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

Japan Securities Finance Co., Ltd.

Be unique.

JAPAN SE CUR ITIES FINANCE C 0., LTD.

1-2-10 Nihonbashi-Kayabacho, Chuo-ku, Tokyo

Integrated Report 2025

Japan Securities Finance Co., Ltd. Integrated Report

JAPAN SECURITIES FINANCE

About Us

The JSF Group at a Glance

Group Composition

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

Real estate leasing business

5.9%

Â¥1.1 billion

Trust banking business

16.0%

JSF Group Gross Profit* by Business (FY2024)

Securities finance business

Loans for negotiable

margin transactions 4.1%

Â¥0.3 billion

Equity repo transactions

23.3%

Â¥1.7 billion

Bond repo

and gensaki transactions 54.8%

Â¥4.0 billion

Securities financing

Gross profit

Â¥7.3

billion

Loans to retail

6.8%

Â¥0.5 billion

General stock

lending 8.2%

Â¥0.6 billion

Trust banking business

Real estate leasing business

Loans for margin transactions

23.0%

Â¥4.3 billion

companies and other companies.

Securities Finance Business

Japan Securities Finance Co., Ltd.

See page 24 for details.

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

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

Â¥3.0 billion

Securities investment, etc.

16.6%

Â¥3.1 billion

Securities financing

Consolidated gross profit

Â¥18.7 billion

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

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

JSF's Main Businesses

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

Loans for margin transactions

Supplying funds and stocks necessary for standardized margin transactions

Bond repo and

gensaki transactions

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

39.0%

Â¥7.3 billion

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

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

JSF's Business Model

Equity repo transactions

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

Bond repo and gensaki

transactions

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

Total bond repo and gensaki

transactions market balance

Approx. ¥226 trillion

JSF's market share: Approx. 4.4%

Investors

Standardized margin transactions

Loans for margin transactions (Margin loans/Stock loans)

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

Standardized margin transaction buying balance

Approx. ¥2,700 billion

Utilization rate for loans for margin

Standardized margin selling balance

Approx. ¥460 billion

Utilization rate for loans for margin

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

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

Stocks

Gave rise to

Strengthening the Earnings Base

Securities

Funds/ Securities

Securities companies

Financial institutions

Funds/ Stocks (Collateral)

Funds/ Securities

Funds/ Stocks

proprietary trading systems

transactions: Approx. 14.6%

transactions: Approx. 32.0%

Equity repo transactions, general stock lending, and other

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

Stock (collateral) lending

transactions balance

Approx. ¥21 trillion

JSF's market share: Approx. 5.0%

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

(Collateral)

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

Trust Banking Business

JSF Trust and Banking Co., Ltd.

See page 36 for details.

Nihon Building Co., Ltd.

See page 37 for details.

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

Gross Operating Profit

(Securities Finance Business and Trust Banking Business)

(Millions of yen)

Trust Banking Business (Non-consolidated)

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

About Us

Japan Securities Finance's Roadmap to the Future

Vision

Announced November 2025

Announced November 2021

Management Policy through FY2025

Medium-Term

Management Policy

FY2022 Results

Consolidated ordinary profit:

Â¥7.6 billion

ROE: 4.36%

Management Goals

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

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

Strategies

• Strengthen securities financing centered on loans for margin transactions

Announced February 2023

Seventh Medium-Term Management Plan

Management goals achieved in the plan's first year

FY2023 Results

Consolidated ordinary profit:

Â¥11.0billion

ROE: 5.73%

Management Goals

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

Announced November 2023

Long-Term Management Vision

FY2024 Results

Consolidated ordinary profit:

Â¥12.5 billion

ROE: 7.44%

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

ROE

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

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

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

PBR

Target a market valuation consistently above 1.0x

Eighth Medium-Term Management Plan

See page 16 for details.

Management Goals

Consolidated ordinary profit:

Â¥15.0 billion Consolidated ROE: 8%

Six Strategies for Achieving Management Goals

See page 17 for details.

Shareholder Return Policy during the Eighth Medium-Term Management Plan

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

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

ROE and PBR

ROE

(ï¼…)

8.0

6.0

4.0 3.79

3.03

2.66

4.36

Establish a Global Position

• Enhance presence and recognition in overseas markets

  Establish a Position as the Market Leader in Securities Finance

• Further strengthen securities lending

• Expand securities financing

• Innovate business and improve operational efficiency by leveraging digital technology

  Ensure Stable Operation of Infrastructure Functions and Strengthen Corporate Foundation

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

• Initiatives for new businesses

• Strengthen consolidated management of the Group

• Strengthen the human resource base

  7.44

PBR

(Times)

2.0

5.73

1.6

1.2

0.97

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

2.0

0.35

0.54

0.59 0.64

0.8

0.4

ratio of 100%)

0.0

2019 2020 2021 2022 2023 2024 (FY)

0.0

Material Issues

• Climate change

• Education

• Human resources

• Human rights

• Capital market

  • Corporate governance

  • Compliance

  • Risk management

  • Business continuity planning (BCP)

    • Eighth Medium-Term Management Plan

    • Ninth Medium-Term Management Plan

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

Message 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

Shigeki Kushida

Representative Executive Officer & President

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

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

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

their ongoing understanding and support.

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

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

6 Japan Securities Finance Co., Ltd. Integrated Report 2025 Japan Securities Finance Co., Ltd. Integrated Report 2025 7

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

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

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

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

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

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

for securities lenders, primarily in Asia but also in Europe

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Corporate Governance Enhancement Initiatives

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

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

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

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

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 Outcomes Vision

Financial Capital

JSF's Unique Features

Business Activities

Generation of social activity

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)

  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

  Services that can link the needs of

  Outside Japan

  Providing liquidity in the form of funds

• 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

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

securities finance

Human Capital

• Human resources with expertise and initiative

• Hiring of talent with diverse backgrounds

• Promotion of personnel across the Group

  Intellectual Capital

  securities markets and financial markets

  In Japan

  JSF

  Financial markets

  and securities to clients in and outside Japan

  Outside Japan

  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

  Enhancement of corporate value

• Enhance presence in global

  Many years of accumulated experience:

  • Capabilities in managing systems for loans for margin transactions

  • Transaction proposal capabilities in securities financing operations

  • Risk management expertise

    Social and Relationship Capital

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

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

  Strengthen the

Expand target markets and position in Asian and Western

margin transactions: Maintain margin transaction system in

of securities lending: Expand strengthen capabilities for

• 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

External Environment

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

  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

  • 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

    • Progress of digitalization

    • Corporate governance reforms

Message from the Chairperson of the Board

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.

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.

Succession Plans (Initiatives of the Nominating Committee)

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

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.

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.

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

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

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.

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.

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

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

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

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.

in both. The Company has focused on strengthening that the Company will work toward achieving ROE of 8%

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

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

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

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 Management Goals of the Eighth Medium-Term Management Plan

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

Profitability Ordinary profit: ¥15.0 billion

• 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.

Capital Efficiency ROE: 8%

• 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

Â¥15.0 billion

(ï¼…)

8.0

Sixth Medium-Term Management Plan

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.

   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)

2. Corporate Message

   Be unique. Be a pioneer.

   Strategy

   Management Plan

   Management Plan

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

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

Six Strategies for Achieving Management Goals

(5) Group management enhancement

identification of market needs

(2) Expansion of Securities Financing Centered on Further Strengthening of Securities Lending

• Expansion of transactions focused on securities

• Strengthening transaction scheme development capabilities

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 for margin transactions and accurate

(6) Talent enhancement

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

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.

(4) Business Innovation and

Operational Efficiency through Digital Technology Utilization

• Strategic IT investment

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

(3) Enhancing Presence and

Recognition in Overseas Markets

• Expanding target markets and products for cross-border transactions

• Enhancing position as a key player in Asia

  Main Measures and Initiatives Shareholder Return Policy

  
  
  

  Promoting Sustainability Management

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.

• To enhance shareholder returns, JSF will aim for a total payout ratio of 100% until it achieves ROE of 8%, by paying dividends and flexibly repurchasing shares.

  Dividend payout ratio of around 70%

  Dividends

Purchase on the market

100%

Driving IT strategies to

support management and operations

Promoting Diversity

& Inclusion (D&I)

• Dividends will be paid proactively, with a dividend payout ratio of around 70% as a guideline.

Talent Portfolio

• Promoting experienced hires and increasing specialized talent ratio

Offensive IT Investment

Strategic investments aligned with changes in the business portfolio

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

(Yen)

• Adding and improving

  functions to strengthen competitiveness

• Introducing new technologies to deliver new value

• Implementing IT tools to promote DX

100

Ordinary dividend per share Special dividend per share

(Billions of yen)

12.0

Profit attributable to owners of parent Share buybacks

Training & Career Path

• Strengthening talent with a focus on expertise and proactivity

80 60

40

20 0

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 0

3.9

Dividends

5.1

5.9

8.0

3.0

10.3

9.4

2020 2021 2022 2023 2024 2025

Forecast

(FY)

2020 2021 2022 2023 2024 2025

2.8

3.0

Forecast

(FY)

Evaluation & Rewards

• Actively evaluating employees' contributions to task execution

Defensive IT Investment

Investments supporting smooth operations and business continuity

Workplace Improvement

• Balancing work with childcare and caregiving, utilizing telework

• Promoting a comfortable work environment

• Maintaining and ensuring

  stable operation of existing systems including IT upgrades

• Strengthening measures against cyberattacks and data breaches

• Expanding BCP frameworks

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

Message from the Officer Responsible for Corporate Strategy

Management Strategy

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.

FY2024 Consolidated Financial Results

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.

The economic environment in FY2024 was characterized by a continued, moderate recovery supported by factors

and trust banking operations.

As a result, consolidated results for FY2024 saw increases

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

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

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

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

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

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

financing, which centers on loans for margin transactions,

sustainability initiatives.

ROE and PBR Total Shareholder Return (Index*)

FY2024 Consolidated Results (Millions of yen)

(%)

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

5.73

0.97

7.00

(Forecast)

1.09 1.12

1.2

1.0

0.8

0.6

400

300

200

198.1

224.1

367.1

406.6

213.4

430.4

254.8

2 0.54

1 0

0.59 0.64

0.4

0.2 0

167.1

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

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.

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 Corporate Governance Initiatives

Our central sales strategy in the Seventh Medium-Term Management Plan is to further strengthen the loans for margin transactions business and securities financing.

secure stable earnings by accumulating carry income through fund procurement on favorable terms backed by our high creditworthiness. We will conduct risk management within

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.

Securities financing is influenced not only by equity

our risk appetite framework (RAF) to appropriately control

Initiatives of the Board of Directors and the Nominating Committee

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.

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

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.

Our policy is to actively pay dividends, with a target

policy during the period of the Seventh Medium-Term

Enhancement of Information Disclosure and Support for Outside Directors

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

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

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.

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.

Shareholder Returns

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

Ordinary dividend per share

Special dividend per share

Share buyback amount

Initiatives for Sustainability

(Yen) 100

(Left axis)

2021

2022

2023

(Left axis)

2024

(Right axis)

2025 (Forecast) (FY)

(Billions of yen)

4.0

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

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.

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

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%.

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

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

Business Environment and Recognized Issues

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.

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

Strategies in the Eighth Medium-Term Management Plan

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

• Enhance the Loans for Margin Transactions Business

  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

  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

  Challenges for Future Expansion

  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

  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.

  Business Environment and Strengths

  	Service	Details
  Securities Financing	Loans for negotiable margin transactions	While loans for margin transactions provide funds and stocks necessary for the settlement of standardized margin transactions, the business of loans for negotiable margin transactions involves lending funds to securities companies to enable them to purchase stocks in negotiable margin transactions.
  	Loans to financial instruments companies	We are responding to the diversification of financing methods of securities companies through transactions such as those in which stocks are used as collateral when lending funds to securities companies (general loans), and those in which cash is deposited in exchange for borrowing stock held by a securities company (equity repo transactions).
  	Loans to retail	These are transactions that involve lending funds to individual investors and others, using stock as collateral. The main service in this business is COM-STOCK loans (securities-backed loans that can be transacted online).
  	General stock lending	General stock lending is the business of procuring stock from institutional investors and others, and lending it to securities companies that mainly require it for trading, thus contributing to the stability of the settlement system.
  	Bond repo and gensaki transactions	This is the business of matching (brokering) various financial institutions' lending and borrowing needs, mainly for Japanese government bond repo and gensaki transactions (transactions in which bonds are exchanged for cash).

  Securities Financing

• 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

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 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

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.

Outstanding Bond Repo and

Gensaki Transaction Balance (Average)

Domestic financial institutions, etc.

Overseas financial institutions, etc. (Japan-based)

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.

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.

Number of Counterparties (Contract Basis)

Domestic financial institutions, etc.

Overseas financial institutions, etc. (Japan-based)

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,

Outstanding Equity Repo Transaction Balance (Average)

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

2020 2021 2022 2023 2024 (FY)

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

Number of Counterparties (Contract Basis)

Domestic financial institutions, etc.

Overseas financial institutions, etc. (Japan-based)

Overseas financial institutions, etc. (Overseas-based)

(Companies)

30

20

10

0

2020 2021 2022 2023 2024 (FY)

Overseas financial institutions, etc. (Overseas-based)

(Billions of yen)

10,000

8,000

6,000

4,000

2,000

0

12,000

2020 2021 2022 2023 2024 (FY)

Overseas financial institutions, etc. (Overseas-based)

(Companies)

200

175

150

125

100

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.

• 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.

Expanding Overseas Transactions through Participation in International Conferences and Other Events Risk Management for Securities Financing

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.

Transaction lots are large for securities financing, especially for bond repo and gensaki transactions, and their balances have increased significantly due to the growth of the business, as explained above. This tends to inflate the balance sheets. Following here is an explanation of the structure and risk management in this business.

Bond repo and gensaki transactions are brokerage transactions that match the needs of lenders and borrowers. As a result, on the balance sheets, both assets (cash collateral for securities borrowed and securities purchased under resale agreements) and liabilities (cash collateral received for securities lent and securities sold under repurchase agreements) expand, as shown in (1) below. In recent years, the balance of bond repo and gensaki transactions has been at a high level. However, we reduce net exposure through a series of measures, including receiving and paying

cash equivalent to the market value of the bonds as collateral for the bonds involved in these transactions, marking the bonds to market during the transaction period, and executing margin calls (receiving/paying the difference between the cash collateral and the market value of the bonds) as appropriate (see (2) below). In addition, most of our clients are eligible for debt assumption by financial institutions with relatively high credit ratings or by the Japanese Securities Clearing Corporation (JSCC).

These risk controls have helped limit increases in net exposure and credit risk even as the balance sheets and transaction balances have grown.

CASLA

ISLA

GFF

PASLA

ISLA

Americas

SASLA

(Billions of yen)

JSF conducts daily

mark-to-market valuations (receipt and payment of the difference between the market value and cash collateral), which limits exposure.

Exposure

(Traded (Collateral) securities)

(2)

• 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)

  Entered in both assets and liabilities

• 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

(1)

Entered in both assets and liabilities

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.)

The balance of transactions in other securities financing, such as equity repo transactions, has also been trending upward. In equity related transactions, JSF applies the same risk control measures as for bond repo and gensaki transactions, and also sets appropriate haircuts (value markdowns) based on the volatility and market liquidity of the equity involved in the transactions to limit the increase in exposure.

As with other securities finance businesses, such as loans for margin transactions, securities financing is managed within an integrated risk management framework by measuring the amount of credit risk on a daily basis and keeping it within the limit for risk capital set based on JSF's financial strength. In addition, we monitor counterparty exposure for each counterparty on a daily basis to ensure that exposure in times of stress remains within a certain limit, thereby preventing excessive exposure to specific counterparties.

Risk Appetite Framework

Message from the Responsible Executive Officer

Risk appetite is the type and total amount of risk that a company takes on in order to achieve its medium-term management plans. JSF's management goals center on capital efficiency, profitability and shareholder returns, and we clearly identify risks that we should be willing to take1 and risks that we should avoid2 in order to achieve those goals within the scope of our management capabilities. Our risk appetite framework (RAF) integrates business management and risk management. In setting the management goals for the medium-term management plan, we review the Company's risk appetite and the associated indicators and conduct regular monitoring.

In addition, the Company plays a public role as a provider of securities market infrastructure, so we are strongly aware that the risks we take on should in no way impact our ability to maintain financial soundness or stably operate our loans for margin transactions business.

We will continue strengthening our monitoring system, developing an operational structure that places greater emphasis on risk and return, and promoting Group-wide RAF management, while further enhancing our RAF to increase corporate value over the medium to long term.

Notes: 1. Risks to be taken: Risks associated with revenue-generating activities

2. Risks to be avoided: Unacceptable risks such as conduct risk

Risk Appetite Framework

Hiroshi Sagawa

Managing Executive Officer Responsible for Risk Management Department

Governance

In the execution of business management, we set more detailed targets and formulate plans for each business in promoting the medium-term management plan, keeping in mind our risk management policy, risk appetite and risk appetite indicators decided by the Board of Directors. The Board of Directors works to improve and strengthen the

Operation

In the operation of the RAF, the Board of Directors establishes a risk management policy for overall management based on the social role that JSF should play as a company responsible for infrastructure functions of Japan's securities market and its medium- to longterm vision for the future. At the same time, the board

determines the basic items of the RAF, such as risk appetite

Process for Setting and Managing Risk Appetite

1. Confirm premises for management plan formulation

   effectiveness of the RAF on an ongoing basis by monitoring risk appetite and risk appetite indicators as part of its supervision of business execution. If risk appetite indicators deviate from the levels set, the board analyzes the causes and formulates countermeasures.

   and the risk appetite indicators that specifically reflect its components, in conformance with the medium-term

   management plan. Risk appetite is set from a wide range of perspectives, including management stability and financial soundness, as well as the social responsibility for the infrastructure functions of and contribution to Japan's securities market.

   Formulate multiple scenarios that take into account changes in the domestic and overseas environment, and verify premises for formulating medium-term management strategies, including capital and liquidity constraints.

Social and public role

Business characteristics (licensed business, concurrent businesses), risk characteristics

Risk culture

RAF operational structure

Corporate philosophy and management strategy

Business management

Risk management

management plan

Integrated management

Management Committee

Type and amount of risk to

be taken (Risk appetite)

Risk appetite indicators

Improvement Monitoring

Analysis and reporting

1. Consider medium-term management plan proposals

   
   
   

   Consider management plan proposals that encompass management goals, risk appetite, and management strategy in order to realize the Vision of the Future Targeted by JSF.

1. Verify risk appetite

   Review as appropriate based on verification results

   Evaluate the propriety of financial plans and risk appetite through stress tests, and revise management plan proposals, as necessary.

1. Determine medium-term management plan

   The Board of Directors discusses and decides management goals, risk appetite and management strategies.

1. Monitor risk appetite compliance

2. Reset risk appetite

Upper limit exceeded or other reason

Basic Policy

The Group considers the RAF to be part of its corporate governance framework. Our objective is to maintain the high degree of financial soundness required of a securities finance company responsible for the infrastructure functions of Japan's securities market, while improving medium- to long-term corporate value as expected of a listed company.

To this end, the RAF enhances the transparency of the review and decision-making process for establishing the Company's overall risk-taking policy, including capital allocation and strengthening profitability. It also optimizes the allocation of management resources and reinforces monitoring.

Fostering and Embedding a Risk Culture

We must provide risk management education and training and share risk information to foster and embed a risk culture across the Group. Therefore, we conduct regular in-house training to help employees deepen their understanding of the RAF and enable them to apply it in business operations. Regarding risk information, we conduct surveys of market trends and monitor business partners as needed and share necessary information in cooperation with relevant business operations departments.

In addition, risk governance is further strengthened through a continuous cycle in which operation of the RAF keeps risk culture in focus, thereby further fostering and embedding this culture.

We will continue to promote greater sophistication in our risk governance, which is an integral part of our corporate governance, with the aim of achieving sustainable growth and increasing corporate value over the medium to long term.

Risk Management

Basic Policy

JSF plays a public role as a provider of infrastructure for securities and financial markets, so we are strongly aware that the risks we take on should help maintain financial soundness and increase corporate value. Furthermore, we position risk management as one of our most important

Risk Management System

We broadly classify assumed risks for management as credit risk, market risk, liquidity risk, operational risk and system risk. For credit risk and market risk, we strive to secure profits while quantitatively identifying risks and keeping them within levels that match our financial strength. For liquidity risk, operational risk and system risk, we strive to prevent their manifestation by implementing appropriate management according to risk characteristics.

Risk Management System

management issues, and through the JSF Business Conduct Guidelines and our risk management policy we instill a mindset and risk culture that emphasizes risk management throughout JSF.

Regarding reporting, credit risk and market risk are reported to the Management Committee following

discussion at the Risk Management Committee, and liquidity risk is reported to the Management Committee following deliberations at the Asset Liability Management (ALM) Committee. The officers responsible for each committee regularly report to the Board of Directors on the status of risks and measures to improve risk management.

Capital Adequacy Ratio (Adequacy of Equity Capital)

As one of the conditions for our involvement in the Japanese Securities Clearing Corporation (JSCC) clearing and settlement system and in the operations of the Bank of Japan, we are required to calculate, manage and maintain

our capital adequacy ratio above a certain level in accordance with the Financial Instruments and Exchange Act. Specifically, we precisely calculate and manage this ratio on a monthly basis, monitor the impact of daily market fluctuations on equity capital, and quickly report this information to management.

To ensure we can maintain these levels, we implement management measures such as setting upper limits on the risk equivalent amount for each business segment.

Integrated Risk Management

We quantify credit risk and market risk using statistical methods. Operational risk and system risk are quantified using a basic approach. We manage calculated risk amounts within the scope of allocated risk capital for each risk type.

Risk capital is allocated to each business based on the assumed maximum amount of risk, after securing a risk buffer for times of stress.

In addition, we verify our capital adequacy by using stress tests to calculate impacts on our equity capital, and formulate action plans, as necessary. We conduct two types of stress tests. The first type is monthly tests based on individual stress scenarios. These include credit stress,

such as the bankruptcy of a counterparty, and market stress, such as fluctuations in the yield curve or a sudden drop in stock prices. The second type consists of comprehensive semiannual stress tests based on scenarios that reflect the current financial environment.

In addition, we are going beyond integrated risk management, further enhancing our approach by linking it with the risk assessment framework (RAF) in ways such as using calculated risk amounts for risk-return analyses by business category and transaction type.

Management

Committee or department

Managing departments

Board of Directors

President Management Committee

Executive Officer Responsible for Risk Management Department

ALM Committee

Risk Management Committee

Executive Officer Responsible Executive Officer

for Information Systems Responsible for Internal Planning Department Audit Department

Checks

Information Systems Planning Committee

Risk Management Department

(Supervising department for risk management)

Information Systems

Planning Department

Liquidity risk

Checks

Market risk

Checks

Credit risk

Checks

Operational risk System risk

Checks Checks

Operation departments

Treasury

Department

Treasury

Department

Margin Loan Department

Institutional Sales Department

Retail Business Department

Margin Loan Department

Treasury Department

Osaka Branch

Each department

Each department

Executive Officer Responsible for Treasury Department

Integrated Risk Management

Risk tolerance

limit

Risk capital

Illiquid assets such as fixed assets

Internal Audit Department

Supervising department for internal audits

Based on this approach to risk management, the system we have developed supports the expansion of our balance sheet through the risk appetite framework described as follows.

Equity capital

Capital allocation limit

Measurement results

Credit Risk Management Liquidity Risk Management

JSF quantifies and manages credit risk using default rates for in-house ratings that it has calculated for each of its business partners. To manage credit risk (except for loans to retail), we adopted the Monte Carlo simulation method starting in FY2025 to improve the sophistication of credit risk measurement.

For credit management, we screen business partners, securities accepted as collateral, and loans, and set and manage transaction limits for each business partner. For each loan transaction, we reduce exposure by marking to

market the relevant collateral on a daily basis and requesting additional collateral as needed. In the event of borrower bankruptcy, we take steps including selling securities held as collateral to promptly collect receivables, and each business unit also conducts rigorous self-assessments of the assets under its management. Additionally, we manage large credit positions by calculating the stress exposure for each business partner across our businesses on a daily basis and sharing this information with business departments.

JSF recognizes liquidity risk as a significant risk and strives to ensure the liquidity necessary for stable business operations by obtaining commitment lines from multiple financial institutions and by diversifying funding methods and maturities.

For cash flow management, we set a minimum amount of liquidity reserves based on the assumption that certain stress events will occur in financial markets. We monitor the state of liquidity reserves by formulating cash flow forecasts and confirming the amount of funding available, as well as the status of highly liquid asset holdings, while confirming concentrated maturities for large amounts of funds. We also

have a system for reporting the status of daily cash flow to management. Furthermore, we conduct stress tests that simulate scenarios such as cash outflows during stress in the funding environment to assess and monitor the required level of liquidity on hand.

In addition, we manage liquidity risk on a consolidated basis by receiving daily reports from JSF Trust and Banking that include cash flow forecasts and the status of its liquidity reserves. Furthermore, we prepare for unforeseen circumstances with measures to supplement liquidity, such as holding a certain amount of government bonds that we can immediately convert into cash.

Market Risk Management Operational Risk Management

The market risk of our portfolio securities and other assets is quantified using the historical method or variance-covariance methods, and results are promptly shared with the front office and management to ensure proper risk management. Furthermore, to validate the reliability of our market risk quantification model, we conduct back testing to compare calculated VaR with hypothetical profit and loss

from a given portfolio. At the same time, we appropriately control investment losses by setting loss limits on an overall profit and loss basis. Trigger points are set just short of the limits to enable prompt formulation and implementation

of action plans based on the situation, before the limits are breached.

Each department at JSF is responsible for managing operational risk, which we mitigate by ensuring that employees are fully versed in appropriate administrative procedures through the development of rules, manuals

and other guidelines, as well as through training and other education. In addition, we regularly conduct internal audits to prevent incidents and to improve administrative processes.

System Risk Management

JSF has established an information security management policy as the basis for information security measures, with the System Planning Department responsible for managing system risks and implementing necessary measures for each risk. To ensure stable operation of our information systems, we proactively prevent system failures by employing redundant networks and equipment. To ensure secure and efficient system development and operation, we clarify work procedures and establish monitoring

systems. In addition, we protect our information assets, encompassing information and systems, through measures against unauthorized access and cybersecurity threats. We have also established rules that all officers and employees must adhere to, and ensure thorough understanding.

Furthermore, we have implemented measures to minimize and quickly recover from the impact of system failures, such as preparing various response manuals and conducting training.

Group Company Initiatives

JSF Trust and Banking Co., Ltd.

Net assets ¥24.4 billion Balance of trust assets: ¥5,562.5 billion Number of employees: 43

Business Description and Policy

A wholly owned subsidiary of JSF, Nihon Building was established in 1958 as the JSF Group's real estate leasing company. Nihon Building is tasked with providing suitable, comfortable offices and various facilities to a range of clients, including those in the securities and financial sectors.

In addition to working for the Group, such as managing the JSF head office building, and steadily promoting the leasing business for buildings owned by the Group mainly in the Nihonbashi-Kayabacho district, Nihon Building will continue to improve its services

in cooperation with parent company JSF, while responding to changes in the business environment, including the redevelopment projects under way in the Nihonbashi and Kabutocho districts.

Shinichi Sugiyama

President

Ordinary Profit (Non-consolidated)

(Millions of yen)

800

715

600

400

200

0

2020 2021 2022 2023 2024 (FY)

Nihon Building No. 3

Net assets: ¥8.1 billion Number of employees: 17

(As of March 31, 2025)

Nihon Building Co., Ltd.

(As of March 31, 2025)

Business Description and Policy

JSF Trust and Banking Co., Ltd. was established in 1998 amid financial system reforms known as the "Japanese Big Bang." A wholly owned subsidiary of JSF, it aims to contribute to the development of financial and capital markets as the JSF Group's trust business. Since its establishment, JSF Trust and Banking has been enhancing and expanding its investment service systems and evolving its financial technologies to meet needs that become more diverse year by year. Through these efforts, it has built, deepened and enhanced a proprietary business model for its management trust business that includes preservation trusts for securities companies and other financial instruments companies.

The Medium-Term Management Plan and Our Progress

Tai Nishida

President

During the Seventh Medium-Term Management Plan, which began in FY2023, we have been implementing the following key management policies: (1) Further expand the management trust business; (2) Provide credit services that complement trust services; (3) Based on appropriate risk management, generate stable earnings from securities investments; and (4) Work to enhance internal control

and governance systems and bolster their supporting operational structure, including human capital and systems development, as a key management strategy.

In FY 2024, in the core trust banking business, various preservation trusts-including client money segregation trusts-performed well. As a result, the fiscal year-end balance of trust assets exceeded ¥5 trillion for the first time, and trust fees reached a record high for the second consecutive year. The banking business recorded steady

earnings from various types of credit services focused on the financial sector and from securities investment services that

take market risks into consideration. As a result, ordinary profit was ¥1,755 million and net profit was ¥1,226 million, with overall performance remaining solid.

FY2025 is the final year of the Seventh Medium-Term Management Plan. As we prepare for the next plan, market trends indicate the ongoing emergence of new business needs resulting from systemic enhancements in financial and capital markets and the progress of technological innovation such

as digital transformation. At the same time, our longstanding track record has enhanced our market recognition.

Management trusts, which include the niche services mentioned above, are our core business. We will enhance our expertise and efficiency in this business, further strengthening existing services and steadily expanding their scope, with the aim of achieving our corporate vision. We likewise remain deeply mindful of our social responsibilities and public mission as a trust bank, and we will continue to meet the trust placed in us.

Strengths and Opportunities

Our strengths lie in our neutrality as an important member of the JSF Group; our expertise, ability to make proposals, and agility in the management trust business developed through the experience and track record we have built since our founding; and our meticulous administrative support capabilities. The system-side measures connected to these strengths are also important points. Under the Seventh Medium-Term Management Plan, we have begun to upgrade key core systems and improve the functionality of peripheral systems to enhance client services and establish a

Trust Fees

(Millions of yen)

stable, efficient operational structure.

Another of our strengths is our collaboration with JSF, our parent company. We have promoted collaboration

in the areas of sales, risk management and operational management, while striving to enhance not only our own but also the entire Group's human capital through systematic personnel exchanges. We will continue striving to strengthen this kind of collaboration in a way that leads to the mutual enhancement of the operational management capabilities of both companies.

Ordinary Profit (Non-consolidated)

(Millions of yen)

2,000

1,500

1,690

2,000

1,500

1,755

1,000 1,000

500 500

0

2020 2021

2022

2023

2024 (FY)

0

2020 2021

2022

2023

2024 (FY)

Strengthening Human Resource Development and Improving Engagement

Initiatives for Human Capital Development

Supporting the growth of each employee improves our corporate vitality and organizational transformation capabilities

As our business structure has long been centered on our licensed business of loans for margin transactions, teamwork is a strength we have relied on to maintain the accurate and steady execution of ongoing operations. However, to respond to our rapidly changing environment, we believe an important management issue is to create a work environment in which diverse employees can fully demonstrate their individuality and strengths, enthusiastically and autonomously explore and transform their work, and grow as they accumulate experience and achievements. Based on this belief, the new

1. Recruitment

2. Training and career path

3. Evaluation and compensation

4. Environment

• In addition to the hiring of new graduates, we actively and continuously hire people with established experience in order to secure a diverse workforce.

• We have created environments for autonomous career development that allow employees to maximize their individuality and strengths and grow on their own through their work.

• In order to support autonomous career development and taking on challenges, we have established new human resources development programs that include the revision of some programs and the establishment of other new training programs.

• We are building a stronger talent pool that can take a leading role in shaping management strategy based on diversity, expertise, and independence.

• We will appropriately assess the contribution of employees' work performance, including the degree to which they have developed their abilities, achieved results, and fulfilled their expected roles.

• We will assess our employees' independent approach and actions toward their work, such as work reform, work efficiency improvement, and voluntary efforts to achieve ambitious goals.

• We will create a work environment that ensures work-life balance by promoting the use of various leave systems to help employees balance childcare or nursing care with their work.

• We will promote the creation of a comfortable work environment that enables diverse work styles, including the utilization of telework.

  human resource strategy in the Seventh Medium-Term Management Plan is a synthesis of a policy (our human capital policy) and measures (human resource development programs) for strengthening our base of human resources, which are the source of corporate value creation.

  We have been working to strengthen our human resources foundation. In terms of recruitment, we continue to actively hire both new graduates and experienced

  Implementing Our Human Resource Development Programs

Wataru Sato

Managing Executive Officer Responsible for Human Resources Department

In the "Initiatives for Achieving the Vision" section of our human capital policy, we set out new human resource development programs designed to support employees' autonomous career development and their efforts to take on challenges for personal growth. We are working to diversify our human resource portfolio and strengthen the foundation of our human resource capabilities through the following initiatives and other efforts.

professionals through various means. Regarding training, we continue to strengthen and expand our skills development system with a focus on autonomous skill improvement. For example, we broaden external experience through temporary assignments to financial institutions in Japan and overseas and through trainee placements. In addition, use of our "Challenge Program," which supports employees' voluntary and proactive learning (enabling applicants to participate in external training programs

of their own choosing), has been increasing each year, reflecting employees' growing engagement in autonomous career development and personal growth. To develop management talent, we continuously conduct "Next-Generation Management Training," in which outside directors with management experience give talks on the qualities expected of such individuals going forward. Furthermore, through effective implementation of specific measures that we will formalize going forward, we intend to continuously support the growth of each employee, thereby improving employee engagement, which will improve Company-wide vitality and organizational transformation capabilities.

Human Resource Development Program

Set career goals

Synergy

On-the-job training

Off-the-job training

Rank-based training Theme-specific training Lectures and external seminars

Practice in the

Synergy workplace Synergy

Self-development

e-Learning Distance learning courses

Qualification acquisition support system Self-development support system

Our human capital policy comprises our vision, criteria describing the ideal human resources that the Company wants to cultivate and strengthen, and initiatives for achieving the vision. These initiatives will be formalized one by one in each area of recruitment, development and career path formulation, evaluation and compensation, and environment improvement.

Vision

JSF

Talent who respect diverse values and work together with other employees to enhance corporate value

Talent who are able to accurately and steadily perform highly complex tasks, and contribute to maintaining the reliability of the Company's infrastructure functions

Talent who are able to strive to gain a deeper and broader understanding of their assigned work, and who are able to lead business transformation while enhancing their expertise in their respective fields

Talent who have expertise in a certain field and are able to lead and contribute within the Company by making use of their expertise

Individuals who take the initiative, set high goals and work independently to achieve those goals with the involvement of the people around them

Talent who are able to take a leading role in shaping management strategy from a broad perspective

Staff/Leaders

Managers Specialists

Senior management Experts

Career Stage

Ideal

We aim to achieve sustainable growth and enhance corporate value by aligning our human capital initiatives with our management plan. The diagram below shows the relationship between JSF's securities financing business and human resource development to provide a clearer picture of these initiatives.

To support the further growth of the securities

of digital technologies; and (4) the ability to cultivate new transactions through innovation. Under our human capital policy, we are working to build a workforce with these qualities through talent development and career growth using both OJT and Off-JT, recruitment that effectively combines experienced professionals and new graduates, the enhancement of organizational vitality

Promoting Active Participation of Women

In order to step up the active participation of women, we have set a target of maintaining a ratio of 40% or higher for women out of total hires, including both new graduates and experienced hires. In addition, we

provide career development support, including a range of training programs, to enable women to take on

leadership roles at an early stage of their careers. We also provide a supportive environment that enables women

to balance work with childcare, nursing care and other responsibilities, while making the most of their individual abilities and strengths. Through such measures, we plan to increase the ratio of women in managerial positions.

financing business, the Company requires personnel

through the promotion of diversity and inclusion, and

Employees Managerial Positions New Graduate Hires

with the following qualities: (1) a deep understanding of securities financing-related markets; (2) international expertise that enables the expansion of transactions in overseas markets, particularly in Asia; (3) knowledge

other initiatives. Through these initiatives, we aim to develop hands-on managers and specialists, expecting them to become senior management as they gain experience in real business operations.

(Number)

250

35.2

200

30

150

100

20

50

0

10

165

300

Men

Women Ratio of women

(%)

40

(Number)

120

Men

Women Ratio of women

5

110

6 4

100

3

2

90

1

0

0

106

5.4

(%)

6

Number)

6

4

2

0

60

50.0 50

40

30

20

10 0

3

3

8

Men

Women Ratio of women

(%)

70

OJT

OJT

• Engagement in initiatives aimed at cultivating new transactions

• Participation in international forums

• Market data collection and analysis

Recruitment/ D&I

Enhancement of workforce

Off-JT/

Recruitment/D&I

• Acquisition of high-potential talent (new graduate recruitment)

• Securing job-ready talent through experienced hires

• Promotion of diversity and inclusion

Self-development

Off-JT/Self-development

• Effective use of training programs

• Development of core skills (foundational skills)

Industry-academia collaboration, international cooperation,

etc.

Specialists

Hands-on managers

Senior management

Required qualities and expertise: Digital technologies

Ability to develop new transactions

Management Plan

2021 2022 2023 2024 2025

2021 2022 2023 2024 2025

2020 2021 2022 2023 2024

(FY)

Human Capital Policy

Through the use of telework and other initiatives, we will achieve efficient and diverse work styles unrestricted by time and place and promote the creation of a

comfortable work environment. Telework is available to all employees, and accounts for about 40% of days worked per week on average, post-pandemic.

In addition, JSF has set the rate of paid leave taken and overtime hours worked as important indicators, and

encourages employees to reduce overtime work and take leave at an appropriate frequency and duration. We also pay attention to changes in employees' work conditions, such as the psychological burden of work and stress caused by the work environment. Employees who are dealing with issues are identified and followed up with quickly to help improve conditions.

Rate of Paid Leave Taken

(%)

74.2

73.5

73.4

79.3

74.6

80

Promoting Active Participation of Experienced Hires

In aiming for sustainable growth and improved corporate value, we are flexibly recruiting talent from a wide range of industries in accordance with the evolution of our business. This includes people capable of providing

all regardless of nationality. We also provide support for experienced personnel we hire so that they can maximize their abilities in the workplace. We provide them with opportunities to acquire knowledge both in their

70

60

50

64.5

diversified financial services, people who can help us enter new fields and people with specialized expertise,

specialized fields and in our main business areas.

40 2019 2020 2021 2022 2023 2024（FY）

As outlined under "Initiatives for Achieving Our Vision," we promote balance between work and childcare or nursing care by establishing various support systems, ensuring that employees are informed of system changes resulting from legal or regulatory revisions, and maintaining frameworks for individual consultation and support. With regard to childcare in particular, the rate of employees taking a childcare leave of absence remains at 100% for women, while we have set a target of 40% or higher for men (the

FY2024 result was 100%). All employees who have taken a childcare leave of absence have returned to work.

We will continue to create a workplace and systems that make it easier for all employees to take a childcare or nursing care leave of absence. For employees wishing to do so, we conduct individual interviews to identify their concerns, anxieties and needs, and respond flexibly

while ensuring psychological safety, including through the development of plans to facilitate a smooth return to work.

Initiatives for Achieving Diversity

Achieving diversity is crucial for creating a sustainable society. JSF is working to appoint a broad range of talent to advance its diversity initiatives. However, the proportion of women in management cannot yet be regarded as high. This gender gap can be attributed to several factors, including the historically low number of female applicants for and hires into career-track

positions under an employment management system that distinguishes between career-track and general positions, as well as the fact that, given the limited number of mid-career departures, the Company has not actively pursued experienced hires, including men. In the legal profession

advancement of women and the diversification of talent to progress steadily. In fact, I understand that many female employees and experienced hires

are actively involved in JSF's efforts to expand transactions with overseas financial institutions, including local sales activities abroad as well

Shoko Sugino

(Chairperson of the Audit Committee)

to which I belong, women were once extremely rare, but the situation has changed significantly. At JSF, the number of female employees in their 20s and 30s has likewise increased in recent years through new graduate and experienced hire recruitment, and many are now building their careers. In light of this, I expect the

Initiatives to Promote Human Capital Management

JSF formulated its Human Capital Policy in 2023. Developed under President Kushida's leadership, this basic policy promotes initiatives in human capital

formation, including human resource development, to strengthen the human resource base that underpins corporate value creation. Personally, I view JSF's employees as having a strong sense of mission with respect to the Company's public role, a high degree of self-discipline, and a consistently solid level of competence. However, this alone is not sufficient. To

advance structural reform and enhance corporate value, the Company will need to take on challenges that are not bound by precedent, and this will require distinctive

Toward Future Enhancement of Corporate Value

JSF is a company that requires careful navigation, as it must steadily fulfill its public role in operating the standardized margin transactions business while also focusing on growth areas to enhance corporate value over the medium to long term. In recent years, the

securities financing business has grown significantly. In addition to the loans for margin transactions business that the Company has long been engaged in, new business initiatives seeded over this period are steadily bearing fruit. Going forward, there remains scope to improve

the quality of operations by accurately identifying customer needs, carefully assessing risk and return, and

as meetings and presentations at international finance and securities conferences. By approaching diversity with a focus on gender as a starting point, I believe JSF is gradually fostering a culture in which individuals are

evaluated based on their abilities and contributions rather than on their gender or how they joined the Company.

and highly motivated talent. I sense the executive team's strong recognition of this issue. In addition to developing existing talent, the Company is also working to diversify its talent portfolio by hiring individuals from a wide variety of backgrounds, regardless of age, gender, or nationality.

I believe reforms to strengthen the human resource base will need to continue. However, how to maintain and enhance employee engagement-long rooted in the Company's public mission-will also become an important challenge. I would also like JSF to continue to value the identity it has cultivated over its long history as

a provider of securities and financial market infrastructure.

continuing to develop new services. As stated in JSF's Human Capital Policy, the vitality of both the organization and its people is essential to corporate growth. As a provider of infrastructure functions for securities and financial markets, JSF must continue to be a sustainable organization, and I believe it already has the qualities required to do so. I hope JSF will remain an attractive company where employees continue to feel a strong sense of attachment, find value and purpose in their work, and engage with it in a positive and forward-looking manner. I will also continue to contribute to these efforts in my capacity as an independent outside director.

Group Management Strategy

An Employee Roundtable Discussion

Employees discuss the expansion of securities financing and the human resource development

initiatives that support it. Nao Endo

Human Resources Department

(Joined JSF in 2015)

Kenta Yamamoto

Treasury Department

(Joined JSF in 2019)

Hinano Masuda

Margin Loan Department

(Joined JSF in 2017)

Kohei Takeda

Institutional Sales Department

(Joined JSF in 2012)

Responsibilities and Motivation

Takeda: I currently work in the Institutional Sales Department. Each project requires considerable time- negotiating terms with counterparties, finding common ground, and structuring the scheme- but I feel a great sense of accomplishment when a deal finally comes together.

Masuda: I currently work in the Margin Loan Department, where I am involved in acquiring shares to cover shortages in loans for margin transactions. Margin transactions are subject to volatility and the stock lending market is also highly fluid, so we need to respond in real time while assessing the supply and demand balance. This can be stressful because of the many contingencies that affect the entire stock market, but I find it very rewarding.

Yamamoto: After joining JSF, I was assigned to the Settlement & Custody Department, then temporarily assigned to the Japan Securities Dealers Association for two years, and now I work in the Treasury Department, where I am involved in bond repo and gensaki transactions. Various transactions proceed in parallel, so I need to quickly present trading terms in response to counterparty requests, which requires speed and agility.

Also, because JSF deals with government bonds, we are subject to the influence of political and international trends. We must therefore stay highly attuned and quickly respond to political, economic, and financial market developments around the world. My work is challenging, but rewarding.

Endo: I have worked in the Treasury Department and the Margin Loan Department, and am now in the Human Resources Department. The basic rule at JSF is to rotate

employees through approximately three-year stints in three departments during the first 10 years. I was assigned to the Human Resources Department as my third department in April 2025. The Human Resources Department is primarily responsible for recruiting new graduates and planning

and managing human resource development. Recruiting involves consideration of how best to communicate the appeal of JSF, and what kinds of personnel we should attract to help JSF grow amid significant changes in the business environment, such as increasingly sophisticated trading and risk management. We examine these issues with a broad perspective and stay informed about conditions across many departments.

Growth of Securities Financing

Takeda: JSF's securities financing business has grown in recent years. This is partly due to the expansion of our pool of

business partners from mainly securities companies in Japan to securities companies outside Japan and other financial institutions, as well as the diversification of collateral we accept beyond Japanese stocks and Japanese government bonds to include foreign stocks, foreign government bonds, and corporate bonds.

In this environment, JSF participates in many conferences outside Japan every year in order to broaden its international business relationships. I attended the Pan-Asia Securities Lending Association (PASLA) conference held in Macau in February 2025 for the first time, along with Mr. Yamamoto and two other colleagues. Although the schedule was demanding, meeting with about 30 companies over two days, I was able to gain insight into needs that differ from those in Japan.

Yamamoto: I believe that having young employees from each department gain experience by participating in conferences outside Japan is steadily enhancing our organization, and

that this is helping us expand our business. I participated in PASLA for the first time. Many of the participants were from Europe and the United States. They were not just looking at Asian markets, but at markets around the world, gathering information and looking for trading ideas. I realized that doing business with people like that goes beyond simply being able to speak English and requires me to learn more about a broad range of transactions.

Masuda: JSF employees began consciously using the term securities financing around the time I joined the company in 2017, and I feel that our work has diversified in recent years.

As part of my work in securities financing, I attended the May 2025 annual meeting of the Canadian Securities Lending Association (CASLA), which brings together securities-related organizations from North America, including Canada and the United States. I met with many of the participants. In addition, as noted on our website, in September 2025 I was featured

as an emerging talent in the international securities finance industry magazine Securities Finance Times. The article has generated a strong response, including many questions and inquiries from our business partners.

Endo: The Human Resources Department intends to expand its training programs so that all employees can take on a variety of challenges early in their careers. As mentioned earlier, with the expansion of securities financing, JSF has been increasing its participation in overseas conferences and its meetings with international business partners. To support these initiatives, in 2025 we introduced English lessons for employees scheduled to go on overseas business trips, using the actual materials they will work with in the field. In

addition, to strengthen core capabilities across the Company, we provided training on securities financing operations to all

employees in 2024, and to newly hired employees in 2025. In addition, we invite external experts to give lectures on topics such as interest rate trends and financial regulations.

Human Resource Development Initiatives

Endo: As part of our human resource development efforts, we introduced a challenge program in 2024 to support employees who are proactively considering their careers.

Under this program, the Company covers the full cost of external courses that are not part of existing training

programs, provided participating employees are motivated to improve their skills and the courses are deemed work-related. Many employees are taking advantage of this program, submitting applications for a variety of courses, including English conversation classes they find effective and specialized seminars on risk management.

Takeda: I used JSF's corporate-sponsored study system to attend graduate school for two years and earned a master's degree in financial engineering. I attended lectures on weekday evenings, and I was grateful that everyone in my department cooperated so that I could attend.

Endo: JSF is a small company with a corporate culture of tolerance and mutual respect. This atmosphere has helped foster Company-wide enthusiasm for actively making use of our training programs.

Masuda: About three years ago, I attended an English conversation school for a year. I'm planning to use the challenge program to take online English lessons taught by native instructors.

Yamamoto: I took online English conversation training during my first and second years with JSF. JSF's wide-ranging business operations are supported by a broad range of training covering fields such as IT, digital transformation, and accounting. I would like to take advantage of this training with my future career development in mind.

My temporary assignment to the Japan Securities Dealers Association was also very educational. I was able to gain knowledge that I could not have acquired within JSF. The Japan Securities Dealers Association is an organization with

a stronger infrastructure focus, and I was grateful for the valuable opportunity to experience firsthand what it means to support the securities market.

Endo: In expanding our training offerings, we research programs that are likely to become necessary at JSF in the future, such as popular English courses and data analysis using the Python programming language. I make a point of

trying them out myself through the challenge program. We are committed to creating a training system that even more employees find useful.

Future Actions and Commitments

Masuda: Japanese equities are once again attracting attention worldwide, backed by a favorable market environment. I think it is important for JSF to continue providing a stable supply of equities from a neutral position in order to support the liquidity and reliability of Japan's stock markets. I hope to contribute to that effort by further deepening my insights into Japan's stock markets through my day-to-day work. I also want to broaden my expertise beyond Japanese equities by actively gaining knowledge and practical experience in international securities financing, and to improve my data analysis skills through technology as well as my communication skills, including English.

Takeda: The securities financing market is expanding worldwide, and there are many needs that we have not yet addressed. Meeting more of these needs will expand JFS's role and, in turn, support the Company's growth and the development of the financial sector. More employees therefore need to grow so that they can take on securities financing responsibilities.

Yamamoto: I believe JSF can develop its people more easily if it provides greater opportunities for temporary

assignments in securities financing at other companies, as well as additional learning opportunities. In addition to growing

as individuals, we need to strengthen our organizational capabilities so that we can identify and address new challenges in securities financing. Closer communication and collaboration among departments are crucial, and we need to maintain flexibility in initiatives such as improving existing systems and analyzing approaches used by other companies.

Endo: The Institutional Sales Department has built up extensive knowledge in new business areas, and we hope to share it with other departments and strengthen the organization as a whole through cross-departmental

training and other measures. For areas in which JSF is less knowledgeable, I would like to draw on frontline opinions to expand learning opportunities, such as study sessions with external organizations, temporary assignments at other companies, and seminars led by external lecturers.

Sustainability Initiatives

Basic Approach to Sustainability Dialogue with Stakeholders

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

Material Issues That We Recognize

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.

Governance

• 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.

Cooperative Relationships with Asia's Securities Market Infrastructure Awards and Rankings

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.

Industry Excellence Awards 2024,

Asian Repo Team of the Year

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

G Governance

Basic Concept for BCP

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.

World Finance Awards, Best Corporate Governance in 2025

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.

Respecting Human Rights

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.

Promoting Respect for Human Rights

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.

Raising Awareness of and Instilling Respect for Human Rights (Education and Training)

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.

Comments from the Osaka Branch about the Operational Status of BCP

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

Basic Concept

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.

Corporate Governance History

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

Composition of the Board of Directors Status of Board of Director Initiatives

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

Overview of the Board of Directors (As of June 27, 2025)

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%

Non-Executive Independent Directors Outside Directors

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.)