Securities Finance
ANNUAL REPORT 2015

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

CONTENTS
Financial Highlights ･･･････････････････････････････････････････････････････････････････････････････････････ 2
Message From The President ･ ･･････････････････････････････････････････････････････････････････････････ 4
Business Review ･ ･･･････････････････････････････････････････････････････････････････････････････････････････ 5Management Policy ･･････････････････････････････････････････････････････････････････････････････････････ 10
Our Business Development ････････････････････････････････････････････････････････････････････････････ 13
Our Business Field ････････････････････････････････････････････････････････････････････････････････････ 14
Corporate Governance ･･････････････････････････････････････････････････････････････････････････････････ 21
Risk Management ･ ･･･････････････････････････････････････････････････････････････････････････････････････ 25
Financial Section ･･････････････････････････････････････････････････････････････････････････････････････････ 29
Outline Of JSF Group ････････････････････････････････････････････････････････････････････････････････････ 61
Corporate Data ････････････････････････････････････････････････････････････････････････････････････････････ 62

1

FINANCIAL HIGHLIGHTS

Thousands of
U.S. dollars*Millions of yen*
2011

2012

2013

2014

2015

2015

Operating Results:
Operating revenues￥

22,849￥20,229￥17,676￥

19,567￥

20,300＄168,927

Operating income

3,656

3,039

1,788

2,569

3,025

25,173

Net income

3,492

779

1,778

6,211

3,521

29,300Total assets￥ 7,078,138￥ 4,931,286￥ 3,433,456￥ 3,914,388￥ 3,482,602＄28,980,627

Net assets

114,927

115,547

118,591

135,228

137,145

1,141,258

1.73

2.56

3.45

3.45

3.94

3.94

Financial Position:

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

Net assets

37.73

￥

8.42

￥

19.10

￥

60.35

￥

33.94

＄

0.28

1,241.67

1,245.83

1,274.67

1,260.43

1,373.94

11.43

14

14

14

14

15

0.12

Cash dividend* except per share amountOperating revenues

Operating income(millions of yen)

25,000(millions of yen)

4,000

22,84920,22920,00019,567

3,656

3,500

20,300

3,039

3,000

17,676

3,025
2,569

2,500

15,0002,000
10,000

1,788

1,500
1,000

5,000

500
0

11

12

13

14

0

15

2

11

12

13

14

15

FINANCIAL HIGHLIGHTSNet income

Net income per share(millions of yen)

(yen)

7,000

70
6,211

6,000

60

5,000

50

4,000

40

3,521

3,492

3,000

60.4

37.7

33.9

30
1,778

2,000

20
19.1

779

1,000

10
8.4

0

11

12

13

14

0

15

Net assets per share
1,374

1,246

1,275

13

14

15

(yen)

1,400

1,242

12

Cash dividend per share

(yen)

1,300

11

20

1,260
15

14

14

14

14

11

12

13

14

15

1,200
1,100

10

1,000
5
900
800

11

12

13

14

0

15

15

Note: 1. Yen amounts have been translated into United States dollars, solely for the convenience of the reader, at the rate of￥120.17=U.S.$1 in effect on March 31, 2015.
2. Net income per share is calculated based on the weighted average number of shares outstanding during each
respective year. Net assets per share is calculated based on the number of shares outstanding at the end of each
respective year.
3. Shareholders’ equity ratio is calculated by using following formula.Total net assets / Total liabilities* and net assets*except for securities accounts such as Collateral securities deposited3

MESSAGE FROM THE PRESIDENT

Based on the 4th Mid-Term Management Plan formulated
in May 2014, we are striving to establish a robust
business and revenue base while streamlining ourorganization and operations management. With regard
to the comprehensive revamp of our core system thatis one of the Mid-Term Management Plan’s key pillars,
development is proceeding on track to meet our aim oflaunching it at the start of 2017.
As part of this initiative, we intend to raise our dividend
payout ratio as well as specifying a policy relating
to share buybacks in order to provide an even more
rewarding return of profits to our shareholders.

Eizo Kobayashi
President

Eizo Kobayashi
President

4

BUSINESS REVIEW

BUSINESS REVIEWBusiness Environment

yen, but it surged again after the Bank of Japan decided

Looking back at Japan’s economy during the term, while

to implement additional monetary easing on October 31

there was a reaction to the rush demand that occurredand continued to trend upward in light of factors suchbefore the consumption tax hike, it continued to make a

as increased pressure for depreciation of the yen. Frommodest recovery. In view of the government’s economic

February onward in particular, this upward trend waspolicy, monetary easing by the Bank of Japan, the weak yen,strengthened by expectations for expansions of corporate

and so forth, improvements were seen in corporate earnings

earnings and anticipated acquisition of Japanese stocks byand the employment/income environment.

domestic public pension funds. The Nikkei 225 reached aterm high of 19,754 yen on March 23, and closed the term

On the equity market, the Nikkei 225 stock average

at 19,206 yen. During this period, the average daily trading

started the term at 14,791 yen, then declined due tovolume on the First Section of the Tokyo Stock Exchange

decreased expectation of further monetary easing by thewas 2.193 billion shares, representing a year-on-year

Bank of Japan, reaching a term low of 13,910 yen on April

decrease of 740 million shares, while the average daily value

14. Subsequently, the average trended broadly upward

traded was 2.1471 trillion yen, representing a decrease of

due to factors such as a growing sense of expectation in

244.1 billion yen compared to the previous year.

response to a recovery in domestic corporate earnings
and government growth strategy, returning to the level of

Meanwhile, the outstanding balance of standardized

16,000 yen in September. In October, following uncertainty

margin buying on the Tokyo market was in the 2.4 trillion

about the global economy’s outlook and a lull in the yen’

yen level at the beginning of the term. By mid-April, its depreciation, the Nikkei 225 dropped to around 14,500

had increased to the 2.5 trillion yen level due to many

Nikkei Indexyen
20,00018,00016,00014,00012,000
Apr
2014

May

Jun

Jul

Aug

Sep

5

Oct

Nov

Dec

Jan
2015

Feb

Mar

Outstanding balance of Standardized Margin Transactions(billions of yen)

3.500
Margin Buying

Margin Selling

3.000
2.500
2.000
1.500
1.000
0.500
0.000
Apr
2014

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan
2015

Feb

Mar

personal investors buying on dips as share prices trended

to aggressive purchasing of government bonds by the Bank

downward. While it subsequently declined to the 2 trillionof Japan, declining to 0.2% by mid-January. Subsequently, it

yen level from late July through early August due to profit-

hovered at around 0.4%, ending the term at 0.395%.

taking selling by personal investors as share prices trended
upward, it rebounded to the 2.4 trillion level by mid-OctoberBusiness result of the JSF groupas share prices dropped. It reached a peak for the term in

In light of these market trends, the total value of outstanding

mid-January at the 2.6 trillion yen level before finishingloans for the JSF group (term average) was 743 billion yen,

the year at the 2.4 trillion yen level. On the other hand, thewhich is comparable to the previous term.

outstanding balance of standardized margin selling began

Consolidated operating revenues were 20,300 million

the term at around the 300 billion yen level, but trendedyen (increase of 3.8% year-on-year), due to increased

upward due to new sales as share prices rose, surpassing

revenue from securities lending fees and the like in the loans

600 billion yen for the first time in around five years in earlyfor margin transactions business. Meanwhile, consolidated

December. It reached a peak for the term in late February, atoperating expenses were 9,450 million yen (increase of 8.0%

the 650 billion yen level, then declined gradually to the 570

year-on-year) due to an increase in securities borrowing

billion yen level by the end of the term.

fees and the like in the loans for margin transactions
business. General and administrative expenses dropped to

Regarding the bond market, the yield on newly issued

7,824 million yen (decrease of 5.2% year-on-year), due to

10-year Japanese government bonds was 0.614% at thea decrease in leasing fees and building management costs

beginning of the term. It trended generally downward due

following the relocation of the Osaka branch in March

6

BUSINESS REVIEW

last year, a decrease in property costs due to a drop in

average for the outstanding balance of margin loans was

M&A-related costs, and a decrease based on a reversal of

428.3 billion yen, representing a 62.3 billion yen year-

allowance for doubtful receivables in line with payments

on-year decrease. In addition, due to the interest on loans

from borrowers to JSF Trust and Banking, a subsidiary of(0.77% to 0.64%) being lowered by the agreed amount on

JSF.

August 6 last year, interest on loans decreased. However,As a result, consolidated operating income was 3,025

the term average for the outstanding balance of stock loans

million yen (increase of 17.8% year-on-year). Consolidated

was 222 billion yen, representing a year-on-year increase ofordinary income was 4,230 million yen (increase of 35.6%

45.5 billion yen, and premium charges on over-lent issues

year-on-year) due to an additional increase in dividend

also increased; the increase in these revenues exceeded

income from owned shares and the posting of a gain on

the decline in revenues from interest on loans. As a result,investment in partnership for JSF Trust and Banking.

operating revenues for this service were 9,667 million yen

Consolidated net income was 3,520 million yen (decrease(increase of 4.6% year-on-year).

of 43.3% year-on-year) due to the absence of gains arisingfrom negative goodwill in the merger with Osaka Securities

Bond financing and General loans

Finance Company that was posted in the previous fiscal year.

As for bond financing and general loans, the term averageof loans was 223.4 billion yen, representing a year-on-year

1) Securities finance business
Loans for Margin Transactions

increase of 66.2 billion yen, due to an increase in loans to

In the loans for margin transactions business, the termof equity repos contributed to operating revenues for thisfinancial instruments business operators. Furthermore, use

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

600

Margin Loans

Stock Loans

490

500

428
400
300

293
228

200

218

184

214

222
183

176

100
0

11

12

13

7

14

15

Breakdown of JSF Group operating revenues
2015

2014

( ￥ million)( ￥ million)

17,162

16,363

9,667

9,240

3,111

4,012

611

436

Fees on lending securities

5,389

4,132

Bond financing and general loans

2,107

1,959

Securities lending

2,294

2,217

Stocks

784

425

Bonds

1,509

1,791

Other business

3,094

2,946

Trust Banking Business

2,269

2,322

Interest on loans

186

317

Trust charges

545

485

Real Estate Leasing Business

868

880

Total Operating Revenues

20,30019,566

Securities Finance Business
Loans for margin transactions
Interest on loans
Interest on collateral money for securities borrowed

service of 2,107 million yen (increase of 7.5% year-on-year).

charges and interest income on securities holdings, butsince the term average loan balance declined by 18.9 billion

Securities lending

yen year-on-year to 58.6 billion yen and revenue fromIn the securities lending business, although revenues

interest on loans also declined, the operating revenues fromdecreased in the bond lending section, revenues fromthis service were 2,269 million yen (decrease of 2.3% year-

securities lending fees increased in the general stock

on-year).

lending section, due to growing demand for borrowing
stock, centering on long-term lending. As a result, operating

3) Real estate leasing businessrevenues for this service were 2,294 million yen (increase of

In the real estate leasing business, operating revenues

3.5% year-on-year).

were comparable to the previous term at 868 million yen(decrease of 1.4% year-on-year).

Other business
Other operating revenues were 3,094 million yen (increase

Future challengesof 5.0% year-on-year), due to factors such as an increase in

The Japanese economy is expected to continue on a modest

interest income on JGB holdings.

recovery trajectory due to government and Bank of Japan
initiatives aimed at sustained growth. In the financial and2) Trust banking businesssecurities markets where we do business, initiatives are

In the trust banking business, there were increases in trust

being undertaken with the aim of expanding investment

8

BUSINESS REVIEW

opportunities, such as the establishment of an infrastructure

our communications activities aimed at promoting trust

fund market on the Tokyo Stock Exchange and the listing

and understanding and use of the loans for marginof three Japan Post Group companies anticipated this fall.

transactions system. In services other than the loans for

Further developments are expected as well, such as themargin transactions business, we are also working toplanned expansion of Nippon Individual Savings Accounts

accurately address customers’ diverse needs. Moreover,(NISA).

with early 2017 as a target date, we plan to enhance our

In May of last year, we formulated our 4th Mid-Termsystem infrastructure by completing revamping our network

Management Plan. Based on our corporate philosophy,

system, which will further improve customer convenience

which states that our mission is to contribute to theand business operations stability while reducing costs

development of the securities market, this plan espouses

through streamlining of our business.

management policies including the establishment of social
trust, strengthening of our revenue base, and achievement

Subsidiary JSF Trust and Banking offers tailor-of a stable return of profits for all shareholders. In themade services as a trust bank to support the operationalloans for margin transactions business, specific measuresinfrastructures of security companies and other institutions.

for enabling these include enhancing our approaches to

It focuses on trust services centering on products aimed atissuers in order to increase the number of loanable issues,

the securities industry while striving to provide appropriate

deploying sales representatives in order to expand usagebanking functions commensurate with its managementby financial instruments business operators, and enhancing

capacity.

9

MANAGEMENT POLICYMANAGEMENT POLICY
Basic Management Policy
As an institution specializing in the securities financeManagement Plan
1. Fourth Mid-term Management Planbusiness, JSF has a mission, while always keen awarenessIn order to improve the convenience of loans for marginof our public role, to contribute to the development oftransactions, a system that allows applications to be madethe securities market by proactively meeting the diverse

using the Internet has been installed,

needs of securities and financial circles and working toboost the long-term interest of securities market users and[Concept]

participants. Based on this corporate philosophy, our basic

Recent years have seen major changes in the

management policy in as follows.

environment in which our company operates. Even as theinternationalization of finance and capital markets continues(1) Bearing in mind at all times our social responsibilities

to accelerate, IT systems have been introduced in Japan’s

as a securities finance company, we aim to practicemarket at a rapid pitch and Internet investors are becoming

sound business management through the exhaustivea greater presence. In this transformed environment, theimplementation of compliance, corporate governanceTokyo Stock Exchange (TSE) and Osaka Securities Exchange

and risk management to establish unshakeable(OSE) completed their merger last year, followed this year

credibility.

by the rollout of Nippon Individual Saving Accounts (NISA).
With the institutional framework for the new Comprehensive(2) We aim to retain robust equity capital to ensure the

Exchange being put in place, numerous initiatives arefinancial health and stable management society expects

underway to promote investment and strengthen theof a company that is part of the infrastructure of thefunctionality of the securities market. This period has also

securities market, while continuing to comprehensively

seen a reassessment of the financial restrictions imposed inassess the revenue environment, investment plans, andresponse to the Lehman Brothers Shock, giving rise to new

other factors to provide a stable return of profits to ourfinancial needs.

shareholders.

With the merger of TSE and OSE, JSF and Osaka
Securities Finance Company, Ltd. also merged in July 2013.

(3) We aim to work to improve the convenience of theFollowing this merger, our company will strive to effectively

margin loan business while expanding our network of

deploy our post-merger managerial resources to steadilyfinancial instruments companies and enhancing the

pursue the business strategies laid out below, even as we

financial and securities-related services offered by JSF

continue to further strengthen our business management

and its Group companies. And further, we aim to solidify

structure. By these and other measures, we will respond to

the profit base for the JSF Group as a whole throughthe changing environment and achieve even further growth

those actions.

for our business.

(4) We aim to promote further Group organizational[Business strategies]

and business management efficiency to respondi) Expanding the loans for margin transactions

expeditiously to changes in the business environment.

business as key infrastructure for the securities
marketIn light of the integration of the spot market, we aim toredouble our efforts both to accurately assess market needs
and to promote the expansion of the investor base andthe use of loans for margin transactions by increasing the10

MANAGEMENT POLICY

number of loanable issues and improving both the system

We aim to work ever harder to improve our risk

and operation of loans for margin transactions. To this end,

management in view of the increasingly diverse andwe aim to enhance our informational outreach activities

complex risks associated with financial business.

to better publicize the systems of margin transactions andii) Strengthening our business managementloans for margin transaction.

structure

Regarding loans for negotiable margin transactions,
we aim to work to accurately identify customer needs andWe aim to enhance the role and functions of our Businessexpand the business.

Promotion Meetings, and put in place a system to oversee
the implementation of business plans to ensure they areii）Responding to the diversifying needs of financial

executed properly. At the same time, we aim to implement

instruments companies and other customers

thoroughgoing cost management.

Building on our recent merger, we aim to further strengthen
our network of financial instruments companies and otheriii) Promoting human resources development

partners, respond proactively to the diversifying needs for

We aim to train the human resources needed to increase ourfunding and securities and work to expand our customer

corporate value and make possible the creation of futureloans business in collaboration with financial instruments

opportunities for long-term growth.

companies.

iii）Strengthening system infrastructure

Shareholder Return Policy

We aim to implement a complete rebuild of the business

The company considers the long-term, stable return ofsystem (JSF-Net) to achieve an even tighter fusion of

profits to shareholders to be among its most importantbusiness and IT, both to better meet customer needs, tomanagement tasks and therefore has a basic guideline of

reduce costs resulting from endeavors to improve businesspaying dividends according to results after provisioning theefficiency and to achieve more stable business operations

capital and internal reserves that it requires as a financial

through enhanced business continuity planning (BCP)

institution.

resiliency. Through these efforts, we reinforce our capacity

Our dividend policy is to return profits to shareholders

on the system side to support all of our business strategies.

basically in accordance with the "consolidated payout ratio"
as a standard that reflect our business performance, but alsoiv）Other business strategies

taking account of the "dividend on equity ratio".

We aim to further strengthen coordination among our Group
companies to respond proactively to diversifying customer[Basic Policy]

needs. We also aim to continue to monitor trends in rapidly

The company considers the long-term, stable return ofdeveloping Asia and other foreign markets in order to seek

profits to shareholders to be among its most importantout and seize new business opportunities. We at the same

management tasks and therefore has a basic guideline oftime aim to improve the efficiency of our fund management

paying dividends according to results after provisioning theunder appropriate risk controls.

capital and internal reserves that it requires as a financial
institution.

[Reinforcing business management systems]i) Enhancing internal controls[Revision of Shareholder Return Policy]

We aim to continue to enhance the effectiveness of ourGoing forward, based on this basic policy, we will endeavor

compliance and internal auditing to respond more nimbly toto pursue management that focuses on shareholder returns.

the evolving social demands placed on financial institutions.

In conjunction with this, we will change our dividend policy

11

starting from the fiscal year ending March 2016 and we

dividend on equity ratio (DOE = ratio of the dividend amounthave also specified a policy relating to share buybacks.

to shareholder equity).

[Basic Dividend Payment Policy][Share Buyback Policy]

Our policy is that the consolidated payout ratio, as aWith a view to offering even more rewarding returns tostandard that reflects our business performance, shall notshareholders, we will buy back shares as needed in future

fall below the 60% level and that we shall return profits towhile considering the company’s financial situation, stock

shareholders while taking into account the consolidated

price levels, and so forth.

12

OUR BUSINESS DEVELOPMENT

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

Loan funds needed to settle standardized margintransactions

Stock loan
Loan stock needed to settle standardized
margin transactions

General stock lending

Bond services

Loans for negotiablemargin transactions

Lending stock needed to settle stock trading

Brokerage between borrowers and lenders in bondborrowing and lending market

Loan funds needed to settle negotiable margintransactions

Bond ﬁnancing

Loan funds needed in bond underwriting, trading, etc.

General loans

Loan working funds, etc., to securities companies

Secured loans on securities for individual and corporate investors

COM - STOCK Loan

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

Business Loan

A large loan aimed at people such as owners of listedcompanies

Peripheral services
Securities custody

Custody services for securities owned byinstitutional investors, etc.

Government bonddebt servicing

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

13

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

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

above, an investor can use margin transactions as a means

requirements) with a securities company and (2) borrowing

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

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

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

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

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

avoid loss with hedging sale by using margin transactions.

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

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

Margin transactions is used, for example, when an

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

determined by stock exchanges, and a securities company

rise or decline sharply in a short period of time.

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

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

investor borrows funds for purchasing stock from a

In negotiable margin transactions, which is limited to cases

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

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

external procurement without borrowing from a securities

borrowed (reversing transaction) and receives the margin.

finance company, the condition of margin transactions

The investor may also receive the stock (actual receipt)

may be decided freely in negotiations between a securities

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

securities company.

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

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

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

14

OUR BUSINESS FIELD

JSF receives loan applications for each issue from a

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

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

the securities company, delivers funds or stock to clearing

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

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

each collateral is appropriated.

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

Standardized margin transactions and Loans for margin transactions

Loans for margin transactions

Standardized margin transactions

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

Customer

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

(7)

Stock exchange
clearing facilities

15

Japan Securities Finance

Submit application (5)Securities company

Place trade orderHandling of over-lent issues

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

JSF usually appropriates stock received as collateral for

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

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

all users of standardized margin transactions, and should

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

securities companies or institutional investors such as life

successful bidders.

In case of Premium Charge may apply
Loans for margin transactions

Standardized margin transactions
Issue A
7,000shares

Funds loan application

2,000
shares5,000shares

7,000shares
Amount matchedwithin each ﬁrm

5,000
sharesMargin selling Margin buying
balancebalance2,000shares

Securities company A
Stock loanbalance

Margin loanbalanceJSF

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

3,000shares
Amount matchedwithin each ﬁrm

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

Securities companies / Institutional investors

16

OUR BUSINESS FIELD

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

matches the needs of both lender and borrower, maintaining

bonds to a borrower, and after mutually agreed period, thehigh confidentiality of information to ensure the complete

borrower repays the lender with bonds of the same typeprivacy of both parities, and transferring all counterpartyand quantity. JSF serves as a broker between borrowers andcredit risk to JSF. The arrangement also contributes tolenders.

creating fair and stable market by publicly disclosing
indication via QUICK, Bloomberg, and other information

The bond borrowing and lending transactions market

services.

was established in May 1990 for the purpose of covering
bonds sold short, and was followed in April 1996 by theTransaction types

introduction of REPO (cash-collateral bond borrowing and

REPO transactions

lending transactions). JSF was the first company in Japan

JSF borrows bonds after depositing cash collateral with ato be authorized to offer such brokerage services, because

lender and then lends bonds after receiving cash collateral

JSF can link securities industries and financial industries

from a borrower. This transaction can be either a Special

on neutral ground and is well versed in handling of bond

Collateral transaction that specifies an issue or a Generaltransactions.

Collateral transaction that does not specify an issue.

JSF receives applications from both parties and, on

Ordinary bond borrowing and lending transactions

their behalf, lends and borrows bonds on the basis of

JSF, in principle, borrows bonds without collateral from aloan agreement. This type of arrangement has several

lender and then lends bonds after receiving collateral from aadvantages, including helping to form a transaction thatborrower.

Types of bond transactions

LenderLending rate

Cash collateral

Cash collateralInterest

Interest

JSF(Fund raising)

Borrowing rate

Borrower

Bonds

Bonds

(Fund investment)

REPO transactions

Ordinary transaction

Lender

Bonds

Bonds
Securities collateral
Lending rate

Borrowing rate

17

Borrower(securities-collateral transaction)

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

In February 2002, we implemented offer-bid borrowing

securities companies. A securities company would use

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

the purpose of hedge sale of convertible bonds or arbitrage

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

insurance companies.

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

Mechanism of stock lending business
Stocks (deposit)

Stocklenders
Institutional
investors

Stocks (lend)

JSF
Borrowing fee

Collateral deposit
Lending fee

18

Securities
companies

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

Loan Period

Loans for negotiable margin transactions is a system

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

lending date, but it can be extended to the deferment

to purchase stocks in negotiable margin transactions on

deadline for repayment of negotiable margin transactions

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

certain margin requirement (2) as collateral for loans

Interest rate
The interest rate on loans is determined individually

Conditions of loans

Loanable stock Issues

between JSF and securities companies.

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

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

JSF receive sto ck purchased in negot iable marg in

day of its listing.

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

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

Negotiable margin transactions
Place an order for negotiablemargin buying

JSF

Loan funds forpurchasing stocks

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

Stock exchange
clearing facilities

19

Japan Securities Finance

Customer

Deposit margin requirement

Securities company

Application

BOND FINANCING
The aim of bond financing is to contribute to smooth

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

underwriting, circulation and fair price formation in bondwhich do not require applicants to come to a branch,markets. This business offers low-interest loans by using"Business Loans" aimed at owners of listed companies,

government and other bonds as collateral to provide funds

and "Safekeeping Deposited Loans" that utilize investment

required by securities companies in bond operations.

securities deposited with securities companies as capital.

GENERAL LOANS

COM-STOCK Loan

This business loans working funds required by securities

A loan aimed at individual investors, for which loan

companies by using stocks, bonds, and other securities asapplications can be made through the Internet, andcollateral, and aims to respond quickly and flexibly to thefor which investors do not need to come to a branch.

needs of securities companies.

Applications can be made through a special JSF website.

SECURED LOANS ON SECURITIES FOR
INDIVIDUAL AND CORPORATE INVESTORSBusiness loan

We provide loans to individuals and companies for any use,companies.

A large loan aimed at people such as owners of listed

utilizing investment securities for shares, etc. as collateral.

20

CORPORATE GOVERNANCECORPORATE GOVERNANCE
auditors)

BASIC CONCEPT OF CORPORATE GOVERNANCE
As a institution specializing in the securities finance・ Attendance of corporate auditors at internal meetings andbusiness, Japan Securities Finance has a mission, while

instigation of necessary checks

always maintaining a keen awareness of our public role,・ Internal audit by the Audit Department, which is

to contribute to the development of the securities industry

independent from other departments

by proactively meeting the diverse needs of securities andfinancial circles and working to boost the long-term interests

Furthermore, from the perspect ive of ensuringof securities markets users and participants. The company

management transparency, we are committed to making

believes gaining the firm trust of society through soundactive and timely disclosure of management information

business operations is our most important managementthat goes beyond legal requirements via our website.

directive.
・ Establishment of compliance system

CORPORATE GOVERNANCE STRUCTURE
1. Management Structure

・ Establishment and implementation of risk management

Below is an outline of JSF's management structure.
・ The Board of Directors is the decision-making body for all

policies

matters related to management policy and the execution

・ Active invitation of outside directors (three directors, two

Corporate Governance System Structure
Decision Making ofManagement
General Meetingof Shareholders

Inspection System

Audit

Board of Directors

ReportCorporate
Auditors

External
Financial
AuditorBusiness
Operation
Audit

President
Management Committee

Compliance
Committee

Executive Oﬃcers
Meeting
Audit
Department

Audit
Subsidiaries
AﬃliatesManagement
Administration& Report. etc.

Executive Oﬃcers in Charge

Compliance Department
Personnel in chargeof compliance

Mutual CheckBusiness
Departments

Risk Management
Department

JSF Group
Company

21

External Reporting
Contact Desk

Consultation and Report for Compliance

Board ofAuditors

All Departments

of operations, and it appoints executive officers who are2) Board of Auditors

charged with the execution of operations in accordance

The Board of Auditors may have up to four members, ofwith its decisions.

which the majority must be outside auditors.

・ Directors are members of the Board of Directors and

The Board of Auditors shall make a decision on the

supervise the company's decision-making and the activities

execution of the duties of auditors and shall discuss theof representative directors. Executive officers execute theexercise of authority by auditors. Meetings of the Board

operations of the Company in line with decisions made byof Auditors are convened from time to time as necessary.

the Board of Directors.

During fiscal 2014, the Board of Auditors met ten times.
Two outside auditors are appointed and are expected to・ Directors may concurrently serve as executive officers

provide supervision based on a wealth of experience and(executive directors).

broad knowledge and expertise.

・ Executive officers comprise executive directors andexecutive officers.

3) Management Committee

・ Executive officers are appointed for a term of 1 year.

The purpose of the Management Committee is to deliberate

2. Organization

important matters related to the execution of company

To strengthen management supervisory functions, theoperations.

Company stipulates that three of the ten directors must

Members of the Management Committee are executive

be outside directors, and outside directors serve as the

directors. When necessary, directors who are not executive

center of the Board of Directors. In addition, two of the four

directors and auditors may attend meetings of theauditors on the Board of Auditors must be outside auditors.

Management Committee.

The Management Committee and Executive Officers Meeting

The Management Committee is in principle convened

serve as management-level decision-making bodies.

once per week. The Management Committee may also meet

Below are outlines of these organizations.

other times as necessary.

1) Board of Directors

4) Executive Officers Meeting

The Board of Directors may have up to ten members

The purpose of the Executive Officers Meeting is to report(including three outside directors).

on the status of operations.

Meetings of the Board of Directors shall in principle

Members of the Executive Officers Meeting are all

be convened once per month but may be convened at

executive officers, including executive directors. Directors

other times as necessary. During fiscal 2014, the Board of

who are not executive directors and auditors may also

Directors met ten times.

attend the Executive Officers Meeting.

Positions on the Board of Directors shall consist of the

The Executive Officers Meeting is in principle convened

chairperson, vice chairperson, president, executive viceonce per week. The Executive Officers Meeting may alsopresident, senior managing directors, managing directors

meet other times as necessary.

and directors. The Board of Directors may appoint directors
to execute operations (executive directors).

3. Outside directors and outside auditors
The Company has three outside directors and two outside

Three outside directors appointed are expected to ensure

auditors.

the appropriateness of company operations and provide
objective, neutral, outside supervision of management

The outside directors and outside auditors have nothrough advice and comments with a wealth of experienceinterest in the Company other than owning shares in thein management and professional knowledge and expertise.

Company. There are not now nor have there ever beenfactors requiring a determination of potential conflict of22

CORPORATE GOVERNANCE

interest with general shareholders by the Tokyo Stockaudits and internal control may exchange information etc.

Exchange.

when necessary for closer coordination.

Outside directors are expected to ensure the

Auditor Toshio Kamiyama is a certified public accountant

appropriateness of company operations and provide

and certified tax accountant and provides considerable

objective, neutral, outside supervision of management

insight on financial and accounting matters.

through advice and comments based on their abundant
experience in management and professional knowledge and5. Status of accounting audits

expertise. They are in an objective position independent of

Accounting audits of the Company are performed by

the executive directors and have no potential conflicts ofcertified public accountants Mitsuhiro Fukuda, Nobuyuki

interest with general shareholders.

Kobayashi and Hironobu Sakai of BDO Toyo & Co.

Outside auditors are expected to provide supervision

Accounting audits are assisted by 18 certified public

based on a wealth of experience and broad knowledge andaccountants and 6 others, and care is taken to eliminate bias

expertise. They have a high degree of independence andin years of experience.

no conflicts of interest with general shareholders and are
therefore judged to contribute to auditing operations and6. Policy regarding the remuneration of
directors and auditors

compliance. They endeavor to mutually coordinate internal1) Executive Directors

audit section etc.
There are no explicit standards or guidelines related

・ With a view to enhancing the correlation between our

to independence in the appointment of outside directors

company’s business performance and remuneration, aand outside auditors, but appointments are made with

fixed percentage of monthly remuneration will be devoted

reference to the standards of judgment for independence

to the acquisition of JFS stocks and will contribute each

formulated by the Tokyo Stock Exchange in the Securities

month to the Executive Stock Ownership Program. JSF

Listing Rules and other documents, and every effort is madestocks obtained under this remuneration program will, into ensure that there are no conflicts of interest with generalprinciple, be held until retirement.
・ Directors’ bonuses will be paid only to executive directors

shareholders.

as a performance-linked remuneration, in order to

4. Status of internal audits and auditor audits

emphasize the management’s responsibility for each year’s

The internal audit structure consists of Audit Department

business performance.

that is independent of all other business units (approximately

2) Non- executive directors (including outside

ten members).

directors) and auditors

Its duties are not only the internal audits of compliance・ They will receive solely their fixed amounts of monthly

with all applicable laws, regulations, contracts etc. It

remuneration, and no director’s bonus.

also figures out the management of risks and so forth byrigorous internal audits of the effectiveness and efficiency
of operation, the accuracy and reliability of financial and

COMPLIANCE SYSTEM

operational information and the assets safeguarding/

The following details our compliance system and consulting

conservation. Through these activities, Audit Department

and reporting system in regard to complianceverifies the appropriateness and effectiveness of internal

The company’s compliance system centers on our Board

management system in respect of control and managementof Directors, the Management Committee, the Complianceof risk and other factors in individual business units.

Committee and the Compliance Department. The situation

Internal audits, auditor audits and accounting audits

regarding internal compliance is constantly studied byare mutually coordinated. All who are responsible for these

the Compliance Department and the results are regularly

23reported to the Board of Directors and the Management

guarantees the complete anonymity of any person

Committee.

consulting or reporting matters regarding the company,

The Compliance Committee deliberates importantmatters concerning compliance.

thereby reducing the psychological burden on those persons

The Complianceand making consulting and reporting easier.

Department makes all possible efforts to promote andthoroughly establish compliance through such measures as

BUSINESS CONDUCT GUIDELINES

urging managers and employees alike to take faithful and1) As an institution specializing in securities-related
financing, the company recognizes its social

honest actions based on clear ethical standards.

responsibility and its public mission. It aims to establish

In addition, the company takes the initiative in thefirm trust through sound business operation.

promotion of the establishment and strengthening of overall

2) The company will comply strictly with relevant rules

group compliance system.

and regulations. It will conduct its business activities
Consulting and reporting system regarding compliancein a fair and reliable manner, in accordance with social

In order to strengthen the compliance system, the company

norms.

has its external consulting and reporting contact desk

3) In the interests of its shareholders, the company willby lawyers, in addition to the Compliance Committee,

maximize its communications with a broad spectrum of

the Compliance Department and personal in charge ofsociety and will disclose information on the management

compliance.

of the organization in a fair and positive manner.

The external consulting and reporting contact desk

Consulting and Reporting
Board of Directors
Management Committee
Compliance Committee

Deliberation of thecountermeasure(Chairman : Executive oﬃcer in charge ofCompliance Department)

Compliance Department

ReportPersonnel in charge ofcompliance

External reporting contact desk
Consult & report

Consult & report

Consulting & Reporting personnel(Managers and employees)

24

RISK MANAGEMENTRISK MANAGEMENT
Basic policies in risk management

Method of risk management

With environmental changes such as financial deregulation

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

then set these categories as management objectives; credit

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

system risks. Among these categories, for credit risks

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

management of financial institutions than ever before.

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

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

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

basic policies in risk management at our Board of Directors.

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

More precisely, we have established basic policies

according to risk characteristics.

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

Risk Categories
Risk Category
Credit Risk

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

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

Liquidity Risk

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

Processing Risk
System Risk

Processing risks are risks to suffer losses from failed processing due to negligence, accidents or
fraud by officers and employees.
System risks are risks to suffer losses due to system defects such as failures or malfunction ofcomputer systems or due to unauthorized use of computer systems.

25Integrated risk management

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

department implements rigid self-assessment of those assets

risks with unified methodology and to manage the total

for which they hold jurisdiction.

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

Additionally, for each loan transaction, as a general

capital to each risk operation department by risk category

rule, we take adequate collateral. By implementing a

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

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

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

securities and so forth, we collect receivables in an

enforced in March 2008, operational risks, which consists

expeditious manner.

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

Market risk management
In our company, the Risk Management Department

Allocated amounts of risk capital are determined as final

quantifies and manages market risks, and to complement

at the Management Committee, with prior deliberation at

management by quantification, it implements stress tests.

regular “Risk Capital Meeting” in every March.

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

Each risk operation department controls the risks

with the portfolio-fixed virtual profit and loss

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

Liquidity risk management

operation conditions, and report to board members.

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

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

supplies. As for cash flow management, while we are

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

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

Credit risk management

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

We try to sustain and improve the soundness of the assets

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

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

government bonds with high liquidity.

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

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

for each in-house rating. Furthermore, to complement

quarter, we develop cash flow projection based on forecasts

management by quantification, we implement stress tests.

of loans outstanding, deliberate policies for ALM (Asset

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

Liability Management) such as revenue management for

Department screens client companies and loan transactions

assets and liabilities of the company as a whole and thus

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

client, while business operation department manages the26

RISK MANAGEMENT

Processing risk management

systems safely and effectively, all operation procedures

In our company, each department has jurisdiction over theare clarified and our monitoring system is facilitated. In

management of processing risks. To lessen processing risks,

addition, concerning protection of our own information

through facilitation of regulations and manuals and also

assets (information and information systems), necessary

through trainings, all employees are familiarized with proper

regulations are consolidated and all officers and employees

handling of operational work. In addition, by ensuring thatare familiarized with handling of the information assets.

each department implements its own voluntary inspection

Furthermore, to minimize the effects of system failures,on a regular basis, we endeavor to prevent occurrence ofmeasures are taken such as facilitation of various handling

accidents and improve our business processing system.

manuals, implementation of drills, and so on.

System risk management

Internal auditing system

In our company, the Information Systems PlanningIn our company, the Audit Department, which is independent

Department holds jurisdiction over management of systemfrom other departments, implements strict internal auditing

risks. To ensure stable operation of our computer systems,of overall business operation on management status of eachthe department takes preventive measures for occurrence of

category of risk along with regulatory compliance status andsystem failures such as duplicating networks and equipment

validates the appropriateness and efficacy of our internaland so forth. To develop and operate our computer

control system in each department.

Appendix
Risk capitalof financial standing, obligor classifications used in self-

Risk capital is capital necessary to cover losses caused byassessment, and so forth. With this system, we assess therisks generated from business operation.

levels of credit risks properly, quantify credit risks, and set
up amount for transaction limitation.

Value at Risk (VaR)
VaR is the maximum expected loss on an asset calculated

Stress tests

with a certain period (holding period) and a certain

Since VaR is statistical estimated figure, it cannot include

probability (confidence level). This is calculated based on

possible losses, which can be caused by extreme market

data in the past with statistical method. In our company,

fluctuation such as Black Monday or economic crisis (stress

VaR is calculated based on confidence level of 99% andevent). In this situation, to be prepared for unforeseeable

holding period of one year.

circumstances, we implement stress tests to calculate amountof losses in a case of occurrence of stress event based on

Risk Capital Meeting

data in the past or on hypothetical scenarios and assess theThis is a meeting to deliberate issues such as allocatedsoundness of our financial management.

amount of risk capital and so forth. The meeting isorganized by the managers of the Risk Management

ALM Committee

Department (chairperson), the Planning Department, theThis is a committee to deliberate ALM such as development

Treasury Department, and all the other business departmentsof fund management plans and revenue management

concerned.

for assets and liabilities of the company as a whole. The
committee is organized by the executive officer in charge

In-house rating systemof the Treasury Department, and managers of the Treasury

We introduced a rating system which segmentalizes credit

Department (chairperson) and all the other department

ratings of client companies into 6 ranks, based on ratings

concerned.

by external credit rating agencies, quantitative assessment

27

Risk Management System

Board of Auditors,
Corporate Auditors

Board of Directors

Management
Committee
Executive Oﬃcers Meeting

Executive Oﬃcer incharge of Treasury
Department

ALM
Committee

Risk Operation Sector

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

Executive Oﬃcer incharge of Department

Executive Oﬃcer
in charge of Audit
Department

Risk Capital
Meeting

Liquidity
Risk

MarketRisk

CreditRisk

SystemRisk

Processing
Risk

Treasury
Department

Risk
Management
Department

Risk
Management
Department

Information
Systems
Planning
Department

Each
Department

Treasury
Department

・Treasury
Department
・Margin Loan
Department

Each
Department

Each
Department

・Institutional
Sales
Department
・Retail Business
Department
・Margin Loan
Department
・Tresury
Department
・Branch28

Internal Audit Sector

Risk Management
Department

Audit Department

Risk Management
SectorRisk
Categories

Integrated Risk
Management Sector

Meeting

Management

President

FINANCIAL SECTION

Consolidated Financial Statements ･･････････････････････････････････････････････････････････････････ 30
Consolidated Balance Sheet ･ ･･･････････････････････････････････････････････････････････････････････ 30
Consolidated Statement of Income ･･･････････････････････････････････････････････････････････････ 32
Consolidated Statement of Other Comprehensive Income ･････････････････････････････････ 32
Consolidated Statement of Changes in Net Assets ･ ･･････････････････････････････････････････ 33
Consolidated Statement of Cash Flows ･･････････････････････････････････････････････････････････ 34
Notes to Consolidated Financial Statements ･･･････････････････････････････････････････････････ 35
Independent Auditors' Report ･････････････････････････････････････････････････････････････････････････ 60

29

CONSOLIDATED BALANCE SHEETJapan Securities Finance Co., Ltd. and Consolidated Subsidiaries
As of March 31, 2015
Millions of yen
AssetsCurrent assets:
Cash (note 3)
Short-term investments (notes 4 and 16)
Short-term loans receivable (note 16)
Deferred tax assets (note 9)
Collateral money for securities borrowed
Other current assets (note 16)
Allowance for doubtful receivables
Total current assets

2015¥

Property, plant and equipment:
Buildings and structures
Tools, furniture and fixtures
Land (note 6)
Leased assets
Construction in progress
Accumulated depreciation
Net property, plant and equipment
Intangible assets, net
Investments and other assets:
Investments in securities (notes 4, 5 and 16)
Other investments and other assets
Allowance for doubtful receivables
Total investments and other assets
Total assets¥

See accompanying notes to consolidated financial statements.

30

2014

Thousands of
U.S. dollars(note 2)
2015

31,792 ¥588,814883,101
391
974,9745,686(340)
2,484,418

93,070408,571
897,825525
1,303,155
6,106
(369)
2,708,883

8,791
1,356
3,265
370
333
14,115(7,087)
7,028

8,790
1,348
3,265
409
3
13,815(6,827)
6,988

73,154
11,284
27,1703,079
2,771
117,458(58,975)
58,483

2,388

1,054

19,872

987,898
2,663(1,793)
988,768

1,196,823
3,616(2,976)
1,197,463

8,220,837
22,160(14,920)
8,228,077

3,482,602¥

3,914,388$$

264,559
4,899,842
7,348,764
3,254
8,113,289
47,316(2,829)20,674,195

28,980,627

Thousands of
U.S. dollars(note 2)Millions of yen
Liabilities and Net Assets
Current liabilities:
Call money (notes 7 and 16)
Short-term borrowings and current installments oflong-term borrowings (notes 7 and 16)
Commercial paper (note 7)
Accrued income taxes (note 9)
Collateral money received for securities lent
Other current liabilities (note 7)
Total current liabilities

2015¥

Non-current liabilities:
Long-term borrowings (note 7)
Deferred tax liabilities (note 9)
Deferred tax liabilities for land revaluation (note 6)
Liabilities for retirement benefits (note 8)
Other non-current liabilities (note 7)
Total non-current liabilities
Total liabilities
Stockholders’ equity:
Common stock (note 10):
Authorized 200,000,000 shares;
issued 100,000,000 shares in 2015
and 107,307,763 shares in 2014
Additional paid-in capital (note 10)
Retained earnings (note 11)
Treasury stock, at cost; 181,071 shares in 2015
and 20,761 shares in 2014
Total stockholders’ equity
Accumulated other comprehensive income (losses):
Net unrealized holding gain on other securities(note 4)
Deferred losses on hedges (note 18)
Gain on revaluation of land (note 6)
Remeasurements of defined benefit plans
Total accumulated other comprehensive
incomeTotal net assets

1,587,000
439,5102014¥

1,596,600
509,5102015$

13,206,291
3,657,402

440,000
299
788,716
73,6003,329,125

429,000
132
1,185,725
46,4493,767,416

3,661,480
2,488
6,563,335
612,466
27,703,462

2,000
7,190
78
2,589
4,475
16,332

3,000
4,059
86
3,088
1,511
11,744

16,643
59,832649
21,54437,239135,9073,345,457

3,779,160

27,839,369

10,00010,00083,216

11,471
103,608(114)

16,027
101,596(16)

95,456862,179(949)

124,965

127,607

1,039,902

14,787

8,346

123,051(2,766)164(5)12,180

(598)
156
(283)
7,621

(23,018)1,365(42)
101,356

137,145

135,228

1,141,258

Commitments and contingencies (note 19)
Total liabilities and net assets¥

31

3,482,602¥

3,914,388$

28,980,627

CONSOLIDATED STATEMENT OF INCOME

Japan Securities Finance Co., Ltd. and Consolidated Subsidiaries
For the year ended March 31, 2015

2014
19,567
8,748
10,8198,250
2,569

Thousands of
U.S. dollars(note 2)
2015$
168,927
78,63890,28965,11625,173

105
293
(0)
591
23
271
39
(144)
(7)

21
186
(0)
32
(0)
–
–
179
(29)

874
2,438
(0)
4,918
191
2,254
325
(1,198)
(58)

–
–
–
–
90
1,261

4,405
(55)
(526)
(199)
138
4,152

–
–
–
–
749
10,493

444
321
765

255
255
510

3,695
2,671
6,366

Millions of yen
Operating revenues
Operating expenses
Operating profit
General and administrative expenses (note 12)
Operating income¥

Other income (deductions):
Interest income
Dividend income
Interest expenses
Equity in earnings of limited partnership
Gain (loss) on sale of investments in securities
Gain on bad debt recovered
Subsidy income
Equity in earnings (losses) of affiliates
Loss on sale/disposal of property, plant andequipment
Gain on negative goodwill
Merger related costs
Branch removal expenses
Retirement benefit expenses
Other, net

¥

4,286

Income before income taxes and minority
interests
Income taxes (note 9):
Current
DeferredIncome before minority interests
Net income

2015
20,3009,450
10,850
7,825
3,025

¥

3,521
3,521

6,721

6,211
6,211

¥

35,66629,30029,300$See accompanying notes to consolidated financial statements.

CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
Japan Securities Finance Co., Ltd. and Consolidated Subsidiaries
For the year ended March 31, 2015
Millions of yen
Income before minority interests
Other comprehensive income (losses) arisingduring the year :Net unrealized holding gain on other securities
Deferred gain (losses) on hedges
Gain on revaluation of landRemeasurements of defined benefit plans
Other comprehensive income (losses) of affiliates
for by the equity method¥

Comprehensive income
Comprehensive income attributable to:
Owners of the parent
Minority interests

¥

2015
3,521

¥

6,397
(2,168)8
211
111

Total other comprehensive income arising during the year¥

See accompanying notes to consolidated financial statements.

32

Thousands of
U.S. dollars

2014
6,211

(note 2)
2015$
29,300

521
266
－
－
(20)

53,233(18,041)
66
1,756
924

4,559
8,080 ¥

767
6,978

8,080 ¥
–

6,978
–

$
$

37,93867,23867,238–CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS
Japan Securities Finance Co., Ltd. and Consolidated Subsidiaries
For the year ended March 31, 2015

Millions of yen
Accumulated other comprehensive income(losses)

Stockholders’ equity
Additional
paid-in
capitalCommonstock

Retainedearnings(note 10)
(note 10)
(note 11)
Balance at March 31, 2013
¥ 10,000 ¥
5,182 ¥ 96,787 ¥Changes arising during year:
Cash dividends(1,402)
Net income
6,211
Increase resulting from merger
10,845Purchase of treasury stock
Disposition of treasury stock
Net changes other thanstockholders' equity
Total changes during the year–
10,845
4,809
Balance at March 31, 2014
10,00016,027
101,596
Cumulative effects of changes
64
in accounting policies
Restated balance at March 31, 2014
10,00016,027
101,660
Changes arising during year:
Cash dividends(1,469)Net income
3,521
Change in the scope of equity method(104)
Purchase of treasury stock
Retirement of treasury stock

Net changes other thanstockholders’ equity

Total changes during the year
Balance at March 31, 2015¥–
10,000 ¥Treasury
stock

Total

(515) ¥ 111,454 ¥

(5)
504

(1,402)
6,211
10,845(5)504(note 4)
7,845 ¥

Deferred
losses onhedges(864) ¥

501

266

Gain onrevaluationof land(note 6)156 ¥Remeasurementsof defined
benefit plans

– ¥

Total

Total net
assets7,137 ¥ 118,591

(283)

484

(1,402)
6,211
10,845
(5)
504
484

499
(16)

16,153
127,607
64

501
8,346

266
(598)

–
156

(283)
(283)

484
7,621

16,637135,22864(16)127,671

8,346

(598)

156

(283)

7,621

135,292(4,556)

1(4,655)
4,556(1,469)3,521(103)(4,655)－

4,559(1,469)3,521(103)(4,655)－
4,559(4,556)
1,948
11,471 ¥ 103,608 ¥(98)(2,706)(114) ¥ 124,965 ¥Additional
paid-in
capitalBalance at March 31, 2014
$ 83,216 $ 133,369 $Cumulative effects of changes
in accounting policies
Restated balance at March 31, 2014
83,216
133,369
Changes arising during year:
Cash dividends
Net income
Change in the scope of equity method
Purchase of treasury stock
Retirement of treasury stock(37,913)
Net changes other thanstockholders' equity
Total changes during the year–
(37,913)
Balance at March 31, 2015
$ 83,216 $ 95,456 $Retainedearnings

Treasury
stock

Total

845,436 $
532(133) $ 1,061,888 $
532

845,968(133)

1,062,420

8(38,737)
37,913(12,224)
29,300(857)(38,737)－(12,224)
29,300(865)

16,211
862,179 $6,441(2,168)8

6,441
14,787 ¥(2,168)(2,766) ¥

8
164 ¥

278

278
4,559
1,853
(5) ¥ 12,180 ¥ 137,145

Thousands of U.S. dollars(note 2)
Accumulated other comprehensive income(losses)

Stockholders’ equity
Commonstock

Netunrealized
gain onothersecurities

Net
unrealized
gain onothersecurities

Deferred
losses onhedges69,452 $(4,977) $1,298 $

(2,355) $ 63,418 $ 1,125,306
532

69,452(4,977)

1,298(2,355)53,599(18,041)(816)(22,518)
53,599(18,041)(949) $ 1,039,902 $ 123,051 $ (23,018) $See accompanying notes to consolidated financial statements.

33

Gain onrevaluationof land

67
67
1,365 $

Remeasurementsof defined benefit
plans

2,313

Total

Total net
assets63,4181,125,838

37,938(12,224)
29,300(857)(38,737)－
37,9382,313
37,93815,420(42) $ 101,356 $ 1,141,258

CONSOLIDATED STATEMENT OF CASH FLOWSJapan Securities Finance Co., Ltd. and Consolidated Subsidiaries
For the year ended March 31, 2015

Thousands of
U.S. dollars(note 2)Millions of yen

2015

Cash flows from operating activities:
Income before income taxes and minority interests

Adjustments to reconcile income before income taxes and minority interests

to net cash used in operating activities:
Depreciation and amortization
Gain on negative goodwill
Loss on disposal of property, plant and equipment
Gain relating to short-term
investments and investments in securities
Allowance for doubtful receivables
Increase (decrease) in liabilities for retirement benefits
Interest and dividend income
Interest expenses
Equity in (earnings) losses of affiliates(Increase) decrease in short-term loans(Increase) decrease in collateral money forsecurities borrowed
Increase (decrease) in call money
Decrease in short-term borrowings
Increase in commercial paper
Increase (decrease) in collateral money
received for securities lent
Increase (decrease) in collateral money received
for loan transactions
Decrease in long-term debt
Purchase of short-term investments andinvestments in securities
Proceeds from sale/redemption of short-term
investments and investments in securities
Other, net
Sub totalInterest and dividend received
Interest paid
Income taxes paid
Income taxes refunded
Net cash used in operating activities
Cash flows from investing activities:
Proceeds from sale/redemption of investments in securities
Capital expenditures
Purchase of intangible assets
Other, net
Net cash used in investing activities
Cash flows from financing activities:
Dividends paid to stockholders
Purchase of treasury stock
Other, net
Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Increase in cash and cash equivalents resulting from merger
Cash and cash equivalents at end of year (note 3)¥¥

See accompanying notes to consolidated financial statements.

34

2014

2015

4,286 ¥

6,721

$

662
–
8
(415)

879
(4,405)
150
(487)

5,509
–
67
(3,453)(1,212)(498)(11,313)
3,461
144
14,724
328,181(1,307)461(11,730)
3,939
(179)
(141,755)(203,542)(10,086)(4,144)(94,142)
28,801
1,198
122,526
2,730,973(9,600)(70,000)
11,000(397,009)

115,000(99,700)
197,500
202,649(79,887)(582,508)
91,537(3,303,728)

14,885(2,405)

123,866(1,000)(436,419)(7,500)(1,708,676)(8,321)(3,631,680)

482,028

1,597,395

4,011,217

985(67,102)
11,791(3,520)(299)
140(58,990)

22,597(34,395)
11,586(3,929)(503)
186(27,055)

8,197(558,392)
98,119(29,292)(2,488)1,165(490,888)

120
(443)
(1,676)913(1,086)

0
(604)
(557)
82
(1,079)999(3,686)(13,947)
7,597(9,037)(1,469)(4,655)(83)(6,207)(66,283)
93,070–26,787 ¥(1,402)(5)(203)(1,610)(29,744)
114,258
8,556
93,070(12,224)(38,737)(691)(51,652)(551,577)
744,486–
222,909$35,666

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Japan Securities Finance Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2015
(1)(a)

Summary of Significant Accounting Policies
Basis of Presenting Consolidated Financial Statements
Japan Securities Finance Co., Ltd. (the Company) and its consolidated subsidiaries maintain their books ofaccount and prepare their financial statements in conformity with financial accounting standards of Japan.
The accompanying consolidated financial statements have been prepared in accordance with the provisions
set forth in the Japanese Financial Instruments and Exchange Law and its related accounting regulations, and in
conformity with accounting principles and practices generally accepted in Japan, which may differ in certain
respects from accounting principles and practices generally accepted in countries and jurisdictions other thanJapan.
In preparing the accompanying consolidated financial statements, certain reclassifications have been madein the financial statements issued domestically in Japan in order to present them in a form which is more familiar
to readers outside Japan. In addition, the notes to the consolidated financial statements include information
which is not required under accounting principles generally accepted in Japan but is presented herein as
additional information.
(b)

Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its 2
subsidiaries.
All significant intercompany accounts and transactions have been eliminated in consolidation.
Investments in affiliates are accounted for by the equity method.
The Accounting Standards for Consolidation require the control or influence concept for the consolidation
scope of subsidiaries and affiliates. Under the control or influence concept, a company in which the parent
company or its consolidated subsidiaries, directly or indirectly, are able to exercise control over operations is fully
consolidated, and a company over which the parent company and/or its consolidated subsidiaries have the ability
to exercise significant influence is accounted for by the equity method.
(c)Cash and Cash Equivalents
For the purpose of the statement of cash flows, the Company considers all highly liquid investments withinsignificant risk of changes in value which have maturities of generally three months or less when purchased tobe cash equivalents.
(d)

Short-term Investments and Investments in Securities
Under the Accounting Standards for Financial Instruments, securities are classified into four categories –“trading securities,” “held-to-maturity securities,” “investments in affiliates” and “other securities.” Securities
classified as “trading securities” are stated at fair value and unrealized gains or losses are recorded in the
consolidated statement of income. Securities classified as “held-to-maturity securities” are stated at amortizedcost. Securities classified as “other securities” with fair value are stated at fair value and unrealized gains orlosses, net of related taxes, are excluded from earnings and recorded in a separate component of net assets.
Realized gains or losses on the other securities are determined by the moving average method. Bond securities
classified as “other securities” for which fair value is not available are stated at the amortized cost. Equity
securities classified as “other securities” for which fair value is not available are stated at the moving-average
cost.
(e)

Property, Plant and Equipment
Property, plant and equipment are carried at cost.
Depreciation is provided principally by the
declining-balance method based on the estimated useful lives, except for the buildings acquired on or after April 1,
1998, which are depreciated based on the straight-line method.
The estimated useful lives are as follows:
Buildings and structures
3–50 years

35

(f)

Intangible Assets
Intangible assets are carried at cost less accumulated amortization. Software development expenses aredeferred and amortized by the straight-line method over estimated useful lives (5 years). Intangible assets otherthan software are deferred and amortized by the straight-line method at rates based on the estimated useful livesof the respective assets.
(g)

Allowance for Doubtful Receivables
An allowance for doubtful receivables is provided at an amount of uncollectible receivables based on
historical loss ratios and an amount that takes into consideration the possibility of specific liabilities.
(h)Retirement and Severance Benefits
The Company and its consolidated subsidiaries have retirement benefit plans covering substantially all
employees.
Liabilities for retirement benefits have been made in the accompanying consolidated financial statements
based on the present value of the projected future retirement benefits attributable to employee services renderedby the end of the year, less amounts funded under contributory and noncontributory pension plans.
The Company has applied ASBJ Statement No. 26 Accounting Standard for Retirement Benefits (released on
May 17, 2012, hereinafter the “Standard”) and ASBJ Guidance No. 25 Guidance on Accounting Standard for
Retirement Benefits (released on March 26, 2015, hereinafter the “Guidance”) effective from the year ended
March 31, 2015, in accordance with the provisions stated in Paragraph 35 of the Standard and Paragraph 67 of
the Guidance.
In applying these accounting standards, the method for attributing projected benefits to periods has beenchanged from the straight-line basis to the benefit formula basis, and the method for determining the discountrate has been changed from the discount rate based on the residual service period of employees to a single
weighted-average discount rate.
According to the transitional treatment provided in Paragraph 37 of the Standard, the effect of changing themethod for calculating retirement benefit obligations and service costs was recognized by adjusting retained
earnings at the beginning of the year ended March 31, 2015.
As of and for the year ended March 31, 2015, the effect of this change on the consolidated financial
statements, net income per share and net assets per share is immaterial.
(i)

LeasesAll finance lease transactions are capitalized.
Leased assets related to finance lease transactions without title transfer are depreciated on a straight-line
basis, with the lease periods as their useful lives and no residual value.
(j)

Income Taxes
The Accounting Standards for Deferred Income Taxes require that deferred income taxes should be accounted
for under the asset and liability method. Deferred tax assets and liabilities are recognized for the expected
future tax consequences of events that have been included in the financial statements or tax returns. Under thismethod, deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be recovered or settled, and the effect ondeferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes theenactment date.
(k)

Directors’ Bonus
Directors’ bonuses are accounted for as an expense when such bonuses are accrued.

(l)Reclassifications
Certain reclassifications have been made to the prior years’ consolidated financial statements to conform to
the presentation used as of and for the year ended March 31, 2015.

36

(2)

Financial Statement Translation
The translations of the yen amounts into U.S. dollars are included solely for the convenience of the reader,using the prevailing exchange rate as of March 31, 2015, which was ¥120.17 to U.S. $1. This translation should
not be construed as a representation that the amounts shown could be converted into U.S. dollars at such rate.
(3)

Cash and Cash Equivalents
Reconciliation between “Cash” in the accompanying consolidated balance sheet and “Cash and cash
equivalents” in the accompanying consolidated statement of cash flows as of March 31, 2015 and 2014 are as
follows:
Thousands ofMillions of yen
U.S. dollars
2015
2014
2015
Cash
¥
31,792¥
93,070$264,559
Certificate of deposits with maturities of(5,005)–(41,650)
over three months
Cash and cash equivalents¥
26,787¥
93,070$222,909(4)

Short-term Investments and Investments in Securities
No trading securities were held both as of March 31, 2015 and 2014.
Balance sheet amount, gross unrealized gain or gross unrealized loss and fair value of held-to-maturity
securities as of March 31, 2015 and 2014 are summarized as follows:
Millions of yen
Balance
Gross
Gross
sheet
unrealized
unrealized
amountgain
loss
Fair value
March 31, 2015
Government bond securities ¥40,737¥178¥(43) ¥
40,872

March 31, 2014
Government bond securities

March 31, 2015
Government bond securities¥

40,737

¥

178

¥

(43)

¥

40,872¥

39,915

¥

301

¥

–

¥

40,216¥39,915¥$338,995
338,995¥–¥

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

Balancesheet
amount
$

301

$

1,481

$

1,481

37

$
$

(358)
(358)

40,216

Fair value$$

340,118
340,118

Acquisition cost, gross unrealized gain or gross unrealized loss and balance sheet amount of other securities
with fair value as of March 31, 2015 and 2014 are summarized as follows:
Millions of yen
Gross
Gross
BalanceAcquisition
unrealized
unrealized
sheet
cost
gain
loss
amountMarch 31, 2015
Equity securities¥
4,595 ¥
7,365
¥
(9)
¥
11,951
Bond securities:
Government bond securities
1,370,604
12,825(383)
1,383,046
Corporate bond securities
98,95213(32)
98,933
Other
33,0381,797(568)
34,267
Other securities
936
814
–
1,750

March 31, 2014
Equity securities
Bond securities:
Government bond securities
Corporate bond securities
Other securities

March 31, 2015
Equity securities¥

1,508,125¥

22,814

¥

(992)

¥

1,529,947

¥

4,595

¥

4,675

¥

(32)

¥

9,238

¥

1,402,253
138,662937
1,546,447

¥

7,774
33
435
12,917

¥

(7)
(12)
(0)
(51)

¥

1,410,020
138,683
1,372
1,559,313

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

Acquisition
cost$

38,238$61,288$(75) $

Balancesheet
amount99,451

Bond securities:
Government bond securities

11,405,542

Corporate bond securities

823,433

Other

274,927
7,789

6,774

Other securities$

12,549,929

106,724$(3,187)

11,509,079

108

(266)

823,275

14,954(4,727)285,154–

14,563

189,848$(8,255) $12,731,522

Securities classified as other securities for which fair value is not available are unlisted equity securities
amounting to ¥2,184 million ($18,174 thousand) and ¥2,282 million and unlisted preferred equity securities
amounting to ¥200 million ($1,664 thousand) and ¥200 million as of March 31, 2015 and 2014, respectively.
For the years ended March 31, 2015 and 2014, proceeds from sale of other securities, the gross realized gains
and the gross realized losses are summarized as follows:
Thousands ofMillions of yen
U.S. dollars
2015
2014
2015
Proceeds from sale of other securities¥
314,609¥813,102$2,618,033
Gross realized gains
433
572
3,603
Gross realized losses
19
85
158
Financial assets received as collateral on which the Company has a right of disposal as of March 31, 2015 and2014are as follows:
Thousands ofMillions of yen
U.S. dollars
2015
2014
2015
The fair value of the securities as collateral¥
2,060,035¥
1,591,934$ 17,142,673
Securities lent
171,352
106,484
1,425,913
Collateral provided
545,873690,048
4,542,506
On hand
1,342,810
795,461
11,174,253

38

Balance sheet amount of securities lent under loan for consumption agreement, etc. as of March 31, 2015 and2014 are as follows:
Thousands ofMillions of yen
U.S. dollars
2015
2014
2015
Short-term investments
Investments in securities¥–
46,734¥

20,17852,463$–388,899

The fair value of the securities borrowed under loan for consumption agreement, etc. as of March 31, 2015
and 2014 was as follows:
Thousands ofMillions of yen
U.S. dollars
2015
2014
2015
Securities loaned¥

866,956¥

68,581

Securities pledged as collateral

1,258,347
51,153$7,214,413
570,700(5)Investments in Affiliates
The aggregate carrying amount of investments in affiliates as of March 31, 2015 and 2014 are ¥3,643 million($30,315 thousand) and ¥3,684 million, respectively.
(6)Land Revaluation
The Company revaluated its land at fair value, pursuant to the Enforcement Ordinance for the Law
Concerning Land Revaluation and its amendments (the “Law”). According to the Law, net unrealized gain wasreported in a separate component of net assets, net of related taxes, and the related taxes are reported inliabilities as deferred tax liabilities for land revaluation as of March 31, 2002.
The value of the land as of March 31, 2015 decreased by ¥120 million ($999 thousand) in comparison with thebook value of the land after revaluation.
(7)

Debt
The composition of debt and the weighted average interest rate on debt as of March 31, 2015 and 2014 are as
follows:
Thousands
Weighted
Millionsof U.S.
averageof yendollars
rate
March 31, 2015
Short-term borrowings¥
436,510 $3,632,437
0.149%
Current portion of long-term borrowings

3,000

Current portion of lease liabilities
Long-term borrowings
Lease liabilities

0.530

79

657

－

2,000

16,643

0.902

53

441

－

1,587,000

13,206,291

0.055

440,000

3,661,480

0.087

¥

2,468,642 $

20,542,914¥

506,510
3,000
83
3,000
133
1,596,600
429,000
2,538,326

Call money
Commercial paper

March 31, 2014
Short-term borrowings
Current portion of long-term borrowings
Current portion of lease liabilities
Long-term borrowings
Lease liabilities
Call money
Commercial paper

24,965¥390.148%
0.596
－
0.570
－
0.067
0.102

(8)

Retirement and Severance Benefits
The Company has defined benefit retirement and pension plans, which consist of defined benefit corporate
retirement and pension plan and unfunded retirement and severance plan that provide for lump-sum payment ofbenefits, and a defined contribution plan. Consolidated subsidiaries’ main retirement plans are unfunded
retirement and severance plans that provide for lump-sum payment of benefits as defined benefit retirement andpension plans. And one subsidiary has participated in Zenkoku Jutakuchi Kaihatsu Kosei Nenkin Kikin which
was established as a multi-employer welfare pension plan. Consolidated subsidiaries adopt the simplified
method for calculation of liability for retirement benefits and retirement benefit expenses of lump-sum payment
plans. For the multi-employer plan in which one subsidiary has participated, the amount of plan assets
attributable to the subsidiary’s contribution cannot be reasonably determined, the required contribution to theplan has been accounted for as a defined contribution plan.
Defined benefit plans
Followings are the information for the Company’s and the consolidated subsidiaries’ defined benefit plans asof March 31, 2015 and for the year then ended.
(1) Reconciliation of changes in retirement benefit obligation (the following table excludes certain plans
mentioned in (3))
Thousands of
U.S. dollars
Millions of yen
2015¥

Retirement benefit obligation at beginning of year

Cumulative effects of changes in accounting policies

2014

7,541

¥

24

Restated balance at beginning of year

7,565
–

Increase by merger
Service cost

277

Interest cost

83

Actuarial gains and losses

340

Benefits paid

(319)

Past service costs
¥

7,946

6,964

$

200

6,964

62,953
–
2,305

213

691

104

2,829

(155)

(2,655)

(265)

–

199
¥

62,753–481–

Retirement benefit obligation at end of year

2015

7,541

$

66,123(2) Reconciliation of changes in plan assets (the following table excludes certain plans mentioned in (3))
Thousands ofMillions of yen
U.S. dollars
2015
2014
2015
Plan assets at beginning of year

¥

4,646

Increase by merger–

Expected return on plan assets

93

Actuarial gains and losses

624

Employer contributions¥

Benefits paid

40

5,534

774
5,192

421

3,412

392

(1,989)

(247)
¥

4,646

38,662
–

81

(239)
¥

$

195

410

Plan assets at end of year

3,804

$

46,051

(3) Reconciliation of changes in liability for retirement benefits whose plans adopted the simplified method
Thousands ofMillions of yen
U.S. dollars
2015
2014
2015
Liabilities for retirement benefits at beginning of year ¥Retirement benefit expenses

137

¥

126

13

Benefits paid

(23)

Contributions(0)

Liabilities for retirement benefits at end of year

¥

127

$

1,140
108

12

(191)

–

(0)

(1)
¥

137

$

1,057

(4) Reconciliation between retirement benefit obligation and plan assets and liability for retirement benefit andasset for retirement benefit recognized in consolidated balance sheet
Thousands ofMillions of yen
U.S. dollars
2015

Funded retirement benefit obligation¥

Plan assets

2014

6,341

¥

5,917

2015

$

52,767(5,534)(4,646)(46,052)

807

1,271

6,715

Unfunded retirement benefit obligation

1,731

Net liabilities for retirement benefit recognized in¥consolidated balance sheet

2,538

¥

3,032

$

21,120Liabilities for retirement benefit

¥

2,538

¥

3,032

$

21,120Net liabilities for retirement benefit recognized in¥consolidated balance sheet

2,538

¥

3,032

$

21,12014,405

1,761(5) The components of retirement benefit expenses

Thousands of
U.S. dollars

Millions of yen
2015
Service cost

¥

2014

277

Interest cost

83

Expected return on plan assets
Amortization of actuarial gains or losses
Amortization of past service costs*
Retirement benefit expenses calculated
simplified method
Retirement benefit expenses

by

¥

213

2015

$

2,305

104

691

(93)

(81)

(774)

42

144

350

–

199

the

–

13

12

108

¥

322

¥

591

$

2,680

* For the year ended March 31, 2014, past service costs occurred when the Company integrated the retirement
benefits system of the Company and the Osaka Securities Finance Company Ltd. that is an absorbed company.
Past service costs were recorded as other expenses in the accompanying statement of income. The costs
include the effect of change from the simplified method to the principle method for calculation of the retirement
benefit obligation of the absorbed company at the time of integration.

41

(6) Remeasurements of retirement benefit plans before related tax effects

Thousands of
U.S. dollars

Millions of yen
2015

2014

2015

Actuarial gains or losses

¥

326

¥

–

$

2,713

Total

¥

326

¥

–

$

2,713

(7) Accumulated remeasurements of retirement benefit plans before related tax effects

Thousands of
U.S. dollars

Millions of yen
2015

2014

2015

Unamortized actuarial gains or losses

¥

(34)

¥

292

$

(283)

Total

¥

(34)

¥

292

$

(283)

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

Debt securities
Equity securities
General account
Other
Total

2015

2014

26.2%
54.2
16.8
2.8

24.6%
50.9
18.0
6.5

100.0%

100.0%(b) Determination procedure of long-term expected rate of return on plan assets
In determining long-term expected rate of return on plan assets, the Company considers the current andprojected asset allocation, as well as current and future long-term rate of returns for various categories of theplan assets.
(9) Basis for calculation of actuarial assumptions
The assumptions used in accounting for the above plans as of March 31, 2015 and 2014 are as follows:
2015
2014
(a) Discount rate

0.8%
2.0%
5.2%

(b) Long-term expected rate of return(c) Expected salary increase rate

1.5%
2.0%
–

Defined contribution plans
For the years ended March 31, 2015 and 2014, the amount to be paid by the consolidated subsidiaries to thedefined contribution plans (including the multi-employer welfare pension plan whose contribution has beenaccounted for as a defined contribution plan) was ¥39 million ($325 thousand) and ¥38 million, respectively.

Followings are the information of the multi-employer plan.
(1)
The most recent funded status of the whole multi-employer pension plan as of March 31, 2014 and 2013
was outlined as follows:
Thousands ofMillions of yen
2014¥

Plan assets at fair value
Total of benefit obligation under pension funding

¥

42

2013
¥

34,214

programs and minimum actuarial reserve
Difference

30,998(3,216)

U.S. dollars

29,442

2014$

32,539¥(3,097)257,951
284,713$(26,762)(2)The subsidiary’s proportion of the contribution to the aggregate pension contributions in March 2015
and 2014 are 0.33% and 0.31%, respectively.
Liabilities for retirement benefits (directors and corporate auditors)
Directors and corporate auditors are not covered by the plans described above. The Company and all
consolidated subsidiaries had abolished retirement benefit system for directors and corporate auditors.
Directors and corporate auditors were entitled to lump-sum payment up to the date of the abolishment
when they leave the Company or subsidiaries.
As of March 31, 2015 and 2014, the liabilities for retirement benefits related to the plans were ¥51
million ($424 thousand) and ¥56 million which include the lump-sum payments mentioned above,
respectively.

(9)

Income Taxes
The Company and its consolidated subsidiaries are subject to Japanese corporate, inhabitant and businesstaxes based on income which, in the aggregate, result in a statutory tax rate of approximately 35.6% and 38.0% in
both 2015 and 2014, respectively.
Following the promulgation of the law “Partial Amendment of the Income Tax Act, etc.” (Act No.9 of 2015)
and “Partial Amendment of the Local Tax Act, etc.” (Act No.2 of 2015) on March 31, 2015, the effective statutory
tax rate used for the calculation of deferred tax assets and deferred tax liabilities has been revised from theprevious rate of 35.6%. The rate of 33.1% has been applied to the temporary differences, expected to be either
deductible, taxable or expired in the year beginning on April 1, 2015, while the rate of 32.3% has been applied tothe temporary differences, expected to be either deductible, taxable or expired in or after the year beginning on
April 1, 2016.
As a result of the change in tax rates, the net amount of deferred tax liabilities decreased by ¥680 million($5,659 thousand) and income taxes-deferred for the current year increased by ¥64 million ($533 thousand), net
unrealized holding gain on other securities increased by ¥720 million ($5,992 thousand), deferred losses onhedges increased by ¥24 million ($200 thousand) and remeasurements of defined benefit plans increased by ¥1
million ($8 thousand), deferred tax liabilities for land revaluation decreased by ¥8 million ($67 thousand) andgain on revaluation of land increased by the same amount.
In addition, due to the revision of the carry-forward system of the net operating losses, the amount of net
operating losses that can be deducted has been limited to the equivalent of 65% of taxable income before suchdeductions from the year beginning on April 1, 2015 through the year beginning on April 1, 2016, while theamount of net operating losses that can be deducted has been limited to the equivalent of 50% of taxable income
before such deductions on or after the year beginning on April 1, 2017. As a result of the revision, the amount ofdeferred tax assets decreased by ¥174 million ($1,448 thousand) and income taxes-deferred for the current year
increased by ¥174 million ($1,448 thousand).

The reconciliation of the statutory tax rate and the effective tax rate as a percentage of income before income
taxes for the years ended March 31, 2015 and 2014 is follows:
2015
2014
Statutory tax rate
Equity in gains of affiliates
Expenses not deductible for tax purposes
Valuation allowance
Income not credited for tax purposes
Gain from negative goodwill
Adjustments of deferred tax assets due to change instatutory tax rate
Other
Effective tax rate

43

35.6%
1.2
0.9
(20.6)(2.4)
   –
1.5

38.0%
(1.0)
0.4
(5.1)
(1.3)
(25.0)
0.8

1.6
17.8%

0.8
7.6%

Significant components of deferred tax assets and liabilities as of March 31, 2015 and 2014 are as follows:
Thousands ofMillions of yen
U.S. dollars
2015
2014
2015
Deferred tax assets:
Accrued business tax
¥
37
¥
20
$
308
Accrued bonuses
167
172
1,390
Liabilities for retirement benefits
837
1,082
6,965
(employees)
Liabilities for retirement benefits (directors
16
20
133
and corporate auditors)
Allowance for doubtful receivables
552
871
4,593
Tax loss carryforward
4,811
6,114
40,035
Deferred losses on hedges
1,706
213
14,196
Net unrealized loss on other securities
307
11
2,555
Other
279
325
2,322
8,712
8,828
72,497
Valuation allowance(6,134)(6,579)(51,044)
2,578
2,249
21,453
Deferred tax liabilities:
Gain on evaluation of subsidiaries’ assets
(158)
(166)
(1,315)Net unrealized gain on other securities(7,304)(4,512)(60,780)
Gain on transfer of investment in an affiliate
(367)
(385)
(3,054)Gain on evaluation of acquired assets by merger
(637)
(702)
(5,301)
Deferred gains on hedges(889)–(7,398)
Other
(22)
(18)
(183)
(9,377)(5,783)(78,031)
Net deferred tax liabilities¥(6,799)¥(3,534)$(56,578)
Net deferred tax assets and liabilities as of March 31, 2015 and 2014 are reflected in the accompanying
consolidated balance sheet under the following captions:Thousands ofMillions of yen
U.S. dollars
2015
2014
2015
Current assets - Deferred tax assets
Non-current liabilities- Deferred tax liabilities¥391(7,190)¥525(4,059)$3,254(59,832)(10) Common Stock
Under the Companies Act, the entire amount of the issue price of shares is required to be designated asstated common stock account although a company in Japan may, by resolution of its Board of Directors, accountfor an amount not exceeding 50% of the issue price of new shares as additional paid-in capital.
(11) Retained Earnings and Dividends
The Companies Act provides that an amount equal to 10% of distributions from retained earnings paid by theCompany and its Japanese subsidiaries be appropriated as a legal reserve. No further appropriations are
required when the total amount of the additional paid-in capital and the legal reserve equals 25% of theirrespective stated capital. The Companies Act also provides that additional paid-in capital and legal reserve areavailable for appropriations by the resolution of the stockholders. Balances of the legal reserve are included inretained earnings in the accompanying consolidated balance sheet.
Cash dividends charged to retained earnings for the years ended March 31, 2015 and 2014 represent
dividends paid out during those years. The amount available for dividends is based on the amount recorded in
the Company’s non-consolidated books of account in accordance with the Companies Act.

44

(a)

Dividends paid during the year ended March 31, 2014
The following was approved by the general meeting of stockholders held on June 26, 2013.
(a) Total dividends¥651 million(b) Cash dividends per common share¥7(c) Record date

March 31, 2013(d) Effective dateJune 27, 2013

The following was approved by the Board of Directors held on November 11, 2013.
(a) Total dividends¥751 million(b)(b) Cash dividends per common share¥7(c) Record date

September 30, 2013(d) Effective date

December 6, 2013

Dividends paid during the year ended March 31, 2015
The following was approved by the general meeting of stockholders held on June 25, 2014.
(a) Total dividends(b) Cash dividends per common share¥751 million ($6,249 thousand)¥7 ($0.06)(c) Record date

March 31, 2014(d) Effective dateJune 26, 2014

The following was approved by the Board of Directors held on November 10, 2014.
(a) Total dividends(b) Cash dividends per common share(c)¥718million ($5,975 thousand)¥7 ($0.06)(c) Record date

September 30, 2014(d) Effective date

December 5, 2014

Dividends to be paid after the balance sheet date but the record date for the payment belongs to the year
ended March 31, 2015
The following was approved by the general meeting of stockholders held on June 24, 2015.
(a) Total dividends¥799million ($6,649 thousand)(b) Dividend source

Retained earnings(c) Cash dividends per common share¥8 ($0.07)(d) Record date

March 31, 2015(e) Effective dateJune 25, 2015(12) General and Administrative Expenses
Significant components of general and administrative expenses are as follows:
Millions of yen
2015
2014
Salaries
Retirement benefit expenses
Administrative and computer expenses
Depreciation

¥

3,215
361
1,368
662

¥

3,092
430
1,334
879

Thousands of
U.S. dollars
2015$

26,754
3,004
11,384
5,509(13) Other Comprehensive Income
The reclassification adjustment and the related income tax effects allocated to each component of othercomprehensive income (losses) for the years ended March 31, 2015 and 2014 are as follows:45

Thousands of
U.S. dollars
2015

Millions of yen
2015
2014
Net unrealized gain on other securities:
Arising during the year
Reclassification adjustment
Before tax amountTax expense
Net-of-tax amount¥

9,336 ¥
(341)
8,995
(2,598)
6,397

1,051
(265)
786
(265)
521

(1,929)–(1,929)(239)(2,168)

(206)
472
266
–
266

(16,052)–(16,052)(1,989)(18,041)

8

–

66

285
41
326
(115)
211

–
–
–
–
–

2,372
341
2,713
(957)
1,756

Share of other comprehensive income (losses) of affiliates accounted for by equity method:
Arising during the year
98
(21)
Reclassification adjustment
13
1
111
(20)

816
108
924

Deferred gain (losses) on hedges:
Arising during the year
Reclassification adjustment
Before tax amountTax benefit /expense
Net-of-tax amount
Gain on revaluation of land:Tax benefit /expense
Remeasurements of defined benefit plans:Arising during the year
Reclassification adjustment
Before tax amountTax benefit /expense
Net-of-tax amount

Total other comprehensive income

¥

4,559

¥

767

$

$

77,690(2,838)74,852(21,619)
53,23337,938(14) Per Share Information(a) Net Income per Share
Basic net income per share, and reconciliation of the numbers and the amounts used in the basic net income
per share computations for the years ended March 31, 2015 and 2014 are as follows:
Yen
U.S. dollars
2015
2014
2015
Basic net income per share

¥

33.94

¥

60.35

Millions of yen
2015
2014
Net income
Net income not applicable to common stockholders
Net income applicable to common stockholders

¥
¥

3,521
–
3,521

¥
¥

6,211
–
6,211

$

0.28

Thousands of
U.S. dollars
2015
$
$

29,300–29,300

Number of shares (Thousands)

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

46

2015

2014

103,726

102,915(b) Net Assets per Share
Net assets per share, and reconciliation of the numbers and the amounts used in the net assets per sharecomputations as of March 31, 2015 and 2014 are as follows:
Yen
U.S. dollars
2015
2014
2015
Net assets per share¥

1,373.94¥

1,260,43

Millions of yen
2015
2014
Total net assets
Amount deducted from total net assets
Net assets applicable to common stockholders¥

137,145–
137,145¥¥¥

135,228–
135,228$

11.43

Thousands of
U.S. dollars
2015$

1,141,258–
1,141,258$

Number of shares (Thousands)

Number of shares outstanding at end of year
on which net assets per share is calculated

2015

2014

99,819107,287(15) Leases(a) Finance Lease
Finance leases which do not transfer the title of leased assets to the lessee, commenced prior to April 1, 2008
have been accounted for as operating leases. The main assets are the telephone facilities which are included intools, furniture and fixtures.
(b)

Operating Lease
Future minimum lease payments required under noncancellable operating leases as of March 31, 2015 and2014 are as follows:
Thousands ofMillions of yen
U.S. dollars
2015
2014
2015
Future minimum lease payments:
Within one year¥

5Over one year

¥

8

¥

13

1
¥

6

$

42

$

50

5

8

(16) Pledged Assets
The carrying value and classification of assets owned by the Company that have been pledged tocounterparties as of March 31, 2015 and 2014 are as follows:
Thousands of U.S.
Millions of yen
dollars
2015
2014
2015
Short-term investments¥

Short-term loans receivable
Investments in securities

47

586,013¥

383,683$

4,876,533

23,281

22,933

193,734

812,392

1,085,846

6,760,356

Assets in the above table were pledged for the followings:

Thousands of
U.S. dollars

Millions of yen
2015
Call money¥

Short-term borrowings

1,302,200

2014¥

75,0002015

1,353,000$ 10,836,315

191,000

624,116

In addition to the above, followings are deposited for the Clearing Fund of Japan Securities Clearing
Corporation and Japan Government Bond Clearing Corporation, etc.
Thousands of U.S.
Millions of yen
dollars
2015
Other current assets¥

501
16,742

Investments in securities

2014
¥

514
12,075

2015
$

4,169
139,319(17) Financial Instruments
Conditions of Financial instruments(1) Management policy
The Company and a consolidated subsidiary, JSF Trust and Banking Co., Ltd. (“JSFTB”) mainly deal infinancial instruments. The Company is engaged in providing loan services, mainly loans for margintransactions. The loans for margin transaction are loan services which are money lending or stock loan forsettlement of standardized margin transactions. The transaction is strongly effected by security market
condition, therefore, the Company raises money flexibly from short-term finance market, primarily from callmarket. The Company owns securities such as Japanese Government Bonds to maintain daytime liquidity.
A consolidated subsidiary, JSFTB is engaged in providing credit services such as loans as banking businessand finance and securities activities. JSFTB invests in highly liquid and safe-and-secure securities such as
government bonds, government-backed bonds, local government bonds and public corporation bonds as securities
investment activities and usually raises money from call market.
(2) Financial instruments and risks
Main financial instrument that the Company holds are trade loans receivable, collateral money for securities
borrowed, short-term investments and investments in securities such as government bonds and equity securities.
Main financial instrument that JSFTB holds are loans to government and business corporations and securities
such as government bonds, government-backed bonds, local government bonds and public corporation bonds.
Trade loans receivable held by the Company and JSFTB are exposed to credit risks that caused fromcounterparties’ default of contract. Securities are exposed to market risks. Collateral money for securities
borrowed is collateral money mainly for repurchase transaction and securities borrowed of loans for margintransactions. Regarding raising money such as call money and short-term borrowings of the Company and
JSFTB, the liabilities are exposed to liquidity risks that caused from turmoil in the financial markets or a credit
rating down.
JSFTB has entered into interest rate swaps for hedging fixed-rate loans and bonds, and variable-rateborrowings as a part of interest risk control (ALM). Hedge accounting is applied to the derivatives held for ALM
purpose, and the Company regularly monitors the hedge effectiveness whether the relationship between hedging
derivatives and hedged assets or liabilities are appropriate and the interest rate risk of hedged items are offset byhedging derivatives.
(3) Financial instruments risk management
The Company places risk management as top priority of management. Basic policy of risk management isapproved at the Board of Directors, and various rules for risk management according to the basic policy are
established for concrete risk management method or system. The Company regularly receives a report fromJSFTB concerning its risk management.

481) Integrated risk management
The Company quantizes the risk by Value at Risk (VaR) approach after allocating risk capital withinequity capital, and controls the quantized risk amount within the allocated risk capital. Each business
operation department controls a risk within the allocated risk capital, risk management department that is
independent from each operational section quantizes the risk, monitors the risk management and reports tothe management.
2) Credit risk
The Company manages all of the credit risk strictly to maintain and improve assets quality. The Risk
Management Department evaluates credit risks according to the in-house rating and quantizes and controls
the credit risk using the default rate by each in-house rating category. Stress tests are also performed forcompensating the quantization control. The Risk Management Department evaluates customers or loans,and sets up the credit limits, while business operation department monitors the credit limit. Assets owned bybusiness operation departments are assessed by themselves strictly. The Company receives collateral
securities for each loan and revaluates the securities daily to mitigate the collectability issues, and theCompany collects the claims quickly through sale of the collaterals when the customer bankrupts.
3) Market risk
The Risk Management Department quantizes and controls market risks, and performs stress tests tocompensate the quantization control. Back-testing which is the test compared calculated VaR and estimatedprofit or loss by using the fixed portfolio is performed to test the reliability of the Company’s market risk
quantization model.
4) Quantitative information of market risk
The Company calculates VaR of short-term investments and investments in securities by using Deltamethod (holding period: 10-120 days (depending on purposes in holding), confidence interval: 99%, observation
period: mainly 1 year).

Market risk amount (possible losses) of the Company is ¥16,387 million ($136,365

thousand) as of March 31, 2015.
Because VaR is a statistical estimate of market risk amount at a particular probability using past market
movement data, VaR may not capture the risk during radical market movements that are extreme in nature.
5) Liquidity risk
The Treasury Department of the Company seeks to diversify financing channels and to secure stablefinancing sources. For sound cash flow management, the Company develops cash flow forecast, understands
the amount can be raised or future liquidity and also understands dates of a large payment concentration, theCompany has a system to report to the management with daily cash flow status. The Company tries to holdenough liquidity, for example, to possess a certain amount of government bonds, makes a contingency plan andbuilds a company-wide emergency response system against contingencies. Liquidity stress tests are
performed monthly for ascertaining whether consolidated liquidity held by the Company and JSFTB is
adequate. At the “ALM Committee” held in every quarter, the Company develops cash flow forecast based on
estimates of loans outstanding, studies policies for ALM (Asset Liability Management) such as revenue
management for assets and liabilities of the Company and the Company has a system to report to the
management.
6) Subsidiary’s risk control system
JSFTB basic policy of risk management is approved at the Board of Directors, and various rules for risk
management according to the basic policy are established for concrete risk management method or system, andthe Risk Management Department controls the risks totally. The Risk Management Department measuresand monitors the risk quantity, collects and analyzes information and reports the risk condition to the
management for maintaining the proper risk management.
JSFTB calculates market risk amount for all market transactions. Interest rate risk amount which is amajor risk variable is calculated by VaR (Delta method; holding period: 1 year, confidence interval: 99%,
observation period: 5 years). JSFTB market risk amount is ¥6,205 million ($51,635 thousand) as of March 31,
2015.

49

(4) Supplemental explanation regarding fair value of financial instruments
Fair value of financial instruments are measured based on the quoted market price, if available, or
reasonably assessed value if a quoted market price is not available. Fair value of financial instruments whichquoted market price is not available is calculated based on certain assumptions, and the fair value might differ if
different assumptions are used. In addition, the contract amount of the derivative transactions described below
in note “(18) Derivative financial instruments” does not represent the market risk of the derivative transactions.
Fair value of financial instruments
The carrying value on the consolidated balance sheet, fair value, and differences as of March 31, 2015 and2014 are as follows.
Financial instruments, of which it is extremely difficult to measure the fair value, are not included. (Pleasesee “<2> Financial instruments of which the fair value is extremely difficult to measure”)

Millions of yen

2015

Assets:(1) Cash(2) Trade loans receivable
Allowance for doubtfulreceivables *1

Carrying
value

Carrying
value

Differences¥

93,070897,826(235)

Fair value¥

93,070Differences

31,792 ¥883,101(195)

31,792 ¥–882,906
974,861

882,905
974,861(1)–

897,591
1,303,020

897,630
1,303,020

39
–

Total

40,737
1,529,947¥ 3,460,243

40,872
1,529,947¥ 3,460,377 ¥

135
–
134

39,915
1,559,313¥ 3,892,909

40,216
1,559,313¥ 3,893,249

¥

301
–
340

(1) Call money¥ 1,587,000¥ 1,587,000 ¥–¥ 1,596,600¥ 1,596,600¥–(3) Collateral money for securities
borrowed *1(4) Short-term investments andinvestments in securities
Held-to-maturity securities
Other securities¥

Fair value

2014

¥

–

(2) Short-term borrowings

436,510436,510–506,510506,510–(3) Commercial paper(4) Collateral money received for
securities lent
(5) Long-term borrowings *2

440,000
788,716

440,000
788,716––

429,000
1,185,726

429,000
1,185,726

–
–

5,000

–
–

¥ 3,723,836¥ 3,723,836¥(3,012) ¥

(–)

¥

¥

¥

5,000

Total

¥ 3,257,226

Derivative transactions *3¥¥ 3,257,226 ¥(3,012) ¥

50

6,000

(598)

6,000

(598)

–
–
(–)

Thousands of U.S. dollars
2015
Carrying
value
Assets:(1) Cash(2) Trade loans receivable
Allowance for doubtfulreceivables *1(3) Collateral money for securities
borrowed *1(4) Short-term investments andinvestments in securities
Held-to-maturity securities
Other securities$

264,559
7,348,764(1,623)

Fair value$

Differences

264,559 $–7,347,141
8,112,349

7,347,133
8,112,349

340,118
12,731,522$ 28,795,681 $

1,123
–
1,115

Total

$

338,995
12,731,522
28,794,566(1) Call money

$

(8)
–

13,206,291$ 13,206,291 $–(2) Short-term borrowings

3,632,437

3,632,437–(3) Commercial paper(4) Collateral money received for
securities lent
(5) Long-term borrowings *2

3,661,480
6,563,335

3,661,480
6,563,335––

41,60841,608–(25,064) $

(–)

Total

$

27,105,151

Derivative transactions *3$(25,064)$ 27,105,151 $$–*1 Allowance for doubtful accounts associated with trade loans receivable is deducted. Carrying value ofcollateral money for securities borrowed is net amount of related allowance for doubtful accounts, because
the allowance for doubtful accounts for collateral money for securities borrowed is not material.
*2 Current portion of long-term borrowings are included in long-term borrowings.
*3 Derivative receivables and payables are on net basis. Items that are net payables are shown in parenthesis.
<1> Fair value measurement of financial instruments
Assets:(1) Cash
The fair value approximates carrying amount because of the short maturity of these instruments.
(2) Trade loans receivable
The fair value of tarde loans receivable with variable interest rate approximates carrying amount because
the fair value is reflected a fluctuation of interest market in a short period and unless credit status of theborrower does not change so much from when the Company lent. Allowance for doubtful receivables are
estimated based on collectable amounts by collaterals and guarantee and thus the fair value approximates the
carrying amount minus allowance for doubtful receivables amounts.
(3) Collateral money for securities borrowed
The fair value approximates carrying amount because of the short maturity of these instruments.
(4) Short-term investments and investments in securities
The fair value of equity securities and bond securities is calculated by quoted market price. The fair value ofgovernment bonds with variable interest rate held by the Company and JSFTB is estimated based on quotes frominformation venders in accordance with the “Practical Solution on Measurement of Fair Value of Financial
Assets” (ASBJ Practical Issue Task Force (PITF) No. 25, October 28, 2008), because based on our determinationthat their market prices cannot be deemed fair value due to the market situation where the number oftransactions is extremely small. The pricing model used by the information vendors is forward pricing model,

51and the price determinant variables are the spot rate for Japanese government bonds and the swaption volatility.
The fair value of investment trust is calculated by quoted market price.
Please see note “(4) Short-term Investments and Investments in Securities” for information by category.
Liabilities:(1) Call money, (2) Short-term borrowings, (3) Commercial paper and (4) Collateral money received for securities lent
The fair value approximates carrying amount because of the short maturity of these instruments.
(5) Long-term borrowings
The fair value of long-term borrowings with variable interest rate approximates carrying amount because thefair value is reflected a fluctuation of interest market in a short period and credit status of the Company does notchange very much from when the Company borrowed.
The fair value of long-term borrowings with fixedinterest rate is based on the present value of future cash flows of interest and principal payments discounted
using the current borrowing rate for similar borrowings of a comparable maturity.
Derivatives:
Please see note “(18) Derivative Financial Instruments.”<2> Financial instruments of which the fair value is extremely difficult to measure

Thousands of
U.S. dollars
2015

Millions of yen
2015
2014

Unlisted equity securities
Other securities
Investments in affiliates
Unlisted preferred equity securities

¥

2,184
3,643
200

¥

2,282
3,684
200

$

18,17430,315
1,664

Above securities have no market value and the fair value is extremely difficult to measure, therefore are notincluded in “Assets: (4) Short-term investments and investments in securities.”<3> Projected future redemption of monetary claim and securities with maturities as of March 31, 2015
Millions of yen
Due after
Due after
one yearfive years
Due within
through fivethrough ten
Due after
one year
years
years
ten years(1) Cash¥(2) Trade loans receivable(3) Collateral money forsecurities borrowed(4) Short-term investments andinvestments in securities
Held-to-maturity securities(Government bonds)
Other securities withmaturities
Bond securities
Government bonds
Corporate bonds
Other
Total
¥

31,792
843,614954,974¥–
35,99920,000

¥

–
3,489
–

¥

–
–
–

–

37,0003,000

800

523,142
65,164–
2,418,686

661,137
33,638–787,774

77,000–29,159112,648

104,000–
2,704
107,504

¥

52

¥

¥

Thousands of U.S. dollars
Due after
Due after
one yearfive years
through fivethrough ten
years
years

Due within
one year(1) Cash$(2) Trade loans receivable(3) Collateral money forsecurities borrowed(4) Short-term investments andinvestments in securities
Held-to-maturity securities(Government bonds)
Other securities withmaturities
Bond securities
Government bonds
Corporate bonds
Other
Total
$

264,559
7,020,171
7,946,859$–
299,567
166,431$

Due after
ten years–
29,034
–

$

–
–
–

–

307,897

24,9646,657

4,353,349
542,265–
20,127,203

5,501,681
279,920–
6,555,496

640,759–
242,648
937,405

865,441–
22,501
894,599$$$<4> The annual maturities of the long-term borrowings, lease liabilities and other interest bearing liabilities as ofMarch 31, 2015
Millions of yen
Due after
Due after
Due after
Due after
one year
two years
threefour years
throughthroughyears
throughDue after
Due within
two years
three
throughfive years
five years
one year
years
four years
Call money
Short-termborrowings
Commercial paper
Collateral money
received for
securities lentLong-term
borrowings *Total¥ 1,587,000 ¥
436,510––440,000
788,716

–
–

–
–

–
–

–
–

–
–

3,000

–

–

–

–

2,000

¥ 3,255,226 ¥Due within
one yearCall money
Short-termborrowings
Commercial paper
Collateral money
received for
securities lentLong-term
borrowings *
Total

–

Due after
one yearthrough
two years

¥

¥

–
–

–

¥

¥

–
–

–

¥

¥

Thousands of U.S. dollars
Due after
Due after
two years
three
throughyears
three
through
years
four years

–
–

–
–

–
–

–
–

24,965––––

16,643$* Current portion of long-term borrowings are included in long-term borrowings.

53

–

$

$

–
–

Due after
five years

–
–

–

–
–

Due after
four years
throughfive years

2,000

3,661,480
6,563,335

$

$

¥

–
–

–
–

–

–
–

–

¥

$ 13,206,291 $
3,632,437$ 27,088,508 $

$

–
–

–

$

$

–
–

16,643

(18) Derivative Financial Instruments
Derivative transactions to which hedge accounting are applied as of March 31, 2015 and 2014 aresummarized as follows:(a) Exchange rate derivatives

Hedge
accounting
method*1

Nature of transaction
Forward exchange
contract:
Sell:
U.S. dollars
Euro

Hedge
accounting
method*1

Nature of transaction
Forward exchange
contract:
Sell:
U.S. dollars
Euro

Hedged items

Investments
in securities
Investments
in securities

Hedged items

Investments
in securities
Investments
in securities(b) Interest rate derivatives

Hedge
accounting
methodNature of transaction

Hedged items*1

Interest rate swaps:
Investments
in securities
Trade loans*2

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

Millions of yen
2015
Contract ornotional
amounts
Fair value¥

10,515 ¥(274)

21,349631

Thousands of U.S. dollars
2015
Contract ornotional
amounts
Fair value$

87,501 $(2,280)177,657

5,251

Millions of yen
2015
2014
Contract orContract ornotional
notional
amounts
Fair value
amounts
Fair value¥

45,000 ¥(3,349)¥36,000 ¥

(583)

7,500

(20)

7,500

(15)

Trade loans

5,056

*3

6,159

*3

Long-term
borrowings

2,000

*3

–

–

54

Hedgeaccounting
methodNature of transaction

Hedged items*1

Interest rate swaps:
Investments
in securities
Trade loans*2

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

Thousands of U.S. dollars
2015
Contract ornotional
amounts
Fair value$

374,470 $(27,869)

62,412(166)

Trade loans

42,074*3

Long-term
borrowings

16,643*3*1 Deferred hedge accounting is applied.
*2 The difference in amounts to be paid or received on interest rate swaps is recognized over the life of theagreements as an adjustment to interest expense.
*3 For the assets and liabilities for which interest rate swap contracts are used to hedge the interest rate
fluctuations, fair value of derivative financial instrument is included in fair value of the respective assets andliabilities as hedged items.
The fair value of interest rate swaps are estimated based on quotes from counterparties.
(19) Commitments and Contingencies
As of March 31, 2015 and 2014, undrawn amount of general loan for securities companies and customers,
overdraft loan and loan commitment line are as follows:

Millions of yen
2015
2014
Total credit line
Drawn amount
Undrawn amount¥¥741,813210,581531,232¥¥

692,404
158,542533,862

Thousands of
U.S. dollars
2015
$
$

6,173,030
1,752,359
4,420,671

Since some of these contracts expire without the rights exercised, the undrawn amount itself does notnecessarily affect future cash flows.
(20) Segment Information
The reported segments of the Company are the business units for which the Company is able to obtainrespective financial information separately in order for the Board of Directors to conduct periodic investigation todetermine distribution of management resources and evaluate their business results.
“Securities finance business” conducted by the Company, “Trust banking business” conducted by JSF Trustand Banking Co., Ltd. and “Real estate leasing business” conducted by Nihon Building Co., Ltd. are theCompany’s reported segments. JSF Trust and Banking Co., Ltd. and Nihon Building Co., Ltd. are consolidated
subsidiaries of the Company.
“Securities finance business” is engaged in providing loan services, which are loans for margin transaction,bond financing and general loans, bond lending and stock lending. “Trust banking business” is engaged inproviding trust services such as securities trust and banking services such as deposit or loan. “Real estateleasing business” is mainly engaged in providing services for leasing and managing real estate owned by JSF
Group.
Segment revenues, income, assets, liabilities and others are calculated by accounting methods similar to
those employed to prepare the accompanying consolidated financial statements. Segment income is calculated
based on “Keijo-soneki.” Under accounting principles generally accepted in Japan, an ordinary income or loss,

55

“Keijo-soneki” should be disclosed in the income statement.
The ordinary income or loss is an income or loss
figure with certain adjustments, which are categorized as extraordinary items in accordance with accounting
principles generally accepted in Japan, made to income or loss before income taxes and minority interests.
Therefore, ordinary income or loss is operating income or loss plus non-operating income from interest anddividend income and other items less non-operating expenses, such as interest expenses. Intersegment revenue
and transfer are based on arms-length transactions.
The reported segment information for the Company and its consolidated subsidiaries for the years ended
March 31, 2015 and 2014 was summarized as follows:
Millions of yen
2015
Securities
Real estate
finance
Trust banking
leasing
Total
Revenues:
Revenues to third parties ¥17,163 ¥2,269 ¥
868 ¥
20,300Intersegment revenues and
22
2
396
420
transfers
Total¥
17,185 ¥2,271 ¥
1,264 ¥
20,720
Segment income

¥

2,653

¥

1,281

¥

583

¥

4,517

Segment assets¥

2,881,054¥

649,730

¥

8,781

¥

3,539,565

387

¥

101

¥

165

¥

653

Others:Depreciation and¥amortization
Interest income
Income taxes
Increase in property, plantand equipment andintangible assets

Revenues:
Revenues to third parties $Intersegment revenues andtransfers
Total
$

105
457
1,881

–
107
200

12
207
37

117
771
2,118

Thousands of U.S. dollars
2015Real estate
Trust banking
leasing

Securities
finance

Total

142,823183$

18,881
17

$

7,223
3,295

$

168,9273,495

143,006$

18,898$10,518$172,422

Segment income$

22,077$

10,660

$

4,851

$

37,588Segment assets$

23,974,819$

5,406,757$

73,072$

29,454,648

3,220

$

841

$

1,373

$

5,434

Others:Depreciation and$amortization
Interest income
Income taxes
Increase in property, plantand equipment andintangible assets

874
3,803
15,653

–
890
1,664

56

100
1,723
308

974
6,416
17,625

Revenues:
Revenues to third parties ¥Intersegment revenues andtransfers
Total¥

Millions of yen
2014
Real estate
Trust banking
leasing

Securities
finance

Total

16,364
28

¥

2,322
2

¥

880
396

¥

19,566426

16,392

¥

2,324

¥

1,276

¥

19,992

Segment income

¥

2,374

¥

175

¥

503

¥

3,052

Segment assets¥

3,223,899¥

726,861

¥

8,434

¥

3,959,194

601

¥

101

¥

168

¥

870

Others:Depreciation and¥amortization
Interest income
Income taxes
Increase in property, plantand equipment andintangible assets

21
292
562

–
24
188

10
194
411

31
510
1,161

Reconciliation between total segment revenues in the table above and revenues in the accompanying
consolidated statement of income for the years ended March 31, 2015 and 2014 are as follows:
Thousands ofMillions of yen
U.S. dollars
2015
2014
2015
Total segment revenues¥

Intersegment revenues
Revenues in the accompanying consolidated
statement of income

20,720¥(420)¥

20,30019,992$(426)¥

19,566

172,422(3,495)$

168,927

Reconciliation between total segment income in the table above and ordinary income in the consolidated
income statement for the years ended March 31, 2015 and 2014 are as follows:
Thousands ofMillions of yen
U.S. dollars
2015
2014
2015
Total segment income

¥

4,517

¥

3,052

$

37,588Intersegment income

(142)

(112)

(1,182)Equity in earnings (losses) of affiliates

(144)

179

(1,198)

Ordinary income

¥

4,231

57

¥

3,119

$

35,208

Reconciliation between total segment assets in the table above and assets in the consolidated accompanying
balance sheet as of March 31, 2015 and 2014 are as follows:
Thousands ofMillions of yen
U.S. dollars
2015
Total segment assets

¥

2014

3,539,565¥

3,959,194

2015$

29,454,648

Intersegment accounts(34,021)(22,030)(283,107)Intersegment investments(26,269)(26,269)(218,599)

3,327

3,493

27,685

Other
Assets in the accompanying consolidatedbalance sheet¥

3,482,602¥

3,914,388$

28,980,627

Reconciliation between others in the table above and amounts in the consolidated financial statements as ofand for the years ended March 31, 2015 and 2014 are as follows:
Millions of yen
Amounts intheconsolidated
financial
Adjustments
statements
Segment total
March 31, 2015
Depreciation and amortization
Interest income

¥

653

¥

117
771
2,118

Income taxes
Increase in property, plant and equipment
and intangible assets

9

¥

(12)
(6)
–

662
105
765
2,118

March 31, 2014
Depreciation and amortization
Interest income

¥

870

¥

31
510
1,161

Income taxes
Increase in property, plant and equipment
and intangible assets

9

¥

(10)
(0)
–

21
510
1,161

Thousands of U.S. dollars

Adjustments

Segment total
March 31, 2015
Depreciation and amortization
Interest income
Income taxes
Increase in property, plant and equipment
and intangible assets

$

5,434
974
6,416
17,625

58

$

75
(100)
(50)
–

879

$

Amounts intheconsolidated
financialstatements
5,509
874
6,366
17,625

Related Information(a) Information by services
Sales by services for the years ended March 31, 2015 and 2014 are as follows:

Thousands of
U.S. dollars
2015

Millions of yen
2015
2014
Loans for margin transaction
Other

¥

9,667

¥

10,633¥

20,3009,240$

10,326¥

19,56680,44488,483$

168,927(b)Geographic information
Because there are no revenues from customers outside Japan and no property, plant and equipment locatedoutside Japan, the geographic information is not disclosed for the years ended March 31, 2015 and 2014.
(c)

Information by major customers
Because no particular third party whose revenues are over 10% of revenues in the consolidated statement ofincome exists, the information by major customers is not disclosed for the years ended March 31, 2015 and 2014.
Information of impairment loss on fixed assets by reported segments
The information is not applicable for the years ended March 31, 2015 and 2014.
Goodwill by reported segments
The information is not applicable for the years ended March 31, 2015 and 2014.
Negative goodwill incurred by reported segments
The information is not applicable for the year ended March 31, 2015. For the year ended March 31, 2014,
gain on negative goodwill of ¥4,405 million was incurred through the acquisition of Osaka Securities Finance Co.,
Ltd. on July 22, 2013.
(21)

Subsequent Event

Acquisition of treasury stocks
The Company acquired treasury stocks pursuant to the provisions of Article 165 Paragraph 3 of theCompanies Act by replacing the provisions stipulated in Article 156 of the same Act in accordance with theresolution of the Board of Directors held on May 11, 2015.
1.

Reasons for the acquisition of treasury stocks

The acquisition of treasury stocks was conducted in an aim to prepare for flexible capital policies.
2.

Details of the acquisition of treasury stocks(1) Type of shares to be acquired: Common stocks(2) Number of shares to be acquired: 3,000,000 shares (upper limit)(3) Total acquisition costs: ¥2,500 million ($20,804 thousand) (upper limit)(4) Schedule of acquisition date: From May 12, 2015 to March 18, 2016

59

INDEPENDENT AUDITORS' REPORT60

OUTLINE OF JSF GROUP

Japan Securities Finance Co., Ltd.

Subsidiaries

Aﬃliates

JSF Trust and Banking Co., Ltd.

Japan Information Processing
Service Co., Ltd.

Nihon Building Co., Ltd.

JSF Information Technology Co., Ltd.

Name

(millions of yen)

Ratio ofshareholding

14,000100

Trust service, Banking services

100

100

Real estate ownership and leasing
Real estate trading and brokerage

2,460

20.00

Information processing services
Software development and sales

100

20.75

Information processing services
Software development and sales

CapitalBusiness overview

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

61

CORPORATE DATA

(as of March 31, 2015)

Establishment

President

July 1927

Eizo Kobayashi

Head office

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

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

Number of employees

Fax: +81-3-3666-1403

261

Share Information
Shares outstanding

Stock exchange listing

100,000,000 shares（as of March 31, 2015）

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

Number of shareholders

Transfer agent

14,063（as of March 31, 2015）

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

Major shareholders

Number ofshares held(Thousands)

Ratio ofshareholding

Northern Trust Co. (AVFC) Re 15Pct Treaty
Account

9,571

9.57

Japan Trustee Services Bank, Ltd.
(Trust account)

5,702

5.70

Mizuho Bank, Ltd.

4,779

4.77

Shihon-Shijo Shinko Foundation

4,610

4.61

RBC ISB A/C Dub Non Resident-Treaty Rate

4,457

4.45

Japan Trustee Services Bank, Ltd.
(Trust account 4)

2,940

2.94

C&I Holdings Co., Ltd.

1,859

1.85

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

1,754

1.75

Sanko Securities Co., Ltd.

1,600

1.60

Japan Secrities Agents, Ltd.

1,460

1.46

62

Composition of shareholders(by number of shares)Securities
Companies
9.6%

Other JapaneseCompanies
11.7%

Financial
Institutions
27.7%
Individuals
23.5%
ForeignInvestors
27.5%

CORPORATE DATA

Board of Directors, Corporate Auditors and Executive Officers (As of June 25, 2015)
Directors

Executive Officers

Chairperson

Minoru Masubuchi *Chairperson

Minoru Masubuchi

Vice Chariperson

Takao Hotta *Vice Chariperson

Takao Hotta

President

Eizo Kobayshi *President

Eizo Kobayashi

Senior Managing Director

Hiroshi Asakura

Senior Managing Director

Hiroshi Asakura

Managing Director

Yasufumi Oda

Managing Director

Yasufumi Oda

Director

Toshihiro Oritate

Toshihiro Oritate

Tomoyoshi Sugaya

Tomoyoshi Sugaya

Takashi Imai **Senior Executive Officer

Yutaka Tanaka

Tetsuo Mae **Executive Officer

Kenji Fukushima

Eiko Shinotsuka **Kazuhiro Maeda(* Representative Directors)

Yasuhiro Hirama(** Outside Directors)

Teruo Murasawa

Corporate Auditors
Ushio Mizuno *Tadahiko Genta
Masayuki Hamada
Toshio Kamiyama *(* Outside Corporate Auditors)

Rating Information
Long-term rating

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

A

A-1

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

AA －

a-1+

Japan Credit Rating Agency (JCR)

AA －

J-1+

63

ORGANIZATION

General Meetingof Shareholders

Board of Auditors
Board of Directors(Chairperson, Vice Chairperson)
President
Management committee

Executive Oﬃcers Meeting
Compliance
Committee

Executive Oﬃcers in Charge

Audit Department
Compliance Department
Risk Management Department

ALM Committee

General Aﬀaires Department

Risk Capital Meeting

Accounting Department

System Committee

Planning Department
Treasury Department
Margin Loan Department
Institutional Sales Department
Retail Business Department
Settlement & Custody Department
Information Systems Planning Department
Osaka Branch64