ANNUAL REPORT
Ending March 31, 2010

Corporate Profile
Okasan Securities Group is a stand-alone securities company group established in 1923.
Headed by the holding company, Okasan Securities Group Inc., it consists of nine
domestic companies and one overseas company. Okasan Securities Group is committed
to a wide spectrum of securities investment and asset management businesses, through a
network of six domestic and overseas securities firms centering on the core firm, Okasan
Securities Co., Ltd. It is also involved in asset-management business, such as investment
trusts, information-processing/system-development business, as well as office-support
business, such as alternate back-office jobs and temporary staffing.
Taking advantage of nurtured expertise since its inception, Okasan Securities Group
engages in unique and community-based “face to face” securities sales activities, and it
also provides a cutting-edge online trading environment. We are always ready to offer
optimum performances by way of highly sophisticated and professional investment andasset management services, which include the development of innovative products,
extensive and abundant market information, and high quality analyst information.

Contents
Corporate Profile

1

Consolidated Financial Highlights

2

Management Policy

3

Operating and Financial Review

6

Consolidated Balance Sheets

10

Consolidated Statements of Operations

12

Consolidated Statements of Changes in Net Assets

13

Consolidated Statements of Cash Flows

16

Notes to Consolidated Financial Statements

18

Independent Auditors' Report

43

Reference Data
Okasan Securities Co.,Ltd.

Non-Consolidated Balance Sheets

45

Non-Consolidated Statements of Operations

47

Corporate Data

48

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Consolidated Financial Highlights
Okasan Securities Group Inc. and consolidated Subsidiaries Years ended March 31, 2010 and 2009

2010

2009

Thousands of
U.S.dollars (note)
2010(4/1/09〜3/31/10)(4/1/08〜3/31/09)(4/1/09〜3/31/10)

Operating revenues ................................................

¥66,236¥55,554$711,909

Operating income ......................................................

7,747△2,27083,265

Net income .....................................................................

2,786△1,881

29,944

Total assets ....................................................................

499,495

424,993

5,368,605

Net assets .........................................................................

115,578

111,525

1,242,240

Millions of yen

Yen

Per share of common stock

U.S.dollars (note)

Basic net income .......................................................

¥13.63¥△9.20$0.15

Cash dividends applicable to the year .....

7.50

5.00

0.08

Note: The translation of the yen amounts into U.S.dollars are included solely for the convenience of thereader, using the prevailing exchange rate at March 31,2010, which was =Y93.04 to U.S.$1.

Operating Revenues（¥ billions）

100

80

Operating Income

Net Income（¥ billions）（¥ billions）

40

40

30

30

Net Assets（¥ billions）

150

100
60
20

20

10

10

0

0

40
50

20

'06 '07 '08 '09 '10'06 '07 '08 '09 '10−'06 '07 '08 '09 '10

2−'06 '07 '08 '09 '10

Management Policy
Okasan Securities Group Inc. and Consolidated Subsidiaries

1. Basic management policy for the Company
The Company manages the corporate Group consisting of the Company, which is the holding company, andconsolidated subsidiaries in Japan and abroad. Through asset management services, which have at their core
the securities business and asset management business, the Company aims to continue to increase corporate
value and to become a company that is trusted by customers, shareholders, and the market.
2. Basic policy on the distribution of profits and dividend for the term
We regard returns to shareholders as a management priority. While ensuring that sufficient earnings are
retained to strengthen management and achieve future development, we pay dividends according to theGroup's performance, with the intention of maintaining steady dividends.
3. Important management index
In rapidly changing market conditions, it is important to secure stable profits. Based on this understanding, we
consider return on equity (ROE) an important management index. We aim to achieve a stable consolidated
ROE of 10% as a business objective.
4. Medium and long-term management strategy(1) Medium-term business plan and progress towards achievement
Okasan Securities Group Inc. has developed and implemented a medium-term business plan for the period
from April 2008 through the end of March 2011 (from FY2008 to FY2010). Although we suspended the
pursuit of numerical targets against a backdrop of financial market turmoil from autumn 2008 onward, we
have maintained the basic content of group policies and implementation of important measures, focusing on
qualitative goals and key strategies. We have also implemented special measures in response to rapidchanges in the market and business environment.
In the fiscal year ending March 2010, the second year of the plan, Okasan Securities strove for improvement
in investment content, particularly in forecasting ability, as a way of strengthening its ability to provide in
products and investment information. In addition, to develop our ability to advise on asset management, thecore subsidiary of the Group reviewed the structure of business operations at branches and renovated theIse Branch. In IT infrastructure, Okasan worked on upgrading its main platform to be well prepared for the
Tokyo Stock Exchange's newly introduced “Arrowhead” trading system. In addition, we have continued todevelop the core system, “Okasan Database Information Node (ODIN)”. Another upgrade was also made to
the listed FX trading system “Click 365” of Okasan Online Securities. The Group also implemented themerger of Rokuni Securities Co., Ltd. and Oishi Securities Co., Ltd., in search of a new business model as acommunity-based securities-business style.
(2) Revision of the medium-term business plan
The Group has steadily implemented various initiatives of its plan formed for the period from April 2008
through the end of March 2011. However, we suspended the pursuit of numerical targets reflecting turmoil inglobal financial markets, triggered by the Lehman Shock in autumn 2008, and shifted management focus on
measures to respond to emergency conditions in the market. We subsequently lifted the emergency mode
partly because we were able to post profits in the year ending March 2010 despite the current difficult
business environment. In addition, we have formed a new medium-term business plan to achieve further
growth of the Group through the period ending 2013, when Okasan will celebrate its 90th anniversary.

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In the new medium-term business plan, keeping the basic policy of “Do all we can for each and every one of ourclients” intact, the Group will focus on improving service quality. Also, the Group aims to establish a businessplatform that delivers stable growth, regardless of any operating environment, and enhance its presence in themarket by providing the highest-quality products, information and services.

We would like to establish asecurities business model tailored to local markets, each with its own particular characteristics.
In parallel with forming the Group's new medium-term business plan, Okasan Securities Co., Ltd., a core
member of the Group, formed its own new medium-term business plan, where the core subsidiary, too, aims to
be a securities company that provides the highest-quality asset management advice by further strengthening its
customer-oriented culture with a focus on providing “optimal investments from a global perspective.”
The period of the new medium-term business plan is three years from April 2010 through the end of March 2013
(from FY2010 to FY2012).

New medium-term business plan of Okasan Securities Group Inc.
-1. Period of the plan
Three years from April 2010 through the end of March 2013
-2. Basic Group policies
For our clients

To do all we can for each and every one of our clients・Provide for best products, information and services
・Establish a business model of community-based securities-business style

For our employees

To be a leading company with regard to employees' sense of job satisfaction

For our shareholders

To enhance the corporate value of the Group, which was built around retailsecurities-3. Management goals on a consolidated basis
ROE: 10% as a long-term target
Net assets: 130 billion yen at the end of the plan period

5. Challenges the Company should address
The social, political, and economic environment in Japan and abroad are changing so drastically that a
conventional investment style is no longer effective. Meanwhile, demand for quality investment advice has
become decidedly stronger.
We believe what is most important is to enhance the value of the Group as a whole by implementing the new
medium-term business plan and establishing a business platform to deliver stable growth, under our basic
policy of “Do all we can for each and every one of our clients.”
For this reason, we will hone our ability to flexibly provide products and information services to meet the needsof each client, as we believe our competitive edge lies in these capabilities. We will also make every effort toprovide the best products, information and services from a global perspective, commit to distinguish ourselvesin a community-grounded style in business, and be the most trusted house and best partner to our clients withregard to asset management advice.

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6. Outline of corporate governance structure(1) Basic concepts regarding corporate governanceAs globalization progresses and a management tends to attach greater importance to corporate value,
corporate governance is becoming increasingly important for a company. In this environment, we regard
improvements in corporate governance as one of the important managerial tasks and are working to improveit through measures such as creating a structure that brings quick decision making and business execution,
constructing an internal control system, strengthening of a risk management system and ensuringtransparency with a timely disclosure of corporate information.
(2) Structure of business execution
With regard to the structure of business execution, the Board of Directors as the supreme decision making
organ on management makes a decision on items provided in laws and regulations and articles ofincorporation and maps out plans of the management strategy of the Group and supervises them. The
President - CEO executes decisions of the Board of Directors and supervises overall management. The
Board of Directors consists of 8 directors, which enables it to make a quick decision by being small in
number.
We have introduced the operating officer system, clarifying the roles of the Board of Directors, which makes
management decisions and supervises management, and executive officers, who are in charge of businessexecution, to strengthen the business management of the Group. The Board of executive officers consists of
12 such officers and, according to the basic management policies adopted in the Board of Directors,
deliberates on laying out specific policies and plans of business execution and other important managerial
subjects. In addition, we set up the meetings of “management strategy of the Group” and “business
management of the Group” as advisory bodies to the president-director, to realize the planning and decisionof uniform and flexible management strategies and the improvement in the administration of each of theGroup companies.
(3) Management monitoring structure
As regards the structure of the management monitoring, out of 6 auditors in total that includes 2 statutory
auditors, 3 are outside auditors specified in the corporate law under Article 2, paragraph (16). Auditors
constitute an auditors' meeting, decide on auditing policies according to laws and regulations and articles ofincorporation based on the rules of auditors' meeting, and make up audit opinions from the reports ofauditors. And through attending the Board of Directors and other important meetings etc., hearing the Boardof Directors and looking through important approved documents etc., they oversee the process of decision
making at the Board of Directors and the state of business execution of directors. In addition, they are trying
to implement a proper auditing in cooperation with independent auditors and the divisions in charge ofinternal auditing.
(4) Internal auditing structure
As part of efforts to contribute to secure appropriate business operations such as reducing management
risks and preventing wrongdoings, we set up internally the auditing division and assigned four staff there.
The auditing division makes up an audit plan in each fiscal year, periodically implements an on-the-spot audit
based on the plan and inspects documents when necessary. The results of auditing are reported to theBoard of Directors from the director in charge of auditing, in the form of the audit report.

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Operating and Financial Review
Okasan Securities Group Inc. and Consolidated Subsidiaries Years ended March 31, 2010 and 2009

I. Analysis of operating results
In the current fiscal year, the Japanese economy followed a path of normalization subsequent to the global
financial crisis, which took place in the second half of the previous fiscal year. In particular, exports experienced
a clear recovery in the second half of the fiscal year. After bottoming, corporate earnings also improved thanks
to domestic and international measures for monetary and fiscal support. Furthermore, in some areas, capital
expenditures for new equipment picked up. That said, declining wages and a tough employment environment
dragged down consumer spending, despite government support via distribution of fixed-amount cash benefits,
tax credits for eco-friendly cars, and an eco-point system for consumer durables.
While the yen was initially weak at the beginning of the fiscal year, the following trend was a sell-off of the US
dollar against most other currencies due primarily to concerns regarding the ballooning US budget deficit andstrong demand for emerging market currencies. Consequently, the yen rose as high as the ¥84/dollar level in
November. Thereafter, the dollar turned around on market expectations for interest rate hikes in the US as wellas the Bank of Japan’s shift to a more accommodative monetary policy. Thus, the exchange rate as of the
fiscal year end was around ¥93/dollar. On the other hand, a relatively strong euro suddenly tumbled at the
beginning of 2010, due to the sovereign debt problems of Greece and other European countries. After the euro
fell to below the ¥120/euro level, it rebounded to around the ¥126 level at the end of the fiscal year.
In the stock market, the Nikkei 225 broke the 10,000 mark in June, driven by receding worries regarding the
global financial crisis and accumulating optimism for an economic recovery. The market then entered range
trading around the 10,000 level, followed by a bear trend through the end of November to around 9,000 due to astronger yen versus the dollar, concerns regarding large equity finances, and the credit crisis in Dubai.
However, additional accommodative policies by the Bank of Japan in December capped the appreciating yen
and encouraged offshore investors to buy back export-oriented stocks. The Nikkei 225 closed at 11,089.94 at
the end of the fiscal year, a 36.8% rise from a year ago and the first time in the last three years where it has
shown an increase at the fiscal year end.
Fixed income markets showed a weaker trend after early April 2009. The recovery of stock markets in the US
and Japan, a rise in the US long bond yield, and concerns about additional issuance of Japanese Government
Bonds caused the 10-year JGB yield to continue its rise. After hitting highs of 1.560% in June, yields continued
to be somewhat volatile, trading between 1.20 and 1.50%. In early December, when the Bank of Japan held amonetary policy meeting and decided to introduce new fund-supplying operations, the yield fell to 1.190%.
However, tightening policies in some emerging countries and the higher US long bond yield brought about amodest rise in the JGB yield, ending up at 1.395% for the fiscal year.
In this environment, in response to various needs of clients, Okasan Securities Co., Ltd., the core member of
the Group, has made efforts to provide higher quality investment information and has focused on proposaloriented services, including investment trust funds and foreign stocks and bonds. The core company also held
its Shisan Kenko Fair to promote health and healthy investment with an focus on clients’ newly depositedassets. In addition, the company widened its product coverage, including an enhanced broking platform for
ADRs of Brazilian shares. Okasan Online Securities enhanced its investment tools, including “Okasan Net
Trader” and “Okasan RSS”. The internet trading subsidiary also expanded its product line and conducted a
promotional campaign to introduce new clients. In March 2010, the forex trading system was upgraded throughthe introduction of “Okasan Online FX (Click 365)”.

Okasan Asset Management focused on the launch of a

new investment trust funds and expansion of its sales network. As a result, institutions including regional banks
are newly included as sales channels.

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6

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As a result of the above-mentioned activities, gross operating revenues of the Okasan Securities Group rose
19.2% from a year ago, to ¥66,236 million, and net operating revenues increased 20.8%, to ¥64,374 million.
Selling, general and administrative expenses edged up 1.9% from a year ago, to ¥56,627 million. Consequently,
Net income was ¥2,786 million, compared with a net loss of ¥1,881 million in the previous fiscal year.
1. Fees and commissions received
Total fees and commissions received increased 29.2% from the previous fiscal year, to ¥43,847 million. A
breakdown of major items is shown as follows:（1）Brokerage commissions
The average daily trading volume (Japanese common stock) on the Tokyo Stock Exchange in the current
fiscal year increased 5.0% from year ago to 2,322 million shares, while trading value fell 23.5% from year
ago, to ¥1,553.1 billion. Despite the mixed environment, the Okasan Group's stock brokerage commissions
rose 6.7%, to ¥13,287 million, from a year ago. The increased volume in equity brokerage at Okasan Online
Securities was one of the drivers of the commission increase. Bond brokerage commissions increased
223.5% from a year ago, to ¥83 million. Other brokerage commissions rose 405.0% from a year ago, to¥1,163 million, reflecting the growth in FX trading. Consequently, total brokerage commissions in thecurrent fiscal year rose 14.3% from a year ago, to ¥14,533 million.
（2）Underwriting fees and selling concessions, and commissions on the sale of financial instruments tospecified investors and otherThanks to a series of large-scale financing primarily by leading financial institutions, the number andamount of deals surged from the previous fiscal year's level and made this year historical boom in equity
finance. As a result, revenue from primary equity markets increased 313.6% from a year ago, to ¥574
million. On the other hand, with the contribution of lead manager fees in municipal bonds and corporate
bonds, as well as fees from the underwriting of CB-type bonds with warrants, revenue from primary bondmarkets increased 80.1% from a year ago, to ¥101 million. As a result, total of underwriting fees, selling
concessions, and commissions on solicitation for sale of financial instrument to qualified investors andother, increased 246.1% to ¥675 million.
（3）Administrative charges on offering, selling and solicitation for sale of financial instrument tospecified investors, and other earned commissions.
This revenue category is dominated by investment trust funds. During the fiscal year, the Group focused on
the marketing of existing funds, including the “Asia Oceania High Yield and Growth Open” and “Emerging
Sovereign Open (nicknamed as Atlas)”, and made efforts so that the clients could accumulate assets undercustody. Furthermore, aiming to widen the product line-up, the Group launched various types of new funds,
including “World Best Companies (WBC) Series” funds (for Japan, the US and China), a fund focusing on
environmental and natural resource related stocks, a fund investing in infrastructure related stocks in Brazil
and India, and a fund investing in stocks and bonds in Asia and Oceania. As a result, administrative
charges on offering, selling and solicitation for sale of financial instruments to specified investors increased
72.8% from a year ago, to ¥17,676 million. On the other hand, other earned commissions edged up 1.5%
from a year ago, to ¥10,963 million, due to the contribution items including administrative charges forinvestment trust funds and sales commissions for insurance policies.

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7

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Fees and Commissions received
Breakdown by category(Millions of yen except percentage)

2010<A>

2009<B>

Ratio(4/1/09〜3/31/10)(4/1/08〜3/31/09)<A>/<B>¥14,533¥12,713114.3

13,287

12,457

106.7

Bonds

83

26

323.5

Others

1,163

230

505.0

675

195

346.1

Equities

574

139

413.6

Bonds

101

56

180.1

Placement commissions

17,676

10,228172.8

Other commissions

10,963

10,804

101.5

Total

¥43,847¥33,940

129.2

Brokerage commissions
Commissions(¥ billions)60
50

Equities

Underwriting fees and selling concessions

40
30
20
10
0

'06 '07 '08 '09 '10

Breakdown by Product(Millions of yen except percentage)

2010<A>

2009<B>

Ratio(4/1/09〜3/31/10)(4/1/08〜3/31/09)<A>/<B>¥14,138¥12,859

109.9

363

283

127.9

Investment trusts

27,412

19,629139.7

Others

1,934

1,169

165.4

Total

¥43,847¥33,940129.2

Equities
Bonds

2. Trading profits
Although trading of Japanese shares was relatively light during the fiscal year, foreign stocks such as Chinese
shares and Brazilian ADRs drove growth in trading in response to investors' strong demand for emerging
markets. Consequently, net trading profits on equities rose 103.5% from a year ago, to ¥7,802 million. On theother hand, reflecting the decline in sales of foreign currency denominated bonds to individuals triggered by thestronger yen and lower interest rates in offshore markets, net trading profits on bonds decreased 19.2% from ayear ago, to ¥10,816 million. Extremely volatile foreign exchange markets caused other trading to record a lossof ¥335 million, compared with trading profits of ¥136 million a year ago. As a result, total trading profits
increased 5.3% to ¥18,283 million.
Trading profits30(¥ billions)20

10

Trading profit/loss(Millions of yen except percentage)

2010<A>

2009<B>

Ratio(4/1/09〜3/31/10)(4/1/08〜3/31/09)<A>/<B>

Equities, etc.

¥ 7,802¥ 3,834

203.5

Bonds, etc.

10,816

13,39480.8

Others

△335

136

−

Total

¥18,283¥17,364105.3

0'06 '07 '08 '09 '10

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3. Net financial income
Interest and dividend income decreased 4.2%, to ¥2,478 million, and interest expenses decreased 18.0%, to¥1,862 million. As a result, net financial income increased 94.4%, to ¥616 million.
4. Other operating income
Operating income from operations other than the financial instrument exchange business or its incidental
business decreased 2.1%, to ¥1,628 million.
5. Selling, general and administrative expenses
Selling, general and administrative expenses edged up 1.9% from a year ago, to ¥56,627 million due mainly toa rise in personnel expenses and depreciation charges. However, the rise was partly offset by a decline in realestate related expenses thanks to negotiation on rents and other efforts.
6. Other income (expenses)
Net of other income and expenses was a loss of ¥193 million, or a ¥1,403 million decrease from the previous
fiscal year, due mainly to the absence of reversal of financial instruments transactions reserve, absence ofamortization of negative goodwill, and a decrease in profit on the sale of investment securities.
7. Dividends
We regard returns to shareholders as a management priority. While ensuring that sufficient earnings are
retained to strengthen management and achieve future development, we pay dividends according to theGroup's performance, with the intention of maintaining steady dividends.
For fiscal 2010 we proposed a ¥7.5 dividend per share to shareholders, according to the dividend policy
mentioned above.

II. Analysis of financial position
1. Assets, liabilities and net assets
Total assets rose ¥74,502 million from the end of previous fiscal year, to ¥499,495 million. The increase wasmainly due to a ¥28,452 million rise in cash segregated as deposits for customers and others, a ¥27,701 million
increase in trading assets, and a ¥12,970 million gain in margin transaction related assets.
Total liabilities increased ¥70,449 million from the end of previous fiscal year, to ¥383,917 million. The rise wasmainly due to a ¥60,261 million increase in short-term borrowings and a ¥8,362 million rise in guarantee
deposits received.
Net assets rose ¥4,053 million from the end of previous fiscal year, to ¥115,578 million. This was mainly due toa ¥1,780 million increase in retained earnings and a ¥1,553 million rise in unrealized gains on available-for-salesecurities.
2. Cash flows
Cash and cash equivalents (“funds”) increased ¥2,273 million from the end of the previous fiscal year, to¥36,250 million (a 6.7% rise from a year ago). Cash flows and important factors in cash flows are shown below.
<Cash flows from operating activities>
Operating activities resulted in a cash outflow of ¥48,903 million (compared to an inflow of ¥49,510 million in theprevious year). Outflows included ¥34,905 million in increase in the net balance of trading assets and ¥27,700
million in increase in deposits segregated for customers. These were offset by an inflow of ¥8,362 million froman increase in guarantee deposits received.
<Cash flows from investing activities>
Investing activities caused a cash outflow of ¥1,285 million, or a 46.2% decline from a year ago. Outflows
included ¥2,351 million in payment for investment securities and ¥2,271 million in payment for intangible fixed
assets. These were offset by a cash inflow of ¥2,383 million from the sale of investment securities.
<Cash flows from financing activities>
Financing activities resulted in a cash inflow of ¥52,613 million (compared to an outflow of ¥41,951 million in theprevious year), due primarily to an increase in short-term borrowings.

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Consolidated Balance Sheets
Okasan Securities Group Inc. and Consolidated Subsidiaries − At March 31, 2010 and 2009

Thousands of
U.S.dollars(note 3)

Millions of yen
2010

2009

2010

ASSETS
Current assets:
Cash on hand and in banks (notes 11 and 20)￥

41,440￥40,651$

445,400

Cash segregated as deposits for customers and others

57,701

29,249620,174

Trading assets (notes 4 and 11)

142,869

115,168

1,535,566

Receivables arising from unsettled trades

12,388

9,778

133,147

Receivables on margin transactions (note 5)

44,33831,368476,548

Receivables on collateralized securities transactions (note 6)

137,066

131,796

1,473,194

601

2,179

6,460

Short-term investments (notes 7 and 11)
Deferred income taxes (note 12)

968

1,983

10,404

Other current assets

7,750

12,556

83,297

Allowance for doubtful accounts

(39)

(22)

(419)

Total current assets

445,082374,706

4,783,771

16,00015,927

171,969

10,427

9,551

112,070

Investment securities (notes 7, 8 and 11)

20,712

16,613

222,614Long-term guarantee deposits

3,218

3,282

34,587

Property and equipment, net of accumulated
depreciation of ¥10,660 million ($114,574 thousand)in 2010 and ¥10,281 million in 2009 (notes 9 and 11)
Intangible assets, net (note 9)
Investments and other assets:

Deferred income taxes (note 12)

2,064

2,992

22,184

Other

3,854

3,760

41,423

Allowance for doubtful accounts(1,862)(1,838)(20,013)

27,98624,809300,795

424,993$ 5,368,605

Total investments and other assets

￥

TOTAL

See accompanying notes to consolidated financial statements.

− 10 −

499,495￥

Consolidated Balance Sheets−(Continued)
Okasan Securities Group Inc. and Consolidated Subsidiaries − At March 31, 2010 and 2009

Thousands of
U.S.dollars(note 3)

Millions of yen
2010
LIABILITIES AND NET ASSETS
Current liabilities:
Trading liabilities (note 4)
Payables on margin transactions (notes 5 and 11)
Payables on collateralized securities transactions (note 6)
Deposits received
Guarantee deposits received
Short-term borrowings (notes 10 and 11)
Income tax payables (note 12)
Other current liabilities (note 12)
Total current liabilities￥

100,447
25,38432,822
22,871
29,746
147,326
2,532
5,207
366,335

2009

￥

2010

105,041
18,70537,63815,447
21,38487,065323
4,774
290,377$ 1,079,611
272,829352,773245,819
319,712
1,583,470
27,21455,965
3,937,393

Non-current liabilities:
Long-term borrowings (notes 10 and 11)
Lease liabilities (note 10)
Deferred income taxes (note 12)
Retirement and severance benefits (note 13)
Other non-current liabilities
Total non-current liabilities

4,960
758
2,301
6,156
2,552
16,727

11,379
365
1,948
6,113
2,769
22,57453,311
8,147
24,731
66,16527,429179,783

Financial instruments transactions reserve (note 14)
Total liabilities

855
383,917517
313,468

9,189
4,126,365

18,59012,91965,363

18,59012,91963,583

199,806
138,854702,526(1,877)
94,995(1,859)93,233(20,174)
1,021,012

Valuation and translation adjustments:
Unrealized gain on available-for-sale securities (note 7)
Surplus on land revaluation (note 16)
Foreign currency translation adjustments
Total valuation and translation adjustments

1,556
235
(476)
1,315

3
235
(321)
(83)

16,724
2,526(5,116)
14,134

Minority interests

19,26818,375207,094

115,578

111,525

1,242,240

424,993$ 5,368,605

Net assets
Shareholders' equity (note 15):
Common stock
Authorized−750,000,000 shares in 2010 and 2009
Issued−208,214,969 shares in 2010 and 2009
Capital surplus
Retained earnings
Treasury stock, at cost, 3,843,901 shares in 2010
and 3,802,640 shares in 2009
Total shareholders' equity

Total net assets
Commitments and contingencies (note 21)￥

TOTAL
See accompanying notes to consolidated financial statements.

− 11 −

499,495￥

Consolidated Statements of Operations
Okasan Securities Group Inc. and Consolidated Subsidiaries − Years ended March 31, 2010 and 2009

Thousands of
U.S.dollars(note 3)

Millions of yen
2010

2009

2010

Operating revenues:
Commissions￥

43,847￥33,940$471,270

Net gain on trading

18,28317,364

196,507

Interest and dividend income

2,478

2,587

26,634Service fee and other revenues

1,628

1,663

17,49866,23655,554

711,909

Interest expense

1,862

2,271

20,013

Net operating revenues

64,37453,283691,896

Selling, general and administrative expenses (note18)

56,62755,553608,631

7,747(2,270)83,265

330

427

3,547

−

684

−

(130)

(144)

(1,397)

98

637

1,053

Loss on devaluation of investment securities(153)(1,013)(1,644)

Reversal of reserve for securities transactions

−

920

−

(338)

−

(3,633)

−

(301)

−

(193)

1,210

(2,074)

7,554(1,060)81,191

2,865

569

30,793Operating income (loss)
Other income (expenses):Dividend income
Amortization of negative goodwill
Interest expense
Gain on sale of investment securities

Provision for financial instruments transactions reserve
Other, net
Income (loss) before income taxes and minority
interests
Income taxes (note 12):Current
Deferred

Minority interests
Net income (loss)¥

See accompanying notes to consolidated financial statements.

− 12 −

1,139

138

12,242

4,004

707

43,035

764

114

8,212

2,786

¥

(1,881)$

29,944

Consolidated Statements of Changes in Net Assets
Okasan Securities Group Inc. and Consolidated Subsidiaries − Years ended March 31, 2010 and 2009
Millions of yen
Shareholders' equity
Commonstock

Balances at March 31, 2008¥

18,590Capitalsurplus¥12,944Retainedearnings

Treasurystock,
at cost¥¥68,479Total
shareholders'equity(1,856) ¥98,157

Changes arising during the year:
Decrease resulting from a change ininterest in consolidated subsidiaries

(4)

(4)

Cash dividends(3,015)Net loss(1,881)(3,015)(1,881)

Purchase of treasury stock
Disposition of treasury stock

(21)

(98)

(98)

131

110

(36)

(36)

Changes of treasury stock arising froma change in interest in consolidated
subsidiaries
Net changes other than shareholders'equityTotal changes during the year
Balances at March 31, 2009

−

(25)

(4,896)(3)(4,924)

18,59012,91963,583(1,859)93,233

Changes arising during the year:
Cash dividends(1,006)(1,006)

Net income

2,786

2,786

Purchase of treasury stock

(18)

(18)

(18)

1,762

(1,877) ¥94,995

Net changes other than shareholders'equity−Total changes during the year
Balances at March 31, 2010¥

18,590−¥− 13 −

12,9191,780¥

65,363¥

Millions of yen
Valuation and translation adjustments
Total
Unrealized
ForeignSurplus on
valuation
gain oncurrency
andlandavailabletranslation translation
for-salerevaluation
adjustments adjustments
securities
Balances at March 31, 2008

¥

4,221

¥

197

¥

(276) ¥

4,142

Minority
interests

Total net
assets¥ 19,721¥ 122,020

Changes arising during the year:
Decrease resulting from a change ininterest in consolidated subsidiaries(4)

Cash dividends(3,015)Net loss(1,881)

Purchase of treasury stock(98)

Disposition of treasury stock110

Changes of treasury stock arisingfrom an increase in interest in
a consolidated subsidiary(36)

Net changes other than shareholders'equityTotal changes during the year
Balances at March 31, 2009

(4,218)38(45)(4,225)(1,346)(5,571)(4,218)38(45)(4,225)(1,346)(10,495)

3

235

(321)

(83)

18,375111,525

Changes arising during the year:
Cash dividends(1,006)

Net income

2,786

Purchase of treasury stock(18)

Net changes other than shareholders'equityTotal changes during the year
Balances at March 31, 2010

¥

1,553

−

(155)

1,398

893

2,291

1,553

−

(155)

1,398

893

4,053

(476) ¥

1,315

¥ 19,268¥ 115,578

1,556

¥

235

− 14 −¥

Thousands of U.S. dollars (note 3)
Shareholders' equity
Commonstock

Balances at March 31, 2009$

199,806

Capitalsurplus$Treasurystock,
at costRetainedearnings

138,854$

683,394$

Total
shareholders'equity(19,981) $ 1,002,073

Changes arising during the year:
Cash dividends(10,812)Net income

29,944(10,812)29,944Purchase of treasury stock

(193)

(193)

(193)

18,939Net changes other than shareholders'equity−Total changes during the year
Balances at March 31, 2010$

199,806−$

138,854

19,132$

702,526$(20,174) $ 1,021,012

Thousands of U.S. dollars (note 3)
Valuation and translation adjustments

Balances at March 31, 2009

Unrealized
gain onavailablefor-salesecurities

Surplus onland
revaluation

Total
Foreignvaluation
currencyandtranslation translation
adjustments adjustments

Minority
interests

Total net
assets$$$$ 197,496$1,198,677

32

2,526

(3,450)$(892)

Changes arising during the year:
Cash dividends(10,812)Net income

29,944Purchase of treasury stock(193)

Net changes other than shareholders'equityTotal changes during the year
Balances at March 31, 2010$

16,692−(1,666)15,026

9,598

24,624

16,692−(1,666)15,026

9,598

43,563(5,116) $14,134$ 207,094$1,242,240

16,724$

2,526

See accompanying notes to consolidated financial statements.

− 15 −$

Consolidated Statements of Cash Flows
Okasan Securities Group Inc. and Consolidated Subsidiaries − Years ended March 31, 2010 and 2009
Thousands of
U.S.dollars(note 3)

Millions of yen
2010

2009

2010

Cash flows from operating activities:
Income (loss) before income taxes and minority interests ￥

7,554

￥

(1,060)$81,191

Adjustments to reconcile income (loss) before income
taxes and minority interests to net cash provided
by operating activities:
Depreciation and amortization

2,703

2,115

29,052

Interest and dividend income(2,823)(3,033)(30,342)Interest expense

1,992

2,415

21,410Gain on sale of investment securities

37

(392)

398

Loss on devaluation of investment securities

153

1,012

1,644

−

(684)

−

(27,700)(11,350)(297,721)(34,905)

13,049(375,161)(6,292)

20,453(67,627)(10,086)

23,624(108,405)

7,536

2,664

80,997

Decrease (increase) in short-term guarantee deposits

2,090(2,008)22,464

Increase (decrease) in guarantee deposits received

8,362

9,697

89,875

Amortization of negative goodwill
Decrease (increase) in deposits segregated for customer
Decrease (increase) in trading assets and increase(decrease) in trading liabilities
Decrease (increase) in receivables on margintransactions and increase (decrease) in payables
on margin transactions
Decrease (increase) in receivables on collateralized
securities transactions and increase (decrease) inpayables on collateralized securities transactions
Increase (decrease) in deposits received

Increase (decrease) in allowance for doubtful accounts

41

59

441

Increase (decrease) in retirement and severance benefits

43

(258)

462

338

(920)

3,633

Increase (decrease) in financial instruments transactions
reserve
Other, net(588)(1,525)(6,320)(51,545)

53,858(554,009)

Interest and dividend received

2,790

3,457

29,987

Interest paid

(2,011)(2,427)(21,615)

Income taxes paid

1,863

(5,378)20,024(48,903)49,510(525,613)

Sub-total

Net cash provided by (used in) operating activities− 16 −

Thousands of
U.S.dollars(note 3)

Millions of yen
2010

2009

2010

Cash flows from investing activities:
Payment for purchase of property and equipment

(434)

(873)

(4,664)

Payment for intangible assets(2,271)(3,340)(24,409)

Payment for investment securities(2,351)(513)(25,269)

Proceeds from sale of investment securities

2,383

2,072

25,613

−

(461)

−

Payment for investments in affiliates
Other, net

1,388

728

14,918(1,285)(2,387)(13,811)

Increase (decrease) in short-term borrowings

55,560(34,944)597,162

Proceeds from long-term borrowings

3,180

−

34,179Payments on long-term borrowings(4,876)(3,848)(52,408)

(18)

(98)

(193)

(1,005)(3,015)(10,802)

(35)

(46)

(376)

Net cash used in investing activities
Cash flows from financing activities:

Purchase of treasury stock
Dividends paid to shareholders
Dividends paid to minority shareholders of subsidiaries
Other, net
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents

(193)

−

(2,074)

52,613(41,951)565,488

(152)

(41)

(1,634)

Net increase in cash and cash equivalents

2,273

5,131

24,430Cash and cash equivalents, beginning of year

33,977

28,846365,187

Cash and cash equivalents, end of year (note 20)

See accompanying notes to consolidated financial statements.

− 17 −¥

36,250¥33,977$

389,617

Notes to Consolidated Financial Statements
Okasan Securities Group Inc. and Consolidated Subsidiaries − Years ended March 31, 2010 and 2009

1. BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements include the accounts of Okasan Securities Group Inc.
(the "Company") and its subsidiaries.
The Company and its domestic subsidiaries maintain their books of account and prepare their financial
statements in conformity with financial accounting standards of Japan, and its foreign subsidiary inconformity with those of the country of its domicile.
Previously, a company could use the financial statements of its foreign subsidiaries which have been
prepared in conformity with financial accounting standards of the countries of their domicile. From theyear ended March 31, 2009, the Company adopted "Practical Solution on unification of Accounting Policies
Applied to Foreign Subsidiaries for Consolidated Financial Statements" (ASBJ Practical Issues Task Force(PITF) No. 18, May 17, 2006). This PITF requires that for the preparation of consolidated financial
statements, the accounting policies and procedures applied to a parent company and its subsidiaries for
similar transactions and events under similar circumstances should be unified, in principle, and financial
statements prepared by foreign subsidiaries in accordance with IFRSs or the generally accepted
accounting principles in the United States (U.S. GAAP) tentatively may be used for the consolidation
process, however, the items listed in the PITF should be adjusted in the consolidation process so that net
income is accounted for in accordance with Japan GAAP unless they were not material.
The accompanying consolidated financial statements have been prepared in accordance with the provisions
set forth in the Japanese Financial Instruments and Exchange Law and its related accounting regulations,and in conformity with accounting principles and practices generally accepted in Japan and applicable to
Japanese securities companies.
In preparing the accompanying consolidated financial statements, certain reclassifications have been madein the financial statements issued domestically in Japan in order to present them in a form which is morefamiliar to readers outside Japan. In addition, the notes to the consolidated financial statements include
information which is not required under accounting principles generally accepted in Japan but is presented
herein as additional information.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa. Consolidation− The consolidated financial statements for the year ended March 31, 2010 include theaccounts of the Company and its 11 subsidiaries (11 subsidiaries in 2009). There are no affiliates
accounted for by equity method in 2010 and 2009.
The "Accounting Standards for Consolidation" require the control or influence concept for the
consolidation scope of subsidiaries and affiliates. Under the control or influence concept, a company inwhich the Company or its consolidated subsidiaries, directly or indirectly, are able to exercise control
over operations is fully consolidated, and a company over which the Company and/or its consolidated
subsidiaries have the ability to exercise significant influence is accounted for by the equity method.
Investments in affiliates are accounted for by the equity method. The difference between the cost andthe underlying net assets at the date of investments in subsidiaries or affiliates is allocated to
identifiable assets and liabilities based on fair market value at the date of investments. The unallocatedportion of the difference is recognized as goodwill or negative goodwill. Goodwill is amortized over its
estimated period of benefit on a straight-line basis and negative goodwill is amortized over theappropriate period to reflect the investments, while immaterial goodwill or negative goodwill is charged
to income when incurred.

− 18 −

All significant intercompany balances and transactions have been eliminated in consolidation.
b. Cash and cash equivalents− For the purposes of the statements of cash flows, the Company considers all
highly liquid investments with insignificant risk of changes in value which have maturities of generally
three months or less when purchased to be cash equivalents.
c. Trading assets and liabilities− Trading assets and liabilities, including securities and financial derivatives
for trading purposes are recorded on a trade date basis at fair value. Revenues and expenses related to
trading securities transactions are recorded on a trade date basis. Changes in the fair values arereflected in "net gain on trading" in the accompanying consolidated statements of operations. Gains andlosses arose from derivatives held or issued for trading purposes are also reported as "net gain on
trading" in the accompanying consolidated statements of operations, which includes realized gains andlosses as well as changes in the fair values of such instruments. Securities owned for non-trading
purposes, shown in the accompanying consolidated balance sheets as "Short-term investments" and"Investment securities" are discussed below.
d. Securities− The Company examines the intent of holding securities for non-trading purposes, andclassifies those securities as (a) debt securities intended to be held to maturity ("held-to-maturity debt
securities"), (b) equity securities issued by an affiliated company and (c) all other securities not classified
in any of the above categories ("available-for-sale securities").
Held-to-maturity debt securities are stated at amortized cost. Available-for-sale securities with market
value are stated at market, based on quoted market prices. Realized gains and losses on sale of suchsecurities are computed using the gross-average cost. Unrealized gains or losses on such securities, netof related taxes, are recorded in a separate component of net assets. Debt securities classified as"available-for-sale securities" for which fair value is not available are stated at the amortized cost.
Equity securities classified as "available-for-sale securities" for which market value is not available arestated at the gross-average cost.
e. Hedging transactions− The Company states derivative financial instruments at fair value and recognizechanges in the fair value as gains or losses unless derivative financial instruments are used for hedging
purposes. Valuation gains or losses on hedging instruments are mainly deferred as assets or liabilities
until the gains or losses on underlying hedged instruments are realized. The Company and certain
subsidiaries have entered into interest rate swap agreements for hedging interest rate exposures. The
difference in amounts to be paid or received on interest rate swap agreements is recognized over thelife of the agreement as an adjustment to interest expense.
f. Collateralized securities transactions− Collateralized securities transactions consist of securities borrowed
and loaned transactions and Gensaki transactions. Securities borrowed transactions generally require
the Company to provide the counterparty with collateral in the form of cash. And securities loaned
transactions, the Company generally receives collateral in the form of cash. The Company monitors themarket value of the securities borrowed or loaned and requires additional cash, as necessary, to ensurethat such transactions are adequately collateralized. Under the "Uniform Accounting Standards ofSecurities Companies", securities borrowed and loaned transactions are accounted for as financing
transactions. Securities borrowed or loaned that are cash collateralized are recorded at the amount ofcash collateral advanced or received. Gensaki transactions originate in the Japanese financial markets,and involve the selling ("Sell Gensaki")/purchasing ("Buy Gensaki") of commercial paper, certificates ofdeposit, Japanese government bonds and various other debt securities to/from an institution wishing to
make a short-term investment, with the Company agreeing to repurchase/resell them from/to theinstitution on a specified date at a specified price. Under the "Accounting Standards for Financial
Instruments", Gensaki transactions are accounted for as financing transactions. Gensaki transactions
are carried at their contractual amounts.

− 19 −

g. Allowance for doubtful accounts− Allowance for doubtful accounts of the Company and its domestic
consolidated subsidiaries are provided on the estimated historical deterioration rate for normal accounts,
and based on specifically assessed amounts for doubtful accounts. An overseas consolidated subsidiary
provides specifically assessed amount for doubtful accounts.
h. Property and equipment− Property and equipment are stated at cost. Depreciation of property andequipment of the Company and its domestic consolidated subsidiaries is computed substantially by the
declining-balance method at rates based on the estimated useful lives of the assets, while the straightline method is applied to buildings purchased in Japan after April 1, 1998. And in an overseas
subsidiary, depreciation is computed by the straight-line method. The range of useful lives isprincipally from 3 to 47 years for buildings and from 3 to 15 years for equipment.
i.

Intangible assets− Intangible assets are carried at cost less amortization. Software for internal use isamortized under straight-line method based on internally estimated useful life (5 years). Amortizationof other intangible assets is calculated by the straight-line method at rates based on the estimateduseful lives of respective assets.

j.

Retirement and severance benefits− The Company and its domestic consolidated subsidiaries havecontributory and noncontributory pension plans, and unfunded retirement and severance plans to provide
retirement and severance benefits to substantially all employees.
Under the "Accounting Standards for Retirement Benefits", provisions for defined benefit retirement andpension plans have been made in the accompanying consolidated financial statements based on the present
value of the projected future retirement and severance benefits attributable to employee services renderedby the end of the year, less amounts funded under contributory and noncontributory pension plans.
From the year ended March 31, 2010, the Company adopted "Partial Amendments to AccountingStandard for Retirement Benefits (Part3)" (ASBJ Statement No. 19, July 31, 2008) and the AccountingStandard is to remove the treatment, which provides that a company may use the discount rate
determined taking into consideration fluctuations in the yield of bonds over a certain period, and theCompany is required to use the discount rate at the each year end. There was no effect on
consolidated financial statements for the year ended March 31, 2010.
The Company and its domestic consolidated subsidiaries have unfunded defined benefit pension plansfor directors and corporate auditors. The provision for the plans has been made in the accompanying
consolidated financial statements for vested benefits to which directors and corporate auditors areentitled if they were to retire and sever immediately at the balance sheet date.

k. Leases− Previously, finance leases, except for those where the legal title of the underlying property istransferred from the lessor to the lessee at the end of the lease term, are accounted for similarly tooperating leases. On March 30, 2007, the ASBJ issued ASBJ Statement No.13, "Accounting Standard forLease Transactions," which revised the former accounting standard for lease transactions issued onJune 17, 1993, and ASBJ Guidance No.16, "Guidance on Accounting Standard for Lease Transactions,"
which revised the former guidance issued on January 18, 1994. The revised accounting standards are
permitted to be adopted for fiscal years beginning on or after April 1, 2008. From the year ended
March 31, 2009, the Company adopted the revised accounting standards. The revised accounting
standards require that all finance lease transactions shall be capitalized. Leased assets related tofinance lease transactions without title transfer are depreciated on a straight-line basis, with the lease
periods as their useful lives and no residual value. Regarding finance leases transactions without title
transfer for which the starting date for the lease transactions is prior to the initial fiscal year in whichthese new accounting standards apply, the Company and its domestic consolidated subsidiaries havecontinued recognize lease payments as expenses. As a result of the change, for the year ended March
31, 2009, operating loss increased by ¥6 million and loss before income taxes and minority interests
increased by ¥16 million.

− 20 −

l.

Income taxes− Income taxes in Japan applicable to the Company and its domestic consolidated
subsidiaries consist of corporate tax, inhabitant tax and business tax.
The "Accounting Standards for Income Taxes" require that deferred income taxes be accounted forunder the asset and liability method. Deferred tax assets and liabilities are recognized for the expected
future tax consequences of events that have been included on the financial statements or tax return.
Under this method, deferred tax assets and liabilities are measured using enacted tax rates expected toapply to taxable income in the years in which those temporary difference are expected to be recoveredor settled, and the effect on deferred tax assets and liabilities of a change in tax rates is recognized inincome in the period that includes the enactment date.
The Company has filed consolidated tax returns in Japan.

m. Foreign currency transactions− Under the "Accounting Standards for Foreign Currency Transactions,"
receivables and payables denominated in foreign currencies are translated into yen at the rate ofexchange as of the balance sheet dates and gains or losses resulting from the translation of foreign
currencies are credited or charged to income. Assets and liabilities, and revenues and expenses of an
overseas subsidiary are translated into yen at the rate of exchange as of the balance sheet dates, acomprehensive adjustment resulting from translation is presented as "Foreign currency translation
adjustments" in a component of net assets.
n. Directors' bonus− Directors' bonuses are accounted for as an expense when such bonuses are accrued.
o. Reclassifications− Certain reclassifications have been made to the prior years' consolidated financial
statements to conform to the presentation used in consolidated statements as of and for the year ended
March 31, 2010.

3. BASIS OF FINANCIAL STATEMENT TRANSLATION
The translations of the yen amounts into U.S. dollars are included solely for the convenience of the reader,using the prevailing exchange rate at March 31, 2010, which was ¥93.04 to U.S. $1.
The convenience translations should not be construed as representations that the yen amounts have been,
could have been, or could in the future be, converted into U.S. dollars at this or any other rate of exchange.

4. TRADING ASSETS AND LIABILITIES
Trading assets and trading liabilities at March 31, 2010 and 2009 consist of the following:Thousands of
U.S.dollars

Millions of yen
2010

2009

2010

Trading assets:
Equity securities and warrants¥

Government, corporate and other bonds
Commercial paper and certificates of deposit
Derivatives¥− 21 −

1,885

¥

176

$

20,260134,988

114,974

1,450,860

5,992

−

64,4034

18

43

115,168$ 1,535,566

142,869¥

Thousands of
U.S.dollars

Millions of yen
2010

2009

2010

Trading liabilities:
Equity securities and warrants¥

707

Government, corporate and other bonds

93,721

Commercial paper and certificates of deposit

127

$

7,599

104,900

1,007,319

5,993

−

64,413

26

14

280

105,041$ 1,079,611

Derivatives¥¥

100,447¥

5. MARGIN TRANSACTIONS
Margin transactions at March 31, 2010 and 2009 consist of the following:Thousands of
U.S.dollars

Millions of yen
2010

2009

2010

Assets:Loans receivable from customers¥

34,226¥

20,258$367,863

Cash deposits as collateral for securities borrowed fromsecurities finance companies

10,112

11,110108,685¥

44,338¥31,368$476,548¥

10,547

¥

6,663

$

113,360¥

25,384

Liabilities:
Borrowings from securities finance companies
Proceeds from securities sold for customers' accounts

14,837

12,042¥

18,705

159,469$

272,829

Loans receivable from customers are stated at amounts equal to the purchase price of the relevant
securities, which are collateralized by customers' securities and customers' deposits in the form of cash
or securities. Proceeds from securities sold for customers' accounts are stated at the sales prices of therelevant securities on the respective transaction dates.

6. COLLATERALIZED SECURITIES TRANSACTIONSCollateralized securities transactions at March 31, 2010 and 2009 consist of the following:Thousands of
U.S.dollars

Millions of yen
2010

2009

2010

Assets:Cash collateral for securities borrowed¥

137,066¥

131,796$

1,473,194¥

32,822¥

37,638$352,773

Liabilities:
Cash collateral for securities loaned− 22 −

7. SECURITIES FOR NON-TRADING PURPOSES
Acquisition cost, balance sheet amount, gross unrealized gain and gross unrealized loss of available-for-salesecurities with fair value at March 31, 2010 and 2009 is summarized as follows:

Acquisition
cost

Millions of yen
Gross
Gross
unrealized
unrealized
loss
gain

¥

599

¥

2

¥

−

¥

601

¥

11,623

¥

4,316

¥

(1,284) ¥14,655−

313

Balancesheet amountAt March 31, 2010
Current:
Government, corporate and other bonds
Non-current:
Equity securities
Government, corporate and other bonds

297

Other

16

692

84

¥

12,612

¥

¥

1,595

¥

(15)

761

4,416

¥

(1,299) ¥15,729−¥(78) ¥

1,517

(32)

662

At March 31, 2009
Current:
Government, corporate and other bonds
Other

674

20

¥

2,269

¥

20

¥

(110) ¥

2,179¥

11,831

¥

2,563

¥

(2,189) ¥12,205−908

Non-current:
Equity securities
Government, corporate and other bonds

894

Other

14

418
¥

13,143

53
¥

2,630

¥

(30)

441

(2,219) ¥13,554

Acquisition
cost

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

$

6,438

$

22

$

−

$

6,460

$

124,925$

46,389$(13,801) $157,513−3,364

Balancesheet amountAt March 31, 2010
Current:
Government, corporate and other bonds
Non-current:
Equity securities
Government, corporate and other bonds

3,192

Other

172

7,438
$

135,555902$

47,463

$

(161)

8,179

(13,962) $169,056

Securities classified as available-for-sale securities for which fair value is not available are unlisted equity
securities amounting to ¥4,741million ($50,957 thousand) and ¥2,737 million, and investments in limited
partnership and similar partnership amounting to ¥241 million ($2,590 thousand) and ¥322 million at March
31, 2010 and 2009, respectively.

− 23 −

For the year ended March 31, 2010, proceeds from sales of available-for-sale securities, gross realized gains
and gross realized losses are as follows:
Millions of yen

Equity securities

Proceeds fromsales ofavailable-for-sale

Gross realized
gains

Gross realized
losses

¥

¥

¥

102

Government, corporate and other bonds
Other

682
¥

20

(51)

−

1,600

−

78

2,384

¥

(83)

98

¥

(134)

Thousands of U.S.dollars

Equity securities

Proceeds fromsales ofavailable-for-sale

Gross realized
gains

Gross realized
losses

$

$

$

1,096

215

(548)

Government, corporate and other bonds

17,197

−

−

Other

7,330

838

(892)

$

25,623

$

1,053

$

(1,440)For the year ended March 31, 2009, proceeds from sales of available-for-sale securities were ¥2,072
million, gross realized gains were ¥637 million, and gross realized losses were ¥244 million.

8. INVESTMENTS IN AN AFFILIATEThe aggregate carrying amount of investments in an affiliate at March 31, 2010 and 2009 are ¥22 million($236 thousand) and ¥22 million, respectively.

9. IMPAIRMENT OF LONG-LIVED ASSETSThe Company recorded a loss on impairment on the following assets in the year ended March 31, 2009.

Location

Usage

Description

Chuo-ku, Tokyo and 1

Operation

Buildings

other location

branchFurniture and fixtures

Chuo-ku, Tokyo

Business asset

Millions of
yen
¥

15
10

Leased assets

6

Software etc.

16

For the companies that own real estate for lease, the Company groups the long-lived assets by individual
real estate, and for other companies, the Company groups the long-lived assets by operation branch or
business group. The Company has recognized a loss on impairment on operation branches because its
performance was so weak and no recovery is expected. Their book values were reduced to the respective
net realizable value of each asset. The net realizable value of the operation branches is estimated zero
because no conversion or sale is expected. The net realizable value of the business assets is estimated by
the value in use and is estimated zero because the estimated future cash flow is minus.

− 24 −

10. BORROWINGS
The weighted-average interest rates applicable to the short-term borrowings are 0.74% and 0.97% at March
31, 2010 and 2009, respectively.
Long-term borrowings at March 31, 2010 and 2009 consist of the following:Thousands of
U.S.dollars

Millions of yen
2010

2009

2010

Borrowings, maturing in installments through 2014;
bearing weighted average interest of 2.79% and 2.97%
at March 31, 2010 and 2009, respectively¥

14,449Less current installments¥

16,145

9,489
¥

4,960

$

4,766
¥

155,299
101,988

11,379$53,311

Lease liabilities at March 31, 2010 and 2009 consist of the following:Thousands of
U.S.dollars

Millions of yen
2010

2009

2010

Lease liabilities maturing in installments through 2016;
bearing weighted average interest of 3.69% and 3.71%
at March 31, 2010 and 2009, respectively

¥

1,030

Less current installments

¥

471

272
¥

758

$

11,071

106
¥

2,924

365

$

8,147

(1) Current installments of long-term borrowings are included in short-term borrowings in theaccompanying balance sheets.
(2) Long-term borrowings included subordinated borrowings provided in Article 2 of the "Cabinet Office
Ordinance Concerning Financial Instruments Business" (the Prime Minister's Office Ordinance No. 52,
2007) as follows:
Thousands of
U.S.dollars

Millions of yen
2010
Current installments of long-term borrowings¥

Long-term borrowings

4,500

2009
¥

1,850

2010

2,700

$

48,366

6,350

19,884

Annual maturities of borrowings after March 31, 2011, are as follows:
Millions ofyen

Thousands of
U.S.dollars¥$

Year ending March 31
2012

2,167

23,291

2013

442

4,751

2014

2,289

24,602

2015

61

656

− 25 −

Annual maturities of lease liabilities after March 31, 2011, are as follows:
Millions ofyen

Thousands of
U.S.dollars¥$

Year ending March 31
2012

283

3,042

2013

279

2,999

2014

148

1,591

2015

39

419

To meet its liquidity needs stably and expeditiously and to strengthen financial operations, theCompany established a ¥22,000 million ($236,457 thousand) commitment line contracts with 8 financial
institutions at March 31, 2010 and a ¥24,000 million commitment line contracts with 10 financial
institutions at March 31, 2009. There were no borrowings under the commitment line contracts both at
March 31, 2010 and 2009.
As is customary in Japan, both short-term and long-term bank borrowings are made under generalagreements which provide that security and guarantees for present and future indebtedness will begiven upon request of the bank, and that the bank shall have the right to offset cash deposits against
obligations that have become due or, in the event of default, against all obligations due the bank.

11. PLEDGED ASSETSAt March 31, 2010 and 2009, the carrying value of assets pledged is as follows:
Thousands of
U.S.dollars

Millions of yen
2010
Cash in banks¥

Trading assets

2009

3,746

¥

2010

6,255

26,726$25,041

40,262287,253

Short-term investments

−

642

−

Property and equipment

9,640

9,640

103,611

Investment securities

14,607¥54,71912,749¥54,327

156,997$

588,123

Assets in the above table are pledged for the following liabilities:
Thousands of
U.S.dollars

Millions of yen
2010
Short-term borrowings¥

Borrowings from securities finance companies

2009

39,628¥827

Long-term borrowings

43,566

$

2,539

3,111
¥

36,275

2010

8,889

5,029
¥

43,843425,924
33,437$468,250

In addition to above, at March 31, 2010, trading assets, etc. amounting to ¥69,686 million ($748,990
thousand) and investments securities amounting to ¥109 million ($1,172 thousand) are deposited as
guarantee for settlement of trading accounts and securities borrowed, respectively. A t March 31, 2009,
trading assets, etc. amounting to ¥36,824million and ¥101 million are deposited as guarantee forsettlement of trading accounts and securities borrowed, respectively.

− 26 −

The fair value of the securities pledged as collateral at March 31, 2010 and 2009, except for those
disclosed in the above table, are as follows:
Thousands ofMillions of yen
U.S.dollars
2010
Securities loaned on margin transactions
Securities pledged for borrowings on margin transactions
Securities loaned
Other

¥

¥

15,746
10,74432,70538,912
98,1072009¥

12,761
6,187
37,85820,74977,555

¥

2010
$

$

169,239
115,477
351,515
418,229
1,054,460

The fair value of the securities received as collateral at March 31, 2010 and 2009 are as follows:
Thousands of
U.S.dollars

Millions of yen
2010
Securities received on margin transactions
Securities borrowed
Securities pledged as collateral
Other

¥

¥

34,832
141,40245,872
10,544
232,650

2009¥¥

17,659131,183
33,078
11,820193,7402010$$

374,377
1,519,798
493,035
113,327
2,500,537

12. INCOME TAXESThe Company and its domestic subsidiaries are subject to Japanese corporate, inhabitant and businesstaxes based on income which, in the aggregate, resulted in a statutory tax rate of approximately 40.5% in2010 and 2009.
The tax effects of significant temporary differences and tax loss carryforwards which resulted in deferred
tax assets and deferred tax liabilities at March 31, 2010 and 2009 are as follows:
Thousands of
U.S.dollars
Millions of yen
2010
Deferred tax assets:
Tax loss carryforwards
Retirement and severance benefits (employees)
Accrued bonuses
Allowance for doubtful accounts
Retirement and severance benefits (directors andcorporate auditors)
Impairment loss
Financial instruments transactions reserve
Accrued business tax
Depreciation and amortization
Loss on devaluation of investment securities
Unrealized loss on available-for-sale securities
Other

¥

Valuation allowance
Total
Deferred tax liabilities:
Unrealized gain on available-for-sale securities
Land revaluation excess
Other
Total
Net deferred tax assets (liabilities)− 27 −

¥

2,802
2,015
612
607

2009
¥

3,899
1,981
527
439

2010
$

30,116
21,657
6,578
6,524

480
396
347
235
207
172
12
547
8,432
(4,430)
4,002

495
399
210
36
233
157
117
574
9,067
(3,651)
5,416

5,159
4,256
3,730
2,526
2,225
1,849
129
5,879
90,628(47,614)43,014(1,223)(1,879)(170)(3,272)730(209)(1,879)(339)(2,427)2,989(13,145)(20,196)(1,827)(35,168)
7,846

¥

$

Net deferred tax liabilities at March 31, 2010 and 2009 are reflected in the accompanying consolidatedbalance sheets under the following captions:Thousands of
U.S.dollars

Millions of yen
2010
Current assets − Deferred income taxes¥

Investments and other assets − Deferred income taxes

2009
968

¥

1,983

2,064

Current liabilities − Other current liabilities
Non-current liabilities − Deferred income taxes

2010$

10,404

2,992

22,184

(1)

(38)

(11)

(2,301)(1,948)(24,731)

¥

730

¥

2,989

$

7,846

A reconciliation of the statutory tax rate and the effective tax rate as a percentage of income before
income taxes and minority interests for the year ended March 31, 2010 is as follows:
2010
Statutory tax rate

40.5%

Expenses not deductible for tax purposes

2.0

Income not credited for tax purposes(0.3)

Per capita tax

1.1

Valuation allowance

10.6

Other

(0.9)

Effective tax rate

53.0%

The reconciliation for the year ended March 31, 2009 was omitted because loss before income taxes andminority interests were recorded.

13. RETIREMENT AND PENSION PLANS
The Company and its domestic consolidated subsidiaries have defined benefit retirement and pension
plans, which consist of a defined contribution retirement and pension plan (Securities Omnibus DC OkasanPlan), a corporate defined benefit pension plan and an unfunded retirement and severance plan thatprovide for lump-sum payment of benefits.
The funded status of retirement and pension plans at March 31, 2010 and 2009 consist of the followings:

Thousands of
U.S.dollars

Millions of yen
2010
Projected benefit obligations¥

Fair value of plan assets

2009(12,287)¥

6,838

Unrecognized actuarial gain

− 28 −¥(4,972)

$

6,143

477

Amount recognized in the consolidated balance sheets(12,201)2010

73,495

1,167¥(4,891)(132,061)
5,127$(53,439)

The components of net periodic benefit cost for the years ended March 2010 and 2009 are as follows:
Thousands of
U.S.dollars

Millions of yen
2010
Service cost

¥

2009
558

¥

2010
593

$

5,997

Interest cost

236

237

2,537

Expected return on plan assets

(29)

(33)

(312)

Recognized actuarial loss

95

(238)

1,021

860

559

9,243

182

185

1,956

Contributions to the defined contribution plan
¥

1,042

¥

744

$

11,199Assumptions used for the years ended March 31, 2010 and 2009 are set forth as follows:
2010

2009

Straight-line

Straight-line

Discount rate

2.1%

2.1%

Expected rate of return on plan assets

0.5%

0.5%

Recognition period of actuarial gain / loss

5 years

5 years

Periodic allocation method for projected benefit

Directors and corporate auditors are not covered by the plans described above. For such persons, theCompany and certain consolidated subsidiaries have unfunded defined benefit pension plans. Under theplans, directors and corporate auditors are entitled to lump-sum payments based on the current rate of pay
and length of service when they leave the Company. Effective from the year ended March 31, 2007, theCompany and certain domestic consolidated subsidiaries provide for the amount of vested benefits towhich directors and corporate auditors are entitled if they were to retire or sever immediately at thebalance sheet date. The liability for retirement and severance benefits related to these plans was ¥1,184
million ($12,726 thousand) and ¥1,222 million at March 31, 2010 and 2009, respectively.

14. FINANCIAL INSTRUMENTS TRANSACTIONS RESERVEThe Financial Instruments and Exchange Law of Japan requires a securities company to set aside areserve in proportion to its securities and other related trading or derivative transactions to cover possible
customer losses incurred by default of the securities company on securities or derivative transactions.
Financial instruments transactions reserve, which was formerly stated as reserve for securities
transactions calculated based on Article 51 of the Securities and Exchange Law and Article 35 of the
Cabinet Office Ordinance Concerning Securities Companies, is calculated based on Article 46-5 of the of the
Financial Instruments and Exchange Law and Article 175 of the Cabinet Office Ordinance Concerning
Financial Instruments Business. As a result of the change, loss before income taxes and minority interests
for the year ended March 31, 2009 decreased by ¥778 million.

15. SHAREHOLDERS' EQUITYThe Corporation Law provides that an amount equal to 10% of distributions from retained earnings paidby the Company and its Japanese subsidiaries be appropriated as a legal reserve. No further
appropriations are required when the total amount of the additional paid-in capital and the legal reserve
equals 25% of their respective stated capital. The Corporation Law also provides that additional paid-in
capital and legal reserve are available for appropriations by the resolution of the shareholders. Balances ofthe legal reserve are included in retained earnings in the accompanying consolidated balance sheets.

− 29 −Cash dividends and appropriations to the legal reserve charged to retained earnings for the years ended
March 31, 2010 and 2009 represent dividends paid out during those years and the related appropriations to
the legal reserve. The amount available for dividends is based on the amount recorded in the Company's
non-consolidated books of account in accordance with the Corporation Law.
Dividends paid during the year ended March 31, 2009 which was approved by the General Meeting of
Shareholders held on June 27, 2008 are as follows:(a) Total dividends(b) Cash dividends per common share(c) Record date(d) Effective date

¥3,111 million¥15
March 31, 2008
June 30, 2008

Dividends paid during the year ended March 31, 2010 which was approved by the General Meeting of
Shareholders held on June 26, 2009 are as follows:(a) Total dividends(b) Cash dividends per common share(c) Record date(d) Effective date

¥1,030 million ($11,071 thousand)¥5 ($0.05)
March 31, 2009
June 29, 2009

Dividends to be paid after the balance sheet date but the record date for the payment belong to the year
ended March 31, 2010 which was approved by the General Meeting of Shareholders held on June 29, 2010
are as follows:(a) Total dividends(b) Dividend source(c) Cash dividends per common share(d) Record date(e) Effective date

¥1,544 million ($16,595 thousand)
Retained earnings¥7.5 ($0.08)
March 31, 2010
June 30, 2010

16. SURPLUS ON LAND REVALUATIONAt March 31, 2002, a consolidated subsidiary revaluated its own land for business activities in accordancewith the "Law Concerning Land Revaluation" (the "Law") effective March 31, 1998. The net unrealized gain,
net of related taxes and minority interests, are reported as "Surplus on land revaluation" in a component of
net assets and the related deferred tax liabilities are included in non-current deferred income taxes.
Fair values of the land are determined based on the values specified in Article 2-1, 2-3 and 2-5 of the
Enforcement Ordinance of the Law concerning Land Revaluation.
The value of the land at March 31, 2010 decreased by ¥533 million ($5,729 thousand) in comparison withthe book value of the land after the revaluation.

17. CAPITAL ADEQUACY REQUIREMENTS
In Japan, securities companies are subjected to risk-based capital adequacy rules established andadministered by the Financial Services Agency. Securities subsidiaries report their capital adequacy ratio
as defined pursuant to these rules. The authorities will take certain administrative measures if such ratio
declines below 140%. Capital adequacy ratios of Okasan Securities Co., Ltd. are 357.8% and 397.5% at
March 31, 2010 and 2009, respectively.

− 30 −

18. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Major elements of selling, general and administrative expenses for the years ended March 31, 2010 and2009 are summarized as follows:
Thousands ofMillions of yen
U.S.dollars
2010
Commissions and brokerage

¥

2009

10,412¥

2010

10,326$111,909

Employees' compensation and benefits

28,54427,713306,793

Occupancy and rental

6,454

6,834

69,368

Data processing and office supplies

5,786

5,672

62,188Depreciation and amortization

2,703

2,115

29,052

Taxes other than income taxes

593

594

6,374

5

−

54

2,130

2,299

22,893

Reserve for doubtful accounts
Other¥56,627¥55,553$608,631

19. PER SHARE INFORMATION(a) Net Income (Loss) per Share
Basic net income (loss) per share, and reconciliation of the numbers and the amounts used in the basic net
income (loss) per share computations for the years ended March 31, 2010 and 2009 are as follows:
Yen

U.S. dollars

2010
Basic net income (loss) per share

¥

2009

13.63

¥

2010
(9.20)Net income (loss)

2,786

¥

2,786

Net income (loss) not applicable to common shareholders
Net income (loss) applicable to common shareholders

2009

¥

0.15

Thousands of
U.S.dollars

Millions of yen
2010

$

2010

¥

(1,881)¥(1,881)−$

29,944$29,944−−

Number of shares(Thousand)
2010

2009

204,387

204,501

Weighted average number of shares outstanding on
which basic net income (loss) per share is calculated(b) Net Assets per Share
Net assets per share, and reconciliation of the numbers and the amounts used in the net assets per sharecomputations at March 31, 2010 and 2009 are as follows:
Yen

U.S. dollars

2010
Net assets per share¥− 31 −

471.25

2009¥455.70

2010
$

5.07

Thousands of
U.S. dollars

Millions of yen
2010
Total net assets¥

115,5782009¥

111,5252010$ 1,2425,240

Amount deducted from total net assets:
Minority interests

19,268

Net assets applicable to common stockholders¥

96,31018,375¥

93,150207,094$

1,035,146

Number of shares(Thousand)Number of shares outstanding at the end of year on
which net assets per share is calculated

2010

2009

204,371

204,412

20. SUPPLEMENTARY CASH FLOW INFORMATION
Reconciliation between "Cash on hand and in banks" in the accompanying consolidated balance sheets and"Cash and cash equivalents" in the accompanying consolidated statements of cash flows at March 31, 2010
and 2009 are as follows:
Thousands of
U.S. dollars

Millions of yen
2010
Cash on hand and in banks¥

41,440¥36,2502009¥

40,651¥

33,977

2010$

445,400$

389,617

Time deposits that have maturities of over three months
when acquired(5,190)Cash and cash equivalents(6,674)(55,783)

21. COMMITMENTS AND CONTINGENCIESAt March 31, 2010 and 2009, the Company and certain subsidiaries have guaranteed approximately ¥155
million ($1,666 thousand) and ¥192 million of employee mortgage loans to financial institutions, respectively.
If an employee defaults on his/her loan payments, the Company and/or certain subsidiaries are required toperform under the guarantee.

22. LEASES(a) Finance Lease
Acquisition cost, accumulated depreciation and net carrying amount of leased assets, if they had been
capitalized at March 31, 2010 and 2009 are as follows, which would have been reflected in the consolidatedbalance sheets if finance lease accounting had been applied to the finance leases currently accounted for as
operating leases:− 32 −

Millions of yen

2010

Acquisition cost

Software

￥

￥

1,615

Accumulated depreciation
Impairment loss
Net carrying amount2009

Furniture
andFixtures

￥

869

Total
￥

2,484

Furniture
andFixtures

Software

￥

￥

2,350

2,763

Total
￥

5,113

1,127

613

1,740

1,427

1,671

3,098

1

−

1

1

−

1

487

￥

256

￥

743

￥

922

￥

1,092

￥

2,014

Thousands of U.S. dollars

2010

Acquisition cost

Furniture
andFixtures

Software$$Accumulated depreciation

17,358

Total$

26,698

12,113

6,589

18,70211−

11

Impairment loss
Net carrying amount

9,340

$

5,234

$

2,751

$

7,985

Future minimum payments required under finance leases at March 31, 2010 and 2009 are as follows:
Thousands of
U.S.dollars

Millions of yen
2010
Due within one year

2009

¥

437

¥

792

Due after one year

2010

¥

924

¥

2,086

355

$

4,697

$

8,512

1,162

3,815

Lease payments, depreciation equivalents and interest expense equivalents for the years ended March 31,
2010 and 2009 are as follows:
Thousands of
U.S.dollars

Millions of yen
2010
Lease payments¥

Reversal of accumulated impairment loss

2009
709

¥

2010

1,166

$

7,620

1

5

11

Depreciation equivalents

637

1,041

6,847

Interest expense equivalents

40

88

430

Impairment loss

−

6

−

Depreciation equivalents and interest expense equivalents are computed by the straight-line method andthe interest method, respectively.

− 33 −

(b) Operating Lease
Future minimum lease payments required under noncancellable operating leases as of March 31, 2010 and2009 are as follows:
Thousands of
U.S.dollars

Millions of yen
2010
Within one year

2009

¥

4

¥

4

Over one year

¥

−

2010
4

$

43

$

43

5
¥

9

−

23. FINANCIAL INSTRUMENTS"Accounting Standard for Financial Instruments" (ASBJ Statement No. 10, March 10, 2008) and its"Implementation Guidance on Disclosures about Fair Value of Financial Instruments" (ASBJ Guidance No.
19 Guidance, March 10, 2008) were applied for the year ended March 31, 2010.
Conditions of Financial instruments(1) Management policy
The Company and subsidiaries (the "Group") primary engages in financial instruments trading business,
which include trading in securities, brokerage for trading in securities, underwriting and distribution of
securities, public offering and secondary distribution of securities and private offering of securities. For
the above mentioned business, the Group uses its own resources and finances funds through bank loans
and call money etc.
The Group makes short-term deposits and loans for margin transaction, and operates securities trading
for the Group own accounts for fund management purposes.
Regarding the trading business, the Group works to do brokerage for trading in securities smoothly andcontribute to a sound market system in an Exchange transaction, and works to make fair prices andtransact smoothly in a Non-Exchange transaction.
Regarding the derivative financial instruments, the Group uses interest rate swaps to hedge futurefluctuations of interest rates and does not enter into interest rate swaps for trading or speculative
purposes, and also uses commodity futures and set the position limit on commodity futures.
(2) Financial instruments and risks
The main financial assets of the Group consist of cash on hand and in banks, cash segregated as
deposits for customers and others, trading assets, receivables on margin transactions, receivables oncollateralized securities transactions and investment securities.
The cash in banks are exposed to credit risk of banks. Most of cash segregated as deposits forcustomers and others are cash segregated as deposits for customers, and are segregated from theGroup own assets and trusted to banks in accordance with the Japanese Financial Instruments andExchange Law. The trusted funds are secured by the Trust Act.
Trading position is made for meeting customers' various needs and for hedging the position. Such
trading involves market and counterparty risks which possibly effect on the financial position of theGroup. Market risk is the risk arising from future changes in the market values of securities, interest
rates and foreign currency exchange rates, and counterparty risk is the risk arising from default by thecounterparty.
Receivables on margin transactions consist of loans receivable from customers and cash deposits as
collateral for securities borrowed from securities finance companies, and are exposed to credit risk of− 34 −

counterparties. Receivables on collateralized securities transactions consist of cash collateral for
securities borrowed, and are exposed to counterparty risk. Investment securities are exposed toissuer's credit risk and market risk.
The main financial liabilities of the Group consist of trading liabilities, payables on margin transactions,payables on collateralized securities transactions, deposits received, guarantee deposits received andborrowings.
Payables on margin transactions consist of borrowings from securities finance companies and proceedsfrom securities sold for customers' accounts. Payables on collateralized securities transactions consist of
cash collateral for securities loaned. Deposit received is temporary unsettled amount arising fromtransaction with customers. Guarantee deposits received is deposit received for margin transactions
from customers. Part of financial liabilities, such as borrowings, are exposed to liquidity risk that is therisk for the Group not to make a payment on due date. The borrowings with variable interest rate areexposed to interest rate fluctuation risk.
The Group uses derivative financial instruments as part of asset and liability management. For trading
purpose, the Group uses derivatives listed on exchange such as stock index futures and bond futures, aswell as over-the-counter derivatives such as forward foreign exchange transactions. For non-trading
purpose, the Group uses interest rate swaps and commodity futures. Interest rate swaps are used tohedge future cash flow fluctuation arising from interest rate fluctuations on the borrowings. The
difference in amounts to be paid or received on interest rate swaps is recognized over the life of theagreements as an adjustment to interest expense, if the agreements meet certain hedging criteria("exceptional accounting method"). Interest rate swaps are exposed to interest rate fluctuation risk,
however, counterparties are limited to the lender. Commodity futures are utilized for the purpose oflong-term fund management, and are exposed to commodity market price fluctuation risk.
(3) Financial instruments risk management
The group maintains appropriate risk management and control measures in order to maintain theGroup financial stability and to effectively use the Group business resources.
In Okasan Securities Co., Ltd., our core firm, market risk is controlled principally through position limits,and counterparty risk is controlled principally through credit limits by each financial instrument.
Primarily, trading department checks the position and the gain or loss. Secondarily, risk control
department ascertains the position and the assessed risks reported by the trading department, andsupervise the position. In order to reduce the risks, receivables on margin transactions are controlled
by daily credit management through setup of inception criteria for margin transactions and limits foropen interest, deposits reception when market fluctuates in accordance with customer management
rules. Purchases and sales of investment securities and stock market fluctuations are controlled inaccordance with investment securities management rules. Liquidity risk is controlled based on fundmanagement plan in accordance with liquidity risk management rules. The Group also makes
contingency plan to mitigate liquidity crisis.
Securities subsidiaries other than Okasan Securities Co., Ltd. also maintain appropriate risk controls.
(4) Supplemental explanation regarding fair value of financial instruments
The contract amount of the derivative transactions does not represent the risk of the derivativetransactions.

− 35 −

Fair value of financial instruments
The carrying amounts on the consolidated balance sheets, fair value, and differences as of March 31, 2010
are as follows.
Financial instruments, of which it is extremely difficult to measure the fair value, are not included. (Pleasesee "② Financial instruments of which the fair value is extremely difficult to measure".)Millions of yen
March 31, 2010

Carrying
value

Thousands of U.S. dollars

Fair value Differences

Carrying
value

Fair value Differences−$ 445,400$ 445,400

Assets:(1) Cash on hand and in banks ¥41,440¥41,440¥$−(2) Cash segregated as deposits
57,701

57,701−

620,174

620,174−

Trading securities

142,865

142,865−

1,535,522

1,535,522−

Available-for-sale securities

16,33016,330−175,516

175,516−

12,38812,388−133,147

133,147−

44,33844,338−476,548476,548−for customers and others(3) Trading assets, short-term
investments and investment
securities(4) Receivables arising fromunsettled trades(5) Receivables on margintransactions(6) Receivables on collateralized
137,066

137,066−

1,473,194

1,473,194−(7) Short-term guarantee deposits

3,760

3,760

−

40,41340,413−(8) Short-term loans

119

119

−

1,279

1,279

−

¥ 456,007¥ 456,007¥−$ 4,901,193$ 4,901,193$−¥ 100,421¥ 100,421¥−$ 1,079,331$ 1,079,331$−

25,38425,384−

272,829

272,829−

32,82232,822−352,773352,773−

22,871

22,871−

245,819

245,819−

securities transactions

Total
Liabilities:(9) Trading liabilities
Trading securities(10) Payables on margintransactions(11) Payables on collateralized
securities transactions(12) Deposits received(13) Guarantee deposits received

29,74629,746−

319,712319,712−(14) Short-term borrowings

147,326

147,36539

1,583,470

1,583,889

419(15) Long-term borrowings

4,960

5,015

55

53,311

53,902591¥ 363,530¥ 363,624¥

94$ 3,907,245$ 3,908,255(27) ¥−$

Total
Derivative transactions¥(27) ¥(290) $$

1,010

(290) $−

＊Derivative receivables and payables are on net basis. Items that are net payables are shown in parenthesis.

− 36 −

① Fair value measurement of financial instruments
Assets:(1) Cash on hand and in banks, (2) Cash segregated as deposits for customers and others, (4) Receivables
arising from unsettled trades, (5) Receivables on margin transactions, (6) Receivables on collateralized
securities transactions, (7) Short-term guarantee deposits and (8) Short-term loans
The carrying amount approximates fair value because of the short maturity of these instruments.
(3) Trading assets, short-term investments and investment securities
The carrying amount approximates fair value because the carrying amount of equity securities, debt
securities and beneficiary certificates is calculated by quoted market price. Please see note 4.
TRADING ASSETS AND LIABILITIES and see note 7. SECURITIES FOR NON-TRADINGPURPOSES for information by category.
Liabilities:(9) Trading liabilities
The carrying amount approximates fair value because the carrying amount of equity securities, debt
securities and beneficiary certificates is calculated by quoted market price. Please see note 4.
TRADING ASSETS AND LIABILITIES for information by category.
(10) Payables on margin transactions, (11) Payables on collateralized securities transactions, (12) Deposits
received, (13) Guarantee deposits received and (14) Short-term borrowings
The carrying amount approximates fair value because of the short maturity of these instruments. Fairvalue of current installments of long-term borrowings included in short-term borrowings is calculated as
below. (See (15) Long-term borrowings.)(15) Long-term borrowings
The carrying amount of long-term borrowings with variable interest rate approximates fair value
because the fair value is reflected the fluctuation of interest market in a short period and credit statusof the Company does not change so much from when the Company borrowed. Fair value of long-termborrowings with fixed interest rate is based on the present value of future cash flows of interest andprincipal payments discounted using the current borrowing rate for similar borrowings of a comparable
maturity.
Fair value of certain long-term borrowings with interest rate swaps for which exceptional accounting
method applied are based on the present value of future cash flows of interest and principal payments
discounted using the current borrowing rate for similar borrowings of a comparable maturity.
Derivative Transactions:
Please see note 24. DERIVATIVES.
② Financial instruments of which the fair value is extremely difficult to measure

Unlisted equity securities

Millions ofyen

Thousands of
U.S.dollars¥$

Investments in limited partnership and similar partnership
Total

241
¥

− 37 −

4,741

4,982

50,9572,590$

53,547

③ Projected future redemption of monetary claim and securities with maturities(1) Cash on hand and in banks(2) Cash segregated as deposits for customers
and others(3) Trading assets, short-term investments
and investment securities
Available-for-sale securities with maturities:
Debt securities:
Government bonds
Corporate bonds
Other
Other
(5) Receivables on margin transactions(6) Receivables on collateralized securities
transactions(7) Short-term guarantee deposits(8) Short-term loans

Due within
one year

Millions of yen
Due after
Due after
five years
one yearthrough five through ten
years
years

Due after
ten years

¥

¥

¥

¥

(1) Cash on hand and in banks(2) Cash segregated as deposits for customers
and others(3) Trading assets, short-term investments
and investment securities
Available-for-sale securities with maturities:
Debt securities:
Government bonds
Corporate bonds
Other
Other
(5) Receivables on margin transactions(6) Receivables on collateralized securities
transactions(7) Short-term guarantee deposits(8) Short-term loans

41,440−¥−−57,701

−

−

−

−
300
300
−
44,338

−
−
−
285
−

300
−
−
−
−

−
−
−
−
−

137,066
3,760
119

−
−
−

−
−
−

−
−
−

285,024

¥

285

¥

300

¥

−

Due within
one yearThousands of U.S.dollars
Due after
Due after
five years
one yearthrough five through ten
years
years

Due after
ten years$$$

445,400

−

$

−

−

620,174

−

−

−

−
3,224
3,224
−
476,548

−
−
−
3,063
−

3,224
−
−
−
−

−
−
−
−
−

1,473,194
40,413
1,279

−
−
−

−
−
−

−
−
−

$ 3,063,456

$

3,063

$

3,224

¥

−

④ The annual maturities of the long-term debt
Please see note 10. BORROWINGS.
24. DERIVATIVES
Derivatives utilized for trading purposes
The contract or notional amounts and fair value of derivative financial instruments for trading purposes
held at March 31, 2010 and 2009 are summarized as follows:− 38 −

Millions of yen

At March 31, 2010
Stock index futures:
Written
Purchased
Stock index options:
Written
Purchased
Bond futures:
Written
Purchased
Interest futures:
Purchased
Forward foreign exchange:
Written:South Africa Rand
U.S. dollar
Other
Purchased:
South Africa Rand
U.S. dollar
Other
At March 31, 2009
Bond futures:
Written
Purchased
Forward foreign exchange:
Written:U.S. dollar
Other
Purchased:
U.S. dollar
Euro
Other

Contract ornotional
amounts

Fair value

¥

¥

¥

300
56

Valuation
gain (loss)
−
−

¥

−
−

18
6

5
4

13
(2)

3,316
2,627

(2)
(1)

(2)
(1)

39,847

(1)

(1)

3,128
601
793

(100)
(2)
(14)

(100)
(2)
(14)

2,993
436
251

106
2
3

106
2
3

138
553

¥

138
553

−
−

¥

335
3,206

336
3,191

(1)
15

90
5
1,950

90
5
1,998

−
−
48

Thousands of U.S. dollars

At March 31, 2010
Stock index futures:
Written
Purchased
Stock index options:
Written
Purchased
Bond futures:
Written
Purchased
Interest futures:
Purchased
Forward foreign exchange:
Written:South Africa Rand
U.S. dollar
Other
Purchased:
South Africa Rand
U.S. dollar
Other− 39 −

Contract ornotional
amounts

Fair value

$

$

3,224
602

Valuation
gain (loss)
−
−

$

−
−

194
64

54
43

140
(21)

35,641
28,235

(21)
(11)

(21)
(11)

428,278

(11)

(11)

33,6206,460
8,523(1,075)(21)(150)(1,075)(21)(150)

32,169
4,686
2,698

1,139
21
32

1,139
21
32

The fair value of stock index futures, stock index options, bond futures and interest futures exchange iscomputed using prices on the market. The fair value of forward foreign exchange is based on the
difference between the present value of future cash flows of receipt amount and the present value of
future cash flows of payment amount. At March 31, 2010, gain or loss on deemed settlement is disclosed inthe "Fair value" column of stock index futures, bond futures, interest futures and forward foreign exchange
above.
Derivatives utilized for non-trading purposes
The contract or notional amounts and fair value of interest rate swap contracts for non-trading purposes
held at March 31, 2010 and 2009 are summarized as follows:
Millions of yen

At March 31, 2010
Interest rate swaps:
Variable rate received for fixed rate
Commodity futures:
Written
Purchased

Contract ornotional
amounts

Fair value

¥

¥

458

(5)

63
55

At March 31, 2009
Interest rate swaps:
Variable rate received for fixed rate
Commodity futures:
Written
Purchased¥

650

Valuation
gain (loss)
¥

(2)
2

¥

(10)

5
4

(5)
(2)
2

¥

(10)
−
1

5
5

Thousands of U.S. dollars

At March 31, 2010
Interest rate swaps:
Variable rate received for fixed rate
Commodity futures:
Written
Purchased

Contract ornotional
amounts

Fair value

$

$

4,923

(54)

677
591

Valuation
gain (loss)
$

(54)

(21)
21

(21)
21

The fair value of interest rate swaps is estimated based on quotes from counterparties, and the fair valueof commodity futures is based on quoted market prices. At March 31, 2010, gain or loss on deemed
settlement is disclosed in the "Fair value" column above.
Derivative transactions to which hedge accounting are applied at March 31, 2010 are summarized asfollows:

Hedge
accounting
method*1

Nature of transaction

Hedgeditems

Interest rate swaps:
Long-term
Variable rate received borrowings
for fixed rate

Millions of yen
Contract ornotional
amounts
Fair value

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

¥

$

7,000

¥

*2

75,236$*2*1 The difference in amounts to be paid or received on interest rate swaps is recognized over the life of the agreements as an
adjustment to interest expense.
*2 For certain long-term borrowings for which interest rate swap contracts are used to hedge the interest rate fluctuations,fair value of derivative financial instrument is included in fair value of the long-term borrowings as hedged items.

− 40 −

25. INVESTMENT AND RENTAL PROPERTY"Accounting Standard for Disclosures about Fair Value of Investment and Rental Property" (ASBJ
Statement No. 20, November 28, 2008) and its "Guidance on Accounting Standard for Disclosuresabout Fair Value of Investment and Rental Property" (ASBJ Guidance No. 23, November 28, 2008)
were applied for the year ended March 31, 2010. The standards require to disclose fair value ofinvestment and rental property in the notes to financial statements.
The Company and certain consolidated subsidiaries own their rental office buildings, land etc(hereafter "rental property"). Income from the rental property is ¥138 million ($1,483 thousand) for
the year ended March 31, 2010.
The amounts recognized in the consolidated balance sheet and fair values related to the rental
property are as follows.
Millions of yen
Consolidated balance sheet amount
Balance at
beginning of
the year¥

6,008

Increase/(decrease)¥(36)

Balance at endof the year
¥

5,972

Fair value
¥

5,783

Thousands of U.S. dollars
Consolidated balance sheet amount
Balance at
beginning of
the year$

64,574

Increase/(decrease)
$

(387)

Balance at endof the year$

64,187

Fair value$

62,156

Fair value is based on real-estate appraisals, and is estimated by the Company.

26. BALANCES AND TRANSACTIONS WITH RELATED PARTY
The Company' officer and the close relatives have a majority equity ownership in Santo Co., Ltd. at
March 31, 2010 and 2009.
Transactions between the consolidated subsidiary of the Company and Santo Co., Ltd. for the years
ended March 31, 2010 and 2009 are summarized as follows:
Thousands of
U.S.dollars

Millions of yen
2010

2009

2010

Transactions:
Loan of securities

¥

581

¥

562

$

6,245

Transactions between the Company and Santo Co., Ltd. for the year ended March 31, 2009 weresummarized as follows:
Millions of yen
Transactions:Purchase of associated company's stock322− 41 −

27. SEGMENT INFORMATION(a) Industry segment information
The Company and its consolidated subsidiaries' primary business activities include (1) trading insecurities and derivatives, (2) brokerage for trading in securities and derivatives, (3) underwriting anddistribution of securities, (4) public offering and secondary distribution of securities and (5) private
offering of securities. These activities include financing and other services. The Company and its
consolidated subsidiaries operate predominantly in a single industry segment as investment andfinancial services.
(b) Geographic segment information
Both domestic sales and assets located in Japan are over 90% of those for all segments for the years
ended March 31, 2010 and 2009.
(c) Overseas sales
Overseas sales, which include export sales of the Company and its domestic subsidiaries, are less than
10% of consolidated sales for the years ended March 31, 2010 and 2009.

28. SUBSEQUENT EVENTSThe Company filed an action for avoidance of reassessment of income taxes and imposition of additional
taxes for software sales transaction etc. in 2005 and the court of first instance dismissed the action on
February 5, 2009. The Company has appealed to the Intellectual Property High Court, and obtained thejudgment from the High Court by which was admitted the demand of the Company on May 25, 2010. A
final appeal or a petition for acceptance of final appeal is not filed against the judgment by thecounterparty, the judgment became final and binding.
Income tax of ¥936 million ($10,060 thousand), local taxes and additional taxes etc. are to be refunded.

− 42 −

Independent Auditors' Report

To the Board of Directors of
Okasan Securities Group Inc.:

We have audited the accompanying consolidated balance sheets of Okasan Securities Group Inc. and its
consolidated subsidiaries as of March 31, 2010 and 2009, and the related consolidated statements of operations,changes in net assets and cash flows for the years then ended, all expressed in Japanese yen. These
consolidated financial statements are the responsibility of the Company's management. Our responsibility is toexpress an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Okasan Securities Group Inc. and its consolidated subsidiaries as of March
31, 2010 and 2009, and the consolidated results of their operations and their cash flows for the years thenended in conformity with accounting principles generally accepted in Japan.
As more fully described in Note 28 to the consolidated financial statements, the judgment of the action foravoidance of reassessment of income taxes for software sales transaction etc. became final and binding.
The accompanying consolidated financial statements as of and for the year ended March 31, 2010 have beentranslated into United States dollars solely for the convenience of the reader. We have recomputed thetranslation and, in our opinion, the consolidated financial statements expressed in yen have been translated
into United States dollars on the basis described in Note 3 to the consolidated financial statements.

June 30, 2010
Tokyo, Japan
Toyo Horwath− 43 −

REFERENCE DATA

− 44 −

Balance Sheets
Okasan Securities Co., Ltd. At March 31, 2010 and 2009

Thousands of
U.S.dollars

Millions of yen
2010

2009

2010

ASSETS
Current assets:
Cash on hand and in banks

￥

8,504

￥

6,557

$

91,402

Cash segregated as deposits for customers and others

22,863

11,363245,733

Trading assets

142,517

115,092

1,531,782

Receivables arising from unsettled trades

11,898

9,706

127,881

Receivables on margin transactions

39,821

19,423427,999

Receivables on collateralized securities transactions

137,066

131,796

1,473,194

2,471

2,639

26,558Deferred income taxes

626

1,729

6,728

Other current assets

2,667

3,331

28,665

(37)

(20)

(398)

368,396

301,616

3,959,544

Property and equipment, net of accumulated depreciation

1,756

1,587

18,874

Intangible assets, net

385

204

4,138

996

879

10,705

Short-term guarantee deposits

Allowance for doubtful accounts
Total current assets

Investments and other assets:
Investment securities
Long-term guarantee deposits

3,124

3,184

33,577

Deferred income taxes

1,836

1,937

19,733

Other

1,687

1,776

18,132

Allowance for doubtful accounts(1,237)(1,260)(13,295)

6,406

6,516

68,852309,923$ 4,051,408

Total investments and other assets

TOTAL

￥

− 45 −

376,943￥

Thousands of
U.S.dollars

Millions of yen
2010

2009

2010

LIABILITIES AND NET ASSETS
Current liabilities:
Trading liabilities￥

105,020$ 1,078,429

24,253

9,455

260,673

Payables on collateralized securities transactions

32,822

37,638352,773

Deposits received

16,664

9,581

179,106

Guarantee deposits received

12,546

6,311

134,845

Short-term borrowings

123,665

73,265

1,329,159

358

−

3,848

Payables on margin transactions

Income tax payables
Other current liabilities

100,337

￥

4,361

3,095

46,872315,006

244,365

3,385,705

Long-term borrowings

1,850

7,350

19,884Retirement and severance benefits

4,555

4,456

48,958

Total current liabilities
Non-current liabilities:

Other non-current liabilities
Total non-current liabilities
Financial instruments transactions reserve
Total liabilities

733

459

7,878

7,138

12,26576,720

580

417

6,234

322,724

257,0473,468,659

Net assets
Shareholder's equity:
Common stock
Authorized − 240,000 shares
5,000

5,000

53,740Capital surplus

Issued − 100,000 shares in 2010 and 2009

29,20029,200313,843

Retained earnings

19,971

18,645

214,650

54,171

52,845582,233

48

31

516

54,21952,876

582,749

309,923$ 4,051,408

Total shareholder's equity
Valuation and translation adjustments:
Unrealized gain on available-for-sale securities
Total net assets
TOTAL

￥

− 46 −

376,943￥

Statements of Operations
Okasan Securities Co., Ltd. Years ended March 31, 2010 and 2009

Thousands of
U.S.dollars

Millions of yen
2010

2009

2010

Operating revenues:
Commissions￥

33,888￥26,380$364,230

Net gain on trading

15,99816,029171,948

Interest and dividend income

1,977

2,126

21,24951,86344,535557,427

Interest expense

1,486

1,866

15,972

Net operating revenues

50,37742,669541,455

Selling, general and administrative expenses

45,99445,563494,346

4,383(2,894)

47,109Operating income (loss)
Other income (expenses):

(163)

−

(1,752)Gain on sale of investment in securities

−

96

−

Gain on exchange from business combination

−

148

−

−

97

−

−

699

-

153

288

1,644

(10)

1,328

(108)

4,373

(1,566)47,001

854

4

9,179

1,193

(50)

12,822

2,047

(46)

22,001

Provision for financial instruments transactions reserve

Reversal of contribution to securities market infrastructure
improvement fundReversal of financial instruments transactions reserve
Other, net

Income (loss) before income taxes
Income taxes:
Current
Deferred

Net income (loss)¥− 47 −

2,326¥(1,520)$25,000CORPORATE DATABOARD OF DIRECTORS(At April 1, 2010)(At June 29, 2010)
ChairmanCompany Name

Seiichi Kato

OKASAN SECURITIES GROUP INC.

President

Date of Establishment

Tetsuo Kato

August 25, 1944

Senior Managing Director
Hiroyuki Shinshiba

Head OfficeKazuhiko Nonaka

1-17-6 Nihonbashi, Chuo-ku,
Tokyo 103-8268, Japan

Managing Director
Hiroyuki Shindo

Phone Number+81-3-3272-2222

Director
Kenichi Tanaka
Masanori Kanai

Paid-in Capital

Kenjiro Takemiya

18,590 Million Yen

Statutory Auditors

Subsidiaries and Affiliates

Koichi Saku

10 companies

Hirosuke Minami
Masahiro Ito
Tokio Hiraragi
Yukihiro Asano
Takao Saga

ORGANIZATION CHART(At April 1, 2010)
General Meeting of Shareholders

Board of Statutory Auditors
Statutory Auditors

Board of Directors

Statutory Auditors Office

ChairmanGroup Strategic Management Meeting

PresidentGroup Administrative Management Meeting
Committee of the Executive Officers
Management Dept.
Business Strategy Dept.
Corporate Planning Division

General Administrative Dept.
Public and Investors Relations Dept.
Secretariat
Personnel Planning Dept.
Treasury Planning Dept.

Administrative Division

Compliance Dept.
Internal Control Promotion Office− 48 −

http://www.okasan.jp/