690,953

690,953[USD 1,000 million]

4.0

10Y

Non-guaranteed bonds issued by JFM(domestic) 2-year bonds (Series 1-2)

2/19/20143/20/2015

415,386

623,079(415,386)0.1
to 0.135

2Y

Non-guaranteed bonds issued by JFM(domestic) 3-year bonds (Series 1)

8/19/2013

166,154

166,154

0.170

3Y

Non-guaranteed bonds issued by JFM(domestic) 5-year bonds (Series 1-16)

5/25/201010/21/2014

2,284,622

2,533,854(747,695)

0.175
to 0.639

5Y

Non-guaranteed bonds issued by JFM(domestic) 7-year bonds (Series 1)

8/20/2012

166,154

166,154

0.446

7Y

Non-guaranteed bonds issued by JFM(domestic) 10-year bonds (Series 1-70)

6/18/20093/20/2015

15,826,203

18,775,442

0.355
to 1.648

10Y

Non-guaranteed bonds issued by JFM(domestic) 15-year bonds (Series 1-3)

1/31/20131/22/2014

415,386

415,386

1.161
to 1.334

15Y

Non-guaranteed bonds issued by JFM(domestic) 20-year bonds (Series 1-42)

6/25/20091/23/2015

6,604,636

7,726,178

0.999
to 2.266

20Y

Non-guaranteed bonds issued by JFM(domestic) 30-year bonds (Series 1)

6/26/2014-

124,616

1.864

30Y

Non-guaranteed bonds issued by JFM(domestic) FLIP bonds (Series F1-F52, F54F210, F212-F243, F245-F264)

7/22/20091/28/2015

10,837,536

12,982,000

0.199
to 2.334

3Y
to 30Y

Non-guaranteed bonds issued by JFM(domestic) FLIP bonds (Floater, Series F53,
F211, F244)

2/1/20117/25/2014

207,693

290,770

Floatingrate

9Y
to 30Y

Non-guaranteed bonds issued by JFM(international)
Private placements (Series 2, 3, 7, 14-16, 19,
28, 31, 33-35, 40-48)

1/12/20123/18/2015

3,889,780

6,278,846[USD 5,922 million][AUD 365 million][NZD 105 million][EUR 1,000 million]

0.875
to 5.092

3Y
to 10Y

Non-guaranteed bonds issued by JFM(international)
Private placements (Floater, Series 1, 4-6, 8-13,
17, 18, 20-27, 29, 30, 32, 36-39)

1/17/20127/22/2013

1,209,603

1,039,079[USD 1,348 million][NZD 40 million][AUD 120 million]

Floating
rate

1.5Y
to 7Y

Non-guaranteed bonds issued by JFM(domestic) Private placements with Pension
Fund Association for Local Government
Officials (Series A1-A62)

7/31/20093/19/2015

13,126,194

15,618,510

0.37
to 1.53

10Y

Bonds issued by JFM - Sub-total-

92,007,563

108,839,741(1,163,081)--

Government-guaranteed bonds issued by
Japan
Finance Organization for Municipal Enterprises(domestic) 10-year bonds (Series 1-8)

10/16/20085/25/2009

4,662,179

4,664,461

1.3
to 1.6

10Y

Non-guaranteed bonds issued by
Japan Finance Organization for MunicipalEnterprises (domestic)
10-year bonds (Series 1-4)

11/25/20085/28/2009

1,162,890

1,162,931

1.59
to 1.77

10Y

JFM Annual Report 2015 | 79

Appendix / JFM Data

Couponrate (%)

Financial Section

Balance as of 31
March 2015

JFM’s Role in
Local Government Finance

Balance
as of 1
April 2014

Management Structure

Date of
issue

Operations

Type of bond

Review and Plan(Thousands of U.S. dollars)Financial
SectionFinancial Statements

Financial Section

Non-guaranteed bonds issued by Japan
Finance Organization for Municipal Enterprises(domestic) 20-year bonds (Series 1, 2)

1/26/20094/30/2009

705,788705,8132.07
to 2.29

20Y

Non-guaranteed bonds issued by Japan
Finance Organization for Municipal Enterprises(domestic) Private placements with Pension
Fund Association for Local Government
Officials (Series A1, A2)

4/30/20095/26/2009

996,926

996,926

1.69
to 1.73

10Y

Bonds issued by Japan Finance Organization
for Municipal Enterprises - Sub-total-

7,527,783

7,530,131--

Government-guaranteed bonds issued by
the Predecessor (domestic)
10-year bonds (Series 838-886)

4/26/20046/19/2008

29,231,007

19,798,693(7,593,919)

1.2
to 2.0

10Y

Government-guaranteed bonds issued by
the Predecessor (domestic)
15-year bonds (Series 1-5)

6/22/20057/18/2007

1,534,657

1,534,843

1.6
to 2.2

15Y

Government-guaranteed bonds issued by
the Predecessor (international)
Euro-sterling bonds (Series 4), Global-yen
bonds (Series 5), etc.

8/9/19996/25/2008

4,938,158

3,926,346[GBP 150 million][USD 2,200 million](1,077,677)

1.9
to 5.75

10Y
to 20Y

Non-guaranteed bonds issued by
the Predecessor (domestic)
10-year bonds (Series 10-30)

6/18/20046/16/2008

6,728,758

4,901,276(1,578,466)

1.33
to 2.07

10Y

Non-guaranteed bonds issued by
the Predecessor (domestic)
20-year bonds (Series 1-25)

7/30/20026/16/2008

4,732,996

4,733,202

1.03
to 2.58

20Y

Non-guaranteed bonds issued by
the Predecessor (domestic)
30-year bonds (Series 1-10)

1/29/20049/20/2006

1,577,413

1,577,464

2.39
to 2.95

30Y

Non-guaranteed bonds issued by
the Predecessor (domestic)
Floating rate bonds (Series 1)

10/31/2002

166,154

166,154

Floating
rate

15Y

Non-guaranteed bonds issued by
the Predecessor (domestic)
Inflation-indexed bonds (Series 1, 2)

3/2/20057/19/2005

332,309

166,154(166,154)0.45
to 0.47

10Y

Non-guaranteed bonds issued by
the Predecessor (domestic)
Bonds with scheduled repayment (Series 1-3)

2/14/20036/9/2004

307,219

289,192(18,028)

1.39
to 2.01

28Y

Non-guaranteed bonds issued by
the Predecessor (domestic)
CMS-linked floating rate bonds (Series 1)

9/13/2006

166,154

166,154

Floating
rate

10Y

Non-guaranteed bonds issued by thePredecessor (domestic) Private placements with
Pension Fund Association for Local Government
Officials (Series Special No.1-10–No.1-31)

6/24/20047/31/2008

12,116,807

8,727,258(2,783,085)

1.32
to 2.18

10Y

Bonds issued by the Predecessor - Sub-total-

61,831,632

45,986,736(13,217,329)

-

-

Total

-

$161,366,978$162,356,608(14,380,410)--

Notes: 1. Pursuant to the provisions of Article 40, Section 2 of the Law, JFM’s total assets are pledged as generalcollateral for JFM bonds in the amount of 19,542,864 million yen (162,356,608 thousand U.S. dollars) as of
31 March 2015.
2. Amounts in square brackets under “Balance as of 31 March 2015” for “Government-guaranteed bonds
issued by JFM (international)—Global U.S. dollar bonds (Series 1),” “Non-guaranteed bonds issued by JFM(international)—Private placements (Series 2, 3, 7, 14-16, 19, 28, 31, 33-35, 40-48),” “Non-guaranteedbonds issued by JFM (international)—Private placements (Floater, Series 1, 4-6, 8-13, 17, 18, 20-27, 29,
30, 32, 36-39)” and “Government-guaranteed bonds issued by the Predecessor (international)—Euro-sterlingbonds (Series 4), Global-yen bonds (Series 5), etc.” are denominated in foreign currencies.
3. Amounts in parentheses under “Balance as of 31 March 2015” are to be repaid within one year.
4. Annual schedule of redemption within five years after the fiscal year-end:

JFM Annual Report 2015 | 80

As of 31 March 2014

Bonds

¥1,952,196

After 2 years
through 3 years

After 3 years
through 4 years

After 4 years
through 5 years¥1,730,970¥1,822,228¥1,736,489¥1,804,268

After 1 year
through 2 years

After 2 years
through 3 years

After 3 years
through 4 years

After 4 years
through 5 years¥1,847,228¥1,745,824¥1,804,268¥2,055,327

After 1 year
through 2 years

After 2 years
through 3 years

After 3 years
through 4 years

After 4 years
through 5 years$15,346,257$14,503,821$14,989,355$17,075,081

As of 31 March 2015
Within 1 year
Bonds

¥1,730,970(Millions of yen)

Bonds

$14,380,410

Operations(Thousands of U.S. dollars)Within 1 year

Review and Plan

Within 1 year

(Millions of yen)
After 1 year
through 2 years

11. Borrowed Money(Millions of yen)
Balance as of
31 March 2014

Averageinterest rate (%)

Short-term borrowed money¥-¥20,000

0.150-

Long-term borrowed money(repayment within 1 year)

-

-

-

-

30,00075,5000.709¥30,000¥95,500-

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

Repayment
date

3/26/2019~3/13/2024-

Borrowed money as of 31 March 2015 consisted of the following:(Millions of yen)
Balance as of
31 March 2015

Averageinterest rate (%)

Short-term borrowed money¥20,000---

Long-term borrowed money(repayment within 1 year)

-

-

-

-

75,50085,5000.675¥95,500¥85,500-

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

Repayment
date

3/26/2019~3/13/2024-

Financial Section

Balance as of
1 April 2014

Classification of borrowed money

JFM’s Role in
Local Government Finance

Balance as of
1 April 2013

Classification of borrowed money

Management Structure

Borrowed money as of 31 March 2014 consisted of the following:(Thousands of U.S. dollars)
Balance as of
31 March 2015

Averageinterest rate (%)

Short-term borrowed money$166,154---

Long-term borrowed money(repayment within 1 year)

-

-

-

-

627,233$710,310

0.675$793,387$710,310-

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

JFM Annual Report 2015 | 81

Repayment
date

3/26/2019~3/13/2024-

Appendix / JFM Data

Balance as of
1 April 2014

Classification of borrowed money

Financial
SectionFinancial Statements

Notes: 1. Average interest rates are calculated by dividing the total amount of interest paid by the total amount ofprincipal multiplied by repayment years.
2. Annual schedule of repayments within five years after the fiscal year-end:

As of 31 March 2014
(Millions of yen)
Within 1 year
Borrowed money¥20,000

After 1 year
through 2 years

After 2 years
through 3 years

After 3 years
through 4 years

After 4 years
through 5 years

¥-

¥-

¥-

¥30,000

As of 31 March 2015

(Millions of yen)

Within 1 year
Borrowed money¥-

After 1 year
through 2 years

After 2 years
through 3 years

After 3 years
through 4 years

After 4 years
through 5 years¥-¥-¥30,000¥10,000(Thousands of U.S. dollars)Within 1 year
Borrowed money$-

After 1 year
through 2 years

After 2 years
through 3 years

After 3 years
through 4 years

After 4 years
through 5 years$-$-$249,232$83,077

12. Reserves
Reserves as of 31 March 2014 consisted of the following:(Millions of yen)
Decrease during the year

Balanceas of
31 March
2014

Balanceas of
1 April 2013

Increaseduring the
year

¥47

¥50

¥47

¥-

¥50

5

7

5

-

7

Reserve for retirement benefits

141

12

28

9

116

Reserve for retirement benefits for directors
and corporate auditors

27

6

3

7

22

Classification of reserve

Reserve for bonuses
Reserve for bonuses for directors andcorporate auditors

Intended
purpose

Other

Financial Section

Reserves as of 31 March 2015 consisted of the following:(Millions of yen)
Decrease during the year

Balanceas of
31 March
2015

Balanceas of
1 April 2014

Increaseduring the
year

¥50

¥50

¥50

¥-

¥50

7

7

7

-

7

Reserve for retirement benefits

116

1

0

75

41

Reserve for retirement benefits for directors
and corporate auditors

22

6

1

4

22

Classification of reserve

Reserve for bonuses
Reserve for bonuses for directors andcorporate auditors

JFM Annual Report 2015 | 82

Intended
purposeOtherDecrease during the year

Balanceas of
31 March
2015

Increaseduring the
year

$422

$421

$422

$-

$421

Reserve for bonuses for directors andcorporate auditors

61

63

61

-

63

Reserve for retirement benefits

966

11

2

627

348

Reserve for retirement benefits for directors
and corporate auditors

190

53

14

39

190

Reserve for bonuses

Intended
purpose

Other

Operations

Balanceas of
1 April 2014

Classification of reserve

Review and Plan(Thousands of U.S. dollars)

13. Reserve for Interest Rate Volatility
Reserve for interest rate volatility as of 31 March 2014 consisted of the following:(Millions of yen)Classification of reserve

Reserve for interest rate volatility¥1,100,000¥220,000¥220,000¥-

Management account reserve forinterest rate volatility

2,771,200

171,744

171,744

870,000

220,000

2,072,945

Total¥3,871,200¥391,744¥391,744¥870,000¥220,000¥3,392,945

Increase during the year

Decrease during the year

AmountprovidedAmountwithdrawn¥1,320,000(Millions of yen)
Balanceas of
31 March
2015

Classification of reserve

Balanceas of
1 April
2014

Reserve for interest rate volatility¥1,320,000¥220,000¥220,000¥-

Management account reserve forinterest rate volatility

2,072,945

158,570

158,570

220,000

220,000

2,011,515

Total¥3,392,945¥378,570¥378,570¥220,000¥220,000¥3,551,515

Increase during the year

Decrease during the year

AmountprovidedAmountwithdrawn¥1,540,000

Balanceas of
31 March
2015

Increase during the year

Decrease during the year

Classification of reserve

Balanceas of
1 April2014

AmountprovidedAmountwithdrawn

Reserve for interest rate volatility$10,966,187$1,827,698$1,827,698$-

Management account reserve forinterest rate volatility

17,221,443

1,317,357

1,317,357

1,827,698

1,827,698

16,711,102

Total$28,187,630$3,145,055$3,145,055$1,827,698$1,827,698$29,504,987

Financial Section(Thousands of U.S. dollars)$12,793,885
Appendix / JFM Data

JFM Annual Report 2015 | 83

JFM’s Role in
Local Government FinanceReserve for interest rate volatility as of 31 March 2015 consisted of the following:

Management Structure

Balanceas of
31 March
2014

Balanceas of
1 April2013

Financial
SectionFinancial Statements

14. Fund for Lending Rate Reduction
Fund for lending rate reduction as of 31 March 2014 consisted of the following:(Millions of yen)Classification of fund

Basic fund for lending rate
reduction
Additional fund for lending rate
reduction
Total

Balanceas of
1 April2013

Balanceas of
31 March
2014

Increase during the year

Decrease during the year

Amount ofreserveAmounttransferred

Amountwithdrawn¥915,698¥3,105

¥-

¥-

¥28

¥918,775

6,869

-

-

3,084

-

3,785

¥922,568¥3,105¥-¥3,084¥28¥922,561

OthersFund for lending rate reduction as of 31 March 2015 consisted of the following:(Millions of yen)Classification of fund

Basic fund for lending rate
reduction
Additional fund for lending rate
reduction
Total

Increase during the year

Decrease during the year

Amount ofreserveAmounttransferred

Amountwithdrawn¥918,775¥3,193¥-¥1,681¥-¥920,287

3,785

-

-

3,785

-

-

¥922,561¥3,193¥-¥5,467¥-¥920,287

Balanceas of
1 April2014

OthersBalanceas of
31 March
2015(Thousands of U.S. dollars)

Classification of fund

Basic fund for lending rate
reduction
Additional fund for lending rate
reduction
Financial Section

Total

Balanceas of
1 April2014

Balanceas of
31 March
2015

Increase during the year

Decrease during the year

Amount ofreserveAmounttransferred

Amountwithdrawn$7,632,928$26,534$-$13,973$-$7,645,489

31,453--31,453--$7,664,381$26,534$-$45,426$-$7,645,489

Others

Notes: 1. The “amount of reserve” in the “increase during the year” for the “basic fund for lending rate reduction”
represents the payment of the amount stipulated in Article 46, Section 1 of the Law and received inaccordance with Article 46, Section 2 of the Law.
2. The “amount withdrawn” in the “decrease during the year” for the “basic fund for lending rate reduction”
represents the payment of the amount reduced in the fund for interest rate reduction pursuant to theprovisions of Article 46, Section 6 of the Law.
3. The “amount withdrawn” in the “decrease during the year” for the “additional fund for lending rate reduction”
represents the amount reduced in the fund for interest rate reduction pursuant to the provisions of Article
46, Section 6 of the Law.

JFM Annual Report 2015 | 84

15. Reserve for Retirement Beneﬁts(c) Profit and loss associated with employee retirement benefits
Pension expenses calculated based on the simplified method: (5) million yen ((48) thousand U.S. dollars)

Financial Section(b) Retirement benefit obligation, plan assets, and reconciliation of retirement benefit asset and liability
Funded retirement benefit obligation:
278 million yen (2,317 thousand U.S. dollars)
Plan assets:(267) million yen ((2,220) thousand U.S. dollars)
Balance:11 million yen(96 thousand U.S. dollars)
Unfunded retirement benefit obligation:
30 million yen(252 thousand U.S. dollars)
Net liability for retirement benefits in the balance sheet:
41 million yen(348 thousand U.S. dollars)
Reserve for retirement benefits at the end of the fiscal year:
41 million yen(348 thousand U.S. dollars)
Net liability for retirement benefits in the balance sheet:
41 million yen(348 thousand U.S. dollars)

JFM’s Role in
Local Government Finance

As of and for the year ended 31 March 2015
(1) Outline of retirement benefits system
JFM has a defined benefit plan that contributes to the Corporate Pension Fund and offers lump-sum payments
upon retirement of employees and a defined contribution plan. The reserve for retirement benefits and pension
expenses are calculated using the simplified method.
(2) Defined benefit plan(a) Reconciliation of outstanding amounts of reserve for retirement benefits:
Reserve for retirement benefits at the beginning of the fiscal year: 116 million yen (966 thousand U.S. dollars)
Pension expenses:(5) million yen ((48) thousand U.S. dollars)
Employee retirement benefits paid:(0) million yen((2) thousand U.S. dollars)
Contributions to the defined benefit plan:(68) million yen ((568) thousand U.S. dollars)
Reserve for retirement benefits at the end of the fiscal year:
41 million yen (348 thousand U.S. dollars)Management Structure(c) Profit and loss associated with employee retirement benefits
Pension expenses calculated based on the simplified method: 12 million yen

Operations(b) Retirement benefit obligation, plan assets, and reconciliation of retirement benefit asset and liability
Funded retirement benefit obligation:
305 million yen
Plan assets:(218) million yen
Balance:87 million yen
Unfunded retirement benefit obligation:
29 million yen
Net liability for retirement benefits in the balance sheet:
116 million yen
Reserve for retirement benefits at the end of the fiscal year:
116 million yen
Net liability for retirement benefits in the balance sheet:
116 million yen

Review and Plan

As of and for the year ended 31 March 2014
(1) Outline of retirement benefits system
JFM has a defined benefit plan that contributes to the Employees’ Pension Fund and offers lump-sum payments
upon retirement of employees. The reserve for retirement benefits and pension expenses are calculated using thesimplified method.
(2) Defined benefit plan(a) Reconciliation of outstanding amounts of reserve for retirement benefits:
Reserve for retirement benefits at the beginning of the fiscal year: 141 million yen
Pension expenses:
12 million yen
Employee retirement benefits paid:(28) million yen
Contributions to the defined benefit plan:(9) million yen
Reserve for retirement benefits at the end of the fiscal year:
116 million yen

16. Net Income by Account(For the year ended 31 March 2015)
Net income of the general account was 30,971 million yen (257,299 thousand U.S. dollars), while there was no net
income of management account.

JFM Annual Report 2015 | 85

Appendix / JFM Data

(For the year ended 31 March 2014)
Net income of the general account was 26,510 million yen, while there was no net income of management
account.

Financial
SectionFinancial Statements

17. Information by Account (Balance sheets)
Balance sheets of general account and management account as of 31 March 2014 were as follows:(Millions of yen)
Item

Generalaccount

Management
account¥9,178,637¥13,904,339

OffsetTotal(Assets)
Loans¥23,082,976

Securities

533,998

533,998

Cash and bank deposits

467,175

467,175

Cash collateral paid for financial instruments

370

Other assets

3,524

Tangible fixed assets

2,836

Intangible fixed assets

938

Due from general account

370
9,512

2,836
938
923,486

Due to management account for fund for lending
rate reduction
Total assets

13,036

192,831¥(923,486)(192,831)

10,380,311

14,837,337

6,983,259

12,440,483(1,116,317)

24,101,331(Liabilities)
Bonds
Borrowed money

95,500Cash collateral received for financial instruments

43,530

Other liabilities

2,667

19,423,743
95,50043,53011,72914,397

Reserve for bonuses

50

50

Reserve for bonuses for directors and corporate
auditors

7

7

Reserve for retirement benefits

116

116

Reserve for retirement benefits for directors andcorporate auditors

22

22

922,561

922,561

918,775

918,775

Fund for lending rate reduction
Basic fund for lending rate reduction
Additional fund for lending rate reduction

3,785

Due to management accountDue from general account for fund for lending rate
reduction
Reserves under special laws

(923,486)
192,831

1,320,000

Reserve for interest rate volatility(192,831)

2,138,627

3,458,627

1,320,000

Financial Section

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

3,785

923,486

10,291,202

1,320,000
2,072,945

2,072,945

65,681

65,681

14,783,671(1,116,317)

23,958,556(Net Assets)
Capital16,602

16,602Retained earnings

76,732

76,732

76,732

76,732

General account surplus reserve
Valuation, translation adjustments and others(4,225)

Management account surplus reserve
Total net assets
Total liabilities and net assets(4,225)53,666

53,666

89,10953,666

142,775¥10,380,311¥14,837,337

JFM Annual Report 2015 | 86¥(1,116,317)¥24,101,331

Balance sheets of general account and management account as of 31 March 2015 were as follows:

Item

Generalaccount

Management
account¥10,868,072¥12,569,557

OffsetTotal

Review and Plan

(Millions of yen)

(Assets)
Loans¥23,437,630

Securities

670,000

670,000

Cash and bank deposits

399,211399,211

Cash collateral paid for financial instruments

437
3,935

Tangible fixed assets

2,840

Intangible fixed assets

1,776

437
8,449

2,840
1,776

Due from general accountDue to management account for fund for lending
rate reduction
Total assets

12,384810,328
92,831¥(810,328)(92,831)

13,388,335

8,378,442

11,164,422(903,160)

24,524,279

19,542,864

Borrowed money

85,50085,500Cash collateral received for financial instruments

182,246

182,246

Other liabilities

2,352

9,348

11,70050

50Reserve for bonuses for directors and corporate
auditors

7

7

Reserve for retirement benefits

41

41

Reserve for retirement benefits for directors andcorporate auditors

22

22

920,287920,287

Fund for lending rate reduction
Basic fund for lending rate reduction
Due to management account920,287920,287

810,328(810,328)

Due from general account for fund for lending rate
reduction
Reserves under special laws
Reserve for interest rate volatility

92,831
1,540,000

2,068,067

3,608,067

1,540,000

1,540,000

Management account reserve for interest rate
volatility

11,919,280

2,011,515

2,011,515

56,55256,552

13,334,669(903,160)

24,350,790(Net Assets)
Capital16,602

16,602Retained earnings

107,703107,703107,703107,703

General account surplus reserve
Valuation, translation adjustments and others(4,482)(4,482)

Management account surplus reserve

Total liabilities and net assets

53,666

53,666

119,823

53,666

173,489¥12,039,104¥13,388,335

JFM Annual Report 2015 | 87¥(903,160)¥24,524,279

Appendix / JFM Data

Total net assets

Financial Section

Reserve for interest rate reduction
Total liabilities(92,831)

JFM’s Role in
Local Government FinanceReserve for bonuses

Management Structure

12,039,104(Liabilities)
Bonds

Operations

Other assets

Financial
SectionFinancial Statements(Thousands of U.S. dollars)
Item

Generalaccount

Management
account$90,288,879$104,424,339

OffsetTotal(Assets)
Loans$194,713,218

Securities

5,566,171

5,566,171

Cash and bank deposits

3,316,533

3,316,533

Cash collateral paid for financial instruments

3,630

Other assets

32,697

Tangible fixed assets

23,598Intangible fixed assets

14,757

Due from general account

3,630
70,193

23,59814,757
6,731,983

Due to management account for fund for lending
rate reduction
Total assets

102,890771,218$(6,731,983)(771,218)

100,017,483

111,226,515

69,605,738

92,750,870(7,503,201)

203,740,797(Liabilities)
Bonds
Borrowed money
Cash collateral received for financial instruments
Other liabilities

162,356,608

710,310710,310

1,514,056

1,514,056

19,54077,664

97,204

Reserve for bonuses

421

421

Reserve for bonuses for directors and corporate
auditors

63

63

Reserve for retirement benefits

348

348

Reserve for retirement benefits for directors andcorporate auditors

190

190

7,645,489

7,645,489

Fund for lending rate reduction
Basic fund for lending rate reduction

7,645,489

Due to management accountDue from general account for fund for lending rate
reduction
Reserves under special laws

(6,731,983)
771,218

12,793,885

Reserve for interest rate volatility(771,218)

17,180,920

29,974,805

12,793,885

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

7,645,489

6,731,983

99,022,023

12,793,885
16,711,102

16,711,102

469,818

469,818

110,780,672(7,503,201)

202,299,494

Financial Section(Net Assets)
Capital137,926

137,926

Retained earnings

894,770

894,770

894,770

894,770

General account surplus reserve
Valuation, translation adjustments and others(37,236)

Management account surplus reserve
Total net assets
Total liabilities and net assets(37,236)445,843445,843995,460

445,843

1,441,303$100,017,483$111,226,515$(7,503,201)$203,740,797

Notes: 1. General account and management accountIn accordance with the provisions of Article 13, Section 1 of the Supplementary Provisions of the Law,
management account is used to conduct administration, collection and other related operations of the assetsthat JFM inherited from the Predecessor (management of the assets of the Predecessor).
Management account is separated from the other account (general account) pursuant to the provisions ofArticle 13, Section 3 of the Supplementary Provisions of the Law.
2. General account surplus reserve and management account surplus reserve“Net income” of the general account is posted as “General account surplus reserve” in accordance withJFM Annual Report 2015 | 88

Statements of income of general account and management account from 1 April 2013 through 31 March 2014 wereas follows:

Operations

18. Information by Account (Statements of income)

Review and Plan

the provisions of Article 39, Section 1 of the Law, while “Net income” of management account is posted
as “Management account surplus reserve” in accordance with the provisions of Article 13, Section 8 of the
Supplementary Provisions of the Law.
3. Due from general account and due to management account
These amounts represent funds lent between the general account and management account pursuant to theprovisions of Article 13, Section 4 of the Supplementary Provisions of the Law.
4. Due from general account for fund for lending rate reduction and due to management account for fund for
lending rate reduction
These amounts represent cash received for “Fund for lending rate reduction,” which was lent to management
account from the general account pursuant to the provisions of Article 9, Section 12 of the Supplementary
Provisions of the Law.

(Millions of yen)
Item
Income¥117,626¥360,076

107,355

347,803

OffsetTotal¥(19,313)¥458,388
455,158

Fees and commissions

117

Other operating income

0

0

3,112

3,112

3,084

3,084

Other income
Contributions from fund for lending rate
reduction
Others28

Administrative fee for management account

1,035Interest on fund for lending rate reduction

6,004

Transfer from general account for fund for
lending rate reduction

28(1,035)(6,004)314(314)

11,958(11,958)(19,313)

91,115

198,535

73,289187,658

Fees and commissions

78

202

281

Other operating expenses

3,058

3,451

6,509

General and administrative expenses

2,415

182

2,598

Interest expenses

Other expenses
Interest on due to management account

260,947

0

0

314

(314)

11,958(11,958)

Administrative fee for management account

1,035(1,035)Interest on fund for lending rate reduction

6,004(6,004)

26,510161,540-

188,051

220,000

880,203(220,000)

880,203

Ordinary income
Special gains
Transfer from management account

220,000

Reversal of management account reserve forinterest rate volatility

10,203220,000

1,041,744

10,203(220,000)

220,000
171,744

Transfer to general account

220,000

Payment to national treasury

650,000¥26,510JFM Annual Report 2015 | 89

1,041,744
220,000

Provision for management account reservefor interest rate volatility

Net income

870,000¥-

171,744(220,000)
650,000¥-¥26,510

Appendix / JFM Data

Provision for reserve for interest rate volatility(220,000)
870,000

Reversal of reserve for interest rate reduction
Special losses

Financial Section

Transfer to management account for fund for
lending rate reduction

270,337

JFM’s Role in
Local Government FinanceInterest on due from general accountExpenses

117

Management StructureInterest income

General account Management accountFinancial
SectionFinancial Statements

Statements of income of general account and management account from 1 April 2014 through 31 March 2015 wereas follows:(Millions of yen)
Item

General account Management accountIncomeInterest income¥133,507¥317,463

122,477

306,500

OffsetTotal¥(16,401)¥434,569
428,977

Fees and commissions

112

Other operating income

0

0

5,479

5,479

5,467

5,467

Other income
Contributions from fund for lending rate
reduction
Others112

11Administrative fee for management account774

Interest on fund for lending rate reduction

4,663

Interest on due from general account

11
(774)
(4,663)94(94)

10,869(10,869)

102,448

168,023(16,401)

85,610160,449

Fees and commissions

104

189

294

Other operating expenses

2,844

1,787

4,632

General and administrative expenses

2,925

158

Transfer from general account for fund for
lending rate reduction
Expenses
Interest expenses

Interest on due to management accountTransfer to management account for fund for
lending rate reduction

254,070
246,060

3,083

94

(94)

10,869(10,869)

Administrative fee for management account

774

(774)

Interest on fund for lending rate reduction

4,663(4,663)

Ordinary income

31,059149,440-

180,499

Special gains

220,000

229,129(220,000)

229,129

Transfer from management account

220,000

Reversal of management account reserve forinterest rate volatility

220,000

Reversal of reserve for interest rate reduction
Special losses
Loss on disposal of fixed assets
Provision for reserve for interest rate volatility(220,000)
220,000

9,129
220,088378,570

9,129(220,000)

88

88

220,000

220,000

Financial Section

Provision for management account reservefor interest rate volatility

158,570

Transfer to general account

220,000(220,000)¥-¥-

Net income

378,658¥30,971

JFM Annual Report 2015 | 90

158,570¥30,971

Item
IncomeInterest income

General account Management account$1,109,145$2,637,400

1,017,505

2,546,317

OffsetTotal$(136,261)$3,610,284
3,563,822

936

Other operating income

3345,52345,52345,42645,426

Contributions from fund for lending rate
reduction
Others936

97Administrative fee for management account

6,437Interest on fund for lending rate reduction

38,741

Interest on due from general account97(6,437)(38,741)(782)

90,301(90,301)

851,115

1,395,891(136,261)

711,228

1,332,971

Fees and commissions

871

1,575

2,446

Other operating expenses

23,63014,85338,483General and administrative expenses

24,303

1,314

Expenses
Interest expenses

Interest on due to management accountTransfer to management account for fund for
lending rate reduction

2,044,199

25,617782(782)

90,301(90,301)
6,437(6,437)

Interest on fund for lending rate reduction

38,741(38,741)

Special gains
Transfer from management account258,0311,241,508-

1,499,539

1,827,698

1,903,547(1,827,698)

1,903,547

1,827,698

Reversal of management account reserve forinterest rate volatility

1,827,698

Reversal of reserve for interest rate reduction
Special losses
Loss on disposal of fixed assets
Provision for reserve for interest rate volatility(1,827,698)
1,827,698

75,8491,828,430

3,145,055

75,849(1,827,698)

732

732
1,827,698

Transfer to general account

1,827,698(1,827,698)$-$-$257,299

1,317,357$257,299

Financial Section

1,317,357

Net income

3,145,787

1,827,698

Provision for management account reservefor interest rate volatility

JFM’s Role in
Local Government Finance

Administrative fee for management accountOrdinary income

2,110,745

Management Structure

782

Transfer from general account for fund for
lending rate reduction

Operations

Fees and commissions
Other income

Review and Plan(Thousands of U.S. dollars)

Appendix / JFM Data

JFM Annual Report 2015 | 91

Financial
SectionFinancial Statements

19. Fair Value of Marketable Securities
Marketable held-to-maturity securities as of 31 March 2014 consisted of the following:(Millions of yen)Book value

Fair value

Difference

Unrealized gains Unrealized losses

Treasury discount bills¥19,998¥19,998

¥(0)

¥-

¥(0)

Negotiable certificatesof deposit

514,000

514,000---¥533,998¥533,998

¥(0)

¥-

¥(0)

Total

Marketable held-to-maturity securities as of 31 March 2015 consisted of the following:(Millions of yen)Book value
Negotiable certificatesof deposit¥670,000Fair value

Difference¥670,000

Unrealized gains Unrealized losses---(Thousands of U.S. dollars)Book value
Negotiable certificatesof deposit$5,566,171

Fair value$5,566,171

Difference

Unrealized gains Unrealized losses--

Notes: 1. The fair value of treasury discount bills is based on market price at the end of the fiscal year.
2. The balance sheet amount for negotiable certificates of deposit is the fair value.
3. Difference is the net amount of “unrealized gains” and “unrealized losses.”Financial Section
JFM Annual Report 2015 | 92-

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

Appendix / JFM Data

JFM Annual Report 2015 | 93

Financial
SectionIndependent Auditor’s Report

Financial Section
JFM Annual Report 2015 | 94

Appendix / JFM Data
Review and Plan
Operations
Management Structure
JFM’s Role in
Local Government FinanceMembers of the Representative Board and theSupervisory Committee
Redemption of Loans in Fiscal 2014
Outstanding Loans by Business
Outstanding Loans by Borrower
Outstanding International Bonds

JFM Data
Organization History
Organization Chart
Directors and Corporate Auditors/Contact Information
JFM Annual Report 2015 | 95

107
107
108
109

Appendix / JFM Data

Bond Issuance in Fiscal 2014

96
96
97
98
102
105

Financial Section

96

AppendixAppendix
JFM Data

Appendix

Members of the Representative Board and the Supervisory Committee
The Representative Board members of JFM as of 31 March 2015 are as follows:
Name

Title

Background

Yuichiro Ito

Chairman

Former Chairman of the Japan Finance Corporation for MunicipalEnterprises Reform Sub-committee, National Governors' Association
Governor, Kagoshima prefecture

Tamio Mori

Deputy Chairman

Chairman, Japan Association of City Mayors
Mayor, Nagaoka City, Niigata prefecture

Tadahiko Fujiwara

Deputy Chairman

Chairman, National Association of Towns & Villages
Mayor, Kawakami Village, Nagano prefecture

Junko Obata

MemberProfessor, Sophia University Law School

Isao Horiba

MemberProfessor, Aoyama Gakuin University

Isao Sumihiro

MemberChairman of The Hiroshima Bank, Ltd.

The Supervisory Committee members of JFM as of 31 March 2015 are as follows:
Name

Title

BackgroundYoshitsugu Hayashi

ChairmanProfessor, Kwansei Gakuin University

Yutaka Suzuki

Deputy Chairman

Professor Emeritus, Aoyama Gakuin University

Tomoko Seiichi

MemberProfessor, Seinan Gakuin University

Yasuharu Yoneda

MemberProfessor, Shinshu University Law School

Hitomi Tamaoki

MemberChief Executive officer of Tsumugi Co., Ltd.

Toshiki KomatsuMemberCorporate Director of Jiji Press, Ltd.

Redemption of Loans in Fiscal 2014
Principal
Classification

Interest

Number ofloans

Amount(USD millions)

Number ofloans

Amount(USD millions)415,508

12,843479,246

3,542

614

100

614

12

416,122

12,943479,860

3,554

General loans

424

107

144

0

Loans to local
government corporations

0

0

0

0

Subtotal

424

107

144

0

Redemption of loans with pre-consent or pre-approval

-

-

-

-

Redemption of short-term loans

-

-

-

-

416,546

13,050480,004

3,554

General loans
Regular redemption ofLoans to local
long-term loans
government corporations
Subtotal

Appendix / JFM Data

Prepayment oflong-term loans

Total
Note: Totals may not add up due to rounding.

JFM Annual Report 2015 | 96(as of 31 March 2015)
Number ofLoans Made

Business

Loan Amount (USD millions)% of total

4,774

3,161

1.6

National Disaster Prevention

291

326

0.2

Educational Facilities Development

304

189

0.1

Social Welfare Facilities Development

621

544

0.3

4

1

0.0

General Projects

379

341

0.2

Regional Revitalization

662

348

0.2

Disaster Prevention

1,251

1,003

0.5

Local Road Development*1

28,961

21,570

11.1

Special Municipal Mergers

3,303

6,994

3.6

Disaster Management and Mitigation

3,362

4,045

2.1

Others

2,896

1,181

0.6

48,124

41,791

21.5

Water Supply

51,95130,397

15.6

Transportation

926

10,083

5.2

3,247

6,494

3.3

123,100

68,262

35.1

2,243

1,729

0.9

909

713

0.4

1,117

566

0.3

Markets and Slaughterhouses

623

700

0.4

Tourism and Others

397

377

0.2

184,513

119,32161.3

Temporary Financial Countermeasures Funding

4,769

33,022

17.0

Total

237,406

194,134

99.7

282

579

0.3

237,688

194,713

100.0

General Account-related
Loans

Subtotal

Hospitals and Elderly Care Services
Sewerage
Municipal Enterpriserelated Loans

Industrial Water Supply
Electricity and Gas
Port Facilities

Subtotal

Local Government Road Corporation, Toll Roads*2
Grand Total

Notes: 1. Includes the former development projects for local roads.
2. No loans will be extended to local government road corporations by JFM. The outstanding loans shown above was extended by thePredecessor.
3. Totals may not add up due to rounding.

JFM Annual Report 2015 | 97

Appendix / JFM Data

Public Housing

Financial Section

1.1

JFM’s Role in
Local Government Finance

2,086Management Structure

1,316

Operations

Public Projects, etc.

General Waste Proposal

Review and Plan

Outstanding Loans by BusinessAppendix
JFM Data

Appendix

Outstanding Loans by Borrower(as of 31 March 2015)
Cities and Special Wardsof TokyoPrefectures
BorrowerTowns and Villages

Number of Loan Amount Number of Loan Amount Number of Loan Amount
Loans Made (USD millions) Loans Made (USD millions) Loans Made (USD millions)

Hokkaido

285

3,423

5,025

6,014

7,876

1,751

Aomori

208

312

1,915

2,043

1,382

394

Iwate

228

489

2,639

2,135

697

236

Miyagi

382

1,220

4,599

3,337

2,599

463

Akita

213

234

4,526

2,052

1,131

119

Yamagata

250

663

2,644

1,526

1,898

314

Fukushima

379

639

3,465

2,181

2,961

473

Ibaraki

470

1,059

6,201

3,556

1,303

342

Tochigi

238

461

3,275

1,875

762

215

Gunma

281

469

3,557

1,739

1,803

336

Saitama

256

2,004

5,954

5,302

1,619

432

Chiba

403

909

4,613

5,021

788

195

Tokyo

129

1,472

1,899

2,418

188

40

Kanagawa

234

1,385

2,750

7,167

956

297

Niigata

267

394

8,149

4,190

889

166

Toyama

281

339

3,714

2,473

530

209

Ishikawa

176

188

2,738

1,881

1,185

368

Fukui

251

414

2,121

1,157

890

134

Yamanashi

152

340

3,042

989

1,070

144

Nagano

232

363

4,225

2,520

3,072

606

Gifu

209

1,236

4,318

1,947

1,195

311

Shizuoka

361

600

4,852

3,180

664

187

Aichi

295

1,847

5,131

5,768

852

210

Mie

391

1,182

3,892

2,342

1,042

239

Appendix / JFM Data
JFM Annual Report 2015 | 98

Local Government Road
Corporations

Number of Loan Amount Number of Loan Amount
Loans Made (USD millions) Loans Made (USD millions)

Review and Plan

Local Government
Associations

Total
Number ofLoans Made

Loan Amount(USD millions)% of Total

13,484

11,413

5.9

104

117

-

-

3,609

2,866

1.5

217

142

-

-

3,781

3,002

1.5

128

79

-

-

7,708

5,100

2.6

7

2

-

-

5,877

2,407

1.2

136

39

10

1

4,938

2,544

1.3

191

188

3

2

6,999

3,483

1.8

220

181

4

3

8,198

5,141

2.6

7

26

8

4

4,290

2,581

1.3

31

49

-

-

5,672

2,594

1.3

234

141

13

7

8,076

7,885

4.0

371

388

11

16

6,186

6,529

3.4

28

146

-

-

2,244

4,075

2.1

74

753

-

-

4,014

9,602

4.9

139

122

-

-

9,444

4,872

2.5

138

109

10

4

4,673

3,133

1.6

18

21

-

-

4,117

2,457

1.3

68

32

-

-

3,330

1,738

0.9

153

62

-

-

4,417

1,536

0.8

159

118

10

6

7,698

3,613

1.9

7

10

-

-

5,729

3,503

1.8

69

111

14

7

5,960

4,086

2.1

111

45

51

252

6,440

8,122

4.2

31

42

-

-

5,356

3,805

2.0

Financial Section-

JFM’s Role in
Local Government Finance-Management Structure

225

Operations

298

Appendix / JFM Data

JFM Annual Report 2015 | 99

Appendix
JFM Data

Appendix

Cities and Special Wardsof TokyoPrefectures
BorrowerTowns and Villages

Number of Loan Amount Number of Loan Amount Number of Loan Amount
Loans Made (USD millions) Loans Made (USD millions) Loans Made (USD millions)

Shiga

210

609

4,183

2,047

565

120

Kyoto

212

409

3,351

3,867

988

232

Osaka

116

580

5,012

11,599

812

254

Hyogo

314

3,494

7,425

7,827

1,825

679

Nara

265

874

2,289

1,418

1,753

456

Wakayama

112

323

1,485

1,576

1,252

443

Tottori

288

407

1,259

842

1,819

404

Shimane

233

823

2,416

1,744

293

68

Okayama

291

995

4,578

3,206

1,270

267

Hiroshima

393

1,355

4,261

4,263

904

249

Yamaguchi

414

519

4,233

2,176

544

106

Tokushima

182

405

1,313

915

764

213

Kagawa

241

238

2,078

1,034

798

172

Ehime

117

214

2,294

1,680

599

196

Kochi

141

679

1,415

1,172

636

154

Fukuoka

107

900

4,506

7,528

1,890

795

Saga

55

280

1,542

1,301

593

249

Nagasaki

145

423

2,713

2,338

623

155

Kumamoto

168

427

2,703

1,767

1,501

388

Oita

118

217

2,212

1,221

150

43

Miyazaki

164

607

2,047

1,301

701

172

Kagoshima

171

1,088

2,340

1,463

771

171

Okinawa

236

745

1,414

1,106

840

189

11,264

38,251

162,313

136,20359,243

14,354Total

Note: Totals may not add up due to rounding.

Appendix / JFM Data
JFM Annual Report 2015 | 100

Local Government Road
Corporations

Number of Loan Amount Number of Loan Amount
Loans Made (USD millions) Loans Made (USD millions)

Total
Number ofLoans Made

Loan Amount(USD millions)% of Total

5,050

2,822

1.4

16

31

11

7

4,578

4,546

2.3

230

629

17

54

6,187

13,115

6.7

458

561

49

44

10,071

12,605

6.5

16

15

2

4

4,325

2,766

1.4

57

55

-

-

2,906

2,396

1.2

22

21

-

-

3,388

1,673

0.9

53

25

-

-

2,995

2,660

1.4

102

193

-

-

6,241

4,661

2.4

7

8

17

61

5,582

5,936

3.0

108

77

-

-

5,299

2,878

1.5

3

1

-

-

2,262

1,535

0.8

9

7

-

-

3,126

1,451

0.7

11

10

-

-

3,021

2,101

1.1

7

94

-

-

2,199

2,098

1.1

252

202

28

101

6,783

9,526

4.9

98

105

-

-

2,288

1,934

1.0

14

27

9

3

3,504

2,945

1.5

32

23

8

1

4,412

2,605

1.3

0

0

-

-

2,480

1,481

0.8

9

9

-

-

2,921

2,090

1.1

13

23

4

1

3,299

2,746

1.4

41

17

-

-

2,531

2,056

1.1

4,586

5,326

282

580

237,688

194,714

100.0

Financial Section

0

JFM’s Role in
Local Government Finance3

Management Structure

45

Operations

89

Review and Plan

Local Government
Associations

Appendix / JFM Data

JFM Annual Report 2015 | 101

Appendix
JFM Data

Appendix

Bond Issuance in Fiscal 2014
1. JFM bonds(1) International bonds
SeriesNumberFormatCurrency

Issue Size(in millions)

Coupon(%)

Issue Price(%)

Issue Date

Maturity Date
1 May 2024

43

EURO

AUD

85

5.092

100

1 May 2014

44

EURO

USD

90

3.250

99.055

1 May 2014

2 May 2024

45

EURO

EUR

1,000

0.875

99.29322 Sep 2014

22 Sep 2021
20 Nov 2017

46

EURO

NZD

105

3.86

99.98

20 Nov 201447

GLOBAL

USD

1,000

2.375

99.611

13 Feb 2015

13 Feb 2025

48

EURO

AUD

70

3.600

100

18 Mar 201518 Mar 2025

(2) Domestic public offerings
Series Number

Issue Size

Coupon (%)

Issue Price (%)

249

0.724

100

17 Apr 2014

26 Apr 2024

249

0.729

100

26 May 2014

28 May 2024

35

291

0.690

100

23 Jun 2014

28 Jun 2024

30

249

0.631

100

17 Jul 2014

26 Jul 2024

63

30

249

0.581

100

19 Aug 2014

28 Aug 2024

64

30

249

0.574

100

22 Sep 2014

27 Sep 2024

65

30

249

0.535

100

21 Oct 2014

28 Oct 2024

66

25

208

0.589

100

21 Nov 2014

28 Nov 2024

67

30

249

0.501

100

22 Dec 201427 Dec 2024

68

30

249

0.355

100

23 Jan 201528 Jan 2025

69

30

249

0.478

100

20 Feb 201528 Feb 2025

70

25

208

0.514

100

20 Mar 2015

28 Mar 2025

36

25

208

1.566

100

17 Apr 201428 Apr 2034

37

25

208

1.535

100

23 Jun 2014

28 Jun 2034

38

20

166

1.487

100

17 Jul 2014

28 Jul 2034

39

20

166

1.425

100

22 Sep 2014

28 Sep 2034

40

15

125

1.381

100

21 Oct 2014

27 Oct 2034

41

15

125

1.273

100

22 Dec 201428 Dec 2034

42

15

125

0.999

100

23 Jan 2015

26 Jan 2035

15

15

125

0.230

100

17 Apr 2014

26 Apr 2019

16

15

125

0.175

100

21 Oct 2014

28 Oct 2019

1

15

125

1.864

100

26 Jun 2014

28 Jun 2044

2

25

208

0.100

100

20 Mar 2015

28 Mar 2017

(JPY billions)(USD millions)

59

30

60

30

61
62

Issue Date

Maturity Date

Appendix / JFM Data

F212

4

33

0.497

100

24 Apr 2014

23 Mar 2022

F213

3

25

0.782

100

24 Apr 2014

27 Jun 2025

F214

5

42

0.940

100

24 Apr 201428 Apr 2027

F215

6.5

54

1.218

100

24 Apr 2014

21 May 2030

F216

3

25

1.384

100

24 Apr 201424 Feb 2032

F217

4

33

1.749

100

24 Apr 201428 Apr 2039

F218

20

166

0.634

100

24 Apr 201417 Mar 2023

F219

4

33

0.766

100

24 Apr 2014

25 Apr 2025

JFM Annual Report 2015 | 102

F220

Issue Size
(JPY billions)(USD millions)325

Coupon (%)

Issue Price (%)

Issue Date

Maturity Date

1.106

100

24 Apr 2014

22 Mar 2029
26 Apr 2030

F221

5

42

1.198

100

24 Apr 2014

F222

3

25

1.610

100

24 Apr 201424 Apr 2035

F223

5.5

46

0.527

100

30 Apr 2014

27 May 2022

4

33

0.862

100

30 Apr 2014

30 Apr 2026

3.5

29

1.044

100

30 Apr 2014

30 Aug 2028

F226

5

42

1.096

100

30 Apr 2014

28 Feb 2029

F227

6

50

1.396

100

30 Apr 201428 Apr 2032

F228

4

33

1.269

100

30 Apr 2014

20 Mar 2031

F229

3

25

0.635

100

30 Apr 2014

20 Jun 2023

F230

3

25

1.111

100

30 Apr 201427 Apr 2029

F231

4.5

37

1.176

100

30 Apr 2014

30 Apr 2030

F232

6

50

1.293

100

30 Apr 2014

25 Apr 2031

F233

6.5

54

1.592

100

15 May 201428 Dec 2034

5.5

46

1.605

100

30 Apr 201427 Apr 2035

20

166

0.562

100

24 Jul 2014

20 Sep 2023

F236

4

33

1.079

100

24 Jul 2014

26 Mar 2030

F237

3

25

1.194

100

24 Jul 2014

25 Jul 2031

F238

4

33

1.574

100

24 Jul 2014

25 Jul 2036

F239

6

50

1.844

100

24 Jul 2014

26 Jul 2044

F240

10

83

1.069

100

25 Jul 2014

28 Feb 2030

F241

4.5

37

1.074

100

25 Jul 2014

26 Apr 2030

F242

3

25

1.188

100

25 Jul 2014

25 Jul 2031

1.285

100

25 Jul 2014

21 Jul 2032

*1

100

25 Jul 2014

25 Jan 2034

F245

3.5

29

1.017

100

25 Jul 2014

26 Feb 2030

F246

3

25

1.196

100

25 Jul 2014

25 Feb 2032

F247

4

33

1.309

100

25 Jul 2014

28 Jul 2033

F248

3.5

29

1.512

100

25 Jul 2014

25 Jul 2036

F249

6

50

1.605

100

25 Jul 2014

28 Jul 2039

F250

4

33

1.779

100

25 Jul 2014

26 Jul 2044

F251

20

166

0.280

100

30 Oct 201417 Sep 2021

F252

3

25

0.845

100

30 Oct 2014

27 Oct 2028

F253

6

50

1.119

100

30 Oct 2014

27 Feb 2032

F254

3

25

1.146

100

30 Oct 2014

26 Mar 2032

F255

3

25

1.196

100

30 Oct 2014

28 Oct 2032

F256

3

25

1.281

100

30 Oct 2014

28 Oct 2033

F257

3

25

0.335

100

30 Oct 2014

28 Sep 2022

F258

3

25

0.650

100

30 Oct 2014

30 Oct 2026

F259

3

25

1.002

100

30 Oct 2014

30 Oct 2030

F260

6

50

1.099

100

30 Oct 2014

28 Oct 2031

F261

3

25

1.061

100

30 Oct 2014

28 Mar 2031

F262

3

25

1.109

100

30 Oct 2014

30 Oct 2031

F263

3

25

1.194

100

30 Oct 2014

28 Oct 2032

F264

20

166

0.249

100

28 Jan 201520 Dec 2023

Note 1. 3m¥L+10bp

JFM Annual Report 2015 | 103

Appendix / JFM Data

29
83

Financial Section

3.5
10

JFM’s Role in
Local Government Finance

F243
F244

Management Structure

F234
F235

Operations

F224
F225

Review and Plan

Series Number

Appendix
JFM Data

Appendix

2. Private placements with Pension Fund Association for Local Government Officials
Series Number

Issue Size

Coupon (%)

Issue Price (%)

Issue Date

Maturity Date

208

0.754

100

17 Apr 201417 Apr 2024

(JPY billions)(USD millions)

A51

25

A52

25

208

0.750

100

26 May 2014

24 May 2024

A53

25

208

0.715

100

23 Jun 2014

21 Jun 2024

A54

25

208

0.651

100

17 Jul 201417 Jul 2024

A55

25

208

0.597

100

19 Aug 201419 Aug 2024

A56

25

208

0.594

100

22 Sep 2014

20 Sep 2024

A57

25

208

0.555

100

21 Oct 2014

21 Oct 2024

A58

25

208

0.629

100

25 Nov 2014

25 Nov 2024

A59

25

208

0.511

100

18 Dec 201418 Dec 2024

A60

25

208

0.370

100

26 Jan 201524 Jan 2025

A61

25

208

0.518

100

23 Feb 2015

21 Feb 2025

A62

25

208

0.583

100

19 Mar 2015

19 Mar 2025

Coupon (%)

Issue Price (%)

Issue Date

Maturity Date

3. Government-guaranteed domestic bonds
Series Number

Issue Size
(JPY billions)(USD millions)

59

55

457

0.669

100

14 Apr 201412 Apr 2024

60

50

415

0.660

100

21 May 2014

21 May 2024

61

55

457

0.644

100

16 Jun 201414 Jun 2024

62

50

415

0.601

100

16 Jul 201416 Jul 2024

63

50

415

0.556

100

18 Aug 201416 Aug 2024

64

30

249

0.544

100

16 Sep 2014

13 Sep 2024

65

30

249

0.539

100

16 Oct 201416 Oct 2024

66

30

249

0.495

100

18 Nov 201418 Nov 2024

67

20

166

0.466

100

15 Dec 201413 Dec 2024

68

20

166

0.320

100

20 Jan 201520 Jan 2025

69

20

166

0.414

100

17 Feb 201517 Feb 2025

70

20

166

0.450

100

16 Mar 2015

14 Mar 2025

13

80

665

0.202

100

24 Apr 201424 Apr 2020

14

80

665

0.199

100

18 Jun 201418 Jun 2020

15

40

332

0.167

100

19 Mar 2015

19 Mar 2021

Appendix / JFM Data
JFM Annual Report 2015 | 104

Review and Plan

Outstanding International Bonds
1. JFM bonds(as of 31 March 2015)
Currency

Issue Size(in millions)

CouponIssue Price(%)

Issue Date

Maturity Date

1

EURO

USD

105

3mL+73bp100

17 Jan 201217 Jan 2017

2

EURO

USD

40

2.035%

100

12 Jan 201212 Jan 2017

3

EURO

USD

57

2.00%

100

17 Jan 201217 Jan 2017

4

EURO

USD

35

3mL+75bp100

17 Jan 201217 Jan 2017

5

EURO

USD

30

3mL+75bp100

19 Jan 201219 Jan 2017

6

EURO

USD

51

3mL+70bp100

18 Jan 201218 Jan 2017

7

EURO

USD

20

2.00%

100

23 Jan 201223 Jan 2017

8

EURO

USD

20

3mL+73bp100

23 Jan 201223 Jan 2017

9

EURO

USD

20

3mL+70bp100

19 Jan 201219 Jan 2017

10

EURO

USD

20

3mL+75bp100

18 Jan 201218 Jan 2017100

24 Jan 201224 Jan 2017

40

12

EURO

USD

20

3mL+69bp100

26 Jan 201226 Jan 2017

13

EURO

USD

20

3mL+70bp100

24 Jan 201224 Jan 2017

14

EURO

USD

25

1.84%

100

1 Mar 2012

1 Mar 2017

15

EURO

USD

20

2.40%

100

1 Mar 2012

1 Mar 2019

16

EURO

USD

25

1.8725%100

1 Mar 2012

1 Mar 2017

17

EURO

USD

30

3mL+70bp100

1 Mar 2012

1 Mar 2017

18

EURO

USD

25

3mL+70bp100

1 Mar 2012

1 Mar 2017

19

EURO

USD

20

1.89%

100

1 Mar 2012

1 Mar 2017

20

EURO

USD

40

3mL+70bp

100

6 Mar 2012

6 Mar 2017

21

EURO

USD

30

3mL+70bp

100

6 Mar 2012

6 Mar 2017

22

EURO

USD

25

3mL+70bp

100

6 Mar 2012

6 Mar 2017

23

EURO

USD

30

3mL+70.5bp

100

6 Mar 2012

6 Mar 2017

24

EURO

USD

30

3mL+70bp

100

8 Mar 2012

8 Mar 2017

25

EURO

USD

30

3mL+70bp

100

6 Mar 2012

6 Mar 2017

26

EURO

AUD

20

3mBBSW+115bp

100

13 Mar 2012

13 Mar 2017

27

EURO

USD

30

3mL+70bp

100

8 Mar 2012

8 Mar 2017

28

EURO

USD

20

1.85%

100

13 Mar 2012

13 Mar 2017

29

EURO

USD

327

3mL+65bp100

22 May 2012

22 May 2017

30

EURO

USD

130

3mL+70bp

100

6 Jun 2012

6 Jun 2019

31

EURO

USD

1,000

1.500%

100

12 Sep 201212 Sep 2017

32

EURO

USD

100

3mL+52bp100

7 Nov 2012

7 Nov 2017

33

EURO

USD

1,000

1.375%

99.544

5 Feb 2013

5 Feb 2018

34

EURO

AUD

100

3.65%

99.99

25 Mar 2013

23 Mar 2018

35

EURO

USD

105

1.375%

99.95218 Apr 201318 Apr 2018

JFM Annual Report 2015 | 105

Appendix / JFM Data

NZD

Financial SectionEURO

JFM’s Role in
Local Government Finance

11

3mNZD-BBRFRA+113bp

Management Structure

FormatOperations

SeriesNumberAppendix
JFM Data

AppendixSeriesNumberFormatCurrency

Issue Size(in millions)

CouponIssue Price(%)

Issue Date

Maturity Date

36

EURO

AUD

100

3mBBSW+83bp

100

21 May 2013

21 May 2018

38

EURO

USD

100

3mL+50bp

100

11 Jul 201311 Jul 2018

39

EURO

USD

100

3mL+65bp

100

22 Jul 201322 Jul 202040

GLOBAL

USD

1,500

2.500%

99.855

12 Sep 201312 Sep 2018

41

EURO

AUD

110

4.20%

99.98

26 Nov 201326 Nov 201842

GLOBAL

USD

1,000

2.125%

99.892

6 Mar 2014

6 Mar 2019

Issue Size(in millions)

Coupon(%)

Issue Price(%)

Issue Date

Maturity Date

2. Government-guaranteed bonds(as of 31 March 2015)
SeriesNumberFormatCurrency

4

EURO

GBP

150

5.750

99.3379 Aug 1999

9 Aug 20192

GLOBAL

USD

1,200

4.625

99.04521 Apr 2005

21 Apr 20154

GLOBALJPY

120,000

2.000

99.8389 May 2006

9 May 2016

3

GLOBAL

USD

1,000

5.000

99.27816 May 2007

16 May 2017

5

GLOBALJPY

75,0001.900

99.90025 Jun 2008

22 Jun 2018

1

GLOBAL

USD

1,000

4.000

99.17013 Jan 201113 Jan 2021

Appendix / JFM Data
JFM Annual Report 2015 | 106

Appendix
JFM Data

JFM Data

History of JFM
The Japan Finance Organization for Municipal Enterprises (the Predecessor of JFM) was establishedpursuant to the Japan Finance Organization for Municipal Enterprises Law on 1 August 2008.
Succeeded the assets and assumed the liabilities of the Predecessor and commenced operations on 1
October 2008.

2009

Reorganized as the Japan Finance Organization for Municipalities based on the partial amendment of
the Japan Finance Organization for Municipal Enterprises Law (1 June 2009).

2011

Created a new special lending rate program by integrating the existing special lending rate and theextra-special lending rate programs.

Operations

FY2008

Review and Plan

Organization History

History of the Predecessor
Established pursuant to the Japan Finance Corporation for Municipal Enterprises Law (1 June 1957).

1960

Started making loans entrusted by Agriculture, Forestry and Fisheries Finance Corporation.

1966

Started a lending program that applied special lending rates.

1967

Started receiving subsidies from the national treasury.

1970

Started a program of contributions of the earnings from municipally operated racing and established theFund for Lending Rate Reduction.

1972

Started lending to local government road corporations and local government land development
corporations.

1978

Included the three types of special projects (in the general account-related business category) in thescope of lending.

1983

Started issuing foreign currency–denominated bonds.

1998

Based on the policy titled “Regarding Reorganization and Rationalization of Special Public Institutions,”
which was approved by the Cabinet on 24 September 1997, one part-time senior executive director wasadded; the Japan Finance Corporation for Municipal Enterprises Management Council was established;
and JFM addressed the phased abolition of subsidies from the national treasury over a three-year
period.

2001

Subsidies from the national treasury were abolished and the Reserve for Interest Rate Reduction wasestablished.
Started offering borrowers two interest rate options: fixed rates or adjustable rates.
Established the prepayment with penalty system. Started issuing FILP agency bonds.
The Special Public Institutions Reform Basic Law was passed, and the Reorganizations andRationalization Plan for Special Public Institutions was approved by the Cabinet.

2002

The policy titled the “Reform of the Four Highway-Related Public Corporations, International Hub
Airports and Policy-Based Finance Institutions” was approved by the Cabinet.

2005

The “Priority Policy for Administrative Reform,” which included the proposal for abolition of thePredecessor in fiscal 2008, a new structure utilizing capital markets, and transitional measures toprepare for the abolition, was approved by the Cabinet.

2006

The Administrative Reform Promotion Law was passed.
The Headquarters for the Promotion of the Reform of Policy-Based Finance and the Cabinet
Headquarters for the Promotion of Administrative Reform (HQPAR) set forth the plan titled “System
Design Regarding the Reform of Policy-Based Finance.
The six associations of local governments submitted the “Local governments’ draft proposal for
designing a new system after the abolition of the Predecessor.”

2007

The Japan Finance Organization for Municipal Enterprises Law was passed. The Act on Assurance ofSound Financial Status of Municipalities was passed.
Implemented prepayment without penalty and other measures in accordance with the national
government’s policy on reducing local governments’ debt service burden. The program ended in fiscal
2008.

2008

Dissolved based on the Japan Finance Organization for Municipal Enterprises Law (1 October 2008).

JFM Annual Report 2015 | 107

Appendix / JFM Data

Started a lending program that applied extra-special lending rates.

Financial Section

Established the Reserve for Losses on Refinancing of Bonds.

JFM’s Role in
Local Government Finance

1989
1990

Management Structure

FY1957

Appendix
JFM Data

JFM Data

Organization Chart
As of 1 April 2015
Personnel and Secretariat … Secretariat, personnel, human resources
development
Corporate Planning…

Corporate planning, budget control, mattersrelated to the Representative Board and theSupervisory Committee, ALM Planning, public
relations, communication and coordination withother organizations

Risk Management…

Integrated risk management, ALM operations

General Affairs…

General affairs including compensation andbenefits and legal review

Accounting…

Budget, settlement of accounts, matters related
to contributions from municipally operated
racing, accounting, receipts and disbursements, external audit

Information Systems
Management…

Information systems management

Finance…

Fund-raising planning, fund-raising operations,
IR, Rating

Corporate Planning
Department

Representative
Board

President and CEO
Deputy President
Senior Executive
Directors

Administration
Department

Corporate
Auditors
Supervisory Committee

Finance Department

Funding Administration … Funding administration and management offund investment

Loan Department

Lending Management … Planning and control of lending operations,calculation and setting of lending rates, lending
operations (excluding operations performed by
Loan Administration)

Local Government
Support Department

Loan Administration…

Lending operations (excluding municipal
enterprises with the exception of public
housing) management of loan receivables,
collection of loan principal and interest,
entrusted loan operations, investigations ofregional financial conditions

Research Planning…

Research and planning to enhance the local
government support operations, research offinancial situation

Financial Activities Support … Financial advisory services to local governments

Appendix / JFM Data

Credit Researchand Analysis……………………………………… Credit analysis, credit management

Internal Auditor……………………………………… Internal audit, internal control

JFM Annual Report 2015 | 108

President and CEO
Yuji Watanabe
Deputy President
Kinya Takino
Senior Executive Directors Eiichi Sugimura, Yasuro Narita, Junichi Yoshitake (part-time)
Corporate Auditors
Aiichirou Hiraguchi, Masaharu Hamakawa (part-time)

Review and Plan

Directors and Corporate Auditors

Operations

Contact Information

Management Structure

Postal address: Shisei Kaikan, 1-3 Hibiya Koen,
Chiyoda-ku, Tokyo 100-0012, JapanTel:+81-3-3539-2697
Fax:+81-3-3539-2615
E-mail: funds-d@jfm.go.jp
Bloomberg ticker: JFM Govt

JFM’s Role in
Local Government Finance(Photo provided by The Tokyo Institute for Municipal Research)

Financial Section
Appendix / JFM Data

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