Japan Securities Finance : INTEGRATED REPORT - Integrated Report 2025 for printing (ir2025 all en print)

Japan Securities Finance Co., L

Integrated Report

'° 2025

JAPAN SECURITIE S FINANCE

Our Statement

Utilizing the power of finance, we have pursued our mission: to develop our nation's stock market. Overheating technologies, accelerating globalization. As the financial universe continues to expand, what role can we now play?

We are Japan's one and only securities finance company.

As the infrastructure for the margin loan business, providing the essential loans, we have sustained a stable securities market.

Grounded by that public mission, we will continue to pioneer new paths.

To become No. 1 in securities finance, responding to operations and acquisitions needs all over the world, with securities as collateral.

Putting our decades of experience and flexibility to work, we forge ahead with the speed and agility of the chosen few. Transcending boundaries between securities and finance, even between nations.

As a securities finance pioneer, we have a role to play, responding to all kinds of emerging needs in Japan and around the world.

Beyond the numbers are the human relationships. Dreams brought to life. We connect their power to expand the potential of the market and the world.

We step into the future with a determined, pioneering spirit. Because being "the only one" comes from meeting challenges.

Be unique. Be a pioneer.

We shape the markets of the future.

Editorial Policy

Japan Securities Finance ("JSF" or "the Company") has issued this integrated report so that investors and other stakeholders may gain an understanding of its efforts to create sustainable value. We hope that this report deepens understanding of the JSF Group, whose mission is to contribute to the development of the securities market.

Information Disclosure System

JSF's Stakeholders

Rating Agencies Analysts Shareholders and Investors Other Stakeholders

Non-Financial Information

Financial Information

Dialogue

Voluntary Disclosure

Integrated Report 2025

Reports

Quarterly Financial Results

Notice of Convocation

Annual Securities Report (Japanese only)

Statutory Disclosure

Investor Relations

Sustainability

Website

Report Coverage Japan Securities Finance Co., Ltd. and its consolidated subsidiaries ("the JSF Group")

Reporting Period

Reference Guidelines

April 1, 2024 to March 31, 2025 (Some sections include information regarding matters occurring before or after the reporting period.)

• IFRS Foundation, International Integrated Reporting Framework

• Ministry of Economy, Trade and Industry, Guidance for Collaborative Value Creation 2.0

  
  
  

  Three Key Points in

  Integrated Report 2025

  Contents

  1

  New Medium-Term Management Plan: Our Vision under the Eighth Medium-Term Management Plan

  • Message from the President (Page 6) The president explains the Eighth Medium-Term Management Plan.

  • Eighth Medium-Term Management Plan (Page 16)

    A summary of the key elements of our management strategies and specific initiatives.

    2 Human Capital Management

  • Initiatives for Human Capital Development (Page 38)

    An introduction to specific initiatives to strengthen the human resource base.

  • Employee Roundtable Discussion (Page 44) Employees discuss the expansion of securities financing and the human resource development

    initiatives that support it.

    3

    Corporate Value Enhancement and Sustainability Initiatives

  • JSF's Roadmap (Page 4)

    A view of recent performance and the Vision of the Future Targeted by JSF.

  • Value Creation Story (Pages 12-23) An explanation of initiatives centered on corporate governance and sustainability.

  • Sustainability Initiatives (Page 46)

The material issues that we recognize and our specific initiatives for addressing them.

About Us

Our Statement Inside front cover

Three Key Points in Integrated Report 2025/Contents 1

The JSF Group at a Glance 2

Japan Securities Finance's Roadmap to the Future 4

Message from the President 6

Value Creation Story

Value Creation Process 12

Message from the Chairperson of the Board 14

Overview of the Eighth Medium-Term

Management Plan 16

Message from the Officer Responsible

for Corporate Strategy 20

Group Management Strategy

Corporate Strategy 24

Risk Appetite Framework 30

Risk Management 32

Group Company Initiatives 36

Initiatives for Human Capital Development 38

An Employee Roundtable Discussion 44

Foundation Supporting Corporate Value

Sustainability Initiatives 46

Addressing Climate Change and Environmental Protection (Initiatives Based on the

TCFD Recommendations) 48

Industry-Academia Collaboration, International Cooperation, and Awards Received 51

BCP Initiatives 53

Corporate Governance 54

Compliance and Internal Audits 64

Officers 66

Corporate Data

11-Year Highlights (Consolidated) 68

Financial Section 70

Shareholder and Investor Information 128

Company Information 129

Cautionary Note Regarding Forward-Looking Statements

Forward-looking statements such as performance forecasts in this report are made by the Company based on information available at the time of creation and include risks, uncertainties and other factors. Therefore, actual results may differ significantly from forecasts due to changes in various factors.

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 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 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

JSF's Business Model

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

Bond repo and

gensaki transactions

Equity repo transactions

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

Standardized margin transactions

Stocks

Funds/ Securities

Funds/ Stocks (Collateral)

Gave rise to

Securities

Funds/ Securities

Funds/ Stocks (Collateral)

Securities companies

Financial institutions

Securities companies

Institutional investors, etc.

Investors

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.

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

Trust Banking Business

JSF Trust and Banking Co., Ltd.

See page 36 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.

Nihon Building Co., Ltd.

See page 37 for details.

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

JSF Group Gross Profit* by Business (FY2024)

Real estate leasing business

5.9%

¥1.1 billion

Trust banking business

16.0%

Securities finance business

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

Trust banking business

Real estate leasing business

Loans for margin transactions

23.0%

¥4.3 billion

¥3.0 billion

Securities investment, etc.

16.6%

¥3.1 billion

Consolidated gross profit

¥18.7 billion

Securities financing

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)

Loans for margin transactions (Margin loans/Stock loans)

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

Standardized margin transaction buying balance

Approx. ¥2,700 billion

Utilization rate for loans for margin transactions: Approx. 14.6%

Standardized margin selling balance

Approx. ¥460 billion

Utilization rate for loans for margin transactions: Approx. 32.0%

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%

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%

Strengthening the Earnings Base

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

Gross Operating Profit

(Securities Finance Business and Trust Banking Business)

(Millions of yen)

Trust Banking Business (Non-consolidated)

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

About Us

Japan Securities Finance's Roadmap to the Future

Announced November 2023

Announced November 2021

Management Policy through FY2025

Medium-Term

Management Policy

Announced February 2023

Seventh Medium-Term Management Plan

Management goals achieved in the plan's first year

Long-Term Management Vision

FY2024 Results

Consolidated ordinary profit:

¥12.5 billion

ROE: 7.44%

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

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

• Strengthen consolidated management of the Group Improve operational efficiency

• Further enhance shareholder returns (targeting a total payout ratio of 100%)

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

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

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

Material Issues

• Climate change

• Education

• Human resources

• Human rights

• Capital market

• Corporate governance

• Compliance

• Risk management

• Business continuity planning (BCP)

Vision

Announced November 2025

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%

  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

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

• Contribute to the development of securities and financial markets as Japan's only securities finance company supporting the infrastructure functions of these markets

• Sustain growth and enhance corporate value while maintaining strong financial soundness

• Aim to be a distinctive and unique company that operates with a high degree of agility and flexibility.

  ROE and PBR

  ROE

  (％)

  8.0

  6.0

  4.0

  2.66

  3.03

  3.79

  4.36

  0.64

  5.73

  0.97

  PBR

  7.44

(Times)

2.0

1.6

1.2

0.8

2.0

0.35

0.54 0.59

0.4

0.0

2019 2020 2021 2022 2023 2024 (FY)

0.0

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

Message

Shigeki Kushida

Representative Executive Officer & President

6 Japan Securities Finance Co., Ltd. Integrated Report 2025

from the President

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

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.

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.

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

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.

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.

Value Creation Process

Inputs Business Model

Financial Capital

Stability:

• Financial foundation

• External credit ratings: R&I AA−

  JCR AA− S&P A

• Capital adequacy ratio (based on FIEA):

367.5% (March 31, 2025)

Business Activities

JSF's Unique Features

A leading securities finance company that addresses change and market needs by leveraging its core strengths in securities transactions and cross-border loans for margin transactions

Securities markets

In Japan

Human Capital

• Human resources with expertise and initiative

• Hiring of talent with diverse backgrounds

• Promotion of personnel across the Group

  Services that can link the needs of securities markets and financial markets

  In Japan

  JSF

  Financial markets

  Intellectual Capital

  Many years of accumulated experience:

  • Capabilities in managing systems for loans for margin transactions

  • Transaction proposal capabilities in securities financing operations

  • Risk management expertise

  Leveraging our unique capabilities by strengthening our earnings base and internal control system

  • Expand securities financing centered on further strengthening transactions focused on the securities themselves, and structuring transaction schemes

  • Enhance presence and recognition in overseas markets: product offerings for cross-border transactions and strengthen markets

  • Ensure stable operations and improved usability of loans for and update the operational framework of the loans for response to changes in the market environment

Strengthen the earnings base

Social and Relationship Capital

• Network with domestic and overseas financial institutions and institutional investors such as securities companies, banks and insurance companies

  Strengthen the internal control system

  • Advance our human capital policy and the human resource

  • Secure diverse human resources and promote the creation environment

Strengthen the human resource base

• Vitalization of stock markets in Japan due to increased profitability

• Shift toward rising interest rates in Japan

• Demand for Japanese government bonds as high-quality liquid assets

• Growing demand for funds

Outcomes Vision

Generation of social activity

Outside Japan

Providing liquidity in the form of funds and securities to clients in and outside Japan

Outside Japan

• Progress of digitalization

• Corporate governance reforms

• Fulfilment of role as infrastructure that functions to link securities and financial markets

• Linkage of Japan with the world through supply of market liquidity

• Customer asset preservation in the trust banking business

• International cooperation with the Asian securities industry

• Collaborative empirical research with the University of Tokyo and other institutions

  Creation of economic value

  • Achievement of Eighth Medium-Term Management Plan's goals: ROE of 8% or higher, consolidated ordinary profit of

    ¥15.0 billion or more (FY2024 results: ROE of 7.4%; Consolidated ordinary profit of

    ¥12.5 billion)

  • Aim for a total payout ratio of 100% on a cumulative basis until ROE reaches 8%. Proactive payment of dividends with a target payout ratio of 70%

    Contributions to shareholders and investors

  • High resilience and stable performance

  • Sustainable growth and enhancement of corporate value

  • Stable and proactive shareholder returns

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

    securities finance

    Enhancement of corporate value

• Enhance presence in global markets as a securities finance company

• Innovate business and improve operational efficiency by leveraging digital technology

• Strengthen consolidated management of the Group with an emphasis on risk and return

• Strengthen the human resource base

• Promote diversity and inclusion

Message from the Chairperson of the Board

With a long-term perspective, I will work to support JSF's efforts to take on new challenges that enhance its corporate value on a sustainable basis and enable it to meet stakeholder expectations.

We outside directors serve as a bridge between stakeholders and executive officers. We provide objective opinions from an independent, external perspective, bearing in mind JSF's corporate philosophy of contributing to the development of the securities and financial markets while maintaining a keen awareness of its public role.

As Chairperson of the Board, I always strive to enhance the effectiveness of deliberations and ensure that the Board of Directors fulfills its role as a "monitoring board." In 2019, JSF transitioned to a company with a Nominating Committee, etc. structure. The current Board of Directors comprises five outside directors and two inside directors. Through the use of a skills matrix tailored to the Company, the board composition reflects a multifaceted skill set and diversity in age, gender, and areas of expertise.

The primary role of the Board of Directors is to formulate basic management policies and strategies and to supervise overall management based on them. Drawing on the insights of directors with diverse backgrounds, discussions and exchanges of opinions at Board of Directors meetings are free, open, and substantive. In addition, a framework is in place for executive management to thoroughly consider the issues and opinions raised during these discussions and provide appropriate feedback.

I will continue to do my utmost as Chairperson to lead discussions and ensure that the Board of Directors meets stakeholder expectations.

Eighth Medium-Term Management Plan

Based on the Seventh Medium-Term Management Plan (FY2023-FY2025), formulated in February 2023, and the Long-Term Management Vision, formulated and announced in November of the same year, the

Company has been working to achieve its management goals of maintaining consolidated ordinary profit at a stable level of over ¥10.0 billion and ROE at a stable level above 5%, while aiming for further improvement in both. The Company has focused on strengthening

corporate governance, reinforcing its earnings base, and diversifying its earnings structure, while also pursuing management with an awareness of the cost of capital and working to improve capital efficiency. It has also advanced efforts to further enhance human capital and strengthen internal controls.

As a result of these initiatives, consolidated ordinary

profit and ROE have steadily improved during the Seventh Medium-Term Management Plan period, reaching levels that exceeded the management goals.

Given the steady progress in enhancing profitability in preparation for new challenges, the Company first revised its Long-Term Management Vision when

formulating the Eighth Medium-Term Management Plan. The revised Long-Term Management Vision clearly states that the Company will work toward achieving ROE of 8% to further improve profitability and capital efficiency, and that it will maintain a total payout ratio of 100% as its shareholder return policy until ROE reaches 8%.

In the Eighth Medium-Term Management Plan (FY2026-FY2028), announced in November 2025, the Company set management goals of achieving consolidated ordinary profit of ¥15.0 billion and ROE

of 8% by FY2028. The Company has developed a business portfolio centered on expanding securities financing, primarily loans for margin transactions, and has continued to strengthen corporate governance. Going forward, these efforts are slated for further acceleration. The Board of Directors has held a series of discussions on business strategies as well as on human capital and system investments to support the Company's long-term growth, and the outcomes of these discussions are reflected in the plan.

Starting in FY2026, initiatives under the new medium-term management plan will begin. We outside directors will continue monitoring progress toward management objectives and providing the necessary advice and oversight to support their achievement. I intend to support the Company in remaining a unique organization that combines agility and flexibility as it carries out the infrastructure functions of the securities and financial markets and pursues sustainable growth while maintaining strong financial soundness.

Succession Plans (Initiatives of the Nominating Committee)

In 2023, the Company formulated and announced its approach to in-house human resource development with a view to selecting the management team and refined its

approach to the composition of the Board of Directors and the appointment of executive officers. For the key position of Representative Executive Officer & President, in addition to the qualities required of executive officers, candidates must demonstrate the ability to oversee execution, enhance corporate value, and have high ethical standards as a representative of a company fulfilling a public role.

Historically, JSF's management has been led by individuals with a public-sector background, reflecting its business portfolio centered on loans for margin transactions, which are an integral part of the securities

market infrastructure. However, for the successor to the current Representative Executive Officer & President, in light of the orientation toward business development with securities financing and other businesses positioned as growth areas and the overall composition of the executive team, the Company has adopted a policy of placing greater emphasis on knowledge and experience in securities and finance operations, including technological innovation. Discussions will focus primarily on internal candidates, including experienced hires, and will exclude individuals from the public sector. Based on this policy, the Board of Directors continues to discuss the preliminary list of successor candidates and the requisite qualifications.

Officer Compensation System and Determination of Individual Compensation (Initiatives of the Compensation Committee)

The Compensation Committee decides on the compensation of directors, executive officers, and corporate officers, as well as policies related to officer compensation and other matters.

The Company has established performance-linked compensation for executive officers to ensure that incentives are aligned with management policies.

Bonuses are positioned as a short-term incentive, with consolidated profit used as the reference indicator

to clarify management responsibility each fiscal year. Share-based compensation is positioned as a longterm incentive, using ROE and consolidated ordinary profit-the management goals of the medium-term management plan-as reference indicators. In addition, bonuses are divided into two components: one

linked to the Company's performance and the other reflecting individual evaluations, to ensure that both the

Board of Directors Initiatives

As part of formulating the Eighth Medium-Term Management Plan, the Board of Directors held extensive discussions in FY2025 on management policies and growth strategies for FY2026 and beyond, with a view to realizing the Company's corporate philosophy and the Vision of the Future Targeted by JSF. As Chairperson

of the Board, I am committed to ensuring that the

performance of the Company as a whole and individual contributions to that performance are reflected.

Under this framework, for share-based compensation, the Company uses a Board Benefit Trust (BBT) scheme under which points determined in line with achievement of management goals in the medium-term management plan are granted. Until now, the Company deployed a system whereby shares corresponding to the number of accumulated points were delivered upon retirement. In August 2025, however, the system was partially revised. Specifically, the Company transitioned to a Board Benefit Trust-Restricted Stock (BBT-RS) system in which restricted stock corresponding to the number of points is delivered to executive officers and corporate officers at a fixed time each year. This change enhances the linkage of share-based compensation to performance and allows for clearer disclosure.

Board of Directors responds flexibly to changes in the securities and financial markets and engages in free and open discussion so that it can ensure the effective implementation of management policies,

supervise business execution, and strengthen corporate governance, thereby fulfilling its role as a monitoring board.

Overview of the Eighth Medium-Term Management Plan

Revision of the Long-Term Management Vision

The Company has updated its Long-Term Management Vision, taking into account changes in its business environment and the steady progress being made in strengthening its earnings base. The revised vision clearly states that the Company will work toward achieving ROE of 8% as it seeks to enhance profitability and capital efficiency, and that it will maintain a total payout ratio of 100% as its shareholder return policy until the ROE target is reached.

Long-Term Management Vision Targeted by JSF

1. Vision of the Future Targeted by JSF

   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.

   It will achieve sustainable growth and enhance its corporate value, while maintaining strong financial soundness and contributing to the development of securities and financial markets.

2. Corporate Message

   Be unique. Be a pioneer.

3. Long-Term Direction

As Japan's only securities finance company, JSF will continue to agilely and flexibly address the trading needs of securities and financial market participants. Through its contributions to market development, JSF will seek to concentrate the collective efforts of its Group companies to sustain growth and enhance its corporate value, while maintaining strong financial soundness.

Under this management direction, JSF will continue striving to strengthen its earnings base and pursue stable and steady improvement of its capital efficiency, while remaining mindful of the cost of capital. JSF aims to achieve ROE of 8% during the period of the Eighth Medium-Term Management Plan, and will continue to work toward steady improvement thereafter as well.

At the same time, with regard to shareholder

returns, JSF will maintain a total payout ratio of 100% until it achieves ROE of 8%, and will strive to enhance shareholder returns thereafter as well.

Through these management efforts, JSF aims to maintain a market valuation with a price-to-book ratio (PBR) in excess of 1x.

In addition, under its organizational design as a company with a Nominating Committee, etc., JSF will strive to strengthen its corporate governance by tackling sustainability issues while focusing on further improvement of the effectiveness of deliberations by its Board of Directors and respective committees, the

further enhancement of information disclosure, and the development of a robust human capital base.

Profitability Ordinary profit: ¥15.0 billion

Capital Efficiency

ROE: 8%

• We aim to achieve our profitability targets by focusing on two key pillars: the stable operation and enhancement of usability in loans for margin

  transactions, and the expansion of securities financing with a focus on further strengthening securities lending.

• We recognize that our cost of equity is in the low-6% range. We will strive to achieve returns that enable us to exceed this level while simultaneously enhancing profitability and maintaining financial soundness, as we work to improve ROE.

(Billions of yen)

15.0

Sixth Medium-Term Management Plan Seventh Medium-Term Management Plan

¥15.0 billion

(％)

8.0

Sixth Medium-Term Management Plan

10.0

5.0

5.5

Forecast

7.1

7.6

11.0

12.5 13.2

7.0

6.0

5.0

4.0

3.0

gains)

Seventh Medium-Term Management Plan

7.4

8%

7.0

5.7

6.5% (excl. extraordinary

4.4

3.8

3.0

0 2.0

2020 2021 2022 2023 2024 2025

(Forecast)

Eighth Medium-Term

(FY)

2020 2021 2022 2023 2024 2025 Eighth

(Forecast) Medium-Term

(FY)

Management Plan Management Plan

Strategy

Six Strategies for Achieving Management Goals

1. Stable Operations and Enhanced Usability of Loans for Margin Transactions as Part of the Securities Market Infrastructure

   • Adapting systems to changes in market conditions

   • Proactive communication on loans

2. Expansion of Securities Financing Centered on Further Strengthening of Securities Lending

   • Expansion of transactions focused on securities

   • Strengthening transaction scheme

     for margin transactions and accurate identification of market needs

     1. Business Innovation and Operational Efficiency through Digital Technology Utilization

        • Strategic IT investment

     2. Group management enhancement

     3. Talent enhancement

     development capabilities

3. Enhancing Presence and Recognition in Overseas Markets

   • Expanding target markets and products for cross-border transactions

     • Continuing medium- to long-term initiatives such as the practical application of distributed ledger technology (DLT)

     • Enhancing position as a key player in Asia

       Main Measures and Initiatives

       Loans for Margin Transactions

       • Maintaining the presence of loans for margin transactions in the stock market by enhancing usability for market participants

         Securities Financing

       • Enhancing quality and driving revenue growth by further developing overseas clients and expanding the range of handled foreign securities

       • Strengthening position as a key player in Asia

         Securities Investment

       • Strengthening the framework to secure revenue by building a strong risk-return portfolio as a core pillar of the business portfolio

         New Business Fields (Medium- to Long-Term Initiatives)

       • Steady growth in fund administration services

       • Ongoing efforts toward business expansion in emerging markets (Indonesia) and the practical application of DLT

         Trust Banking (JSF Trust & Banking)

       • Further growth in trust operations through expansion in adjacent niche areas

       • Strengthening Group collaboration in securities financing

       Initiatives for Each Business Field

• Maintaining and ensuring

  stable operation of existing systems including IT upgrades

• Strengthening measures against cyberattacks and data breaches

• Expanding BCP frameworks

Defensive IT Investment

Investments supporting smooth operations and business continuity

• Adding and improving

  functions to strengthen competitiveness

• Introducing new technologies to deliver new value

• Implementing IT tools to promote DX

Offensive IT Investment

Strategic investments aligned with changes in the business portfolio

Driving IT strategies to

support management and operations

Workplace Improvement

• Balancing work with childcare and caregiving, utilizing telework

• Promoting a comfortable work environment

Evaluation & Rewards

• Actively evaluating employees' contributions to task execution

Training & Career Path

• Strengthening talent with a focus on expertise and proactivity

Talent Portfolio

• Promoting experienced hires and increasing specialized talent ratio

Promoting Diversity

& Inclusion (D&I)

We aim to achieve sustainable growth through initiatives in each business area aligned with our management strategies, supported by investments in human capital and systems.

Purchase on the market

100%

(Yen)

100

Ordinary dividend per share Special dividend per share

(Billions of yen)

12.0

Profit attributable to owners of parent

Share buybacks

80 60

40

20

Dividend payout ratio

60.1%

53.0% 47.2% 50.0%

67.4%

80

68

10.0

69.7%

8.0

6.0

4.0

2.0

3.9

Dividends

5.1

5.9

8.0

10.3

2.8

3.0

9.4

0

2020 2021 2022 2023 2024 2025

Forecast

(FY)

3.0

0

2020 2021 2022 2023 2024 2025

Forecast

(FY)

Message from the Officer Responsible for Corporate Strategy

Aiming to be a company that earns the trust of all stakeholders

FY2024 Consolidated Financial Results

The economic environment in FY2024 was characterized by a continued, moderate recovery supported by factors including stronger corporate earnings and increased

inbound demand. Furthermore, signs of increased demand for funding emerged in Japan's financial markets, and market interest rates began to rise as the Bank of Japan ended its negative interest rate policy.

Japan's stock markets turned bullish following favorable corporate earnings reports. However, after the Bank of Japan announced an additional interest rate hike, expectations of a narrowing interest rate gap between Japan and the United States led to a correction. The market then rebounded, but concerns about U.S. tariff policies and other issues kept prices subdued toward the end of the fiscal year. Japan Securities Finance is working to enhance its corporate value over the medium to long term under a business portfolio that includes securities financing, which centers on loans for margin transactions,

and trust banking operations.

As a result, consolidated results for FY2024 saw increases in all profit categories to record highs. Operating profit

rose 11.3% year on year to ¥11,329 million, ordinary profit increased 13.4% to ¥12,507 million, and profit attributable to owners of parent increased 29.2% to ¥10,375 million.

During FY2024, results were solid for securities financing such as loans for margin transactions and equity repo transactions, backed by factors including increased demand for funds in a strong stock market and the shift to an environment of fluctuating market interest rates. In

addition, management trust services continued to perform well in the trust banking business. We are counting on the continued understanding and support of our stakeholders as we strive to enhance JSF's corporate value over the medium to long term with our public role in mind, and

to strengthen corporate governance and advance our sustainability initiatives.

FY2024 Consolidated Results (Millions of yen)

Note: Premium charges (lending fees) included in operating revenue are received from borrowers when lending securities as part of loans for margin transactions, and the same amount is paid to the lender as premium charges (borrowing fees) and recorded as an operating expense. Therefore, although changes in premium charges increase or decrease operating revenue, lending fees and borrowing fees offset each other and thus do not affect profit. To facilitate understanding of the Company's business performance, we have presented operating revenue and operating expenses excluding premium charges on lending and borrowing securities.

In the Seventh Medium-Term Management Plan, in addition to accelerating and deepening our initiatives to date, we have been strengthening the human resource base, and making management efforts toward the management goal we set for ROE: maintain at a stable level above 5% and aim for further improvement. Based on these ongoing management efforts, we formulated

our Eighth Medium-Term Management Plan in November 2025. Here I will explain our business portfolio, our efforts to implement management with an awareness of the cost of equity and stock price, as well as our growth strategy, shareholder returns, and our initiatives for corporate governance and sustainability.

Business Portfolio

The JSF Group is keenly aware of its public role as part of the infrastructure of Japan's securities and financial

markets, and provides a variety of related services to meet the diverse needs of the securities and financial sectors.

These services mainly involve securities financing centered on loans for margin transactions, a licensed business. JSF is the only securities finance company in Japan authorized to offer loans for margin transactions. In our securities financing operations, we play a unique role by focusing

on the provision of liquidity in the form of securities,

a physical asset, and by acting as a bridge between domestic and overseas markets. Going forward, we will continue to leverage these distinctive features in our loans for margin transactions business.Our business portfolio also encompasses securities investment, trust banking and real estate leasing. We have been using these businesses to diversify our revenue sources and cultivate multiple earnings drivers to stabilize revenue as we continue to pursue more sustainable growth and work to achieve the Vision of the Future Targeted by JSF.

Efforts to Implement Management That is Conscious of Cost of Capital and Stock Price

Based on the Seventh Medium-Term Management Plan (FY2023-FY2025) formulated in February 2023 and the Long-Term Management Vision formulated and

announced in November 2023, JSF is working to achieve its management goals of maintaining a stable ROE of 5% and ordinary profit exceeding ¥10 billion, with a continued focus on further enhancing these metrics. As a Prime Market-listed company that supports the infrastructure of the securities and financial markets, we have strengthened corporate governance and pursued improvements in profitability and capital efficiency to achieve sustainable growth and enhance corporate value over the medium

to long term. ROE for FY2024 was 7.44%, or 6.50% on a core basis before adjustment for extraordinary income,

significantly exceeding the management goal in the Seventh Medium-Term Management Plan. In addition, market valuation of the Company has steadily improved, with PBR generally above 1.0 times and total shareholder return (TSR) significantly outperforming TOPIX.

Given these achievements, in November 2025 we formulated and announced the Eighth Medium-Term Management Plan, which targets even higher levels of profitability and capital efficiency. After estimating the cost of equity in the low 6% range, we set management goals of

¥15 billion for consolidated ordinary profit and 8% for ROE.

We will continue to steadily strengthen our earnings base and improve capital efficiency.

ROE and PBR Total Shareholder Return (Index*)

(%)

7

ROE (Left axis) PBR (Right axis)

7.44

(Times)

1.4

(%)

500

JSF TOPIX (incl. dividends)

6

5

4

3 3.03

3.79

4.36

0.64

5.73

0.97

7.00

(Forecast)

1.09 1.12

1.2

1.0

0.8

0.6

400

300

200

167.1

198.1

224.1

367.1

406.6

213.4

430.4

254.8

2 0.54 0.59

1 0

0.4

0.2 0

100

0

142.1 144.9 153.3

216.7

Year ended Mar. 2021

Year ended Mar. 2022

Year ended Mar. 2023

Year ended Mar. 2024

Year ended Mar. 2025

Nine months ended Sep. 2025

Year ended Mar. 2021

Year ended Mar. 2022

Year ended Mar. 2023

Year ended Mar. 2024

Year ended Mar. 2025

Nine months ended Sep. 2025

Notes: PBR is the value at the end of each fiscal year.

ROE for the nine months ended September 2025 has been calculated using the estimated consolidated results announced on May 15, 2025, and PBR for September 2025 has been calculated using the stock price on September 30, 2025.

Growth Strategy

Our central sales strategy in the Seventh Medium-Term Management Plan is to further strengthen the loans for margin transactions business and securities financing. Securities financing is influenced not only by equity prices but also by fluctuations in interest rates. In Japan, the end of the negative interest rate policy has created an environment in which interest rate mechanisms are functioning again. As a result, our lending interest rates have increased, and we are seeing signs of increased funding demand from our clients.

To respond appropriately to this change in the environment, we will work to improve the quality of our internal control through focusing on the balance between risk and return, and to enhance the stability of the middle and back-office operations in tandem with front-office sales activities. We will also secure stable revenues in

the other businesses that make up our portfolio. In the securities investment business, as part of the asset-liability management (ALM) necessary for securities financing, including loans for margin transactions, our basic policy is to

Shareholder Returns

We remain committed to enhancing shareholder returns. Our goal through FY2025 is to achieve a total payout ratio of 100% on a cumulative basis through the payment of dividends and flexible implementation of share buybacks. Our policy is to actively pay dividends, with a target payout ratio of 70%. Under this policy, we increased dividends for FY2024 by ¥37 from the previous fiscal year to ¥84 per share, including a special dividend of ¥16 per share. In addition, we conducted ¥3.0 billion in on-market

secure stable earnings by accumulating carry income through fund procurement on favorable terms backed by our high creditworthiness. We will conduct risk management within our risk appetite framework (RAF) to appropriately control market risk and expand stable funding methods, including foreign currencies, as well as focusing efforts on liquidity management.

Regarding subsidiaries, the trust banking business will continue to flexibly meet transaction needs for preservation trusts-including client money segregation trusts-and management trusts across a range of fields, while maintaining a strong presence in niche sectors and conducting distinctive operations. The real estate

leasing business will continue to steadily promote leasing of buildings owned by the JSF Group (for details of subsidiary businesses, see pages 36-37).

During the Eighth Medium-Term Management Plan, we will further accelerate and develop existing initiatives, centered on expanding securities financing, primarily loans for margin transactions.

share buybacks, resulting in a total payout ratio of 96.8%.

For FY2025, we continue to aim for a total payout ratio of 100% through dividends and flexible implementation

of share buybacks based on our shareholder return policy during the period of the Seventh Medium-Term

Management Plan. Accordingly, dividends for FY2025 will total ¥80 per share, including a special dividend of ¥12 per share.

Shareholder Returns

Ordinary dividend per share

Special dividend per share

Share buyback amount

(Yen) 100

(Left axis)

(Left axis)

(Right axis)

(Billions of yen)

4.0

80

3.8

3.5

16

60

3.0

40

2.3

JSF will actively pay dividends

during the period from FY2024 through FY2025, aiming for a target payout ratio of 70%

20

0

3.0

2.5

2.0

1.5

1.0

0.5

0

68

3.0

2.8

80

2021

2022

2023

2024

2025 (Forecast) (FY)

Note: Dividends per share for FY2025 are an estimate, and the share buyback amount represents the upper limit.

The total shareholder return ratio is calculated using the earnings forecast announced on May 15, 2025.

Regarding shareholder returns during the Eighth Medium-Term Management Plan, we are targeting a total return ratio of 100% through dividends and the flexible implementation of share buybacks until we achieve ROE of 8%. Additionally, JSF plans to actively pay dividends with a target payout ratio of 70%.

Composition of the Board of Directors

JSF transitioned to a company with a Nominating Committee, etc. in FY2019, and the Board of Directors currently comprises five outside directors, two of whom are women, and two inside directors. Accounting

for about 70% of board members, outside directors play a central role in formulating management policies and in making personnel and compensation decisions involving executive management.

Initiatives of the Board of Directors and the Nominating Committee

In FY2024, having steadily achieved the management goals set out in the Seventh Medium-Term Management Plan and recognizing that management efforts to date have produced solid results, the Board of Directors engaged in discussions and took other steps toward

formulating the next medium-term management plan, while also working to set appropriate agenda items aimed at enhancing corporate value over the medium to long term.

Regarding nominations for director, executive officer and other positions, the Board of Directors and the Nominating Committee finalized the list of director candidates to be submitted to the General Meeting of Shareholders, and the candidates for executive officers and corporate officers for FY2025. Specifically, the appointment process

Officer Compensation

JSF has structured officer compensation to align incentives with its management policies. Performance-linked compensation is divided into short-term and long-term incentives, with bonuses positioned as a short-term incentive and share compensation as a long-term incentive. Bonuses are based on reference indicators for performance, and

Status of Dialogue with Shareholders

As a Prime Market-listed company, JSF follows Japan's Corporate Governance Code in proactively engaging in dialogue with shareholders to support sustainable growth and the enhancement of corporate value over the medium to long term. The three main themes and matters of interest that came up in dialogue with shareholders in FY2024 were management strategy, business model and changes in the external environment. For management strategy, we mainly discussed our medium-term management plan and shareholder return policy. For business model, we discussed initiatives to strengthen our business foundation by diversifying revenue sources and establishing multiple

involves discussion by the Nominating Committee of a preliminary list of candidates, which is narrowed down to a short list from which final decisions are made following interviews with the individual candidates.

To improve the transparency of this process, the Company has disclosed the status of the nomination process, particularly the active involvement of outside directors and the approach to internal talent development with a view to the selection of management executives (details on page 60). In addition, the duties of executive officers were redefined to make them easier for stakeholders to understand, and with a view to making

the nomination process more transparent the Nominating Committee discussed matters such as a preliminary list of candidates for the succession plan for the current Representative Executive Officer & President.

individual evaluations have also been incorporated. Furthermore, JSF partially revised its executive compensation system in August 2025 to enhance the linkage of share-based compensation to performance and allow for clearer disclosure (details on pages 61-62).

revenue drivers. For changes in the external environment, we mainly discussed the impact of rising interest rates on profitability. Many shareholders expressed their appreciation for the Company's initiatives to date. The insights gained through dialogue were discussed by the Board of Directors, after which the board took action on insights that it determined the Company should incorporate (details on page 62).

The status of dialogue with shareholders is promptly reported to the Board of Directors after each such opportunity so that the board and various committees can also take into account the feedback of shareholders in their discussions.

Enhancement of Information Disclosure and Support for Outside Directors

In FY2024, as part of our initiatives to improve our information tools, we renewed the Company website and adopted a new logo. We also refine the content of our integrated report each year to enable stakeholders to gain a more comprehensive understanding of our initiatives. We will continue to focus on providing information to all stakeholders, including shareholders, investors, and business partners.

Initiatives for Sustainability

We also take a proactive approach to key issues related to sustainability.

Developing and maintaining the infrastructure that forms the foundation of socioeconomic activity is a key element in realizing a sustainable society. It is also one of the Sustainable Development Goals (SDGs) set by the United Nations, and is an area in which JSF believes it is particularly well positioned to contribute as a company that has long supported infrastructure functions of Japan's securities and financial markets. Based on that belief, in addition to the governance initiatives described above, we are carrying out environmental and social initiatives. Specifically, we continue to provide technical and other assistance to an Indonesian securities finance company as a contribution to securities and financial

To Our Stakeholders

We respectfully request the continued understanding and support of our stakeholders as we work to enhance corporate value over the medium to long term with our

Furthermore, with the addition of new directors in FY2025, we will continue with initiatives to enhance support for outside directors by the secretariat of the Board of Directors and thereby improve the board's effectiveness.

We will continue to develop a corporate governance system suited to our operating environment and business portfolio, and remain committed to the sustainable enhancement of corporate value.

market infrastructure overseas. Moreover, as part of our promotion of academic research activities through industry-academia collaboration, we conducted joint demonstration tests with the University of Tokyo on the

potential application of distributed ledger technology to securities financing transactions. We published a paper summarizing the research findings, presented the results at an academic conference overseas, and engaged in ongoing discussions of other topics. We also recognize that addressing climate change is a critical issue.

Although our CO2 emissions have never been large due to the nature of our businesses, in line with the TCFD recommendations, we disclose information on climate change on our corporate website and elsewhere (details on page 47).

public role in mind, strengthen corporate governance, and advance our sustainability initiatives.

Corporate Strategy

Securities Financing Centered on Loans for Margin Transactions

Message from the Responsible Executive Officer

We will achieve growth by meeting the diverse transaction needs of the securities and financial sectors in Japan and overseas.

Our core loans for margin transactions business, licensed under the Financial Instruments and Exchange Act, serves as infrastructure for the securities market as a source of funds and stock certificates for the smooth implementation of standardized margin transactions. Securities financing, which has become a key pillar of our earnings in recent years, leverages the expertise we have cultivated in handling securities and funds through our founding business of loans for margin transactions. It comprises five business areas: (1) bond repo and gensaki transactions, (2)

equity repo transactions, (3) general stock lending, (4) loans for negotiable margin transactions, and (5) loans to retail. These businesses broadly provide liquidity to the securities and financial markets by meeting the financing needs of securities firms, financial institutions, and others for their securities inventories, as well as their need to borrow securities for collateral purposes in various financial transactions. We are promoting securities financing as one of our growth engines, and are also working to expand our services by increasing the number of business partners we work with, including foreign financial institutions, and by diversifying securities handled to

include foreign stocks and foreign government bonds. Recently, there has been an

increase in transactions where assets in the Asia region, including Japanese equities, are accepted as collateral in exchange for high-quality qualified liquid assets

(HQLA) such as Japanese yen and Japanese government bonds. As an institution specializing in transactions related to stocks and bonds, we will continue to provide agile and flexible proposals to meet the diverse transaction needs of the securities and financial sectors in Japan and overseas.

Morikuni Shimoyamada

Senior Managing Executive Officer Responsible for Margin Loan Department,

Institutional Sales Department, Retail Business Department

Business Environment and Strengths

Securities Financing

In stock-related businesses such as loans for margin transactions and general stock lending, demand for stock lending transactions has been rising amid robust equity market conditions since the second half of FY2022. In terms of transaction needs, in addition to conventional covering of short sales, there has been

a trend toward borrowing Japanese equities for use as collateral. Furthermore, the balance of equity repo transactions continues its uptrend in line with the growing purchases of Japanese stocks by foreign financial institutions and others.

In the bond-related business, balances of bond repo and gensaki transactions have remained high, reflecting growing demand for Japanese government bonds and similar instruments from domestic and overseas financial institutions, given stronger settlement risk management and tighter international financial regulations.

One challenge we face is that the performance of loans for margin transactions, our founding business, is significantly affected by stock market conditions and the balance of standardized margin transactions. To ensure that we can continue to provide stable infrastructure functions for securities and financial markets even during market downturns, we have been promoting securities financing to diversify our revenue sources beyond loans for margin transactions and to maintain financial soundness.

We will continue to expand securities financing by making the most of our high credit rating

(creditworthiness) backed by solid equity capital and the expertise we have cultivated in finance and securities-related businesses.

Strategies in the Eighth Medium-Term Management Plan

• Enhance the Loans for Margin Transactions Business In addition to ensuring the stable operation of the loans for margin transactions business by appropriately responding to changes in the stock market environment in ways such as expanding the number of loanable stock issues and stepping up the procurement of stock certificates, we will continue to review measures to promote the use of loans for margin transactions by accurately identifying the trading needs of market participants.

• Expand and Enhance Securities Financing

In securities financing, we will deepen relationships with existing clients while continuing to expand our client base, primarily overseas. To increase the number of securities borrowers, we will actively attend international conferences and other events to further enhance our presence and cultivate new

business with foreign financial institutions and others. To increase bond procurement sources, we will work to strengthen relationships and expand transactions with regional financial institutions and others. With respect to loans to financial instruments companies, we will continue to flexibly respond to client needs, enhancing our commercial appeal and improving transaction convenience in various ways, including diversifying types of collateral accepted and currencies handled. We will also advance our response to the

digitalization of securities and explore collaboration with

Challenges for Future Expansion

Further Enhancing Our Presence

• Continuous engagement

• Building relationships with clients

• Effective public relations efforts

Enhancing Deal Planning and Responsiveness

• Human resource development

• Building transaction expertise and a proven track record

Gathering Information and Identifying

Potential Clients

• Discovering transaction schemes

• Cultivating new clients

• Deepening relationships with existing clients

new market entrants, including fintech companies, in Japan and overseas. At the same time, we will focus on developing human resources to drive these initiatives forward. (Please refer to the "An Employee Roundtable Discussion" on page 44 for details.)

Status of Bond Repo and Gensaki Transactions and Equity Repo Transactions

Since the 2010s, balances of bond repo and gensaki transactions and equity repo transactions have continued to trend upward as a result of our efforts to expand transactions with non-residents by participating in overseas conferences and to diversify transaction

schemes, including accepting foreign securities as collateral and using derivatives such as total return swaps (TRS). The following sections outline specific initiatives and risk management related to bond repo and gensaki transactions and equity repo transactions.

Bond Repo and Gensaki Transactions

Bond repo and gensaki transactions mainly involve the exchange of Japanese government bonds for cash. In recent years, there has been an increase in transactions in which these bonds are procured from institutional investors in Japan and lent to overseas financial institutions and hedge funds. Factors driving this increase include the globalization of Japan's bond market due to the increased entry of foreign-affiliated financial institutions, and the significant increase in the ratio of overseas financial institutions participating in Japan's repo market due to increased demand for collateral to reduce settlement risk and for Japanese

government bonds to comply with financial regulations. Amid these circumstances, transactions now include the exchange of equities for government bonds, not only securities for cash.

Institutional investors in Japan, including regional financial institutions, have investment needs with respect to the Japanese government bonds they hold, but directly lending those bonds to overseas entities such

as financial institutions involves the significant burden of establishing business relationships, including creating credit lines and handling international contracts. As

one of the leading players in the repo market, we cover almost all financial institutions in Japan and serve as

a bridge between the investment needs of domestic institutional investors and the procurement needs of overseas financial institutions from a relatively neutral standpoint. Going forward, we will continue to increase bond repo and gensaki transactions both domestically and internationally.

Outstanding Bond Repo and

Gensaki Transaction Balance (Average)

Number of Counterparties (Contract Basis)

Domestic financial institutions, etc.

Overseas financial institutions, etc. (Japan-based)

Overseas financial institutions, etc. (Overseas-based)

Domestic financial institutions, etc.

Overseas financial institutions, etc. (Japan-based)

Overseas financial institutions, etc. (Overseas-based)

(Billions of yen)

12,000

(Companies)

200

10,000

8,000

6,000

4,000

2,000

0

175

150

125

100

2020 2021 2022 2023 2024 (FY) 2020 2021 2022 2023 2024 (FY)

• Transactions with overseas financial institutions (overseas-based) are steadily increasing.

• As we focus on securities demand rather than funding demand, our presence in specific collateral (SC) transactions* is growing.

* In general collateral (GC) transactions, no specific security is designated, as the primary purpose is to meet funding requirements. In SC transactions, a specific security is designated, as the primary purpose is to obtain that security.

In order to meet the diverse needs of our domestic and overseas clients for purposes including fund procurement and fund management mainly using domestic and overseas equities, we are increasing the number of contract-based transactions (such as stock loan agreements, Global Master Securities Lending Agreements (GMSLAs), TRSs, and loan agreements). Amid the recent trend toward stronger corporate governance, market expectations for awareness of the cost of capital in management has led to widespread purchases of Japanese stocks by overseas financial institutions and other investors. Against this backdrop,

equity repo transactions for funding purposes have increased, and our transaction balance has been trending upward.

In addition, we are actively meeting the needs of overseas financial institutions for funding in Japanese yen collateralized by Asian equities. Going forward, we will continue to leverage our neutral position, high credit ratings and accumulated transaction expertise to flexibly meet the needs of our clients in ways such as diversifying the types of collateral accepted and currencies handled.

* The standard international contract for securities lending transactions

Outstanding Equity Repo Transaction Balance (Average)

Number of Counterparties (Contract Basis)

Domestic financial institutions, etc.

Overseas financial institutions, etc. (Japan-based)

Overseas financial institutions, etc. (Overseas-based)

Domestic financial institutions, etc.

Overseas financial institutions, etc. (Japan-based)

Overseas financial institutions, etc. (Overseas-based)

(Billions of yen)

1,400

1,200

1,000

800

600

400

200

0

(Companies)

30

20

10

0

2020 2021 2022 2023 2024 (FY) 2020 2021 2022 2023 2024 (FY)

• Funding to overseas financial institutions (overseas-based) and lending of Japanese government bonds collateralized by Japanese equities to foreign-affiliated financial institutions remain solid.

Expanding Overseas Transactions through Participation in International Conferences and Other Events

For JSF, international conferences provide a valuable point of contact with potential new clients. We actively participate in international conferences and have expanded our scope to locations worldwide. In addition to having participated in the ISLA, PASLA, ISLA Americas, and other conferences held in Europe, North America, and Asia, in 2025 we participated for the first time in the SASLA conference held in South Africa.

CASLA

ISLA

GFF

PASLA

ISLA

Americas

SASLA

• International Securities Lending Association (ISLA)

  Industry association representing the common interests of securities financing market participants across Europe, the Middle East and Africa (established in 1989)

• Pan Asia Securities Lending Association (PASLA)

  APAC market equivalent to ISLA (established in 1995)

• Canadian Securities Lending Association (CASLA) Canadian market equivalent to ISLA (established in 2009)

• South African Securities Lending Association (SASLA) African market equivalent to ISLA (established in 1989)

• International Securities Lending Association Americas (ISLA Americas)

  Industry association dedicated to research and education on various regulatory responses and topics in the financial services industry

  (established in 1914)

• Global Funding and Financing (GFF) International conference on securities financing, organized by Clearstream

When attending conferences, we meet with a diverse group of clients based outside Japan, including securities firms, banks, tri-party agents and other financial institutions, as well as stock exchanges, platform operators and magazines and other media outlets based in various countries. These meetings enable us to acquire up-to-date information about the latest technologies and overseas market trends and regulations in the finance sector, which we then share within our organization.

In addition, JSF participated for the first time as a sponsor at the PASLA conference held in Macau in February 2025. Participation in overseas conferences has led to the conclusion of an increasing number of new transactions in Asia, thereby contributing to the diversification of the Company's revenue. (Please refer to "An Employee Roundtable Discussion" on page 44 for details.)