Japan Securities Finance : INTEGRATED REPORT - 4.Foundation Supporting Corporate Value (ir2025 04 e)

Sustainability Initiatives

The development of infrastructure that serves as the foundation of socio-economic activities is a key element in realizing a sustainable society, and it is also one of the Sustainable Development Goals (SDGs: Goal 9). The JSF Group provides a variety of services, including the loans for margin transactions business, as a company that supports the infrastructure of Japan's securities and financial markets, and works to improve the liquidity of the domestic securities and financial markets, as well

as convenience for market participants. Through these activities, we aim to contribute to initiatives to realize a sustainable society, including supporting market participants who are engaged in similar initiatives.

Because it is responsible for the infrastructure of the securities and financial markets, the Group believes

it is important to build a system that provides stable operations regardless of circumstances. To this end, we must not only respond to disasters in a narrow sense, but also ensure the stability and high reliability of our business base.

In addition, we believe that there are issues toward which the Group can also contribute by utilizing the know-how and other resources that it has cultivated over the years. Based on this perspective, we are currently aware of the following material issues. Our Group recognizes the roles expected of it in addressing these material issues and will advance various initiatives while flexibly responding to changes in the social environment.

We are promoting the following initiatives in order to gain and maintain the support and trust of our stakeholders.

* Diffusion Index: An index based on employee surveys that measures employee job satisfaction, changes in workplace conditions and other conditions

E Environment

Addressing Climate Change and Environmental Protection

(Initiatives Based on the TCFD Recommendations)

In addition to engaging in initiatives aimed at bringing about a sustainable global environment through its business activities, JSF is working to improve disclosure of climate change information in accordance with the TCFD* recommendations.

* Task Force on Climate-related Financial Disclosures: Established by the Financial Stability Board (FSB) in 2015 at the request of the G20 for the purpose of financial stability. The final report on frameworks for disclosure of climate-related risks and opportunities (TCFD recommendations) published in 2017 calls on companies to assess the risks and opportunities of climate change, reflect them in their business strategy and risk management, understand their financial impact, and disclose this information.

• To drive Group-wide climate-related efforts, the Board of Directors approved the Basic Stance on Sustainability, in which it recognizes climate change as a material issue for its business.

• The Management Committee (chaired by the Representative Executive Officer & President) deliberates and decides on sustainability initiatives, including those concerning climate-related issues, and the Board of Directors oversees the progress on these initiatives.

• Specific sustainability initiatives, including those concerning climate-related issues, are detailed in the action plan for the medium-term management plan, and they are carried out across the organization under the oversight of the Corporate Governance Office.

  Strategy

  Note: Short-term, medium-term and long-term time frames are assumed to be 3 years or less, 3-10 years and 10 years or longer, respectively.

• As a company responsible for Japan's securities and financial market infrastructure, JSF recognizes the importance of building systems that can operate reliably under any circumstances. Therefore, we consider a sustainable global environment to be crucial for the continuation of our business activities, and identify climate change as a material issue.

• After identifying the risks and opportunities of climate change that could impact our business activities, we qualitatively analyze those impacts and verify the resilience of our management strategy.

• In responding to the transformation into a carbon-free society, we support the efforts of securities and financial market participants that are grappling with climate-related issues by providing financial services and improving the commercial appeal of our products. At the same time, we are aiming to enhance our own corporate value.

  Recognized Risks

• Climate change risks are divided into two categories for identification and recognition purposes. These are "transition risks," which are risks arising from the process of transitioning to a lower-carbon economy to address climate change, and "physical risks," which are risks of losses arising directly from climate change.

• For recognized risks, assumptions have been made about the type of damage (direct or indirect), the scale of the risk (large, medium or small), and the time frame (short- to medium- to long-term).

• JSF believes that the increase in its credit costs will be limited because most of its lending comprises securities-backed loans to securities firms and banks.

  Recognized Opportunities

• JSF anticipates and recognizes the following opportunities associated with tackling climate-related issues.

  Opportunity	Description	Time frame
  Resource-efficient energy sources		Short- to long-term
  Markets for products and services		Short- to long-term
  Resilience		Short- to long-term

  • Promoting resource and energy savings

  • Utilizing renewable energy

  • Offering financial services that support the transition to a carbon-free society

  • Contributing to an environmentally sustainable society through investments in green bonds and other instruments

  • Increased demand for funding due to the expanding market for ESG investment

  • Gaining the trust of counterparties and capital markets as a result of appropriate initiatives and disclosure in response to climate-related issues

  • Ensuring business continuity in securities market infrastructure such as loans for margin transactions by building a resilient BCP system

• We incorporate these climate-related initiatives into the action plan of the medium-term management plan and monitor the progress of their implementation.

  Scenario Analysis

• A qualitative analysis of the impact of climate change on the JSF Group, based on two scenarios, is presented below. Under the 2°C scenario, global warming is curbed due to strict countermeasures, while under the 4°C scenario, global warming continues to progress in the absence of drastic measures.

  Metrics and Targets

• We are working to save resources and energy by promoting telework, using web conferencing both inside and outside the Company, introducing an electronic decision-making system and a paperless meeting system, and digitalizing document storage.

• Among the carbon neutrality initiatives reported to the Board of Directors, we began transitioning to LED lighting in FY2022, starting with our head office. The LED conversion of other office buildings we use was completed in FY2024. We continue to investigate and consider other measures to reduce CO2 emissions.

• The JSF Group's CO2 emissions (combined Scope 1 and Scope 2 emissions*) are shown below. We have steadily reduced CO2 emissions and are implementing initiatives to reduce them still further.

  		2°C scenario 1	4°C scenario 2
  Assumptions
  Opportunities
  Risks	Transition risks
  	Physical risks		estate due to rising sea levels

  • Greenhouse gas emissions are curtailed through policy measures

  • There are advances in low-carbon technologies and they are widely adopted

  • Sudden storm and flood damage occurs at a similar scale and frequency as at present

  • Without drastic policy measures, greenhouse gas emissions continue to increase at the current rate

  • Sudden storm and flood damage occurs more frequently and is larger in scale

  • Chronic changes, such as rising sea levels, have a significant impact on economic activity

  • Demand increases for funding in the securities and financial markets due to growing ESG investment

  • Need increases for financial products and services related to environmental protection

  • Demand increases for funding in connection with investment in infrastructure for disaster preparedness

  • Stakeholders criticize JSF's response to global warming, causing its share price to decline

  • Equipment costs rise as a result of measures to cut greenhouse gas emissions and enhance BCP

  • Securities financing balances decline as the economy and financial markets deteriorate due to the effects of global warming

  • Sudden extreme weather events are similar to those at present, and no major financial impact is expected

  • There is no irreversible climate change, such as rising sea levels, and no major financial impact is expected

  • There is damage to owned real estate and facilities due to major storms and flooding, affecting business continuity (assumes limited increase in credit costs in conjunction with damage to counterparty financial institutions)

  • Relocation expenses arise from damage to owned real

  (t-CO2)

  	FY2020	FY2021	FY2022	FY2023	FY2024
  CO2 emissions	874	856	810	790	676

  * Scope 1: Direct emissions (use of gas, gasoline, etc.); Scope 2: Indirect emissions (use of electric power)

  S Social

  Notes: 1. 2°C Scenario: International Energy Agency (IEA) 2°C Scenario (2DS)

  2. 4°C Scenario: Intergovernmental Panel on Climate Change (IPCC) Representative Concentration Pathway (RCP) 8.5

  Empirical Research on Securities Finance Transactions Using Distributed Ledger Technology Risk Management

• JSF recognizes that climate change not only poses the risk of a significant impact on the global environment, but it could also affect the Company's financial position in the future.

• Because these climate change risks could cause or amplify financial risks (credit risk and market risk, for example), we manage the risks associated with climate change within an integrated risk management framework.

Starting in April 2021, JSF and the Graduate School of Engineering, The University of Tokyo jointly conducted an empirical study to verify the feasibility of using distributed ledger technology to facilitate transactions involving tokenized securities or collateral in repo transactions and securities lending and borrowing transactions. The results were published in a report* on May 30, 2023, and were also

reported at the 31st International Conference on Transdisciplinary Research (Transdisciplinary Engineering 2024) held in London in July 2024.

*https://www.jsf.co.jp/media/report_dlt_230530_ja.pdf

JSF was responsible for the conceptualization of the scheme, as well as scheme planning, research of related market practices, and compiling a summary in its integrated report, while the University of Tokyo was in charge of data analysis and review of basic technologies and systems concerning distributed ledger technology.

We expect the findings of this research to be utilized for social implementation in a number of fields in the future, including the securities industry. In addition, we believe that this industry-academia collaboration has yielded positive outcomes in addressing important sustainability issues identified by JSF, particularly in advancing academic research activities and contributing to securities and financial market infrastructure.

JSF is working to build relationships and collaborate with overseas securities finance companies. In Indonesia, a project to establish and operate a securities finance company was launched in 2014, and in December 2016 PT Pendanaan Efek Indonesia (hereinafter "PEI") was established with investment from three companies, including the Indonesia Stock Exchange. As a company that contributes to the infrastructure of the Japanese securities market, JSF has been actively supporting this project since its beginning in ways such as providing knowledge of the role and operation of securities finance companies. In August 2020, we acquired a 10% stake in PEI through an investment

of approximately ¥400 million, and together with the Indonesia Stock Exchange and other parties, we are participating in the advisory committee made up of PEI shareholders. Additionally, JSF has signed memoranda of understanding (MOUs) with the

Korea Securities Finance Corporation (KSFC) and the Thailand Securities Finance Corporation (TSFC), and exchanges views with them through meetings and other interactions. In September 2025, Senior Managing Executive Officer Okada attended KSFC's 70th anniversary celebration, participating in a panel discussion with international organizations such as the European Bank for Reconstruction and Development and the Asian Development Bank. He also signed a statement of cooperation with Asian securities finance companies (Japan, South Korea, China, Thailand, and Indonesia).

JSF will continue to strengthen its cooperative relationships with relevant parties while contributing to the sustainable development of Asia's economy and its financial and securities markets.

JSF received the following awards sponsored by British financial media, Securities Finance Times (Black Knight Media Ltd.) and World Finance (World News Media Ltd.). These awards recognize companies that conduct outstanding activities in the field of international finance.

Asian Repo Team of the Year

(JSF is the first Japan-based financial institution to receive this award)

G Governance

As a securities finance company with a social mission to continue operations that serve as infrastructure for the securities market, such as loans for margin transactions, for the handling of a possible disaster event such as a large scale earthquake, JSF

has established a business continuity plan (BCP) system so that operations can be continued or resumed as soon as possible, and so the impact of the disaster on our business partners and related external organizations is minimized.

Additionally, JSF was listed in the 2025 edition of the Global 2000, a ranking of the world's publicly traded companies published by Forbes magazine. This ranking, published annually by Forbes, is based on a comprehensive evaluation of publicly traded companies worldwide using metrics such as revenue.

The Company has positioned the loans for margin transactions, loans for negotiable margin transactions and fund/securities settlement businesses as operations to be continued on a priority basis. We have established a policy assuming the respective cases of 1) injury (or threat of injury) to officers and employees, and damage to buildings, etc., 2) damage to the Company's main centers, and 3) insufficient personnel.

In October 2024, we formulated and announced the Japan Securities Finance Human Rights Policy. As an enterprise that supports the infrastructure of the securities and financial markets, the JSF Group (Japan Securities Finance Co., Ltd., JSF Trust

and Banking Co., Ltd., and Nihon Building Co., Ltd.) provides a variety of services, including loans for margin transactions.

Our business activities are made possible by the support of our stakeholders, including our clients. The JSF Group has long recognized respect for human rights as a key priority. This includes prohibiting discrimination, respecting diversity, and prohibiting various forms of harassment, and the Group has

consistently worked to uphold these principles. Under our newly formulated Human Rights Policy, we will continue to promote efforts to respect the human rights of all people involved in our business activities.

We will continuously monitor compliance with our Human Rights Policy and make improvements as needed. Furthermore, we will regularly report and discuss our efforts regarding respect for human rights at Management Committee meetings and other forums. The details of these discussions will be reported to the Board of Directors to facilitate appropriate oversight.

In order to promote initiatives addressing human rights issues, we will continue to provide effective education and awareness-raising programs for our officers and employees. These programs will include training on the prevention of harassment to ensure that each officer and employee cultivates an accurate understanding and awareness of human rights issues and diversity.

The Osaka Branch was established as a BCP base in September 2018 with the aim of strengthening business continuity in the event of a large-scale disaster such as an earthquake directly beneath the Tokyo metropolitan area or a wide-area disaster there. In normal times, the two locations conduct operations in parallel with each other, so that in the event of a disaster in the Tokyo metropolitan area, the Osaka Branch can function as a remote backup office for the Tokyo head office, handling important operations centered on loans for margin transactions and their settlement, which are securities market infrastructure.

In addition, since the opening of JSF Trust and Banking's Osaka office in February 2025, we have been working with the company to strengthen our BCP system.

Corporate Governance

As an institution specializing in securities finance, JSF has a mission to contribute to the development of the securities and financial markets by proactively meeting the diverse needs of the securities and financial sectors and to enhance the long-term interests of securities market participants and users, while always maintaining a keen awareness of its public role. Based on this thinking, the Company aims to gain the solid trust of society through sound business operations.

Board of Directors (7 members, incl. 5 outside directors)

Cooperation

Survey and report, etc.

Audit Committee (4 members, incl. 3 outside directors)

Entrustment and

Inside Director

Outside Director

Report to Audit Committee

Cooperation

supervision of Secretariat business execution

Report

Compliance Department

Audit

Management administration and report, etc.

Checks

Consult and report

JSF Group Companies

Business Departments

Compliance Committee

Management Committee

Corporate Governance Office

Business Execution

Cooperation

Audit

Compensation Committee (5 members, incl. 4 outside directors)

Nominating Committee (5 members, incl. 4 outside directors)

Accounting Auditor

Corporate Governance System

Internal audit

Internal Audit Department

Note: Entities in area enclosed by dashed outlines are subject to internal audit.

The Company has a history of being proactive about corporate governance since the time it was a company with a board of auditors. For example, in FY2015 the Company appointed a woman as an outside director, and in FY2016 it established two voluntary committees-the Nominating Committee and the Compensation Committee-with the majority of members of each committee being outside directors and outside Audit & Supervisory Board members. In FY2018, the Company formulated a succession plan for candidates for executive director.

Based on this foundation, in FY2019 JSF transitioned to a company with a Nominating Committee, etc. The aim was to separate supervision from execution and to establish a structure in which the Board of Directors determines and supervises

Under this corporate philosophy, the Company has adopted the company with a Nominating Committee, etc. structure

External Reporting Desk

under the Companies Act, based on which it strives to clarify the separation of supervision and execution of business operations, further strengthen supervision by having mainly outside directors to ensure sound management, and achieve prompt business execution that responds quickly to changes in the business environment.

management policies such as the medium-term management plan, while the executive side-comprising the executive officers under the leadership of the Representative Executive Officer

& President-is tasked with advancing these policies through prompt decision-making. Therefore, from the outset, the chairpersons of the Board of Directors and its three committees were all outside directors, and the majority of directors were independent outside directors.

Under the basic framework as a company with a Nominating Committee, etc., JSF has made various efforts to improve

its effectiveness accordingly. A summary of key initiatives is presented here.

Company with a Board of Auditors

Company with a Nominating Committee, etc.

JSF's Corporate Governance Enhancements

The Board of Directors comprises a variety of directors with diverse expertise, experience and other characteristics, based on a skill matrix formulated by the Company. To the extent stipulated in the Articles of Incorporation, JSF secures the appropriate number of members to maximize the effectiveness and efficiency of the board's functions. In addition, multiple

outside directors independent from the Company and possessing abundant experience and expert knowledge of business

management and other matters have been appointed to the board to ensure appropriate business operations while enabling objective and neutral management supervision from external viewpoints. The Board of Directors currently comprises seven members (including five outside directors), with an outside director serving as chairperson.

6 / 7

85.7%

5 / 5

100%

In FY2024, after steadily achieving the management goals set out in the Seventh Medium-Term Management Plan and recognizing that the Company's management efforts to date have produced solid results, the Board of Directors focused on setting agenda items aimed at enhancing medium- to long-term corporate value and engaged in discussions to develop the next medium-term management plan.

The board received reports from executive officers and discussed various initiatives addressing material sustainability issues, including climate-related measures aligned with the TCFD recommendations, formulation of a Human Rights Policy, academic research on securities finance using distributed ledger technology, and international cooperation with the Indonesian securities industry.

Main Agenda Items for FY2024 Corporate Governance

• Discussions toward formulating the next medium-term management plan

• Review of progress on the Seventh Medium-Term Management Plan

• Disclosure of climate-related financial information in accordance with the TCFD recommendations

• Formulation and announcement of a Human Rights Policy

• Implementation of Company stock incentive program for employees

• Evaluation of the effectiveness of the Board of Directors

• Information disclosure initiatives

  Management Structure

• Summary report on the risk appetite framework (RAF)

• Review of risk appetite indicators

• Implementation status of internal audits

• Report on system management structure

  Capital and Financial Policy

• Examination of future shareholder returns

• Evaluation of strategic equity holdings

• Status of dialogue with investors

  Organization form	Company with a Nominating Committee, etc.
  Chairperson of the Board	Outside director
  Maximum number of directors as stipulated in the Articles of Incorporation	8
  Number of directors	7
  Number of outside directors [Independent directors]	5 [5]

  Overview of Each Statutory Committee and Status of Initiatives Director Expertise (Skill Matrix) and Attendance at Board of Directors and Other Meetings Nominating Committee

  To ensure that the Board of Directors can adequately determine management policies and supervise execution, the Nominating Committee deliberates and decides on general matters related to the appointment and dismissal of the Company's management team (directors, executive officers and corporate officers) such

  as the composition of the Board of Directors, including the skill matrix; determination of director candidates; consideration of succession plans; qualifications required of executive officers and corporate officers; the policy for their appointment and dismissal;

  and determination of specific candidates. The committee currently comprises five directors (including four outside directors) and is chaired by an outside director.

  Main Agenda Items for FY2024

• Consideration of the approach to the appointment of executive officers and corporate officers

• Nomination of director, executive officer and corporate officer candidates for FY2025

• Duties of executive officers

  Area of Expertise

  FY2024 Meeting Attendance

  Name

  Outside/ Corporate

  Finance,

  Inside

  management securities,

  economics

  International Legal affairs, affairs compliance

  Financial

  Internal

  affairs,

  control, risk

  ESG

  Board of Nominating Compensation

  Audit

  accounting management

  Directors Committee Committee Committee

  Naotaka

  Obata Outside

  100% 100%

  13/13 9/9

  100%

  9/9

  -

  Shoko

  Sugino Outside

  100% 100% 100% 100%

  13/13 9/9 9/9 13/13

  Kensuke Futagoishi Outside

  100% 100%

  13/13 9/9

  100%

  9/9

  -

  Takayoshi Yamakawa Outside

  100%

  13/13

  100%

  9/9

  -

  100%

  13/13

  Yasuyo Tanaka*

  Outside

  -

  -

  -

  -

  Shigeki

  Kushida Representative Executive Officer & President

  Inside

  100% 100%

  13/13 9/9

  100%

  9/9

  -

  Kazuhiro Maeda*

  Inside

  -

  -

  -

  -

  
  
  Compensation Committee

  The Compensation Committee deliberates and decides on general matters related to amounts of compensation for the management team (directors, executive officers and corporate officers) for the steady implementation of the Medium-Term Management Policy and management plans based on this policy. These matters include making sure the compensation system is consistent with the implementation of the management policy and related plans, deciding on compensation for individual members of

  the management team, and the policy for determination thereof. The committee currently comprises five directors (including four outside directors) and is chaired by an outside director.

  Main Agenda Items for FY2024

  • Determination of FY2024 compensation amounts for individual directors and executive officers

  • Review of the share-based compensation plan (introduction of restricted stock)

    Chairperson
    Member (As of October 31, 2025) * Appointed in June 2025
    
    Audit Committee

    In addition to carrying out tasks such as auditing the execution of duties of directors and executive officers and preparing audit reports, the Audit Committee deliberates on and determines the content of proposals (including those on appointment and dismissal of the accounting auditor) to be submitted to the General Meeting of Shareholders. The committee currently

    comprises four directors (including three outside directors) and is chaired by an outside director.

    Main Agenda Items for FY2024

• Business operation status, risk management, compliance, internal auditing

• Reports from the accounting auditor (audit plans, major audit matters, etc.)

In FY2024, based on evaluations provided by each director (including outside directors), the Board of Directors analyzed and assessed its effectiveness, including its composition and operation, the support framework for directors, and directors' individual initiatives. The three statutory committees-the Nominating, Compensation, and Audit Committees-were also included within the scope of this assessment.

For the analysis and evaluation, a questionnaire survey of all

The questionnaire responses and other findings confirmed that the composition, operation, support system and other aspects of the Board of Directors and the committees are all appropriate. Board and committee meetings were also highly evaluated for

directors was conducted. The Company has chosen to receive recommendations from an external organization regarding the content of the questionnaire and, in principle, to send responses directly to that organization. The board's analysis and evaluation are based on the external organization's report of the aggregated results and on discussions at an opinion-exchange meeting held prior to the questionnaire survey.

their free, lively and constructive discussions and exchanges of opinions.

Based on these findings, the Company judged that the effectiveness of its Board of Directors has been ensured.

JSF believes that the roles expected of its management team, centered on the Representative Executive Officer & President, change over time depending on the environment in which the Company operates and its business portfolio. With this in mind,

the appointment of our management team and succession planning are structured based on our approach concerning the Company's business portfolio, as follows:

Based on the FY2023 effectiveness evaluation, in FY2024 the board recognized the need to further deepen discussions aimed at enhancing corporate value going forward. An annual

deliberation schedule was prepared at the start of the fiscal year, and efforts were made to further enhance the agenda items and reports submitted to the board from a medium- to long-term perspective while ensuring that deliberations were more focused

and more effectively prioritized.

Accordingly, the Board of Directors concluded that appropriate actions had been taken and improvements made through these initiatives. However, the board recognizes that enhancing its discussions and those of its committees remains an ongoing challenge and will continue efforts to achieve further improvements.

Based on such future business developments and the required qualifications, the management team is currently being structured as follows.

FY2025 is the final year of the Seventh Medium-Term Management Plan. The Board of Directors recognizes as key issues the proper supervision of executive-side initiatives, including the steady implementation of the plan, and, based on the Long-Term Management Vision formulated and announced in November 2023, the need to deepen discussions aimed at

enhancing corporate value going forward, including consideration of the Eighth Medium-Term Management Plan beginning in

FY2026. Efforts will continue to further enhance agenda items and reports from a medium- to long-term perspective, ensure focused and well-prioritized deliberations, support outside directors in obtaining information, and improve the environment necessary for more substantive discussions.

The Company will work to address all of the aforementioned issues to further improve the effectiveness of the Board of Directors.

• Execution

  JSF will build an overall executive system with the qualities sought by combining the strengths and talents of each individual executive officer so that the above business development can proceed effectively. The required qualities of the entire executive team include having a thorough recognition of JSF's public

  role; extensive knowledge of the market in general; familiarity with various laws and regulations; knowledge of the Company's highly specialized operations; international expertise; advanced knowledge of business management, risk management, and financial accounting; and flexibility in responding to the changing business environment.

• Supervision

  After establishing a skills matrix to enable effective supervision of the above execution, we will structure a team of directors taking into consideration the multi-layering of skills and diversification in age and gender. In recent years, experience in corporate management in the financial and industrial sectors, specialized knowledge such as that relating to law, and expertise in digital transformation and innovative business have been emphasized.

  Approach to Succession Planning for the Representative Executive Officer & President

  Particularly important among the succession plans for the executive side of the management team mentioned above is that for the Representative Executive Officer & President. Our approach for this plan is as follows.

  • Required Qualifications for the Representative Executive Officer & President

    In addition to the requisite qualities for executive officers mentioned above, candidates must also have high ethical standards for overseeing business execution, enhancing corporate value, and serving as a representative of a company that fulfills a public role.

  • Current approach to the succession plan for the Representative Executive Officer & President

    Given the above-mentioned direction for developing JSF's business by positioning areas such as securities financing as growth fields, as well as the composition of the executive officer team as a whole, we place greater emphasis on knowledge

    and experience in securities and financial businesses, including technological innovation, and are mainly considering candidates from within the Company, including experienced mid-career hires, but not candidates from public sector backgrounds.

    Management Team Appointment Process and the Roles Played by the Nominating Committee and the Board of Directors

    The appointment of the management team is one of the most important missions of the Nominating Committee and Board of Directors, and this committee and the Board of Directors are independently and actively engaged in the following management nomination process.

    Appointment Process Officer Compensation System Policy for Determining the Amount of Compensation for Officers and the Calculation Method Details of Policy and Calculation Method

    Compensation for directors and executive officers shall be based on systems and standards in accordance with their respective roles and expected functions, in order to achieve sustained growth and enhancement of corporate value over the medium to long term based on the corporate philosophy and management principles. Specifically, individual amounts of compensation shall be determined by the Compensation Committee based on the following policy decided on by the committee.

    1. Deliberation and determination of the basic qualitative requirements

       The Nominating Committee and Board of Directors deliberate and determine the "Approach to the structure of the Board

       of Directors," the skill matrix for directors, and the "Approach to the appointment of Executive Officers," and establish the required qualities as described on the previous page.

    2. Preliminary list discussions

       For directors, discussions on the preliminary list of candidates focus on individuals with corporate management experience,

       those with legal and other expertise, and those with expertise in digital transformation and innovative business. For executive officers, discussions focus on individuals from within the Company, as well as those from external sources, such as the public sector or the securities and financial sectors.

    3. Narrowing down and finalizing the list to a short list

       Following 2), above, the Nominating Committee narrows down the candidates to a short list based on their backgrounds, expertise, and evaluation results. The final decision is then made based on this short list.

       • Directors

       • With a view to having supervisory functions carried out appropriately, directors shall receive only fixed monthly compensation (base compensation). Performance-linked compensation shall not be provided to directors.

       • Compensation for individual directors shall be determined in accordance with the responsibilities of each director, such as whether that person is serving in a full-time or part-time capacity or as a chairperson.

       • Directors concurrently serving as executive officers shall not receive compensation as directors.

       • Executive Officers

       • With a view to enhancing correlation with the Company's business performance and shareholder value, compensation for executive officers comprises fixed monthly compensation (base compensation), performance-linked officer bonuses and share-based compensation.

       • Fixed monthly compensation (base compensation) shall be determined in accordance with each executive officer's position.

       • With a view to clarifying management responsibility, officer bonuses are determined after the end of the fiscal year based on

    Independent and Active Involvement of the Nominating Committee in the Above Process

    achievement of management goals in the medium-term management plan and business performance for each fiscal year. Bonuses are

    The Nominating Committee gathers information through opportunities such as regular briefings and discussions at the Board of Directors, on-site tours, and briefings by the executive side prior to board meetings. The committee also exchanges opinions with outside directors (excluding the director who also serves as the Representative Executive Officer & President) through activities such as outside director liaison committee meetings. Based on this understanding of the Company's operations and candidates, the supervisory side proactively raises issues, and the executive side responds through reviews and proposals. In this way, deliberations and decisions are carried out effectively.

    For example, in January 2023 JSF disclosed its view regarding succession planning for the current president, which was to consider internal personnel, including employees hired mid-career, but not including those from public sector backgrounds. This approach stemmed from an issue raised by the Nominating

    of views with the executive team. Likewise, in 2021 the executive side independently began developing a similar awareness of the issue during the process of establishing its approach to the business portfolio and its thoughts on appointing executive officers. This alignment in fundamental understanding between the supervisory and executive sides led to continued discussions on the ideal succession plan for the Representative Executive Officer & President. The finalized plan was disclosed in January

    2023 following resolutions by the Nominating Committee and the Board of Directors.

    For important matters, including the aforementioned issues, decisions are made after several rounds of discussions consisting of (1) organization of the issues and free discussion, (2) discussions on the draft proposals, and (3) deliberation on the resolutions and disclosure, with the supervisory side proposing and raising issues to the executive side throughout the process.

    paid within three months of being determined.

    • As for share-based compensation, the Company uses a Board Benefit Trust (BBT) scheme under which points determined in line with medium- to long-term performance are granted, and Company shares corresponding to the number of points are delivered each year at a specified time. These shares are subject to transfer restrictions until the officer retires from office.

    • Officer Compensation System

    • Performance-linked compensation is divided into short-term and long-term incentives, with bonuses positioned as a short-term incentive and share-based compensation as a long-term incentive.

    • As a short-term incentive, bonuses are tied to consolidated current fiscal year profit as a reference indicator to clarify management responsibility for each fiscal year. They consist of a performance-linked component and an individual evaluation component, with the latter adjusted based on the results of the individual evaluation.

    • As a long-term incentive, share-based compensation uses ROE and consolidated ordinary profit, for which management goals have been set in the Seventh Medium-Term Management Plan, as reference indicators.

    Overview of the Officer Compensation System (FY2025)

    Committee in the summer of 2022 during an informal exchange

    Proportion of total compensation paid

    Fixed or variable compensation

    Payment standards

    Basic approach

    Preliminary list

    Short list

    Interviews, etc.

    Decision

    
    
    

    Candidates for director are determined by the Nominating Committee (Appointed by the General Meeting of Shareholders)

    The Board of Directors makes decisions on candidates based on the candidates proposed by the Nominating Committee.

    Basic		65%	Fixed	Position Chairperson President Senior managing Managing executive officer executive officer
    Performance-linked	Bonus	20% (Performance-linked component: 15%; individual evaluation component: 5%)	Linked to short-term performance (Short-term incentive)	Base calculation amount according Performance- Consolidated profit to position linked coefficient (YoY change)
    	Share-based	15%	Linked to medium- to long-term performance (Long-term incentive)

    • Number of standard points according to position × Performance-linked coefficient

    • Consolidated ROE and consolidated ordinary profit (Degree of achievement: Actual values in relation to standard values for each fiscal year)

    Directors	Skill matrix Approach to board structure	Individuals with corporate management experience, legal and other experts, and those with expertise in digital transformation and innovative business
    		Individuals from
    Executive officers	Qualities sought	within the Company and individuals from the public sector or the securities and
    		financial sector

    Nominating Committee compiles a short list.

    • Interviews are held for new director candidates.

    • Executive officer candidates are judged on their character and qualifications over the course of regular briefings and discussions at Board of Directors meetings, as well as through interviews, as necessary.

1. Directors concurrently serving as executive officers shall not receive compensation as directors. The above table includes one director who retired upon completion of his term at the conclusion of the 114th Ordinary General Meeting of Shareholders held on June 25, 2024, and one director who resigned on October 31, 2024.

2. The indicator for calculating performance-linked bonus compensation is consolidated profit, which in FY2024 was ¥10,375 million.

3. The indicators for calculating performance-linked non-monetary share-based compensation are ROE and consolidated ordinary profit, which in FY2024 were 7.44% and ¥12,507 million, respectively.

Below, we introduce specific examples of dialogue, including shareholder opinions, matters that were brought to our attention by shareholders and our response to them, and matters that were explained to and understood by shareholders.

The Company has been reducing strategic equity holdings. Between March 2018 and March 2022, it reduced shares of listed issues held by 91% on a market value basis, and shares of total issues held including listed and unlisted issues by 78%. In FY2024 as well, the Board of Directors received a report on the status of

strategic equity holdings. After reviewing the appropriateness of all such holdings, the board determined that they all remained justifiable.

Basic Policy on Strategic Equity Holdings

1. In order to contribute to sustainable growth and enhancement of corporate value over the medium to long term, JSF strategically holds other companies' shares it deems necessary for purposes such as strengthening business relationships.

2. With respect to strategic equity holdings, the Company examines the status of dividends and valuation gains and losses, the status of transactions with investee companies, and the history and the effects of the shareholdings, and based on this examination, reduces the number of strategic equity holdings deemed to be no longer necessary.

As a Prime Market-listed company, JSF, based on Japan's Corporate Governance Code, engages in dialogue with its shareholders in a constructive manner to foster understanding of the management policies, businesses, and unique characteristics of JSF, and to contribute to the Company's sustainable growth

and the enhancement of corporate value over the medium to long term.

Dialogue with shareholders conducted by JSF's management and others during FY2024 was as follows.

Compliance and Internal Audits

We are always mindful of our public role in serving as infrastructure for securities and financial markets, and believe that conducting business in compliance with laws, regulations and rules is crucial, as are integrity and fairness in corporate activities. We have positioned compliance as a cornerstone of management for realizing our corporate philosophy. We have therefore established a management-led system to ensure thorough compliance and

We established the Compliance Department to promote Company-wide compliance activities, and in other business departments we have appointed compliance officers who also serve as members of the Compliance Department to ensure the promotion of compliance activities across all departments.

The Compliance Committee, chaired by the Executive Officer Responsible for the Compliance Department, deliberates on important matters related to compliance, such as formulating a compliance program and considering measures to be taken when compliance-related issues arise.

In addition, we regularly hold compliance management

Board of Directors

Management Committee

Compliance Committee

Report

(Chairperson: Executive Officer Responsible for Compliance Department)

Report

Report

Compliance officers

Consult/Report

Consult/Report

Consult/Report

Consulting and reporting personnel (Managers and employees)

will proactively respond to the social demands placed on the Company. In addition, strengthening the business management structure is one of the strategies in the Seventh Medium-Term Management Plan and the Eighth Medium-Term Management Plan. To this end, we will establish a robust system that ensures effective internal audits and contributes to enhancing corporate value over the medium to long term.

meetings, where management shares information with the Compliance Department and the compliance officers from each department, as well as meetings for compliance officers to foster shared awareness across all departments.

Furthermore, to maintain and strengthen the Group compliance system centered on Japan Securities Finance Co., Ltd., we hold Group compliance liaison meetings and Group compliance officer liaison meetings to promote mutual

understanding and information sharing among the officers and employees of Group companies.

Regarding the prevention of money laundering, as international frameworks require stronger measures, we are conducting risk assessments, as well as identification and mitigation measures for potential money laundering and other risks associated with clients and other stakeholders in compliance with the guidelines of Japan's Financial Services Agency. While addressing the changing external environment, we will continue to review our business practices on an ongoing basis under the leadership of our management team.

The organization as a whole takes a resolute stance against demands made by antisocial forces. Our aim is to eliminate

any relationships with antisocial forces by working closely with external specialized agencies such as the police. We also implement effective measures to block relationships with

antisocial forces through appropriate pre-screening, organized crime exclusion clauses for contracts and other documents, and centralized management of information on such groups.

Regarding opinions and complaints received from clients,

Operating under the Representative Executive Officer & President, the Company's Internal Audit Department is independent of other departments. It conducts internal audits of all Company businesses and departments. Additionally, the department audits Group businesses, as necessary.

Specifically, the Internal Audit Department verifies the propriety and effectiveness of the internal management structure of each business and department. It reports audit results to

the Management Committee attended by the Representative

we clarify the relevant facts and responsibilities and work to resolve the situation quickly, honestly, fairly and appropriately, with respect for the client's position. In the event of a dispute or similar issue, we respond appropriately in accordance with the aims of the financial alternative dispute resolution (ADR) system.

In addition, regarding transactions between Company or Group company businesses and their clients, or between Company or Group company clients, we carry out our duties

appropriately, taking necessary measures in accordance with laws and regulations and our conflict of interest management policy to ensure that the interests of our clients are not unduly harmed.

We take appropriate measures to safely and properly manage the personal information of our clients to prevent leakage, loss, damage or other issues, and educate and properly supervise our employees to that end. In addition, when entrusting the handling of personal information and similar data that we have received, we appropriately supervise the entrusted party.

Executive Officer & President and designated Audit Committee members. Based on these evaluations, recommendations

for improvements and streamlining are made to the audited department. Moreover, important matters such as internal audit plans and audit results are reported to the Audit Committee and the Board of Directors. By maintaining this internal audit system, we aim to strengthen our business management structure and ensure sound business operations.

JSF Group Companies

Internal audit

Internal audit

Accounting Auditor

Cooperation

Internal Audit Department

Report

Cooperation

Direct supervision

Representative Executive Officer & President Management Committee

Executive Officers

Departments

Report Cooperation

Report

Report

Audit Committee

Board of Directors

In addition to formulating and disseminating the JSF Business Conduct Guidelines and the accompanying Compliance Manual, JSF requires all officers and employees to carry a "compliance self-check card" at all times to instill compliance awareness.

The Company has formulated a Compliance Program as a practical plan for promoting compliance, and the Board of

Directors regularly receives reports on the program's content and implementation status.

The Compliance Program incorporates specific measures

related to compliance promotion from the perspectives of understanding compliance risks and the status of legal

Compliance Department

(Experienced hire)

I joined the Company in November 2022 after working at a law firm and in the legal department of a

publicly traded company. Currently, I am reviewing various business operations from a legal perspective and promoting compliance efforts across the Company.

When I joined, I was excited to work in such a highly specialized environment, but, honestly, I was a bit anxious. After coming on board, however, I received a warm welcome from my colleagues and support in my work, which helped me feel part of the team very quickly.

With that support, I now handle consultations from various departments, including Group companies, on laws, regulations, and related matters. I am also working on various measures to promote compliance, such as planning and running compliance seminars for officers and employees that feature invited external lecturers. At the Company, there are opportunities to take part in various initiatives for those who are motivated. Even in a rapidly changing social environment, I hope to contribute even more to corporate value enhancement by leveraging my strengths across a broader range of fields.

compliance (such as the establishment of systems related to laws and regulations and self-inspections using checklists), and compliance awareness-raising activities (including training and tests, as well as activities aimed at sharing recognition and awareness among Group companies and among officers and employees).

Officers

Directors

Director

Apr. 1991 Joined Yokogawa Hewlett Packard Co. Oct. 1995 Joined The Boston Consulting

Group

Jun. 2000 Founder (co-established), Director and CTO of Dream Incubator Inc.

Jun. 2005 Vice Representative Director of Dream Incubator Inc.

Jun. 2006 Representative Director & CEO of Dream Incubator Inc. (retired June 2020)

Jul. 2020 Representative Partner of Business Producer LLC (current position)

Jan. 2021 Outside Director of BitStar, Inc. (current position)

Apr. 2021 Outside Director of Baseconnect Inc. (current position)

Jun. 2021 Outside Director of Akatsuki Securities, Inc. (current position)

Jun. 2022 Outside Director of FP Corp. (current position) Director of Japan Securities Finance Co., Ltd. (current position)

Significant concurrent positions

Representative Partner of Business Producer LLC

Outside Director of Akatsuki Securities, Inc. Outside Director of FP Corporation

Director

Mar. 1979 Joined Asahi Chemical Industries Co., Ltd. (now Asahi Kasei Corporation)

Jun. 2011 Representative Director and President, Asahi Kasei Ability Corporation

Apr. 2014 Representative Director and President, Asahi Kasei Amidas Co., Ltd.

Feb. 2017 Member, Central Labour

Relations Commission

Jun. 2022 Outside Director, Janome Corporation (current position)

Director, The Institute for International Business Communication (IIBC)

Jun. 2025 Director of Japan Securities Finance Co., Ltd. (current position)

Director of JSF Trust & Banking Co., Ltd.

Outside Director of Denso Corporation

Significant concurrent positions

Outside Director of Janome Corporation

Director

May 2008 Deputy Director-General of Personnel and Corporate Affairs Department (Personnel Management), Bank of Japan (BOJ)

Mar. 2009 Director-General of Personnel and Corporate Affairs Department, BOJ

Jun. 2010 Director-General of Monetary Affairs Department, BOJ

May 2011 General Manager of Nagoya Branch, BOJ

Mar. 2013 Executive Director of BOJ Apr. 2017 Senior Advisor of American

Family Life Assurance Company (currently Aflac Japan Ltd.)

May 2019 Advisor of Japan Securities Finance Co., Ltd.

Jun. 2019 Director, Representative

Executive Officer & President (current position)

Jun. 2022 Director of JSF Trust & Banking Co., Ltd.

(current position)

Significant concurrent positions

Director of JSF Trust & Banking Co., Ltd. Outside Director of Denso Corporation

Director

Apr. 1982 Joined Japan Securities Finance Co., Ltd.

Jun. 2007 General Manager of General Affairs Department

Jun. 2011 Corporate Officer & General Manager of General Affairs Department

Jun. 2016 Managing Director

Jun. 2018 Senior Managing Director Jun. 2019 Senior Managing Executive

Officer (retired in Mar. 2021)

Apr. 2021 Advisor of Nihon Building Co., Ltd. Jun. 2021 President of Nihon Building Co., Ltd. Jun. 2025 Director of Japan Securities

Finance Co., Ltd. (current position)

Takayoshi Yamakawa

Director

Kensuke Futagoishi

Director

Shoko Sugino

Director

Shigeki Kushida Yasuyo Tanaka

Director Director

Naotaka Obata Kazuhiro Maeda

Director, Chairperson of the Board Director

Executive Officers

Director and Chairperson of the Board

Apr. 1968 Joined The Mitsubishi Bank, Ltd.

May 1999 Managing Executive Officer of The Bank of Tokyo-Mitsubishi, Ltd.

Jan. 2004 Senior Managing Executive Officer of The Bank of Tokyo-Mitsubishi, Ltd.

Jun. 2004 Deputy President of The Bank of Tokyo-Mitsubishi, Ltd.

Jun. 2005 President and CEO of Diamond Lease Company Limited

Apr. 2007 President and CEO of Mitsubishi UFJ Lease & Finance Company Limited (currently Mitsubishi HC Capital Inc.)

Jun. 2010 Chairman of Mitsubishi UFJ Lease & Finance Company Limited

Jun. 2012 Executive Advisor to the Board, Mitsubishi UFJ Lease & Finance Company Limited

Jun. 2018 Special Advisor, Mitsubishi UFJ Lease & Finance Company Limited

Director

Apr. 1973 Registered as an attorney

Joined Fujibayashi Law Office

Apr. 1994 Partner Attorney at Fujibayashi Law Office (current position)

Apr. 1997 Professor for The Legal Training and Research Institute of Japan

Apr. 2000 Tokyo Family Court Conciliation Committee Member

Jul. 2005 Environment Dispute Coordination Commission Member

Mar. 2007 Outside Audit & Supervisory Board Member of Kitoku Shinryo Co., Ltd.

Jun. 2018 Outside Audit & Supervisory Board Member of Takeei Corporation (current position)

Jun. 2019 Director of Japan Securities Finance Co., Ltd. (current position)

Jun. 2022 Outside Director of Janome Corporation (current position)

Director

Apr. 1977 Joined The Sanwa Bank, Limited Apr. 2001 General Manager, Retail Banking

Planning Division, UFJ Holdings, Inc.

Jan. 2002 General Manager, Gotanda Corporate Sales Department and Branch Manager, Gotanda Branch, UFJ Bank Limited

Oct. 2003 Joined IY Bank Co., Ltd.

(currently Seven Bank, Ltd.) Jun. 2004 Director of IY Bank Co., Ltd.

Jun. 2006 Director, Executive Officer of Seven Bank, Ltd.

Nov. 2007 Director, Managing Executive Officer of Seven Bank, Ltd.

Jun. 2009 Director, Senior Managing Executive Officer of Seven Bank, Ltd.

Jun. 2010 President and Representative Director of Seven Bank, Ltd.

Jun. 2018 Chairman and Representative Director of Seven Bank, Ltd.

Chairperson

Managing Executive Officer Responsible for Compliance Department, Human Resources Department, Settlement & Custody Department, Osaka Branch

Corporate Officers

Representative Executive Officer & President

Responsible for Internal Audit Department

Managing Executive Officer Responsible for Corporate Planning Department, Risk Management Department, Information Systems Planning Department, Group Companies Relations

Senior Managing Executive Officer Responsible for Corporate Governance Office, Business Development Department, Treasury Department, International Relations

Senior Managing Executive Officer Responsible for Margin Loan Department, Institutional Sales Department, Retail Business Department

Jun. 2019 Director and Chairperson of the Board of Japan Securities Finance Co., Ltd. (current position)

Jun. 2023 Honorary Advisor, Mitsubishi HC Capital Inc. (current position)

Significant concurrent positions

Partner Attorney at Fujibayashi Law Office

Outside Audit & Supervisory Board Member of Takeei Corporation

Outside Director of Janome Corporation

Jun. 2022 Executive Advisor of Seven Bank, Ltd. (current position)

Director of Japan Securities Finance Co., Ltd. (current position)

General Manager of Osaka Branch

Audit Officer

General Manager of Risk Management Department

General Manager of Compliance Department

General Manager of Treasury Department

General Manager of Information Systems Planning Department