Japan Securities Finance : INTEGRATED REPORT - 1.About Us (ir2025 01 e)

About Us

The JSF Group at a Glance

Group Composition

The JSF Group comprises three companies that operate in sync with the securities and financial markets: Japan Securities Finance Co., Ltd (JSF), which responds to the diverse needs of financial institutions and investors as a provider of securities and financial market infrastructure, JSF Trust and Banking Co., Ltd., which provides highly distinctive trust services, and Nihon Building Co., Ltd., which provides high-quality office environments for Group

Real estate leasing business

5.9%

¥1.1 billion

Trust banking business

16.0%

JSF Group Gross Profit* by Business (FY2024)

Loans for negotiable

margin transactions 4.1%

¥0.3 billion

Equity repo transactions

23.3%

¥1.7 billion

Bond repo

and gensaki transactions 54.8%

¥4.0 billion

Securities financing

Gross profit

¥7.3

billion

Loans to retail

6.8%

¥0.5 billion

General stock

lending 8.2%

¥0.6 billion

Loans for margin transactions

23.0%

¥4.3 billion

companies and other companies.

Securities Finance Business

Japan Securities Finance Co., Ltd.

See page 24 for details.

JSF's Mission: Supplying Liquidity to Stock and Bond Markets

JSF is the only securities finance company in Japan licensed by the Prime Minister to operate as a company specializing in

¥3.0 billion

Securities investment, etc.

16.6%

¥3.1 billion

Securities financing

Consolidated gross profit

¥18.7 billion

securities finance, providing essential lending of funds and securities to the stock and bond markets.

As an institution specializing in securities finance, JSF has a mission to contribute to the long-term development of the securities and financial markets by proactively meeting diverse needs both in Japan and overseas.

JSF's Main Businesses

JSF's core business is securities financing (lending funds and securities to financial institutions, etc.), which is centered on loans for margin transactions.

Loans for margin transactions

Supplying funds and stocks necessary for standardized margin transactions

Bond repo and

gensaki transactions

Acting as an intermediary between the Japanese government bond (JGB) investment needs of domestic financial institutions and institutional investors, and the JGB borrowing needs of prime brokers and overseas financial institutions

39.0%

¥7.3 billion

* Figures for gross profit by business are on a non-consolidated basis (before elimination of the effects of consolidation), therefore the sum of these figures does not correspond to consolidated gross profit.

Market Size and JSF's Share (As of March 31, 2025)

JSF's Business Model

Equity repo transactions

Transactions that meet securities companies' needs to raise funds using stock as collateral and for procuring JGBs and other securities

Bond repo and gensaki

transactions

Source: Prepared by JSF based on Statistics on Securities Financing Transactions in Japan, published by the Bank of Japan

Total bond repo and gensaki

transactions market balance

Approx. ¥226 trillion

JSF's market share: Approx. 4.4%

Investors

Standardized margin transactions

Loans for margin transactions (Margin loans/Stock loans)

Source: Prepared by JSF based on publicly available data from domestic stock exchanges, including

Standardized margin transaction buying balance

Approx. ¥2,700 billion

Utilization rate for loans for margin

Standardized margin selling balance

Approx. ¥460 billion

Utilization rate for loans for margin

Loans for margin transactions involve lending securities companies the funds and stocks essential for settling standardized margin transactions.

Bond repo, gensaki, and equity repo transactions (securities financing) involve lending funds and securities (government bonds and stocks) to meet the funding needs of securities companies, institutional investors and others, as well as their needs for securities as collateral.

Stocks

Gave rise to

Strengthening the Earnings Base

Securities

Funds/ Securities

Securities companies

Financial institutions

Funds/ Stocks (Collateral)

Funds/ Securities

Funds/ Stocks

proprietary trading systems

transactions: Approx. 14.6%

transactions: Approx. 32.0%

Equity repo transactions, general stock lending, and other

Source: Prepared by JSF based on Statistics on Securities Financing Transactions in Japan, published by the Bank of Japan

Stock (collateral) lending

transactions balance

Approx. ¥21 trillion

JSF's market share: Approx. 5.0%

Note: Funds lent by JSF are procured from the money market, etc.

(Collateral)

Strengthened by growth in securities financing, our business portfolio has become more robust and our earnings structure more diversified.

Trust Banking Business

JSF Trust and Banking Co., Ltd.

See page 36 for details.

Nihon Building Co., Ltd.

See page 37 for details.

Based on its management philosophy of contributing to the development of the securities and financial markets, JSF Trust and Banking Co., Ltd., focuses on providing management trust banking services, such as segregated management of customer assets required by securities companies. With the increasing range of sectors in which customer asset preservation trusts are obligatory, JSF Trust and Banking offers a wide range of trust products for customers in different industries.

Gross Operating Profit

(Securities Finance Business and Trust Banking Business)

(Millions of yen)

2 Japan Securities Finance Co., Ltd. Integrated Report 2025 Japan Securities Finance Co., Ltd. Integrated Report 2025 3

About Us

Japan Securities Finance's Roadmap to the Future

Announced November 2025

Announced November 2021

Management Policy through FY2025

Medium-Term

Management Policy

FY2022 Results

Consolidated ordinary profit:

¥7.6 billion

ROE: 4.36%

Management Goals

Sixth Medium-Term Plan Period (through FY2022) ROE: 4%

Seventh Medium-Term Plan Period (through FY2025) ROE: 5%

Strategies

• Strengthen securities financing centered on loans for margin transactions

Announced February 2023

Seventh Medium-Term Management Plan

Management goals achieved in the plan's first year

FY2023 Results

Consolidated ordinary profit:

¥11.0billion

ROE: 5.73%

Management Goals

(Revised upward on November 6, 2023) Maintain ROE at a stable level above 5% and consolidated ordinary profit at a stable level of over ¥10.0 billion while aiming for further improvement in both

Announced November 2023

Long-Term Management Vision

FY2024 Results

Consolidated ordinary profit:

ROE: 7.44%

(6.5% on an actual basis, excluding extraordinary income)

ROE

Continue working toward steady improvement, keeping the 8% level in mind

Shareholder Returns Maintain a total payout ratio of 100% during the Seventh

Medium-Term Management Plan period, and strive to enhance shareholder returns thereafter

PBR

Target a market valuation consistently above 1.0x

Eighth Medium-Term Management Plan

See page 16 for details.

Management Goals

Consolidated ordinary profit:

¥15.0 billion Consolidated ROE: 8%

Six Strategies for Achieving Management Goals

See page 17 for details.

Shareholder Return Policy during the Eighth Medium-Term Management Plan

• Until ROE reaches 8%, aim for a total payout ratio of 100% through dividends and flexible implementation of share buybacks

• Actively pay dividends, with a target dividend payout ratio of 70%

ROE and PBR

ROE

(％)

8.0

6.0

4.0 3.79

3.03

2.66

4.36

Establish a Global Position

• Enhance presence and recognition in overseas markets

  Establish a Position as the Market Leader in Securities Finance

• Further strengthen securities lending

• Expand securities financing

• Innovate business and improve operational efficiency by leveraging digital technology

  Ensure Stable Operation of Infrastructure Functions and Strengthen Corporate Foundation

• Ensure stable operations and improved usability of loans for margin transactions in response to market changes

• Initiatives for new businesses

• Strengthen consolidated management of the Group

• Strengthen the human resource base

  7.44

PBR

(Times)

2.0

5.73

1.6

1.2

0.97

Deploy the Group's collective strengths to become the leader in securities finance

2.0

0.35

0.54

0.59 0.64

0.8

0.4

ratio of 100%)

0.0

2019 2020 2021 2022 2023 2024 (FY)

0.0

Material Issues

• Climate change

• Education

• Human resources

• Human rights

• Capital market

  • Corporate governance

  • Compliance

  • Risk management

  • Business continuity planning (BCP)

  • Eighth Medium-Term Management Plan

  • Ninth Medium-Term Management Plan

4 Japan Securities Finance Co., Ltd. Integrated Report 2025 Japan Securities Finance Co., Ltd. Integrated Report 2025 5

As the only securities finance company in Japan, we will contribute to the development of the country's securities and financial markets.

FY2024 Results and Achievements

Shigeki Kushida

Representative Executive Officer & President

During FY2024, the second year of the Seventh Medium-Term Management Plan, the securities finance business encompassing loans for margin transactions and equity repo transactions continued to perform strongly. As a result, consolidated ordinary income for FY2024 totaled ¥12.5 billion, and consolidated profit attributable to owners of parent totaled ¥10.3 billion.

Both were record highs for Japan Securities Finance (JSF or "the Company"). Furthermore, consolidated return on equity (ROE) was 7.4%, or 6.5% before adjustment for extraordinary gains on sale of real estate owned by consolidated subsidiary Japan Building Co., Ltd. We therefore made steady progress toward the 8% ROE goal in our Long-Term Management Vision. I extend

my heartfelt appreciation to our shareholders, business partners, market participants, and all stakeholders for

their ongoing understanding and support.

I attribute the notable improvement in our performance over recent years to two key factors. First, from a business strategy perspective, our initiatives to diversify revenue streams and cultivate multiple earnings drivers to stabilize revenue have yielded positive

results, thereby gradually reinforcing our foundation for sustainable growth. Second, under the organizational design of a company with a Nominating Committee, etc., I believe we have made progress in strengthening corporate governance by proactively addressing key issues such as enhancing the functions of the Board of Directors, formulating the medium-term management plan and the Long-Term Management Vision, overseeing operational execution, and appointing excellent members to the management team.

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Business Strategy Initiatives

First, I will discuss our initiatives from a business strategy perspective. As Japan's sole securities finance company, we fulfill an essential infrastructure role within the securities market, facilitating the smooth circulation

of stocks and supporting the proper price discovery process. We play a critical role in enabling standardized margin transactions through our loans for margin transactions business operations. This role holds great importance for us, with the loans for margin transactions business serving as a cornerstone of our operations.

However, from an earnings perspective, the business has faced notable fluctuations influenced by stock market conditions. In addition, the utilization of standardized margin transactions and loans for margin transactions has declined compared with the period prior to the introduction of negotiable margin transactions in the late 1990s.

To this end, we have focused on diversifying our revenue streams and the factors causing their fluctuations, in an effort to build a business portfolio that supports stable, consistent growth. Amid these

initiatives, our fastest growing business in recent years has been securities financing-equity repo, bond repo and gensaki transactions-originating from our loans for margin transactions business. This business, launched

in the early 2010s, is a relatively new area for us, but we have expanded and deepened our relationships with institutional investors and financial institutions in Japan. Internationally, we have participated in forums

for securities lenders, primarily in Asia but also in Europe

and North America, to cultivate new clients and to identify and meet a wide range of transaction needs. In recent years, heightened attention to settlement security and financial regulations has led to a notable increase

in global demand for borrowing high-quality securities, primarily for use as collateral. In response, we have enhanced our performance over the past several years by steadily honing our function as a bridge connecting liquidity between the domestic and overseas markets. This function is one of our core capabilities.

Securities financing features a relatively high return in proportion to risk, as net credit exposure is limited in transactions secured by collateralized securities.

Moreover, in addition to being sensitive to stock price trends, securities financing is also affected by interest rate fluctuations. In Japan, the end of the negative interest rate policy has created a market environment in which interest rate mechanisms are functioning again and interest rate volatility has returned. As a result,

our lending interest rates have increased, and funding demand from our clients has also increased.

In addition, our wholly owned subsidiary JSF Trust and Banking Co., Ltd. has secured a high market share and steadily enhanced its profitability by improving its proprietary services with emphasis on the niche area of preservation trusts and other management trusts. I

believe that our efforts to diversify our revenue streams and strengthen our business portfolio are steadily building a solid foundation for the Group's sustainable growth.

suitable for making decisions on medium- to longterm management policies while enabling the board to

effectively fulfill its oversight function, taking into account the Company's business portfolio. From this perspective, the skills matrix was formulated following discussions in the Nominating Committee. In addition, independent outside directors have been appointed as Chairperson

of the Board of Directors and as chairpersons of the Nominating Committee, the Compensation Committee, and the Audit Committee. In 2022, we also added two outside directors to further broaden the board's skill set. Furthermore, based on an approach aligned with the Company's business portfolio, we have determined our basic policy for appointing senior management and the succession plan for the Representative Executive Officer & President through discussions in the Nominating Committee, and are also advancing discussions on the long list of management candidates.

We established the Corporate Governance Office to function as a secretariat supporting the Board of Directors. This office enhances board deliberations by

providing directors with preliminary explanations ahead of board meetings, sharing wide-ranging information, and facilitating opportunities for outside directors to exchange views. In FY2024, recognizing the need to further deepen discussions aimed at enhancing corporate value, we focused on enhancing the substance of agenda items and reports prepared from a medium- to long-term perspective, while sharpening the focus of discussions

in line with their relative importance. Specifically, we discussed and established an annual schedule for the board and each committee, enabling deliberations and reviews to be conducted in a planned and efficient manner. Furthermore, in FY2025, while reviewing the progress of the Seventh Medium-Term Management

Plan, the board is engaging in active discussions on the formulation of the Eighth Medium-Term Management Plan, with a focus on setting appropriate agenda items that contribute to medium- to long-term corporate value. In this way, we are working to enhance both the substance and effectiveness of discussions at the board and committee levels.

Corporate Governance Enhancement Initiatives

Recognizing that stronger corporate governance is essential to the execution of our business strategy, we transitioned to a company with a Nominating Committee, etc. in 2019. Since then, we have clearly

separated supervisory and executive roles, establishing a structure that enables swift decision-making and

execution by management while strengthening the supervisory function, including the formulation of management policies and the effective monitoring of their execution.

Specifically, with regard to the composition of the Board of Directors, we are aiming for a structure

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Eighth Medium-Term Management Plan

Recently, based on the progress of the Seventh Medium-Term Management Plan and the Company's Long-Term Management Vision, we formulated and announced

the Eighth Medium-Term Management Plan (FY2026-FY2028). In the plan we have set specific management goals of consolidated ordinary profit of ¥15 billion and ROE of 8%. These goals are premised on our primary objective of generating returns that exceed our current cost of equity, which is in the low-6% range. They are also grounded in our basic management approach of pursuing sustainable growth and enhancing corporate value while simultaneously improving profitability and capital efficiency and ensuring financial soundness. As mentioned earlier, we believe that our initiatives to date have laid a solid foundation for achieving higher profitability and capital efficiency.

Our plan encompasses the following six specific strategies for achieving our management objectives:

Strategy One is "Stable Operations and Enhanced Accessibility of the Loans for Margin Transactions as Part of the Securities Market Infrastructure." In other words, we will ensure stable operations and improve usability

of the loans for margin transaction business as securities market infrastructure by maintaining a framework that responds appropriately to changes in the equity market environment. Moreover, we will promote the use of loans for margin transactions by proactively providing information regarding these transactions and accurately identifying market needs.

Strategy Two is "Expansion of Securities Financing Centered on Further Strengthening of Securities Lending." This involves strengthening the role of our securities financing business as a bridge between Japanese and international markets. To this end, we will continue to expand our client base, including financial institutions outside Japan, while also diversifying the range of securities we handle. We will leverage the expertise in funds and securities transactions that we have developed over the years to expand revenue opportunities, primarily by increasing securities-for-securities transactions and strengthening our capabilities in developing transaction schemes within the securities lending business.

Strategy Three is "Enhancing Presence and Recognition in Overseas Markets." We will reinforce our position as a leading player in Asia by promoting our loans for margin transactions and securities financing outside Japan, actively participating in forums for international market participants, and expanding target markets and the products we handle in cross-border transactions.

Strategy Four is "Business Innovation and Operational Efficiency through Digital Technology Utilization." In other words, we will use digital technology to innovate our businesses and improve operating efficiency. By aggressively deploying these technologies, we will strengthen our competitive foundation, focusing on strategic IT investments and exploring ways to improve operating efficiency in line with changes in our business portfolio. We will also continue our medium-

to long-term initiatives targeting business innovation, such as the practical application of transactions using distributed ledger technology (DLT).

Strategy Five is "Strengthening of Group Consolidated Management." We will intensify collaboration in areas such as sales, risk management, and operations management, thereby strengthening consolidated management across Group companies.

Strategy Six is "Strengthening the Human Resource Capabilities." We believe that initiatives to enhance our human capital are extremely important as the basis for sustainable growth and enhancement of corporate

value. We will strengthen our human resource foundation by recruiting external talent for highly specialized business and by developing professional talent who can drive our strategies in areas such as loans for margin transactions, securities financing, international business, digital technology, and consolidated management.

Furthermore, we aim to improve employee engagement by promoting diversity and inclusion and creating a comfortable working environment, which will enhance our corporate vitality and organizational transformation capabilities. Through these initiatives, we will cultivate organizational capabilities that enable us to accurately identify changes in the business environment and translate them into concrete actions in a more proactive and self-directed manner, while engaging and mobilizing those around us.

Our goal for shareholder returns is a total return ratio of 100% on a cumulative basis through dividends and the flexible implementation of share buybacks until we achieve ROE of 8%. In addition, the Company has a policy of actively paying dividends with a target payout ratio of 70%.

To Our Stakeholders

As Japan's only securities finance company supporting the infrastructure functions of securities and financial markets, JSF aims to be a distinct and unique company that operates with a high degree of agility and flexibility, by contributing to the development of securities and financial markets and, in doing so, achieving sustainable growth and enhancing corporate value while maintaining

strong financial soundness. From FY2026 onward, under our corporate philosophy and the newly formulated Eighth Medium-Term Management Plan, we are committed to further advancing initiatives based on this vision of the future. We look forward to your ongoing support.

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