ANNUAL REPORT
Ending March 31, 2011

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.
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 Income

12

Consolidated Statement of Comprehensive Loss

13

Consolidated Statements of Changes in Net Assets

14

Consolidated Statements of Cash Flows17

Notes to Consolidated Financial Statements

19

Independent Auditors' Report

47

Reference Data
Okasan Securities Co.,Ltd.

Non-Consolidated Balance Sheets

49

Non-Consolidated Statements of Operations

51

Corporate Data

52

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1

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Consolidated Financial Highlights
Okasan Securities Group Inc. and consolidated Subsidiaries Years ended March 31, 2011 and 2010

2011

2010

Thousands of
U.S.dollars (note)
2011(4/1/10〜3/31/11)(4/1/09〜3/31/10)(4/1/10〜3/31/11)

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

¥62,964¥66,236$757,234

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

3,409

7,747

40,998Net income .....................................................................

640

2,786

7,697

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

542,537

499,495

6,524,799

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

112,623

115,578

1,354,456

Millions of yen

Yen

Per share of common stock

U.S.dollars (note)

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

¥3.15¥13.63$0.04

Cash dividends applicable to the year .....

5.00

7.50

0.06

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 31,2011, which was =Y83.15 to U.S.$1.

Operating Revenues（¥ billions）

100

80

Operating Income

Net Income（¥ billions）（¥ billions）

20

20

15

15

Net Assets（¥ billions）

150

100
60
10

10

5

5

0

0

40
50

20

'07 '08 '09 '10 '11'07 '08 '09 '10 '11−'07 '08 '09 '10 '11

2−'07 '08 '09 '10 '11

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
Okasan Securities Group Inc. is currently advancing a medium-term business plan for the period from April
2010 through the end of March 2013 (from FY2010 to FY2012). The plan is focused on elevating the quality of
our services following our basic policy of “Do all we can for each and every one of our clients.” The plan's
objective is to enhance our presence in the markets and construct an earning structure capable of realizing
steady growth by “providing highest-quality products, research, and services” and “establishing unique
brokerage services that match local-area characteristics.”.
In FY2010, the plan's first year, Okasan Securities Co., Ltd. continued to develop products and informationdelivery platform from a “global perspective.” Steps taken during the year included expanding its product lineup, notably in foreign equities and foreign bonds, and strengthening its research capabilities in foreign markets
by establishing alliances with the leading Asian securities firms such as China Galaxy Securities Co., Ltd. in
China and OSK Investment Bank Berhad in Malaysia.
Okasan Online Securities upgraded the platform for its customer service by further expanding its menu of
trading tools, which includes the Okasan Net Trader series, Okasan RSS, Web-based order entry facilities, andiPhone applications. In addition, Okasan Information Systems continued to enhance the core system, Okasan
Database Information Node (ODIN).
In January 2011, Okasan Securities Group Inc. and Okasan Securities Co., Ltd. relocated some headquarter
functions to the Muromachi Head Office to facilitate management decisions and enhance our investment
information distribution capabilities.

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3

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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
For our shareholders

To be a leading company with regard to employees' sense of job satisfaction
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 increasing economic interdependence of countries around the world and the steady progression toward a
truly global economy are making a “global perspective” more important than ever for investment decisions. This
trend is also making quality investment advice increasingly essential for investors.
Our medium-term business plan for fiscal years 2010 to 2012 (April 1, 2010, to March 31, 2013) was formulated
in response to this business environment. The plan sets a course for the Group to continue honing its
competitive edge, which is our ability to flexibly provide products and information services to meet the needs ofeach client. We will also endeavor to provide the most attractive and effective products, research, and services
from a global perspective, to establish unique brokerage services that match local-area characteristics, and to
be a highly trusted investment advisor that is the best partner for our customers.
The Great East Japan Earthquake on March 11, 2011, has created a situation of insufficient power supply inareas serviced by Tohoku Electric Power Company and Tokyo Electric Power Company. The Group is currently
implementing measures to conserve energy. To prepare for potential blackouts and do our part in the national
effort to further reduce energy consumption, we have made it our social mission as a securities company to beaggressively vigilant about conserving electricity.

6. Outline of corporate governance structure(1) Basic concepts regarding corporate governanceAs globalization progresses and a shift in management towards creation of enterprise value accelerates,
the importance of corporate governance is increasing. In response to this environmental change, we arecommitted to high standards of corporate governance as we regard it as one of our management
responsibilities. As we face the challenges of a rapidly changing business landscape, we have undertaken todeliver such solutions so as to speed up the decision-making process and to enhance efficiency of the
managerial and supervisory systems.
Okasan Securities Group Inc. operates as a Company with Auditors. Management oversight of the Board of
Directors decision-making functions is enhanced by the inclusion of 3 outside auditors among our 6 auditors,
as such a supervisory system is considered to adequately assure objectivity and neutrality in the decisionmaking functions.

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4

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(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 7 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 “Group Strategic Management Meeting” and “Group Administrative
Management Meeting” as advisory bodies to the president-director, to realize the planning and decision of
uniform and flexible management strategies and the improvement in the administration of each of the Group
companies.
(3) Management monitoring structure
As regards the structure of the management monitoring, out of 6 auditors in total that includes 3 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.
Okasan Securities Group Inc. entered into an agreement with the 3 outside auditors to limit their liabilities
under Article 423, Paragraph 1 of the Companies Act to the amount provided by laws and ordinances.
(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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5

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Operating and Financial Review
Okasan Securities Group Inc. and Consolidated Subsidiaries Years ended March 31, 2011 and 2010

I. Analysis of operating results
The Japanese economy opened the fiscal year in a gradual recovery supported by stimulus policies, risingexports, and other factors, including a bottoming and signs of growth in capital spending. The recovery moved
into a plateau phase in autumn, however, as eco-car subsidies, the eco-point program for consumer electric
appliances, and other stimulus measures expired or were scaled down. At the start of the 2011 calendar year,
increasing exports to Asia drove the economy toward further recovery, but the trend was derailed on March 11
by the extensive damage caused by the Great East Japan Earthquake. The fiscal year ended with widespread
concern over the disaster's consequences along with serious power shortages in areas supplied by Tohoku
Electric Power and Tokyo Electric Power.
In the currency markets, the yen first rose markedly versus the euro early in the fiscal year on a backdrop of thesovereign debt crisis in Greece then began rising against the dollar in July on concern of an economic
slowdown and expectation for supplemental monetary easing policies in the United States. The dollar
intermittently gained back ground through the end of the 2010 calendar year. When the yen spiked to ¥76
versus the dollar on market speculation for yen-buying in the wake of the March earthquake, the G7 central
banks responded with a coordinated yen-selling intervention, enabling the dollar to quickly regain the ¥80 level.
By the close of the fiscal year, steps by the United States to move away from its monetary easing policy had
helped the dollar bounce back to the ¥83 level.
In the stock markets, concern that the strong yen would hamper Japanese corporate earnings drew the Nikkei
225 down to the 8,800 level in late August. Encouraged by improved corporate revenue structures and otherfactors, the stock index climbed steadily from that point to reclaim the 10,800 level in mid February. The
earthquake and ensuing uneasiness over the accident at the Fukushima Daiichi nuclear power plants caused
the index to briefly plummet to a low point of 8,227.63. However, as investors turned more bullish, the Nikkei
225 ended at 9,755.10 for the fiscal year, narrowing the 12 month loss to 12.0%.
In the fixed income market, a scenario of decelerating economies in the United States and Japan, the credit
crisis in Europe, and the stronger yen versus the dollar fueled anticipation that the Bank of Japan would instituteadditional monetary easing. Yields on new 10-year JGB issues moved into a declining trend that lowered therate to 0.820% in October. Meanwhile, domestic financial institutions were facing a swelling in their surplus fundaccounts and began acquiring bonds, focused on shorter maturities, which helped firm up the supply anddemand balance. When long-term interest rates in the United States turned upward in mid October, 10-year
JGB yields followed and reached 1.350% in February before a reactionary-buying phase brought the rising
trend to a halt. Yields moved into period of range trading and ultimately ended the fiscal year at 1.255%.
Okasan Securities Co., Ltd., the core member of the Okasan Group, responded to the operating environment byfortifying its Global Equity products, such as by expanding its presence in markets trading Asian shares, andbroadening its menu of foreign currency-denominated products, including the commencement of Brazilian realdenominated bond trading. Okasan Securities also took steps to strengthen its information gathering capabilities
in foreign markets, including establishing alliances with leading securities companies in China and Malaysia.
Okasan Online Securities, a specialized internet-based broker, enhanced its trading tools, including providing a
Smartphone application, offered new services such as the “Click Equity 365” exchange CFD (an equity index
margin contracts), and conducted various promotional campaigns during the fiscal year. Okasan AssetManagement upgraded its service to provide information and sales support to sales companies and continued
launching new funds geared to the investment environment.

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6

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As a result of the above mentioned environment, operating revenues and net operating revenues of Okasan
Securities Group Inc.(consolidated, Group hereinafter) decreased 4.9% and 4.8% respectively from a year ago, to¥62,964 million and ¥61,276 million respectively for the fiscal year. Selling, general and administrative expenses
edged up by 2.2% from a year ago, to ¥57,867 million. Consequently, net income for the fiscal year decreased
77.0% from a year ago, to ¥640 million.
1. Fees and commissions received
Total fees and commissions received increased 29.2% from the previous fiscal year, to ¥43,846 million. A
breakdown of major items is shown as follows:（1）Brokerage commissions
The average daily trading volume (Japanese common stocks) on the Tokyo Stock Exchange in the fiscal
year decreased 2.5% from a year ago, to 2,264 million shares, while trading value posted ¥1,553.2 billion,
almost the same as the amount for the previous fiscal year. In the mixed environment, stock brokeragecommissions earned by the Group were down 19.1% from a year ago, to ¥10,748 million due to a decline inindividual investors' trading value. Furthermore, bond brokerage commissions decreased 77.6% from ayear ago, to ¥19 million. Other brokerage commissions rose 6.5% from a year ago, to ¥1,238 million yen.
Consequently, total brokerage commissions in the fiscal year posted a 17.4% decline from a year ago, at¥12,005 million.
（2）Underwriting fees, selling concessions, and commissions on solicitation for sales of financial
instruments to specified investors and others
Equity brokerage commissions for the fiscal year decreased 43.6% from a year ago, to ¥324 million, due
primarily to fewer deals in large-scale financings of IPOs and POs by already-listed companies. On theother hand, bond commissions decreased 20.9% from a year ago, to ¥80 million, in spite of contribution oflead manager fees in corporate bonds and manager fees in municipal bonds.

As a result, total ofunderwriting fees, selling concessions, and commissions on solicitation for sales of financial instruments tospecified investors and others declined by 40.2% from a year ago, to ¥404 million yen.
（3）Administrative charges on offering, selling and solicitation for sales of financial instruments tospecified investors, and other fees and commissions received
Investment trust funds are the revenue drivers of this category.
During the fiscal year, the Group focused on marketing of existing funds including “Asia Oceania High Yield
and Growth Open” and made efforts for accumulation of clients' assets under custody. Furthermore, aiming
to widen the product line-up, the Group launched various types of new funds, including a fund investing in
the developed market stocks that are likely to benefit from growth in emerging countries, a fund investing in
the US and the domestic equities with focus on new technologies, a fund investing in high yield bonds ofEuropean counties, and a fund investing in shares of agriculture- and food-related companies throughout
the world and bonds linked with the world's commodity markets for agricultural crops.
Despite of the above efforts, administrative charges on offering, selling and solicitation for sales of financial
instruments to specified investors decreased 8.7% from a year ago, to ¥16,131 million. On the other hand,
other fees and commissions received increased 7.9% from a year ago, to ¥11,831 million, due tocontribution of administrative charges for investment trusts and sales commissions for insurance policies
such as variable annuity.

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7

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Fees and Commissions received
Breakdown by category

Commissions(¥ billions)(Millions of yen except percentage)

Brokerage commissions
Equities

2011<A>

2010<B>

Ratio(4/1/10〜3/31/11)(4/1/09〜3/31/10)<A>/<B>¥12,005¥14,533

82.6

10,74813,287

80.9

60

Bonds

19

83

22.4

50

Others

1,238

1,163

106.5

404

675

59.8

324

574

56.4

Underwriting fees and selling concessions

40

Equities

30

80

101

79.1

Placement commissions

Bonds

16,131

17,676

91.3

Other commissions

11,831

10,963

107.9

Total

¥40,370¥43,847

92.1

20
10
0

'07 '08 '09 '10 '11

Breakdown by Product(Millions of yen except percentage)

Equities
Bonds

2011<A>

2010<B>

Ratio(4/1/10〜3/31/11)(4/1/09〜3/31/10)<A>/<B>¥11,346¥14,138

80.3

201

363

55.6

Investment trusts

27,051

27,412

98.7

Others

1,772

1,934

91.6

Total

¥40,370¥43,847

92.1

2. Trading profits
Trading profits on equities rose 23.6% from a year ago to ¥9,645 million due to significant increase in over-thecounter trading in Japan of foreign stocks, in response to investors' strong demand for US shares including
telecom-related and relisted auto stocks. On the other hand, reflecting a decline in trading volume of foreign
currency denominated bonds to individuals, net trading profits on bonds decreased 13.6% from a year ago to¥9,342 million. Other trading profits recorded ¥112 million (a loss of 335 million yen for the previous fiscal year).
Consequently, total trading profits increased 4.5% from a year ago, to ¥19,100 million.
Trading profits30(¥ billions)20

Trading profit/loss(Millions of yen except percentage)

2011<A>

2010<B>

Ratio(4/1/10〜3/31/11)(4/1/09〜3/31/10)<A>/<B>

Equities, etc.

¥ 9,645¥ 7,802

123.6

Bonds, etc.

9,342

10,816

86.4

112

△335

−

¥19,100¥18,283

104.5

Others

10

Total
0

'07 '08 '09 '10 '11

3. Net financial income
Interest and dividend income decreased 8.0% from a year ago, to ¥2,280 million, while interest expenses
decreased 9.3% from a year ago, to ¥1,688 million. As a result, net financial income decreased 4.0% from ayear ago, to ¥591 million.
4. Other operating income
Operating income from operations other than the financial instrument exchange business or its incidental
business decreased 25.4% from a year ago, to ¥1,214 million.

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8

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5. Selling, general and administrative expenses
Selling, general and administrative expenses edged up 2.2% from a year ago, to ¥57,867 million due mainly toa rise in depreciation charges and trading-related expenses, with such a rise partly offset by a decline inadministrative expenses.
6. Other income (expenses)
Net of other income and expenses ended up with a loss of ¥1,148 million for the fiscal year (a loss of ¥193
million for the previous fiscal year), due mainly to provision of allowance for doubtful accounts for the purpose ofaccommodating a fund shortfall related to failed settlements against customers resulting from plunging equity
market triggered by the Great East Japan Earthquake.
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 2011 we proposed a ¥5.0 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 at the end of the fiscal year were ¥542,537 million, or an increase of ¥43,042 million from the end of
the previous fiscal year. The increase was mainly due to a ¥39,643 million rise in trading assets, a ¥30,456
million rise in receivables on collateralized securities transactions, a ¥12,387 million decline in receivables arisingfrom unsettled trades, and a ¥9,647 million decline in cash segregated as deposits for customers and others.
Total liabilities at the end of the fiscal year were ¥429,914 million, or an increase of ¥45,996 million from the endof the previous fiscal year. The increase was mainly due to a ¥28,475 million rise in payables arising fromunsettled trades, and a ¥23,983 million rise in trading liabilities. However, the rise was detracted by a ¥5,961
million decline in payables on margin transactions.
Net assets at the end of the fiscal year were ¥112,623 million, or a decrease of ¥2,954 million from the end of
the previous fiscal year. This was mainly due to a ¥973 million decrease arising from purchase of treasury
stocks, a ¥969 million decrease in unrealized gains on available-for-sale securities, and a ¥867 million decrease
in retained earnings.
2. Cash flows
Cash and cash equivalents (“funds”) as of the end of the fiscal year increased ¥2,089 million from the end of theprevious fiscal year, to ¥38,340 million (a 5.8% rise from a year ago). Cash flows and important factors in cash
flows are as follows:<Cash flows from operating activities>
Operating activities resulted in a cash inflow of ¥1,456 million in the fiscal year (compared to an outflow of¥48,902 million in the previous fiscal year). The inflow reflected a ¥25,203 million gain from the net balance oftrading assets and a ¥9,700 million gain from a decrease in cash segregated as deposits for customers. Suchgains, however, are partly offset by an outflow of ¥34,253 million due to the use of fund for the net balance ofreceivables on collateralized securities transactions and payables on collateralized securities transactions.
<Cash flows from investing activities>
Investing activities caused a cash outflow of ¥5,644 million, or a 339.4% increase from a year ago. Outflows
included ¥4,497 million in payment for purchase of investment securities and ¥1,489 million in payment forpurchase of intangible fixed assets. These were offset by a cash inflow of ¥1,245 million from the sale ofinvestment securities.
<Cash flows from financing activities>
Financing activities resulted in a cash inflow of ¥6,549 million, or an 87.6% decrease from a year ago, due
primarily to an increase in short-term borrowings.

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9

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Consolidated Balance Sheets
Okasan Securities Group Inc. and Consolidated Subsidiaries − At March 31, 2011 and 2010

Thousands of
U.S.dollars(note 3)

Millions of yen
2011

2010

2011

ASSETS
Current assets:
Cash on hand and in banks (notes 10 and 21)￥

43,340￥41,440$521,227

Cash segregated as deposits for customers and others

48,05357,701

577,907

Trading assets (notes 4 and 10)

182,513

142,869

2,194,985−

12,388−

Receivables on margin transactions (note 5)

36,24744,338435,923

Receivables on collateralized securities transactions (note 6)

167,522137,066

2,014,696

3,298

601

39,663

Receivables arising from unsettled trades

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

848

968

10,199Other current assets

7,576

7,750

91,113

Allowance for doubtful accounts

(7)

(39)

(84)

Total current assets

489,390445,082

5,885,629

16,43816,000197,691

9,386

10,427

112,880

Investment securities (notes 7, 8 and 10)

19,463

20,712

234,071

Long-term guarantee deposits

3,540

3,218

42,574

Property and equipment, net of accumulated
depreciation of ¥10,849 million ($130,475thousand)in 2011 and ¥10,660 million in 2010 (note 10)
Intangible assets, net
Investments and other assets:

Deferred income taxes (note 11)

2,471

2,064

29,717

Other

5,267

3,854

63,343

Allowance for doubtful accounts(3,418)(1,862)(41,106)

27,32327,986

328,599

499,495$ 6,524,799

Total investments and other assets

￥

TOTAL

See accompanying notes to consolidated financial statements.

− 10 −

542,537￥

Consolidated Balance Sheets−(Continued)
Okasan Securities Group Inc. and Consolidated Subsidiaries − At March 31, 2011 and 2010

Thousands of
U.S.dollars(note 3)

Millions of yen
2011
LIABILITIES AND NET ASSETS
Current liabilities:
Trading liabilities (note 4)
Payables arising from unsettled trades
Payables on margin transactions (notes 5 and 10)
Payables on collateralized securities transactions (note 6)
Deposits received
Guarantee deposits received
Short-term borrowings (notes 9 and 10)
Income tax payables (note 11)
Other current liabilities (note 11)
Total current liabilities￥

124,430
28,476
19,42329,024
20,187
27,388146,283
1,117
5,279
401,607

2010

￥

2011

100,447−
25,38432,822
22,871
29,746
147,326
2,532
5,207
366,335$ 1,496,452
342,465
233,590349,056
242,778
329,3811,759,266
13,434
63,4884,829,910

Non-current liabilities:
Long-term borrowings (notes 9 and 10)
Lease liabilities (note 9)
Deferred income taxes (note 11)
Retirement and severance benefits (note 12)
Asset retirement obligations (note 13)
Other non-current liabilities
Total non-current liabilities

15,343
705
1,880
6,262
532
2,374
27,096

4,960
758
2,301
6,156
−
2,552
16,727

184,5228,478
22,61075,3106,398
28,551
325,869

Financial instruments transactions reserve (note 14)
Total liabilities

1,211
429,914855
383,917

14,564
5,170,343

18,59012,91164,496

18,59012,91965,363

223,572
155,274
775,658(2,850)93,147(1,877)
94,995(34,275)
1,120,229

586
270
(811)
45

1,556
235
(476)
1,315

7,047
3,247
(9,753)541

19,431

19,268233,686

112,623

115,578

1,354,456

499,495$ 6,524,799

Net assets
Shareholders' equity (note 15):
Common stock
Authorized−750,000,000 shares in 2011and 2010
Issued−208,214,969 shares in 2011 and 2010
Capital surplus
Retained earnings
Treasury stock, at cost, 7,095,507 shares in 2011
and 3,843,901 shares in 2010
Total shareholders' equity
Accumulated other comprehensive income (loss):
Unrealized gain on available-for-sale securities (note 7)
Surplus on land revaluation (note 16)
Foreign currency translation adjustments
Total accumulated other comprehensive income
Minority interests
Total net assets
Commitments and contingencies (note 22)￥

TOTAL
See accompanying notes to consolidated financial statements.

− 11 −

542,537￥

Consolidated Statements of Income
Okasan Securities Group Inc. and Consolidated Subsidiaries − Years ended March 31, 2011 and 2010

Thousands of
U.S.dollars(note 3)

Millions of yen
2011

2010

2011

Operating revenues:
Commissions￥

40,370￥43,847$

485,508

Net gain on trading

19,10018,283229,706

Interest and dividend income

2,280

2,478

27,420Service fee and other revenues

1,214

1,628

14,60062,964

66,236757,234

Interest expense

1,688

1,862

20,301

Net operating revenues

61,27664,374

736,933

Selling, general and administrative expenses (note18)

57,86756,627

695,935

3,409

7,747

40,998Dividend income

443

330

5,328

Gain on sale of investment securities

453

98

5,448

Operating income
Other income (expenses):

Negative goodwill

166

−

1,996

Interest expense

(119)

(130)

(1,431)

Loss on devaluation of investment securities

(400)

(153)

(4,811)

Provision for financial instruments transactions reserve

(356)

(338)

(4,281)(343)−(4,125)(1,702)−(20,469)

710

−

8,539

(1,148)(193)(13,806)

2,261

7,554

27,192Current

2,571

2,865

30,920Refund of income taxes(1,585)−(19,062)

Cumulative effect on prior years of adoption of new accounting
standard for asset retirement obligations (note 13)
Provision for doubtful accounts
Other, net
Income before income taxes and minority interests
Income taxes (note 11):

DeferredIncome before minority interests
Minority interests
Net income¥

See accompanying notes to consolidated financial statements.

− 12 −

35

1,139

421

1,021

4,004

12,279

1,240

3,550

14,913

600

764

7,216

640

¥

2,786

$

7,697

Consolidated Statement of Comprehensive Loss
Okasan Securities Group Inc. and Consolidated Subsidiaries − Years ended March 31, 2011

Millions ofyen
Income before minority interests

￥

1,240

Thousands of
U.S.dollars(note 3)$

14,913

Other comprehensive loss:
Unrealized loss on available-for-sale securities(1,038)Foreign currency translation adjustments
Total other comprehensive loss
Comprehensive loss

(12,483)(334)(4,017)(1,372)(16,500)

¥

(132)

$

(1,587)

￥

(663)

$

(7,973)Comprehensive income (loss) attributable to:
Owners of parent
Minority interests

531

See accompanying notes to consolidated financial statements.

− 13 −

6,386

Consolidated Statements of Changes in Net Assets
Okasan Securities Group Inc. and Consolidated Subsidiaries − Years ended March 31, 2011 and 2010
Millions of yen
Shareholders' equity
Commonstock

Balances at March 31, 2009¥

18,590Capitalsurplus¥12,919Retainedearnings

Treasurystock,
at costTotal
shareholders'equity¥¥¥63,583(1,859)93,233

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

Net income

2,786(1,006)
2,786

Purchase of treasury stock

(18)

(18)

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

−

−

1,780

(18)

1,762

18,59012,91965,363(1,877)

94,995(20)(28)

Changes arising during the year:
Decrease resulting from changes ininterest in consolidated subsidiaries(8)

Cash dividends
Net income(1,507)(1,507)640

640

Purchase of treasury stock

(953)

(953)

(973)

(1,848)(2,850) ¥93,147

Net changes other than shareholders'equity−Total changes during the year
Balances at March 31, 2011¥

18,590(8)¥− 14 −

12,911(867)¥

64,496¥

Millions of yen
Accumulated other comprehensive income (loss)
Total
Unrealized
ForeignSurplus ongain oncurrency accumulated
other
land
availabletranslation comprehensive
for-salerevaluation
adjustments income (loss)
securities
Balances at March 31, 2009

¥

3

¥

235

¥

(321) ¥

Minority
interests

Total net
assets(83) ¥ 18,375¥ 111,525

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

Net income

2,786

Purchase of treasury stock(18)

Net changes other than shareholders'
1,553

−

(155)

1,398

893

2,291

Total changes during the year

1,553

−

(155)

1,398

893

4,053

Balances at March 31, 2010

1,556

235

(476)

1,315

19,268

115,578

equityChanges arising during the year:
Decrease resulting from changes ininterest in consolidated subsidiaries(28)

Cash dividends(1,507)

Net income

640

Purchase of treasury stock(953)

Net changes other than shareholders'equityTotal changes during the year
Balances at March 31, 2011

¥

(970)

35

(335)

(1,270)163(1,107)

(970)

35

(335)

(1,270)163(2,955)45¥ 19,431¥ 112,623

586

¥

270

− 15 −¥(811) ¥

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

Commonstock

Balances at March 31, 2010$

223,572$

Treasurystock,
at costRetainedearnings

155,370$786,085$

Total
shareholders'equity(22,574) $ 1,142,453

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

(96)

(240)

Cash dividends(18,124)

Net income(336)(18,124)

7,697

7,697

Purchase of treasury stock(11,461)(11,461)(11,701)(22,224)

Net changes other than shareholders'equityTotal changes during the year

(96)

Balances at March 31, 2011$

223,572$

155,274(10,427)$775,658$(34,275) $ 1,120,229

Thousands of U.S. dollars (note 3)
Accumulated other comprehensive income (loss)

Balances at March 31, 2010

Unrealized
gain onavailablefor-salesecurities

Surplus onland
revaluation

Total
Foreigncurrency accumulated
othertranslation comprehensive
adjustments income (loss)

Minority
interests

Total net
assets$$$$ 231,726$1,389,994

18,713

2,826(5,724)$

15,815

Changes arising during the year:
Decrease resulting from changes ininterest in consolidated subsidiaries(336)

Cash dividends(18,124)

Net income

7,697

Purchase of treasury stock(11,461)

Net changes other than shareholders'equityTotal changes during the year
Balances at March 31, 2011$

(11,666)421(4,029)(15,274)

1,960(13,314)(11,666)421(4,029)(15,274)

1,960(35,538)541$ 233,686$1,354,456

7,047

$

3,247

See accompanying notes to consolidated financial statements.

− 16 −$(9,753) $Consolidated Statements of Cash Flows
Okasan Securities Group Inc. and Consolidated Subsidiaries − Years ended March 31, 2011 and 2010
Thousands of
U.S.dollars(note 3)

Millions of yen
2011

2010

2011

Cash flows from operating activities:
Income before income taxes and minority interests

¥

2,261

¥

7,554

$

27,192Adjustments to reconcile income before income taxes andminority interests to net cash provided by (used in)operating activities:
Depreciation and amortization

3,828

2,703

46,037

343

−

4,125

Interest and dividend income(2,735)(2,823)(32,892)

Interest expense

1,808

1,992

21,744

Loss (gain) on sale of investment securities

(450)

37

(5,412)

Loss on devaluation of investment securities

400

153

4,811

Cumulative effect on prior years of adoption of new
accounting standard for asset retirement obligations

Negative goodwill incurred

(166)

−

(1,996)

Decrease (increase) in deposits segregated for customer

9,700(27,700)

116,657

25,203(34,905)

303,1032,129(6,292)25,604(34,253)(10,086)(411,942)(2,479)7,536(29,814)

Decrease (increase) in trading assets and increase(decrease) in trading liabilities
Decrease (increase) in receivables on margin transactions
and increase (decrease) in payables on margintransactions
Decrease (increase) in receivables on collateralized
securities transactions and increase (decrease) inpayables on collateralized securities transactions
Increase (decrease) in deposits received
Decrease (increase) in short-term guarantee deposits

337

2,090

4,053

Increase (decrease) in guarantee deposits received(2,359)8,362(28,371)

Increase (decrease) in allowance for doubtful accounts

1,524

41

18,328

Increase (decrease) in retirement and severance benefits

105

43

1,263

reserve

356

338

4,281

Other, net(2,686)(588)(32,303)

2,866(51,545)

34,468Interest and dividend received

2,782

2,790

33,457

Interest paid

(1,812)(2,011)(21,792)

Income taxes refunded (paid)(2,380)1,863(28,623)

1,456(48,903)

17,510

Increase (decrease) in financial instruments transactions

Sub-total

Net cash provided by (used in) operating activities− 17 −

Thousands of
U.S.dollars(note 3)

Millions of yen
2011

2010

2011

Cash flows from investing activities:
Payment for short-term investments(4,498)−(54,095)

Proceeds from sale of short-term investments

1,200

−

14,432

Payment for purchase of property and equipment

(896)

(434)

(10,776)

Payment for intangible assets(1,489)(2,271)(17,907)

Payment for investment securities(1,039)(2,351)(12,495)

Proceeds from sale of investment securities

1,245

2,383

14,973

Payment for investments in affiliates

(144)

−

(1,732)Other, net

(23)

1,388

(277)

(5,644)(1,285)(67,877)

Increase (decrease) in short-term borrowings

6,155

55,56074,023

Proceeds from long-term borrowings

9,200

3,180

110,643

Payments on long-term borrowings(5,998)(4,876)(72,135)

Purchase of treasury stock

(953)

(18)

(11,461)

Dividends paid to shareholders

Net cash used in investing activities
Cash flows from financing activities:(1,507)(1,005)(18,124)

Dividends paid to minority shareholders of subsidiaries

(42)

(35)

(505)

Other, net

(306)

(193)

(3,680)Net cash provided by financing activities

6,549

52,61378,761

Effect of exchange rate changes on cash and cash equivalents

(271)

(152)

(3,259)Net increase in cash and cash equivalents

2,090

2,273

25,135

Cash and cash equivalents, beginning of year

36,25033,977435,959

Cash and cash equivalents, end of year (note 21)

See accompanying notes to consolidated financial statements.

− 18 −¥

38,340¥36,250$461,094

Notes to Consolidated Financial Statements
Okasan Securities Group Inc. and Consolidated Subsidiaries − Years ended March 31, 2011 and 2010

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.
"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) 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 forthe 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 are not material.
The Company made necessary modification to the consolidated financial statements according to the PITF.
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, 2011 include theaccounts of the Company and its 10 subsidiaries (11 subsidiaries in 2010). There are no affiliates
accounted for by equity method in 2011 and 2010.
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 unallocated portion of
the difference is recognized as goodwill or negative goodwill. Goodwill is amortized over its estimatedperiod of benefit on a straight-line basis and negative goodwill is amortized over the appropriate period
to reflect the investments, while immaterial goodwill or negative goodwill is charged to income whenincurred.
All significant intercompany balances and transactions have been eliminated in consolidation.

− 19 −

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.

− 20 −

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 50 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 toprovide retirement and severance benefits to substantially all employees.
Under the "Accounting Standards for Retirement Benefits", provisions for defined benefit retirement
and pension plans have been made in the accompanying consolidated financial statements based on thepresent value of the projected future retirement and severance benefits attributable to employee
services rendered by 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− Leased assets related to finance lease transactions without title transfer are depreciated on astraight-line basis, with the lease periods as their useful lives and no residual value. Regarding financeleases transactions without title transfer for which the starting date for the lease transactions is prior to
March 31, 2008, the Company and its domestic consolidated subsidiaries have continued recognize lease
payments as expenses.
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.

− 21 −

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. Asset retirement obligations− From the year ended March 31, 2011, the Company applied "the AccountingStandard for Asset Retirement Obligations" (ASBJ Statement No.18, March 31, 2008) and "the Guidanceon Accounting Standard for Asset Retirement Obligations" (ASBJ Guidance No.21, March 31, 2008). The
Standard and the Guidance require that a company should recognize an asset retirement obligation
which is a statutory or similar obligation with regard to the removal of assets as a liability. An asset
retirement obligation is recognized as a liability at the time that the asset is incurred by its acquisition,
construction, development or ordinary use. When an asset retirement obligation is recognized as aliability, the asset retirement cost corresponding to it is included in the cost of the relevant asset by thesame amount.
As a result of this change, operating income decreased by ¥9 million ($108 thousand) and income before
income taxes and minority interests decreased ¥351 million ($4,221 thousand).
p. Presentation of comprehensive income− From the year ended March 31, 2011, the Company applied "theAccounting Standard for Presentation of Comprehensive Income" (ASBJ Statement No.25, June 30, 2010)and "the Revised Accounting Standard for Consolidated Financial Statements" (ASBJ Statement No.22,
Revised on June 30, 2010). Comprehensive income is the change in net assets that is recognized in an
entity's financial statements for a period, other than those changes resulting from direct transactions
with equity holders in the entity's net assets. Other comprehensive income is a portion ofcomprehensive income that is not included in net income for the period or minority interest's share in it.
Comprehensive income is required to be presented in either of, (a) a format composed of the statementof income that presents net income and the statement of comprehensive income that presents
calculation of comprehensive income (two-statement format), or (b) a format using one statement(statement of income and comprehensive income) that presents net income and comprehensive income(one-statement format).
The Company presents comprehensive income in two-statement format.
q. 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, 2011.

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, 2011, which was ¥83.15 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.

− 22 −

4. TRADING ASSETS AND LIABILITIES
Trading assets and trading liabilities at March 31, 2011 and 2010 consist of the following:Thousands of
U.S.dollars

Millions of yen
2011

2010

2011

Trading assets:
Equity securities and warrants¥

Government, corporate and other bonds
Commercial paper and certificates of deposit

1,140

¥

1,885

13,710177,871

134,988

2,139,158

3,498

5,992

42,069Derivatives

4¥$

182,513

¥

962

¥

4

48

142,869$ 2,194,985

Trading liabilities:
Equity securities and warrants¥

Government, corporate and other bonds
Commercial paper and certificates of deposit

707

11,56993,721

1,442,117

3,497

5,993

42,056

Derivatives

59
¥

$

119,912

124,430

¥

26

710

100,447$ 1,496,452

5. MARGIN TRANSACTIONS
Margin transactions at March 31, 2011 and 2010 consist of the following:Thousands of
U.S.dollars

Millions of yen
2011

2010

2011

Assets:Loans receivable from customers¥

29,837¥34,226$358,833

Cash deposits as collateral for securities borrowed fromsecurities finance companies

6,410

10,112

77,090¥36,247¥44,338$435,923

¥

8,795

¥

10,547$

105,773

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

10,628¥19,423

14,837¥25,384

127,817$233,590

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.

− 23 −

6. COLLATERALIZED SECURITIES TRANSACTIONSCollateralized securities transactions at March 31, 2011 and 2010 consist of the following:Thousands of
U.S.dollars

Millions of yen
2011

2010

2011

Assets:Cash collateral for securities borrowed¥

167,522¥137,066$

2,014,696¥

26,784¥32,822$

322,117

Liabilities:
Cash collateral for securities loaned
Sell Gensaki transactions

−

2,240
¥

29,024¥26,93932,822$

349,056

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, 2011 and 2010 is summarized as follows:

Acquisition
cost

Millions of yen
Gross
Gross
unrealized
unrealized
loss
gain

¥

3,298

¥

−

¥

−

¥

3,298

¥

11,354

¥

3,302

¥

(2,057) ¥12,599Balancesheet amountAt March 31, 2011
Current:
Government, corporate and other bonds
Non-current:
Equity securities
Government, corporate and other bonds

298

15

−

313

Other

1,432

126

(25)

1,533

¥

13,084

¥

3,443

¥

(2,082) ¥14,445

¥

599

¥

2

¥

−

¥

601

¥

11,623

¥

4,316

¥

(1,284) ¥14,655−313

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

297

Other

16

692
¥

12,612− 24 −

84
¥

4,416

¥

(15)

761

(1,299) ¥15,729

Acquisition
cost

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

$

39,663

$

−

$

−

$

39,663$

136,548$

39,711$(24,738) $151,521

Balancesheet amountAt March 31, 2011
Current:
Government, corporate and other bonds
Non-current:
Equity securities
Government, corporate and other bonds

3,584

180

−

3,764

Other

17,222

1,516

(301)

18,437(25,039) $173,722$

157,354$

41,407$

Securities classified as available-for-sale securities for which fair value is not available are unlisted equity
securities amounting to ¥4,725 million ($56,825 thousand) and ¥4,741 million, and investments in limited
partnership and similar partnership amounting to ¥293 million ($3,524 thousand) and ¥241 million at March
31, 2011 and 2010, respectively.
For the years ended March 31, 2011 and 2010, proceeds from sales of available-for-sale securities, grossrealized gains and gross realized losses are as follows:
Millions of yen
Proceeds fromsales ofavailable-for-sale

Gross realized
gains

Gross realized
losses¥¥¥March 31, 2011
Equity securities

497

450

(1)

Government, corporate and other bonds

1,800

−

−

Other

148

3

(1)

¥

2,445

¥

453

¥

(2)

102

¥

20

¥

(51)

March 31, 2010
Equity securities¥

Government, corporate and other bonds

−

1,600

Other

682
¥

−

78

2,384

¥

98

(83)
¥

(134)

Thousands of U.S.dollars
Proceeds fromsales ofavailable-for-sale

Gross realized
gains

Gross realized
losses$$$March 31, 2011
Equity securities
Government, corporate and other bonds

5,977

Other

1,780
$

29,405

5,412

(12)

−

21,648

−

36
$

5,448

(12)
$

(24)

8. INVESTMENTS IN AN AFFILIATEThe aggregate carrying amount of investments in an affiliate at March 31, 2011 and 2010 are ¥22million($265 thousand) and ¥22 million, respectively.

− 25 −

9. BORROWINGS
The weighted-average interest rates applicable to the short-term borrowings are 0.61% and 0.74% at March
31, 2011 and 2010, respectively.
Long-term borrowings at March 31, 2011 and 2010 consist of the following:Thousands of
U.S.dollars

Millions of yen
2011
Borrowings, maturing in installments through 2016;
bearing weighted average interest of 2.71%
at March 31, 2011
Borrowings, maturing in installments through 2014;
bearing weighted average interest of 2.79%
at March 31, 2010

¥

2010

17,650Less current installments
¥

2011

¥

−

$

212,267−

14,449

−

2,307

9,489

27,745

15,343

¥

4,960

$

184,522

Lease liabilities at March 31, 2011 and 2010 consist of the following:Thousands of
U.S.dollars

Millions of yen
2011
Lease liabilities maturing in installments through 2017;
bearing weighted average interest of 3.58%
at March 31, 2011
Lease liabilities maturing in installments through 2016;
bearing weighted average interest of 3.69%
at March 31, 2010

¥

2010

1,059

Less current installments
¥

2011

¥

−

$

12,736

−

1,030

−

354

272

4,258

705

¥

758

$

8,478

(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 176 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
2011
Current installments of long-term borrowings
Long-term borrowings

¥

1,850
7,900

2010
¥

2011

4,500
1,850

$

22,24995,009Annual maturities of borrowings after March 31, 2012, are as follows:Year ending March 31
2013
2014
2015
2016

− 26 −

Millions ofyen

Thousands of
U.S.dollars

¥

$

1,882
3,604
4,151
5,705

22,634
43,34349,922
68,611

Annual maturities of lease liabilities after March 31, 2012, are as follows:Year ending March 31
2013
2014
2015
2016

Millions ofyen

Thousands of
U.S.dollars

¥

$

351
215
91
39

4,221
2,586
1,094
469

To meet its liquidity needs stably and expeditiously and to strengthen financial operations, theCompany established a ¥22,000 million ($264,582 thousand) commitment line contracts with 8 financial
institutions at March 31, 2011 and a ¥22,000 million commitment line contracts with 8 financial
institutions at March 31, 2010. There are no borrowings under the commitment line contracts both at
March 31, 2011 and 2010.
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.

10. PLEDGED ASSETSAt March 31, 2011 and 2010, the carrying value of assets pledged is as follows:
Thousands of
U.S.dollars

Millions of yen
2011
Cash in banks¥

Trading assets

4,008

2010
¥

2011

3,746

28,883$

26,72648,202
347,360

Property and equipment

9,546

9,640

114,805

Investment securities

11,375

14,607

136,801¥

53,812¥54,719$647,168

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

Millions of yen
2011
Short-term borrowings¥

34,322

2010
¥

2011

39,628$412,772

Borrowings from securities finance companies

2,379

827

28,611Long-term borrowings

7,443

3,111

89,513¥44,144¥43,566$

530,896

In addition to above, at March 31, 2011, trading assets, etc. amounting to ¥60,098 million ($722,766
thousand) and investments securities amounting to ¥86 million ($1,034 thousand) are deposited as
guarantee for settlement of trading accounts and securities borrowed, respectively. At March 31, 2010,
trading assets, etc. amounting to ¥69,686 million and investments securities amounting to ¥109 million
are deposited as guarantee for settlement of trading accounts and securities borrowed, respectively.

− 27 −

The fair value of the securities pledged as collateral at March 31, 2011 and 2010, except for those
disclosed in the above table, are as follows:
Thousands ofMillions of yen
U.S.dollars
2011
Securities loaned on margin transactions
Securities pledged for borrowings on margin transactions
Securities loaned
Other

¥

¥

10,796
8,961
26,69253,25399,702

2010¥

15,746
10,74432,70538,912
98,107

¥

2011
$

$

129,838
107,769
321,010
640,445
1,199,062

The fair value of the securities received as collateral at March 31, 2011 and 2010 are as follows:
Thousands of
U.S.dollars

Millions of yen
2011
Securities received on margin transactions
Securities borrowed
Securities pledged as collateral
Other

¥

¥

27,809172,425
36,396
6,806
243,4362010¥¥

34,832
141,40245,872
10,544
232,6502011$$

334,4442,073,662
437,715
81,852
2,927,673

11. 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% in2011 and 2010.
The tax effects of significant temporary differences and tax loss carryforwards which resulted in deferred
tax assets and deferred tax liabilities at March 31, 2011 and 2010 are as follows:
Thousands ofMillions of yen
U.S.dollars
2011
Deferred tax assets:
Tax loss carryforwards
Retirement and severance benefits (employees)
Allowance for doubtful accounts
Accrued bonuses
Retirement and severance benefits (directors andcorporate auditors)
Financial instruments transactions reserve
Impairment loss
Asset retirement obligations
Loss on devaluation of investment securities
Loss on devaluation of golf memberships
Depreciation and amortization
Accrued business tax
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)− 28 −

¥

3,022
2,032
1,275
612

2010
¥

2,802
2,015
607
612

2011
$

36,34424,43815,334
7,360

497
492
393
347
270
220
192
153
−
305
9,810
(5,778)
4,032

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

5,977
5,917
4,726
4,173
3,247
2,646
2,309
1,840
−
3,668
117,979(69,489)
48,490(506)(1,879)(233)(2,618)1,414(1,223)(1,879)(170)(3,272)730(6,085)(22,598)(2,802)(31,485)
17,005¥$

Net deferred tax liabilities at March 31, 2011 and 2010 are reflected in the accompanying consolidatedbalance sheets under the following captions:Thousands of
U.S.dollars

Millions of yen
2011
Current assets − Deferred income taxes¥

Investments and other assets − Deferred income taxes

2010
848

¥

968

2,471

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

2011
$

10,1992,064

29,717

(25)

(1)

(301)

(1,880)(2,301)(22,610)

1,414

¥

730

$

17,005

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 years ended March 31, 2011 and 2010 is as follows:
2011

2010

40.5 %

40.5 %

Statutory tax rate
Expenses not deductible for tax purposes

7.7

2.0

Income not credited for tax purposes

(1.9)

(0.3)

Per capita tax

3.5

1.1

Refund of income taxes(70.1)−

Valuation allowance

55.3

10.6

Expiration of tax loss carryforwards

9.4

−

Other
Effective tax rate

0.7

(0.9)

45.1 %

53.0 %

12. 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, 2011 and 2010 consist of the followings:

Thousands of
U.S.dollars

Millions of yen
2011
Projected benefit obligations¥

Fair value of plan assets

2010(12,244)¥

6,816

Unrecognized actuarial gain

− 29 −¥(5,035)(12,287)

$

6,838

393

Amount recognized in the consolidated balance sheets

2011

81,972477¥(4,972)(147,252)
4,727$(60,553)

The components of net periodic benefit cost for the years ended March 2011 and 2010 are as follows:
Thousands of
U.S.dollars

Millions of yen
2011
Service cost

¥

2010
564

¥

2011
558

$

6,783

Interest cost

238

236

2,862

Expected return on plan assets

(32)

(29)

(385)

Recognized actuarial loss

92

95

1,107

862

860

10,367

184

182

2,213

Contributions to the defined contribution plan
¥

1,046

¥

1,042

$

12,580Assumptions used for the years ended March 31, 2011 and 2010 are set forth as follows:
2011

2010

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 ¥1,226
million ($14,744 thousand) and ¥1,184 million at March 31, 2011 and 2010, respectively.

13. ASSET RETIREMENT OBLIGATIONS
The asset retirement obligation is based on estimated future restoration liabilities related to leasehold
contracts of branch offices and so on.
The obligation is calculated based on the estimated period of use of 10 to 58 years and discounted rate of
1.39% to 2.33%.
The following table provides a Company's total asset retirement obligation for the year ended March 31,
2011:

Balance, beginning of year

Millions ofyen

Thousands of
U.S.dollars¥$

Liabilities incurred by asset acquisition

490
66

5,893
794

Accretion expenses

10

120

Liabilities settled

(34)

(409)

Balance, end of year¥532

The above asset retirement obligation at the beginning of year is calculated by estimating theundiscounted future cash flow as of the beginning of the year and by using a discount rate.

− 30 −$

6,398

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 is calculated based on Article 46-5, Paragraph 1 of the Financial
Instruments and Exchange Law.

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.
Cash dividends and appropriations to the legal reserve charged to retained earnings for the years ended
March 31, 2011 and 2010 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, 2010 which was approved by the General Meeting of
Shareholders held on June 26, 2009 are as follows:(a) Total dividends¥1,030 million(b) Cash dividends per common share¥5(c) Record date
March 31, 2009(d) Effective dateJune 29, 2009
Dividends paid during the year ended March 31, 2011 which was approved by the General Meeting of
Shareholders held on June 29, 2010 are as follows:(a) Total dividends¥1,544 million ($18,569 thousand)(b) Cash dividends per common share¥7.5 ($0.09)(c) Record date
March 31, 2010(d) Effective dateJune 30, 2010
Dividends to be paid after the balance sheet date but the record date for the payment belongs to the year
ended March 31, 2011 which was approved by the General Meeting of Shareholders held on June 29, 2011
are as follows:(a) Total dividends¥1,014 million ($12,195 thousand)(b) Dividend source
Retained earnings(c) Cash dividends per common share¥5 ($0.06)(d) Record date
March 31, 2011(e) Effective dateJune 30, 201116. 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, 2011 decreased by ¥553 million ($6,651 thousand) in comparison withthe book value of the land after the revaluation.

− 31 −

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 373.3% and 357.8% at
March 31, 2011 and 2010, respectively.

18. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Major elements of selling, general and administrative expenses for the years ended March 31, 2011 and2010 are summarized as follows:
Thousands of
U.S.dollars

Millions of yen
2011
Commissions and brokerage

¥

2010

10,934¥2011

10,412$

131,497

Employees' compensation and benefits

28,56528,544

343,536

Occupancy and rental

6,439

6,454

77,438

Data processing and office supplies

5,092

5,786

61,239Depreciation and amortization

3,828

2,703

46,037

Taxes other than income taxes

561

593

6,747

Reserve for doubtful accounts
Other
¥

−

5

−

2,448

2,130

29,441

57,867¥56,627$

19. COMPREHENSIVE INCOMEa) Comprehensive income for the year ended March 31, 2010 was as follows:
Millions ofyenComprehensive income attributable to:
Owners of parent¥

Minority interests

4,182
889

Total comprehensive income

¥

5,071

b) Other comprehensive income for the year ended March 31, 2010 was consisted of as follows:
Millions ofyen
Net unrealized gain on available-for-sale securities

¥

1,678

¥

1,522

Foreign currency translation adjustments(156)

Total other comprehensive income− 32 −

695,935

20. PER SHARE INFORMATION(a) Net Income per Share
Basic net income per share, and reconciliation of the numbers and the amounts used in the basic net
income per share computations for the years ended March 31, 2011 and 2010 are as follows:
Yen

U.S. dollars

2011
Basic net income per share

¥

2010
3.15

¥

2011

13.63

Net income¥

Net income applicable to common shareholders

2010
640

Net income not applicable to common shareholders

¥

640

2011

2,786

−
¥

0.04

Thousands of
U.S.dollars

Millions of yen
2011

$

$

7,697

−
¥

2,786

−
$

7,697

Number of shares(Thousand)
2011

2010

203,104

204,387

Weighted average number of shares outstanding on
which basic net income 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, 2011 and 2010 are as follows:
Yen

U.S. dollars

2011
Net assets per share¥

463.372010¥

471.25

Total net assets¥

112,623

$

2010
¥

5.57

Thousands of
U.S. dollars

Millions of yen
2011

2011

115,5782011$

1,354,456$

1,120,770

Amount deducted from total net assets:
Minority interests

19,431

Net assets applicable to common stockholders¥

93,192

19,268¥96,310

Number of shares(Thousand)Number of shares outstanding at the end of year on
which net assets per share is calculated− 33 −

2011

2010

201,119

204,371

233,68621. 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, 2011
and 2010 are as follows:
Thousands of
U.S. dollars

Millions of yen
2011
Cash on hand and in banks

¥

2010

43,340¥2011

41,440$521,227

Time deposits that have maturities of over three months
when acquired(5,000)Cash and cash equivalents¥

38,340(5,190))¥(60,133)

36,250$461,094

22. COMMITMENTS AND CONTINGENCIESAt March 31, 2011 and 2010, the Company and certain subsidiaries have guaranteed approximately ¥127
million ($1,527 thousand) and ¥155 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.

23. LEASES(a) Finance Lease
Acquisition cost, accumulated depreciation and net carrying amount of leased assets, if they had been
capitalized at March 31, 2011 and 2010 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:
Millions of yen

2011

Acquisition cost

Software￥￥Accumulated depreciation
Accumulated impairment loss
Net carrying amount2010

Furniture
andFixtures

￥

1,192

491

Total
￥

1,683

Net carrying amount

Total
￥

2,484

1,228

1,127

613

1,740

−

1

1

−

1

352

￥

102

Software$$14,336
10,091

￥

4,233

5,905

454

Total
$

4,678
$

1,227

− 34 −

20,241
14,769

−

12
$

869

389

2011

Accumulated impairment loss

￥

1,615

1

Furniture
andFixturesAccumulated depreciation

Software￥839

Thousands of U.S. dollars

Acquisition cost

Furniture
andFixtures

12
$

5,460

￥

487

￥

256

￥

743

Future minimum payments required under finance leases at March 31, 2011 and 2010 are as follows:
Thousands of
U.S.dollars

Millions of yen
2011
Due within one year
Due after one year

¥

2010
276
207
483

¥

¥

2011
437
355
792

¥

$
$

3,319
2,490
5,809

Lease payments, depreciation equivalents and interest expense equivalents for the years ended March 31,
2011 and 2010 are as follows:
Thousands of
U.S.dollars
Millions of yen
2011
Lease payments
Reversal of accumulated impairment loss
Depreciation equivalents
Interest expense equivalents

¥

2010
497
−
456
24

¥

2011
709
1
637
40

$

5,977
−
5,484
289

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

(b) Operating Lease
Future minimum lease payments required under noncancellable operating leases as of March 31, 2011 and2010 are as follows:
Thousands ofMillions of yen
U.S.dollars
2011
Within one year
Over one year

¥
¥

512
2,577
3,089

2010
¥
¥

2011
4
−
4

$
$

6,158
30,99237,15024. FINANCIAL INSTRUMENTS
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.

− 35 −

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 ofcounterparties. 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.
Proprietary position at every month end is stress tested based on the scenario of 10% decrease instocks and 100 basis points increase in interest rates for bonds, and effect of an expected loss on capital
adequacy ratio is reported to Financial Service Agency. The stress test indicates that the expected
loss is ¥569 million ($6,843 thousand) as of March 31, 2011.
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 for open interest,
deposits reception when market fluctuates in accordance with customer management rules. Purchases
and sales of investment securities and stock market fluctuations are controlled in accordance withinvestment securities management rules. Liquidity risk is controlled based on fund management planin accordance with liquidity risk management rules. The Group also makes contingency plan tomitigate liquidity crisis.
Securities subsidiaries other than Okasan Securities Co., Ltd. also maintain appropriate risk controls.

− 36 −

(4) Supplemental explanation regarding fair value of financial instruments
The contract amount of the derivative transactions does not represent the risk of the derivativetransactions.
Fair value of financial instruments
The carrying amounts on the consolidated balance sheets, fair value, and differences as of March 31, 2011
and 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
2011

2010

Carrying
value

Fair value Differences¥¥

Carrying
value

Fair value Differences¥¥

Assets:Cash on hand and in banks

43,34043,340¥−41,44041,440¥−Cash segregated as deposits
48,05348,053−57,701

57,701−

Trading securities

182,509

182,509−

142,865

142,865−

Available-for-sale securities

17,743

17,743−

16,33016,330−−−−12,38812,388−36,24736,247−44,33844,338−167,522

167,522−137,066

137,066

−

3,423

3,423

−

3,760

3,760

−

−

−

−

119

119

−

¥ 498,837¥ 498,837¥−¥ 456,007¥ 456,007¥−¥ 124,371¥ 124,371¥−¥ 100,421¥ 100,421¥−

28,47628,476−−−−

19,423

19,423−25,38425,384−for customers and others
Trading assets, short-term
investments and investment
securities

Receivables arising from unsettled
trades
Receivables on margintransactions
Receivables on collateralized
securities transactions
Short-term guarantee deposits
Short-term loans
Total
Liabilities:
Trading liabilities
Trading securities
Payables arising from unsettled
tradesPayables on margin transactions
Payables on collateralized
29,02429,024−32,82232,822−

Deposits received

20,187

20,187−22,871

22,871−

Guarantee deposits received

27,38827,388−29,74629,746−

Short-term borrowings

146,283

146,2874

147,326

147,365

39

Long-term borrowings

15,343

15,550

207

4,960

5,015

55

¥ 410,495¥ 410,706¥

211¥ 363,530¥ 363,624(56) ¥−

securities transactions

Total
Derivative transactions¥(56) ¥− 37 −¥(27) ¥¥

94(27) ¥−

Thousands of U.S. dollars
2011
Carrying
value

Fair value Differences$ 521,227$ 521,227

577,907577,907−

Trading securities

2,194,937

2,194,937−

Available-for-sale securities

213,385

213,385−435,923435,923−

2,014,696

2,014,696−

41,167

41,167−$ 5,999,242$ 5,999,242$−$ 1,495,743$ 1,495,743$−

342,465

342,465−

233,590

233,590−

Assets:Cash on hand and in banks$−

Cash segregated as deposits forcustomers and others
Trading assets, short-term
investments and investment
securities

Receivables on margintransactions
Receivables on collateralized
securities transactions
Short-term guarantee deposits
Total
Liabilities:
Trading liabilities
Trading securities
Payables arising from unsettled
tradesPayables on margin transactions
Payables on collateralized
349,056

349,056−

Deposits received

242,778

242,778−

Guarantee deposits received

329,381329,381−

Short-term borrowings

1,759,266

1,759,314

48

Long-term borrowings

184,522

187,011

2,489$ 4,936,801$ 4,939,338

securities transactions

Total
Derivative transactions$(673) $$

2,537

(673) $−

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

(1) Fair value measurement of financial instruments
Assets:Cash on hand and in banks, Cash segregated as deposits for customers and others, Receivables arisingfrom unsettled trades, Receivables on margin transactions, Receivables on collateralized securities
transactions, Short-term guarantee deposits and Short-term loans
The carrying amount approximates fair value because of the short maturity of these instruments.
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.

− 38 −

Liabilities:
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.
Payables arising from unsettled trades, Payables on margin transactions, Payables on collateralized
securities transactions, Deposits received, Guarantee deposits received and 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 Long-term borrowings.)
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 25. DERIVATIVES.
(2) Financial instruments of which the fair value is extremely difficult to measure
Thousands of
U.S.dollars

Millions of yen
2011
Unlisted equity securities

¥

4,725

Investments in limited partnership and similar partnership
Total

2010
¥

4,741

293
¥

5,018

2011
$

56,825

241
¥

3,524

4,982

$

60,349(3) ① Projected future redemption of monetary claim and securities with maturities at March 31, 2011

Due within
one year
43,340Millions of yen
Due after
Due after
five years
one yearthrough five through ten
years
years

Due after
ten years¥¥

Cash on hand and in banks¥
Cash segregated as deposits for customers
and others
Trading assets, short-term investments
and investment securities:
Available-for-sale securities with maturities:
Debt securities:
Government bonds
Other
Receivables on margin transactions
Receivables on collateralized securities transactions
Short-term guarantee deposits

48,053

−

−

−

3,300
−
36,247
167,522
3,423

300
568
−
−
−

−
3
−
−
−

−
64
−
−
−

¥

301,885− 39 −

¥

−

868

¥

¥

−

3

¥

−

64

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

Due after
ten years

Cash on hand and in banks$
521,227
Cash segregated as deposits for customers
and others
577,907
Trading assets, short-term investments
and investment securities:
Available-for-sale securities with maturities:
Debt securities:
Government bonds
39,687
Other−
Receivables on margin transactions
435,923
Receivables on collateralized securities transactions
2,014,696
Short-term guarantee deposits
41,167$$$ 3,630,607$

Due within
one year

−

$

−

−

−

−

−

3,608
6,831
−
−
−

−
36
−
−
−

−
770
−
−
−

10,439

$

36

¥

770

② Projected future redemption of monetary claim and securities with maturities at March 31, 2010

Due within
one year
41,440Millions of yen
Due after
Due after
five years
one yearthrough five through ten
years
years

Due after
ten years¥¥

Cash on hand and in banks¥
Cash segregated as deposits for customers
and others
Trading assets, short-term investments
and investment securities:
Available-for-sale securities with maturities:
Debt securities:
Government bonds
Corporate bonds
Other
Other
Receivables on margin transactions
Receivables on collateralized securities transactions
Short-term guarantee deposits
Short-term loans

57,701

−

−

−

−
300
300
−
44,338137,066
3,760
119

−
−
−
285
−
−
−
−

300
−
−
−
−
−
−
−

−
−
−
−
−
−
−
−

¥

285,024

¥

−

285

¥

¥

−

300

¥

−

−

(4) The annual maturities of the long-term debt
Please see note 9. BORROWINGS.

25. 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, 2011 and 2010 are summarized as follows:− 40 −

Millions of yen
2011

2010

Contract ornotional
Fair value
amounts
Stock index futures:
Written
Purchased
Stock index options:
Written
Purchased
Bond futures:
Written
Purchased
Interest futures:
Purchased
Forward foreign exchange:
Written:U.S. dollar
South Africa Rand
Other
Purchased:
U.S. dollar
South Africa Rand
Other

¥

2,933
3,175

¥

Valuation
gain (loss)(78) ¥
30

Contract ornotional
amounts
Fair value(78) ¥
30

300
56

¥

−
−

Valuation
gain (loss)
¥

−
−

−
22

−
2

−
(20)

18
6

5
4

13
(2)

1,674
140

(1)
−

(1)
−

3,316
2,627

(2)
(1)

(2)
(1)

−

−

−

39,847

(1)

(1)

124
120
859

−
(1)
(6)

−
(1)
(6)

601
3,128
793

(2)
(100)
(14)

(2)
(100)
(14)

−
−
−

−
−
−

−
−
−

436
2,993
251

2
106
3

2
106
3

Thousands of U.S. dollars
2011
Contract ornotional
Fair value
amounts
Stock index futures:
Written
Purchased
Stock index options:Purchased
Bond futures:
Written
Purchased
Forward foreign exchange:
Written:U.S. dollar
South Africa Rand
Other

$

35,27438,184$

Valuation
gain (loss)(938) $
361

(938)
361

265

24

(241)

20,132
1,684

(12)
−

(12)
−

1,491
1,443
10,331

−
(12)
(72)

−
(12)
(72)

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, 2011 and 2010, gain or loss on deemed settlement isdisclosed in the "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, 2011 and 2010 are summarized as follows:− 41 −

Millions of yen
2011
Contract ornotional
amounts
Fair value
Interest rate swaps:
Variable rate received
for fixed rate
Commodity futures:
Written
Purchased

¥

54

¥

−
−

2010
Contract ornotional
amounts
Fair value

Valuation
gain (loss)

(1) ¥

(1) ¥

458

−
−

−
−

63
55

¥

Valuation
gain (loss)

(5) ¥

(5)

(2)
2

(2)
2

Thousands of U.S. dollars

At March 31, 2011
Interest rate swaps:
Variable rate received for fixed rate

Contract ornotional
amounts

Fair value

$

$

649

(12)

Valuation
gain (loss)$(12)

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, 2011 and 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, 2011 and 2010 are summarized
as follows:
Contract or notional amounts
Thousands of
U.S.dollars

Millions of yen
Nature of transaction
Interest rate swaps:
Variable rate received for
fixed rate

2011

Hedged items
Long-term
borrowings

¥

8,050

2010

¥

7,000

2011

$

96,813*1 Hedge accounting method is the exceptional accounting method which is the difference in amounts to be paid or received
on interest rate swaps being recognized over the life of the agreements as an adjustment to interest expense.
*2 Fair value of derivative financial instrument is included in fair value of the long-term borrowings as hedged items forcertain long-term borrowings for which interest rate swap contracts are used to hedge the interest rate fluctuations.

26. 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 Disclosures about Fair
Value of Investment and Rental Property" (ASBJ Guidance No. 23, November 28, 2008) require to disclose
fair value of investment 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 ¥161 million ($1,936 thousand) and ¥138 million forthe years ended March 31, 2011 and 2010, respectively.
The amounts recognized in the consolidated balance sheet and fair values related to the rental property
are as follows:
Thousands ofMillions of yen
U.S.dollars
2011
Consolidated balance sheet amount:
Balance at beginning of the year
Increase/(decrease)
Balance at end of the year
Fair value

¥
¥

5,972
(19)
5,953

¥

5,845

2010
¥
¥

6,008
(36)
5,972

$

71,822(228)
71,594

¥

5,783

$

70,295The above fair value is based on real-estate appraisals, and is estimated by the Company.

− 42 −

2011$27. BUSINESS COMBINATIONOn April 1, 2010, two consolidated subsidiaries of Okasan Securities Group Inc., Rokuni Securities Co., Ltd.
and Oishi Securities Co., Ltd., both were merged into one single company, Sanen Securities Co., Ltd. Since
the merger was between entities under common control, the merger was accounted for similar to a poolingof interests whereby the assets and liabilities were recorded at historical cost in accordance with the"Accounting Standard for Business Combinations" (ASBJ Statement No. 21, December 26, 2008) and the"Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business
Divestures" (ASBJ Guidance No. 10, December 26, 2008).

28. 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, 2011 and2010.
Transactions between the Company and Santo Co., Ltd. for the year ended March 31, 2011 are summarized as follows:

Millions of yen

Thousands of
U.S.dollars

Transactions:Purchases of affiliates shares

¥

144

$

1,732

Transactions between the consolidated subsidiary of the Company and Santo Co., Ltd. for the years ended March 31,
2011 and 2010 are summarized as follows:
Thousands ofMillions of yen
U.S.dollars
2011

2010

2011

Transactions:
Loan of securities

¥

646

¥

581

$

7,769

29. SEGMENT INFORMATION
From the year ended March 31, 2011, the Company applied "the Accounting Standard for Disclosures about
Segments of an Enterprise and Related Information" (ASBJ Statement No.17, March 27, 2009) and "theGuidance on Accounting Standard for Disclosures about Segments of an Enterprise and RelatedInformation" (ASBJ Guidance No.20, March 21, 2008).
The Standard and the Guidance adopt the management approach. Disclosures about segments of anenterprise and related information should provide proper information on the nature of various businessactivities in which it engages and the economic environments in which it operates.
The reported segments of the Company are the business units for which the Company is able to obtainrespective financial information separately in order for the Board of Directors to conduct periodic
investigation to determine distribution of management resources and evaluate their business results.
"Securities business", "Asset management business" and "Support business" are the Company's reported
segments.
"Securities business" renders trading and brokerage for trading in securities, underwriting and distributionof securities, public offering and secondary distribution of securities and private offering of securities.
"Asset management business" renders investment management and investment advisory. "Support
business2 renders information processing services, administrative support services, custodianship andtemping services, etc.
Segment operating revenues, income, assets, liabilities and others are calculated by accounting methods
similar to those employed to prepare the accompanying consolidated financial statements.
Segment income is calculated based on operating income in the consolidated statements of income.
Intersegment revenues and transfer are based on arms-length transactions.

− 43 −

Operating revenues, income, assets, liabilities and others by reported segments
The reported segment information for the Company and its consolidated subsidiaries for the year ended
March 31, 2011 are summarized as follows:
Millions of yen
Reported segments
Asset
Securities management

Support

¥

¥

Total

Adjustments Consolidated

Operating revenues:
Revenues from third
partiesIntersegment revenues
Total

52,281

¥

9,354

1,311

¥

62,946¥18¥

62,964

5,443

−

9,039

14,482(14,482)−

57,7249,354

10,35077,428(14,464)

62,964

Segment income

¥

850

¥

655

¥

1,251

¥

2,756

¥

653

¥

3,409

Segment assets¥ 511,174¥

11,833¥25,822¥ 548,829¥

Segment liabilities¥ 434,727

¥

1,063

¥

16,646¥ 452,436¥ (22,522) ¥ 429,914

¥

¥

40

¥

2,514

¥

¥

(6,292) ¥ 542,537

Others:Depreciation

1,165

3,719

109

¥

3,828

−

−

−

−

47

47

Financial income

2,840

−

−

2,840

(560)

2,280

Financial expenses

2,149

−

−

2,149

(460)

1,689

1,213

23

1,525

2,761

178

2,939

Amortization of goodwill

Increase in property
and equipment andintangible assets

Thousands of U.S. dollars
Reported segments
Asset
Securities management

Support$ 628,755

$

Total

Adjustments Consolidated

Operating revenues:
Revenues from third
partiesIntersegment revenues
Total$ 112,495

15,767$ 757,017$

217$ 757,234

65,460−108,707174,167(174,167)−

694,215

112,495

124,474

931,184(173,950)

757,234

Segment income$

10,223$

7,877

Segment assets$ 6,147,613$ 142,309

Segment liabilities$ 5,228,226$

12,784

$

$

481

$

15,045$33,145

$

7,853

$

40,998$ 310,547$ 6,600,469$$ 200,193$ 5,441,203$ (270,860) $ 5,170,343

$

$

$

(75,670) $ 6,524,799

Others:Depreciation

14,011

30,23444,726

1,311$

46,037

−

−

−

−

565

565

Financial income

34,155−−

34,155(6,735)27,420Financial expenses

25,845−−25,845(5,532)

20,313

14,588277

18,34033,2052,141

35,346

Amortization of goodwill

Increase in property
and equipment andintangible assets− 44 −

1. (1) "Adjustments in segment income" of ¥653 million ($7,853 thousand) include elimination ofintersegment transactions of ¥2,771 million ($33,325 thousand) and unallocated company-wide
expenses of ¥2,118 million ($25,472 thousand). Company-wide expenses are holding company's
expenses.
(2) "Adjustments in segment assets" of ¥6,292 million ($75,670 thousand) include elimination ofintersegment balances of ¥38,900 million ($467,829 thousand) and unallocated company-wide assets of¥32,608 million ($392,159 thousand). Company-wide assets are holding company's assets.
(3) "Adjustments in segment liabilities" of ¥22,522 million ($270,860 thousand) include elimination ofintersegment balances of ¥38,118 million ($458,425 thousand) and unallocated company-wide
liabilities of ¥15,596 million ($187,565 thousand). Company-wide liabilities are holding company's
liabilities.
2. Segment income is adjusted with operating income in the consolidated statements of income.
The reported segment information for the year ended March 31, 2010 which are restated to conform to thesegmentation for the year ended March 31, 2011 are as follows:
Millions of yen
Reported segments
Asset
Securities management

Support

¥

¥

Total

Adjustments Consolidated

Operating revenues:
Revenues from third
partiesIntersegment revenues
Total

55,898

¥

8,577

1,709

¥

66,184¥52¥

66,236

5,316

−

7,205

12,521(12,521)−61,214

8,577

8,914

78,705(12,469)

66,236

Segment income

¥

4,266

¥

583

¥

1,342

¥

6,191

¥

1,556

¥

7,747

Segment assets¥ 475,893¥

11,981¥

27,150¥ 515,024¥ (15,529) ¥ 499,495

Segment liabilities¥ 398,005

¥

1,365

¥

18,160¥ 417,530¥ (33,613) ¥ 383,917

¥

¥

42

¥

1,455

¥

¥

Others:Depreciation

1,036

2,533

170

¥

2,703

Financial income

2,872

−

−

2,872

(394)

2,478

Financial expenses

2,184

−

−

2,184

(322)

1,862

894

20

2,429

3,343

22

3,365

Increase in property
and equipment andintangible assets

1. (1) "Adjustments in segment income" of ¥1,556 million include elimination of intersegment transactionsof ¥3,454 million and unallocated company-wide expenses of ¥1,898 million. Company-wide expenses
are holding company's expenses.
(2) "Adjustments in segment assets" of ¥15,529 million include elimination of intersegment balances of¥57,098 million and unallocated company-wide assets of ¥41,569 million. Company-wide assets areholding company's assets.

− 45 −

(3) "Adjustments in segment liabilities" of ¥33,613 million include elimination of intersegment balances of¥50,961 million and unallocated company-wide liabilities of ¥17,348 million. Company-wide liabilities
are holding company's liabilities.
2. Segment income is adjusted with operating income in the consolidated statements of income.

Related information
1. Information by products and services
Disclosures are omitted because operating revenues from third parties of a single product and service
are over 90% of operating revenues in the consolidated statements of income.
2. Geographical information(1) Operating revenues
Disclosures are omitted because operating revenues from customers in Japan are over 90% of
operating revenues in the consolidated statements of income.
(2) Property and equipment
Disclosures are omitted because property and equipment located in Japan are over 90% of property
and equipment in the consolidated balance sheets.
3. Information by major customers
Disclosures are omitted because no particular third party whose operating revenues are over 10% of
operating revenues in the consolidated statements of income exists.
Information of impairment loss on fixed assets by reported segments
Not applicable
Negative goodwill incurred by reported segments
Negative goodwill of ¥166 million ($1,996 thousand) which are not allocated to each reported segments arereported for the year ended March 31, 2011. The negative goodwill occurred when the Company acquired
additional shares of its subsidiary.
Segment information for the year ended March 31, 2010(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 for the year ended March 31, 2010.
(b) Geographic segment information
Both domestic sales and assets located in Japan are over 90% of those for all segments for the year
ended March 31, 2010.
(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 year ended March 31, 2010.

− 46 −

Tel: +8-3-3295-1040
Fax: +8-3-3295-1993
www.bdo-toyo.or.jp

BDO Toyo & Co.
Kandamitoshirocho7,
Chiyoda-ku, Tokyo
101-0053 Japan

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, 2011 and 2010, and the related consolidated statements of income,changes in net assets and cash flows for the years then ended, and the related consolidated statement ofcomprehensive loss for the year ended March 31, 2011, all expressed in Japanese yen. These consolidated
financial statements are the responsibility of the Company's management. Our responsibility is to express 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, 2011 and 2010, and the consolidated results of their operations and their cash flows for the years thenended in conformity with accounting principles generally accepted in Japan.
The accompanying consolidated financial statements as of and for the year ended March 31, 2011 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, 2011
Tokyo, JapanBDO Toyo & Co.

BDO Toyo & Co., a Japanese Audit Corporation, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international
BDO network of independent member firms.
BDO is the brand name for the BDO network and for each of the BDO member firms.

− 47 −

Balance Sheets
Okasan Securities Co., Ltd. At March 31, 2011 and 2010

Thousands of
U.S.dollars

Millions of yen
2011

2010

2011

ASSETS
Current assets:
Cash on hand and in banks¥

12,191

¥

8,504

$

146,615

Cash segregated as deposits for customers and others

15,362

22,863

184,750

Trading assets

182,458

142,517

2,194,324−

11,898−

Receivables on margin transactions

30,80039,821

370,415

Receivables on collateralized securities transactions

167,522137,066

2,014,696

2,564

2,471

30,836

Receivables arising from unsettled trades

Short-term guarantee deposits
Deferred income taxes

578

626

6,951

Other current assets

2,580

2,667

31,028

(5)

(37)

(60)

414,050

368,396

4,979,555

Property and equipment, net of accumulated depreciation

2,264

1,756

27,228Intangible assets, net

364

385

4,378

1,064

996

12,796

Allowance for doubtful accounts
Total current assets

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

3,545

3,124

42,634

Deferred income taxes

1,764

1,836

21,214

Other

1,519

1,687

18,268

Allowance for doubtful accounts(1,073)(1,237)(12,904)

6,819

6,406

82,008376,943$ 5,093,169

Total investments and other assets
TOTAL

￥

− 49 −

423,497￥

Thousands of
U.S.dollars

Millions of yen
2011

2010

2011

LIABILITIES AND NET ASSETS
Current liabilities:
Trading liabilities

100,337$ 1,496,140

Payables arising from unsettled trades￥

28,582−

343,740

Payables on margin transactions

16,88624,253203,079

Payables on collateralized securities transactions

29,02432,822

349,056

Deposits received

12,445

16,664

149,669

Guarantee deposits received
Short-term borrowings

124,404￥

8,666

12,546104,221130,415

123,665

1,568,431

Income tax payables

194

358

2,333

Other current liabilities

4,525

4,361

54,420355,141

315,006

4,271,089

8,900

1,850

107,035

Retirement and severance benefits

4,577

4,555

55,045

Other non-current liabilities

1,234

733

14,841

14,711

7,138

176,921

768

580

9,236

370,620322,724

4,457,246

5,000

5,000

60,132

Capital surplus

29,20029,200351,173

Retained earnings

18,621

19,971

223,945

52,821

54,171

635,250

56

48

673

52,87754,219635,923

376,943$ 5,093,169

Total current liabilities
Non-current liabilities:
Long-term borrowings

Total non-current liabilities
Financial instruments transactions reserve
Total liabilities
Net assets
Shareholder's equity:
Common stock
Authorized − 240,000 shares
Issued − 100,000 shares in 2011 and 2010

Total shareholder's equity
Accumulated other comprehensive income:Unrealized gain on available-for-sale securities
Total net assets
TOTAL

￥

− 50 −

423,497￥

Statements of Operations
Okasan Securities Co., Ltd. Years ended March 31, 2011 and 2010

Thousands of
U.S.dollars

Millions of yen
2011

2010

2011

Operating revenues:
Commissions¥

29,396¥33,888$353,530

Net gain on trading

17,78615,998

213,903

Interest and dividend income

1,832

1,977

22,03249,01451,863

589,465Interest expense

1,484

1,486

17,848Net operating revenues

47,53050,377

571,617

Selling, general and administrative expenses

46,27445,994

556,512

Operating income

1,256

4,383

15,105

(188)

(163)

(2,261)(411)−(4,943)

328

153

3,945

(271)

(10)

(3,259)

985

4,373

11,846

Other income (expenses):
Provision for financial instruments transactions reserve
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Other, net

Income before income taxes
Income taxes:
Current

721

854

8,671

Deferred

114

1,193

1,371

835

2,047

10,042

Net income¥− 51 −

150

¥

2,326

$

1,804

CORPORATE DATABOARD OF DIRECTORS(At July, 2011)(At July, 2011)
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

Director
Kenichi Tanaka

Muromachi Head Office

Masanori Kanai

2-2-1 Nihonbashi Muromachi, Chuo-ku,

Hiroyuki ShindoTokyo 103-0022, Japan

Statutory Auditors
Tetsumi Iwaki

Phone Number

Koichi Saku

+81-3-3272-2222

Hirosuke Minami
Tokio Hiraragi

Paid-in Capital

Yukihiro Asano

18,590 Million Yen

Takao Saga
Subsidiaries
10 companies

ORGANIZATION CHART(At July, 2011)
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− 52 −

http://www.okasan.jp/