Financial Section421 5,952 113,301 Payments for purchases of investment securities ..... (5,330) (13,521) (64,101) Proceeds from sales and redemptions of investment securities .....

Financial Section

Consolidated Financial Statements...................... 56

Notes ...................................................................... 62

Report of Independent Auditors ......................... 83

55Mizuho Securities Annual Report 2011

Consolidated Financial Statements

Thousands of Millions of yen U.S. dollars

2011 2010 2011

ASSETS

Cash and bank deposits: Cash and bank deposits (Notes 2 (q) and 6) ............................................... ¥ 377,668 ¥ 162,392 $ 4,542,008 Cash segregated as deposits for customers and others ............................... 103,765 96,812 1,247,925

481,434 259,205 5,789,945

Receivables: Loans and receivables from customers ....................................................... 14,047 24,871 168,935 Receivables related to margin transactions ................................................. 46,503 58,031 559,266 Accrued income ......................................................................................... 37,721 34,816 453,650 Other ......................................................................................................... 6,632 7,684 79,759 Less: Allowance for doubtful accounts ....................................................... (1,911) (1,954) (22,982)

102,993 123,449 1,238,641

Collateralized short-term fi nancing agreements-receivable: Deposits paid for securities borrowed ........................................................ 4,732,533 3,960,261 56,915,610 Securities purchased under agreements to resell ........................................ 7,984,619 8,409,518 96,026,686

12,717,153 12,369,779 152,942,309

Trading assets (Notes 4 and 6): Trading securities and others ...................................................................... 7,274,959 6,848,579 87,491,990 Loans receivable ........................................................................................ 10,000 26,448 120,264 Derivatives ................................................................................................. 750,408 720,643 9,024,750

8,035,368 7,595,671 96,637,017

Operating investment securities (Note 4) ....................................................... 84,106 88,957 1,011,497 Operating loans receivable ............................................................................ 6,075 5,772 73,060

Other assets: Property and equipment ............................................................................ 86,224 85,597 1,036,969 Less: Accumulated depreciation ................................................................. (45,453) (41,486) (546,638)

40,771 44,110 490,330

Intangible assets ........................................................................................ 92,566 104,156 1,113,241 Long-term guarantee deposits ................................................................... 14,437 15,187 173,625 Deferred tax assets (Note 10) ..................................................................... 19,727 18,705 237,245 Investment securities (Notes 4 and 6) ......................................................... 69,177 124,250 831,954 Other (Note 7) ........................................................................................... 122,815 203,721 1,477,029 Less: Allowance for doubtful accounts ....................................................... (1,770) (1,936) (21,286)

316,953 464,084 3,811,822

Total assets ...................................................................................................... ¥21,784,855 ¥20,951,031 $261,994,648

The accompanying notes are an integral part of these fi nancial statements.

CONSOLIDATED BALANCE SHEETSMizuho Securities Co., Ltd. and Consolidated Subsidiaries

As of March 31, 2011 and 2010

56 Mizuho Securities Annual Report 2011


2011 2010 2011

LIABILITIES AND NET ASSETS Liabilities Borrowings (Notes 6 and 8): Short-term borrowings .............................................................................. ¥ 3,747,079 ¥ 2,700,015 $ 45,064,088 Commercial paper ..................................................................................... 484,100 331,700 5,822,008 Long-term debt ......................................................................................... 1,343,641 1,233,511 16,159,242

5,574,821 4,265,226 67,045,351 Payables: Payables to customers ................................................................................ 275,589 271,834 3,314,359 Payables—unsettled trades ........................................................................ 323,891 591,810 3,895,261 Payables related to margin transactions (Note 6) ........................................ 24,103 21,354 289,873 Accrued expenses ...................................................................................... 35,787 27,189 430,390 Other ......................................................................................................... 23,708 213,612 285,123

683,081 1,125,802 8,215,045 Collateralized short-term fi nancing agreements-payable: Deposits received for securities loaned ....................................................... 1,746,838 2,019,454 21,008,274 Securities sold under agreements to repurchase ......................................... 8,894,121 9,247,635 106,964,774

10,640,959 11,267,090 127,973,048 Trading liabilities (Note 4): Trading securities and others ...................................................................... 3,621,920 2,923,830 43,558,869 Derivatives ................................................................................................. 641,494 686,502 7,714,900

4,263,415 3,610,332 51,273,782 Accrued and other liabilities: Income taxes payable ................................................................................. 1,534 1,654 18,448 Accrued employees’ bonuses ..................................................................... 14,752 22,472 177,414 Provision for bonus point redemption ........................................................ 440 376 5,291 Provision for retirement benefi ts (Note 9) ................................................... 15,119 15,320 181,828 Deferred tax liabilities (Note 10) ................................................................. 3,086 11,212 37,113 Securities: fail to receive ............................................................................. 18,558 16,022 223,187 Other ......................................................................................................... 13,919 14,649 167,396

67,410 81,708 810,703 Statutory reserves (Note 11) .......................................................................... 1,194 1,883 14,359

Total liabilities ................................................................................................ 21,230,882 20,352,043 255,332,315

Net assets Shareholders’ equity: Common stock .......................................................................................... 125,167 125,167 1,505,315 Capital surplus ........................................................................................... 389,716 389,662 4,686,903 Retained earnings ...................................................................................... 90,278 127,621 1,085,724 Treasury stock ............................................................................................ (7,367) (7,450) (88,598)

Total shareholders’ equity .............................................................................. 597,794 635,000 7,189,344

Accumulated other comprehensive income Net unrealized gains on (operating) investment securities, net of tax .......... 1,768 4,628 21,262 Foreign currency translation adjustments ................................................... (67,551) (64,853) (812,399)

Total accumulated other comprehensive income ............................................ (65,783) (60,225) (791,136) Stock subscription rights ................................................................................ 582 367 6,999

Minority interests .......................................................................................... 21,380 23,845 257,125

Total net assets .............................................................................................. 553,973 598,988 6,662,333

Total liabilities and net assets ......................................................................... ¥21,784,855 ¥20,951,031 $261,994,648



2011 2010 2011

Operating revenues: Commissions (Note 15) ............................................................................................ ¥135,991 ¥145,822 $1,635,490 Net gain on trading .................................................................................................. 12,624 64,124 151,822 Net gain (loss) on operating investment securities ..................................................... 2,096 (653) 25,207 Interest and dividend income .................................................................................... 117,883 102,868 1,417,714

268,595 312,161 3,230,246

Interest expenses ......................................................................................................... 75,768 61,760 911,220

Net operating revenues ................................................................................................ 192,827 250,401 2,319,025Selling, general and administrative expenses (Note 16) ................................................. 229,773 219,513 2,763,355

Operating income (loss) ............................................................................................... (36,945) 30,887 (444,317)

Other income: Reversal of statutory reserves, net ............................................................................. 689 — 8,286 Other, net (Note 17) ................................................................................................. (697) 105,029 (8,382)

(8) 105,029 (96)

Income (loss) before income taxes and minority interests .............................................. (36,954) 135,917 (444,425)

Income taxes (Note 10): Current .................................................................................................................... 954 4,165 11,473 Deferred ................................................................................................................... (7,832) 4,536 (94,191)

Total income taxes ....................................................................................................... (6,878) 8,701 (82,717)Income (loss) before minority interests.......................................................................... (30,076) 127,215 (361,707)Minority interests ......................................................................................................... 763 (151) 9,176

Net income (loss) ......................................................................................................... ¥ (29,312) ¥127,064 $ (352,519)



2011 2010 2011

Income (loss) before minority interests.......................................................................... ¥(30,076) ¥127,215 $(361,707)Other comprehensive income:Net unrealized gains (losses) on (operating) investment securities, net of tax ................ (2,872) 4,730 (34,539)Foreign currency translation adjustments...................................................................... (3,868) (2,106) (46,518)Share in other comprehensive income of affi liates accounted for using equity method ... (114) 63 (1,371)

Total other comprehensive income (loss) ...................................................................... (6,854) 2,688 (82,429)

Comprehensive income (loss) ....................................................................................... (36,930) 129,904 (444,137)Attributable to: Owner’s of the parent ......................................................................... (34,870) 129,960 (419,362)

Minority interests .................................................................................................. ¥ (2,060) ¥ (56) $ (24,774)

CONSOLIDATED STATEMENTS OF OPERATIONSMizuho Securities Co., Ltd. and Consolidated Subsidiaries

Years ended March 31, 2011 and 2010

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMEMizuho Securities Co., Ltd. and Consolidated Subsidiaries




Millions of yen

Shareholders’ equity Valuation and translation adjustments

Net Total unrealized Adjustments valuation Number of Treasury Total gains/losses on foreign and Stock Total shares of Common Capital Retained stock, shareholders’ on other currency translation subscription Minority net common stock stock surplus earnings at cost equity securities translation adjustments rights interests assets

Balance at March 31, 2009 ................ 811,118,683 ¥125,167 ¥ 82,973 ¥ 41,571 ¥(7,426) ¥242,285 ¥ 1,214 ¥ 95 ¥ 1,310 ¥ 6,325 ¥249,921

Amounts of changes during the period: Dividends Balance at end of previous period of the acquired company .............. (125,167) (82,973) (41,571) 7,426 (242,285) (1,214) (95) (1,310) (6,325) (249,921) Balance at end of previous period of the acquiring company ............. 250,000 75,742 556 326,298 3 (63,124) (63,120) 15,864 279,043 Net income .................................... 127,064 127,064 127,064 Acquisition of treasury stock ........... (26) (26) (26) Disposition of treasury stock ........... 4 6 11 11 Increase (decrease) due to merger ..................................... 815,570,000 (124,832) 313,916 (7,431) 181,652 181,652 Net change in items other than shareholders’ equity ............. 4,625 (1,729) 2,895 ¥367 7,980 11,243 Changes during the period ............. 306,689 86,050 (24) 392,715 3,414 (64,949) (61,535) 367 17,519 349,066

Balance at March 31, 2010 ................ 1,626,688,683 ¥125,167 ¥389,662 ¥127,621 ¥(7,450) ¥635,000 ¥ 4,628 ¥(64,853) ¥(60,225) ¥367 ¥23,845 ¥598,988

Amounts of changes during the period: Dividends ....................................... (7,942) (7,942) (7,942) Net loss ......................................... (29,312) (29,312) (29,312) Acquisition of treasury stock ........... (28) (28) (28) Disposition of treasury stock ........... 53 110 163 163 Changes in scope of equity method ............................... (87) 0 (86) (86) Net change in items other than shareholders’ equity ............ (2,860) (2,697) (5,558) 215 (2,465) (7,808) Changes during the period ............. 53 (37,342) 82 (37,206) (2,860) (2,697) (5,558) 215 (2,465) (45,014)

Balance at March 31, 2011 ........... 1,626,688,683 ¥125,167 ¥389,716 ¥90,278 ¥(7,367) ¥597,794 ¥1,768 ¥(67,551) ¥(65,783) ¥582 ¥21,380 ¥553,973

Thousands of U.S. dollars

Shareholders’ equity Valuation and translation adjustments

Net Total unrealized Adjustments valuation Number of Treasury Total gains/losses on foreign and Stock Total shares of Common Capital Retained stock, shareholders’ on other currency translation subscription Minority net common stock stock surplus earnings at cost equity securities translation adjustments rights interests assets

Balance at March 31, 2010 ................ 1,626,688,683 $1,550,443 $4,826,736 $1,580,845 $(92,289) $7,865,735 $57,335 $(803,343) $(746,007) $4,547 $295,371 $7,419,646 Amounts of changes during the period: Dividends ....................................... (98,384) (98,384) (98,384) Net loss ......................................... (363,096) (363,096) (363,096) Acquisition of treasury stock ........... (348) (348) (348) Disposition of treasury stock ........... 665 1,365 2,030 2,030 Changes in scope of equity method ............................... (1,085) 8 (1,076) (1,076) Net change in items other than shareholders’ equity ............ (35,428) (33,418) (68,847) 2,665 (30,537) (96,719) Changes during the period ............. 665 (462,565) 1,025 (460,874) (35,428) (33,418) (68,847) 2,665 (30,537) (557,594)

Balance at March 31, 2011 ........... 1,626,688,683 $1,550,443 $4,827,402 $1,118,279 $(91,264) $7,404,861 $21,906 $(836,761) $(814,855) $7,213 $264,833 $6,862,052


CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSMizuho Securities Co., Ltd. and Consolidated Subsidiaries




2011 2010 2011

Cash fl ows from operating activities: Income (loss) before income taxes and minority interests .................................. ¥ (36,954) ¥135,917 $ (444,425) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ...................................................................... 23,825 23,838 286,530 Reversal of statutory reserves, net ................................................................. (689) 44 (8,286) Loss (gain) on investment securities, net ........................................................ 155 (708) 1,864 Loss on noncurrent assets, net ...................................................................... 821 1,728 9,873 Loss on impairment of golf club membership ................................................ 63 35 757 Nonrecurring depreciation on noncurrent assets ........................................... 1,759 420 21,154 Foreign exchange losses (gains) ..................................................................... (314) 435 (3,776) Gain on negative goodwill ............................................................................ — (110,219) — Amortization of goodwill .............................................................................. 72 591 865 Interest and dividend income ........................................................................ (118,867) (103,951) (1,429,549) Interest expense ............................................................................................ 75,768 62,209 911,220 Decrease (increase) in cash segregated for customers and others .................. (6,953) (30,486) (83,619) Loans, receivables and payables, net ............................................................. (163,511) 118,410 (1,966,458) Trading assets and liabilities, net ................................................................... (106,093) (910,110) (1,275,923) Receivables and payables related to margin transactions, net ........................ 14,009 (19,221) 168,478 Collateralized short-term fi nancing agreements, net ..................................... (930,974) 717,584 (11,196,319) Decrease in allowance for doubtful accounts ................................................ (199) (1,283) (2,393) Increase (decrease) in accrued employees’ bonuses ....................................... (6,666) 1,061 (80,168) Increase (decrease) in provision for retirement benefi ts .................................. (3,329) (1,708) (40,036) Other, net ..................................................................................................... 91,282 130,556 1,097,799

Subtotal ........................................................................................................... (1,166,796) 15,143 (14,032,423)

Interest and dividends received ..................................................................... 113,495 104,893 1,364,942 Interest paid ................................................................................................. (70,340) (59,234) (845,941) Income taxes paid ......................................................................................... (1,314) (4,228) (15,802)

Net cash provided by (used in) operating activities ............................................ ¥(1,124,956) ¥ 56,574 $(13,529,236)

CONSOLIDATED STATEMENTS OF CASH FLOWSMizuho Securities Co., Ltd. and Consolidated Subsidiaries





2011 2010 2011

Cash fl ows from investing activities: Payments for time deposits ............................................................................... ¥ (8,912) ¥ (9,655) $ (107,179) Proceeds from withdrawal of time deposits ...................................................... 9,421 5,952 113,301 Payments for purchases of investment securities ............................................... (5,330) (13,521) (64,101) Proceeds from sales and redemptions of investment securities .......................... 13,028 8,693 156,680 Payments for purchases of property and equipment ......................................... (2,517) (6,718) (30,270) Proceeds from sales of property and equipment ............................................... 1 128 12 Payments for purchases of intangible assets ..................................................... (9,296) (7,610) (111,797) Payments for long-term loans receivable ........................................................... — (8,749) — Collection of long-term loans receivable ........................................................... 4,709 1,557 56,632 Decrease (increase) in short-term loans receivable ............................................. 3,095 (1,504) 37,221 Proceeds from collection of long-term guarantee deposits ................................ 1,290 3,560 15,514 Payments for long-term guarantee deposits ...................................................... (585) (2,094) (7,035) Other, net ........................................................................................................ (608) (361) (7,312)

Net cash provided by (used in) investing activities ............................................. 4,296 (30,323) 51,665

Cash fl ows from fi nancing activities: Increase (decrease) in short-term borrowings .................................................... 1,053,216 (133,439) 12,666,458 Increase (decrease) in commercial paper ........................................................... 152,400 34,100 1,832,832 Increase in long-term debt ................................................................................ 294,110 249,462 3,537,101 Decrease in long-term debt .............................................................................. (186,588) (218,889) (2,243,992) Acquisition of treasury stock ............................................................................. (28) (26) (336) Proceeds from reissuance of treasury stock ....................................................... 6 6 72 Payment of cash dividends ............................................................................... (7,963) (2,318) (95,766) Proceeds from stock issuance to minority interests ............................................ — 540 — Payment of cash dividends to minority interests ................................................ (150) (175) (1,803) Repayment of lease obligations ........................................................................ (1,021) (1,434) (12,279)

Net cash provided by (used in) fi nancing activities ............................................. 1,303,981 (72,176) 15,682,273

Effect of exchange rate changes on cash and cash equivalents ............................. (8,150) 1,376 (98,015)

Net increase (decrease) in cash and cash equivalents ............................................ 175,171 (44,549) 2,106,686

Cash and cash equivalents at beginning of period ................................................ 195,206 171,890 2,347,636

Beginning balance of cash and cash equivalents: Acquired company .................... — (171,890) —

Beginning balance of cash and cash equivalents: Acquiring company ................... — 89,560 —

Increase in cash and cash equivalents due to merger ............................................ — 150,195 —

Decrease in cash and cash equivalents related to changes in scope of consolidation ................................................................................... (136) — (1,635)

Cash and cash equivalents at end of year ............................................................. ¥ 370,241 ¥195,206 $ 4,452,687


(Continued)


1. BASIS OF PRESENTING FINANCIAL STATEMENTSThe accompanying consolidated fi nancial statements of Mizuho Securities Co., Ltd.

(the “Company”) and its consolidated subsidiaries (collectively, the “Companies”)

are prepared in accordance with the provisions set forth in the Financial Instruments

and Exchange Act, and in conformity with accounting principles and practices gen-

erally accepted in Japan, which are different in certain respects from the application

and disclosure requirements of International Financial Reporting Standards.

In preparing the consolidated fi nancial statements, certain reclassifi cations and

rearrangements have been made to the fi nancial statements issued in Japan in

order to present these statements in a form which is more familiar to readers of

these statements outside Japan. The consolidated fi nancial statements are not

intended to present the consolidated fi nancial positions, results of operations and

cash fl ows in accordance with accounting principles and practices generally accept-

ed in countries and jurisdictions other than Japan.

As permitted by regulations under the Financial Instruments and Exchange Act,

amounts of less than one million yen have been omitted. As a result, the totals

shown in the accompanying consolidated fi nancial statements (both in yen and in

U.S. dollars) do not necessarily agree with the sums of the individual amounts.

On May 7, 2009, Shinko Securities Co., Ltd. merged with the former Mizuho

Securities Co., Ltd. and changed its name to Mizuho Securities Co., Ltd. As the

merger with the former Mizuho Securities Co., Ltd. is accounted for as a reverse

acquisition, the consolidated operating results for the previous fi scal year were pre-

pared by combining the consolidated operating results of the former Mizuho

Securities for the period from April 1, 2009 through May 6, 2009 with the consoli-

dated operating results of the Company for the period from May 7, 2009 through

March 31, 2010.

The translation of yen amounts into U.S. dollars is included solely for the conve-

nience of the reader, using the exchange rate prevailing at March 31, 2011, which

was ¥83.15 to US$1. The translation should not be construed as a representation

that the yen amounts have been, could have been or could in the future be con-

verted into U.S. dollars at this or any other rate of exchange.

Certain amounts in the 2010 fi nancial statements and notes have been reclassi-

fi ed to conform to the 2011 presentation.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(a) Principles of consolidation

Subsidiaries:

The consolidated fi nancial statements include the accounts of the Company and all

companies which are controlled by the Company through substantial ownership of

more than 50% of the voting rights or through ownership of a high percentage of

the voting rights and the existence of certain conditions evidencing control by the

Company of the decision-making body of such companies.

1) Consolidated subsidiaries: 30 entities

During the fi scal year 2010, the number of consolidated subsidiaries decreased by

7, all of which were excluded from consolidation mainly due to merger and liquida-

tion, while the number of consolidated subsidiaries increased by 1, which was

newly established. As a result, the number of consolidated subsidiaries was 30 at

March 31, 2011.

Subsidiaries newly consolidated: 1 entity

Mizuho Securities India Private Limited

Excluded from the scope of consolidation: 7 entities

Shinko Securities (Europe) Limited

Shinko Securities (H.K.) Limited

Industrial Decisions, Inc.

Tokyo Valuation Research Co., Ltd.

Mizuho Securities Investment Services Co., Ltd.

Other 2 entities

Affi liates:

Affi liates are, in general, the companies other than subsidiaries in which the

Company 1) holds, directly and/or indirectly, 20% or more of the voting shares; 2)

holds, directly and/or indirectly, 15% or more of the voting shares and also is able

to infl uence the decision-making body through sharing personnel, provision of

fi nance and technology, and other relationships; or 3) holds more than 20% of the

voting shares together with those entities that would vote or agree to vote with

the Company due to their close relationship with the Company through sharing

personnel, the provision of fi nance and technology and other relationships and,

at the same time, is able to infl uence the decision-making body to a material

degree, unless evidence exists which shows that the Company does not have such

infl uence.

2) Affi liates accounted for using the equity method: 11 entities

During the fi scal year 2010, the number of affi liates increased by 1, which became

an affi liate through a reduction of the share holding ratio due to a private place-

ment of equity, while the number of affi liates decreased by 1, which became non-

affi liates due to a stock transfer. As a result, 11 affi liates were accounted for using

the equity method at March 31, 2011.

Major affi liates accounted for using the equity method

Mizuho Alternative Investments, LLC


Neostella Capital Co., Ltd.

Energy & Environment Investment, Inc.

Mobile Internet Capital Inc.

Japan Industrial Partners, Inc.

Eiwa Securities Co., Ltd.

The Neostella Capital No. 1 Investment Business Limited Partnership

Newly applied:


Excluded from the scope of application:

Mitoyo Securities Co., Ltd.

3) Fiscal year-end of consolidated subsidiaries

The fi scal year-ends of consolidated subsidiaries are as follows:

End of March: 21 subsidiaries

End of December: 9 subsidiaries

The above 9 consolidated subsidiaries with the different fi scal year end from the

consolidated balance sheet date are consolidated on the basis of their respective

year-end. Appropriate adjustments are made for material transactions during the

period from their respective year-end to the consolidated balance sheet date includ-

ing elimination of the inter-company accounts on consolidation, if necessary.

(b) Foreign currency translation

Transactions denominated in foreign currencies are recorded at the current

exchange rate on the transaction date. Subsequently, assets and liabilities denomi-

nated in foreign currencies are translated into Japanese yen using fi scal year-end

exchange rates, with the translation gains and losses recognized through the state-

ment of operations for the period. The fi nancial statements of overseas consolidat-

ed subsidiaries and affi liates are translated into Japanese yen using fi scal year-end

exchange rates. Foreign currency translation gains and losses related to the fi nan-

cial statements of those overseas entities are credited or charged directly to foreign

currency translation adjustments and minority interests, components of total net

assets of the balance sheet.

(c) Recognition of income

The mark-to-market method is applied for the valuation of trading assets and liabil-

ities. Securities transactions, gains or losses on securities transactions and deriva-

tives transactions included in trading assets and liabilities, and brokerage

commissions are recorded on a trade date basis. Expenses incidental to securities

transactions are also recognized on a trade date basis. Underwriting and distribu-

tion commissions are recorded on the date the terms of underwriting are fi xed or

on the date of distribution or offering.

Notes


(d) Financial instruments

1) Derivatives

All derivatives are stated at fair value, with changes in fair value included in net

income (loss) for the period in which they arise, except for those designated as

“hedging instruments” (see 3) Hedging transactions, below).

2) Securities

Securities held by the Companies are classifi ed into three categories:

a) Trading securities, which are held for the purpose of generating profi ts on short-

term differences in prices, are stated at fair value, with changes in fair value includ-

ed in net income (loss) for the period in which they arise. Additionally, securities

held in trust for trading purposes are accounted for in the same manner as trading

securities.

b) Held-to-maturity debt securities, which the Companies intend to hold to maturi-

ty, are stated at cost after accounting for premium or discount on acquisition,

which are amortized or accreted over the period to maturity.

c) Other securities for which market quotations are available are stated at fair value.

Net unrealized gains or losses on these securities are reported as a separate item in

net assets on a net-of-tax basis. Cost of securities sold is calculated using moving

average method.

Other securities for which it is extremely diffi cult to determine the fair value are

stated at cost using moving average method, except as stated in the paragraph

below.

With regard to contributions to investment business limited partnerships and

similar partnerships

(according to Article 2, Paragraph 2 of the Financial Instruments and Exchange

Act, such contributions are regarded as negotiable securities), the Company mainly

uses, as the book value, the value of its share of partnership assets as designated

on the partnership’s most recent statement of accounts that the Company is able

to obtain as of the day - stipulated in the partnership agreement - on which the

latest statement of accounts is reported. With regard to profi t and loss incurred

from the operations of the partnership, etc., the Company records the portion of

its share.

3) Hedging transactions

Gains or losses resulting from forward foreign exchange transactions entered into

in order to hedge the exchange risk of foreign currency denominated equity invest-

ments in subsidiaries are recognized in foreign currency translation adjustments in

net assets to the extent these transactions qualify for hedge accounting.

Borrowings in foreign currency undertaken in order to hedge the risk of fl uctua-

tions in the exchange rate on foreign currency denominated operating investment

securities are accounted for under fair value hedge accounting. For interest rate

swap contracts that are used as hedges for the interest rate risk of borrowings, the

net amount to be paid or received under the contract is added to or deducted from

the interest on the borrowings subject to the hedge.

In order to avoid foreign currency risk and interest rate risk, hedging transactions

are implemented under the internal regulations. Assessment of the hedge effec-

tiveness for forward foreign exchange transactions and borrowings in foreign cur-

rencies is omitted because hedging instruments and hedged items are denominated

in the same currencies. In addition, assessment of hedge effectiveness for interest

rate swap transactions is omitted if the swaps are accounted for by the exceptional

accrual method.

(e) Depreciation of property and equipment (except for leased assets)

Depreciation is generally computed by the declining-balance method based on the

estimated useful lives of assets. Buildings acquired on or after April 1, 1998 are

depreciated using the straight-line method.

The useful lives of property and equipment are as follows:

Buildings: 2-50 years

Equipment: 2-20 years

(f) Intangible fi xed assets and long-term prepaid expenses

The cost of computer software developed or obtained for internal use is capitalized

and amortized mainly using the straight-line method over its estimated useful life

(within 5 years). Software costs are classifi ed as intangible assets in other assets.

(g) Deferred assets

Bond issuance costs are expensed as incurred.

(h) Gensaki transactions

The settlement amounts, including accrued interests, are accounted for as securi-

ties sold under agreements to repurchase or securities purchased under agreements

to resell with no valuation gain or loss recognized. Realized gains or losses on

Gensaki trading, equivalent to the differences between start-date unit prices and

end-date unit prices, are included in interest and dividends income or interest

expenses, respectively, in the accompanying consolidated statements of operations.

(i) Lease transactions

Depreciation expense arising from leased assets under fi nance lease transactions

that do not transfer ownership is calculated using the declining-balance method,

based on the assumption that the useful life equals the lease term, and the residual

value is zero.

(j) Allowance for doubtful accounts

Allowance for doubtful accounts is provided on the basis of historical loss experi-

ence for receivables. For certain receivables, for which collection is doubtful, a spe-

cifi c allowance equivalent to the amount of expected loss is established.

(k) Bonuses

Accrued employees’ bonuses and accrued directors’ bonuses are provided at the

estimated amounts that the Companies will pay employees and directors after the

fi scal year-end, based on their services for the current period.

(l) Provision for retirement benefi ts

Employees of the Companies are generally entitled to certain lump-sum payments

or pension payments upon retirement or termination of employment, mainly based

on the current rates of pay and the length of service.

Retirement benefi t plans that the Company and its domestic subsidiaries provide

are defi ned benefi t plans (regulation-type plans, fund-type plans and qualifi ed

retirement pension plans), pension fund plans, defi ned contribution plans, retire-

ment lump-sum plans.

Provision for retirement benefi ts, which is provided for the payment of employ-

ees’ retirement benefi ts, represents the estimated present value of projected bene-

fi t obligations in excess of the fair value of the plan assets, considering adjustments

for unrecognized prior year service costs and unrecognized actuarial differences at

the end of the fi scal year. Prior year service costs are charged to expenses at one

time or amortized using the straight-line method over a predetermined number of

years (10 years), which is within the average remaining employment period when

they are recognized. Actuarial differences are charged to expenses from the follow-

ing fi scal year using the straight-line method over the predetermined number of

years (10 years), which is within the average remaining service years of the employ-

ees when incurred.

Provision for directors and executive offi cers are provided and included in provi-

sion for retirement benefi ts at the amount that would be required if all directors

and executive offi cers retired at the balance sheet date.

Certain domestic subsidiaries apply the simplifi ed method in calculating the pro-

vision for retirement benefi ts, which assumes all employees voluntarily terminate

their employment at the end of the year.


(m) Provision for bonus point redemption

The total amount of estimated future obligations, as of the end of the fi scal year,

arising from future redemption of bonus point issued under the Mizuho Point

Service Program is provided in provision for bonus point redemption. To prepare for

the cost associated with use of the Mizuho Point Service in the future, the expected

amount to be used is calculated for this period based on the usage rate.

(n) Income taxes

Income taxes of the Company and its domestic subsidiaries consist of corporate

income taxes, local inhabitants’ taxes and enterprise taxes. The Companies adopted

deferred tax accounting. Deferred income taxes are determined using the asset and

liability approach, whereby deferred tax assets and liabilities are recognized in

respect of temporary differences between the tax bases of assets and liabilities and

those as reported in the fi nancial statements. A valuation allowance is made if it is

expected that some portion or the entire deferred tax assets will not be realized.

(o) Net income per share

Net income per share shown for each period in the accompanying consolidated

statements of operations is based on the weighted average number of shares of

common stock outstanding during the respective periods.

(p) Consumption taxes

The Company and its domestic consolidated subsidiaries are subject to Japanese

consumption taxes. Japanese consumption taxes are excluded from transaction

amounts.

(q) Cash and cash equivalents

Cash and cash equivalents in the consolidated statements of cash fl ows consists of

cash on hand, bank deposits that can be withdrawn on demand and short-term

investments with an original maturity of three months or less and which carry a

minor risk of fl uctuations in value.

Cash and cash equivalents at March 31, 2011 and 2010 consist of:


2011 2010 2011

Cash and bank deposits ................................. ¥377,668 ¥162,392 $4,542,008

Time deposits with original maturity over three months ....................................... (7,426) (8,635) (89,308)

MMF .............................................................. — 41,449 —

Cash and cash equivalents ............................. ¥370,241 ¥195,206 $4,452,687

(r) Goodwill

Goodwill arising from acquisitions is charged to expense in the year it is recog-

nized.

3. CHANGES IN ACCOUNTING POLICIES(1) Accounting Standard for Equity Method of Accounting for Investments

Effective the year ended March 31, 2011, the Company adopted “Accounting

Standard for Equity Method of Accounting for Investments” (Accounting Standards

Board of Japan (“ASBJ”) Statement No. 16, March 10, 2008) and “Practical

Solution on Unifi cation of Accounting Policies Applied to Associates Accounted for

Using the Equity Method” (ASBJ PITF No. 24, March 10, 2008). There is no impact

of adopting these accounting standards to the consolidated fi nancial statements.

(2) Accounting Standard for Asset Retirement Obligations

Effective the year ended March 31, 2011, the Company has adopted the

“Accounting Standard for Asset Retirement Obligations” (ASBJ Statement No. 18,

March 31, 2008) and “Guidance on Accounting Standard for Asset Retirement

Obligations” (ASBJ Guidance No. 21, March 31, 2008). The change has no material

effects on operating loss and loss before income taxes and minority interests in the

consolidated fi nancial statements.

4. FINANCIAL INSTRUMENTS(1) Trading assets and trading liabilities

Trading assets and trading liabilities are recorded at fair value with unrealized gains

and losses recognized as net gain and loss on trading in the consolidated state-

ments of operations. Sales of securities, which the Companies do not currently

own and will, therefore, be obligated to purchase at future dates (“short sales”),

are included in trading liabilities. Purchases and sales of fi nancial instruments for

trading purposes are recognized on their respective trade dates. Unrealized gains

and losses arising from over-the-counter (“OTC”) fi nancial instruments are pre-

sented in the accompanying consolidated balance sheets on a gross basis and are

included in trading assets and trading liabilities, respectively.

The fair values of the trading positions are generally based on market prices. If

market prices are not available, fair value is determined based on other relevant

factors, including dealer price quotations and price quotations for similar instru-

ments, or pricing models.

Valuation models incorporate current market and contractual prices for the

underlying fi nancial instruments as well as time value, yield curve, volatility, market

liquidity and other statistical adjustments relevant to similar instruments.

(a) Trading assets and trading liabilities as of March 31, 2011 and 2010 consist of

the following:


2011 2010 2011

Trading assets: Equities and warrants ......................... ¥ 503,599 ¥ 242,662 $ 6,056,512 Bonds ................................................. 6,624,323 6,298,389 79,667,143 Commercial paper and certifi cates of deposit ......................................... 53,994 150,608 649,356 Benefi ciary certifi cates of investment trusts .............................. 8,083 19,358 97,209 Derivatives .......................................... 750,408 720,643 9,024,750 Other* ............................................... 94,957 164,008 1,141,996

¥8,035,368 ¥7,595,671 $96,637,017

Trading liabilities: Equities and warrants ......................... ¥ 36,232 ¥ 56,317 $ 435,742 Bonds ................................................. 3,585,639 2,867,492 43,122,537 Benefi ciary certifi cates of investment trusts .............................. 48 20 577 Derivatives .......................................... 641,494 686,502 7,714,900

¥4,263,415 ¥3,610,332 $51,273,782

Unrealized gain (loss) included in the consolidated statements of operations

amounted to ¥(38,388) million ($461,671 thousand) and ¥(7,372) million as of

March 31, 2011 and 2010, respectively.

* Loans receivable is included in “Other”.

(b) Notional amounts and fair value of derivatives as of March 31, 2011 and 2010:

Millions of yen

Assets Liabilities

Notional Fair Notional Fair amount value amount value

March 31, 2011Options ....................................... ¥ 2,239,103 ¥153,950 ¥ 2,372,098 ¥161,214Foreign exchange forwards* ....... 86,495 1,057 201,575 6,091Futures and forwards* ................ 492,187 7,557 752,210 6,269Swap transactions ....................... 32,966,645 595,838 31,334,430 467,918MTM reserve ............................... — (7,994) — —

¥35,784,431 ¥750,408 ¥34,660,314 ¥641,494

March 31, 2010Options ....................................... ¥ 2,353,468 ¥148,131 ¥ 2,460,238 ¥177,808Foreign exchange forwards* ....... 91,359 757 248,547 6,364Futures and forwards* ................ 440,431 3,099 379,158 4,459Swap transactions ....................... 20,769,335 577,882 20,127,658 497,868MTM reserve ............................... — (9,227) — —

¥23,654,595 ¥720,643 ¥23,215,602 ¥686,502


Notes


Assets Liabilities

Notional Fair Notional Fair amount value amount value

March 31, 2011Options ............................. $ 26,928,478 $1,851,473 $ 28,527,937 $1,938,833Foreign exchange forwards* ....................... 1,040,228 12,711 2,424,233 73,253Futures and forwards* ...... 5,919,266 90,883 9,046,422 75,393Swap transactions ............. 396,471,978 7,165,820 376,842,212 5,627,396MTM reserve ..................... — (96,139) — —

$430,359,963 $9,024,750 $416,840,817 $7,714,900

* As for foreign exchange forwards and futures and forwards, the “Fair value” column has gains

(losses) which would be realized on settlement at the respective fi scal year ends.

(2) Held-to-maturity debt securities:

Millions of yen

March 31, 2011 March 31, 2010

Carrying Fair Carrying Fair amount value Differences amount value Differences

With fair value exceeding the carrying amount: (1) Government bonds and municipal bonds, etc. ........ ¥ — ¥ — ¥— ¥ — ¥ — ¥— (2) Corporate bonds ............ 3,519 3,534 15 4,945 4,975 29 (3) Other ............................. — — — — — —With fair value not exceeding the carrying amount: (1) Government bonds and municipal bonds, etc. ........ — — — — — — (2) Corporate bonds ............ — — — — — — (3) Other ............................. — — — — — —

¥3,519 ¥3,534 ¥15 ¥4,945 ¥4,975 ¥29


March 31, 2011

Carrying Fair amount value Differences

With fair value exceeding the carrying amount: (1) Government bonds and municipal bonds, etc. ........ $ — $ — $ — (2) Corporate bonds ............ 42,321 42,501 180 (3) Other ............................. — — —With fair value not exceeding the carrying amount: (1) Government bonds and municipal bonds, etc. ........ — — — (2) Corporate bonds ............ — — — (3) Other ............................. — — —

$42,321 $42,501 $180

(3) Other securities:

Millions of yen

March 31, 2011 March 31, 2010

Acquisition Carrying Acquisition Carrying cost amount Differences cost amount Differences

With a carrying amount exceeding the acquisition cost: a. Stocks .................... ¥ 9,247 ¥ 12,621 ¥3,373 ¥ 14,549 ¥ 21,262 ¥6,712 [Operating investment securities*] ............... [—] [—] [—] [—] [—] [—] b. Bonds (1) Government bonds and municipal bonds, etc. .......................... — — — — — — (2) Corporate bonds ... 1,007 1,011 3 2,315 2,318 2 (3) Other .................... 13,197 13,550 353 13,907 14,609 702 c. Other ..................... 1,023 1,055 32 4,104 4,251 147 [Operating investment securities*] ............... [—] [—] [—] [4,104] [4,251] [147]With a carrying amount not exceeding the acquisition cost: a. Stocks .................... 10,390 8,268 (2,122) 6,342 5,698 (643) [Operating investment securities*] ............... [1,500] [1,500] [—] [410] [410] [—] b. Bonds (1) Government bonds and municipal bonds, etc. .......................... — — — — — — (2) Corporate bonds ... 705 705 (0) 1,313 1,311 (1) (3) Other .................... 3,879 3,879 — 12,491 12,063 (428) c. Other ..................... 23,717 22,959 (758) 55,307 54,986 (320) [Operating investment securities*] ............... [16,980] [16,640] [339] [13,391] [13,070] [320]

¥ 63,169 ¥ 64,052 ¥ 882 ¥110,332 ¥116,502 ¥6,169


March 31, 2011

Acquisition Carrying cost amount Differences

With a carrying amount exceeding the acquisition cost: a. Stocks .................... $111,208 $151,785 $40,565 [Operating investment securities*] ...... [—] [—] [—] b. Bonds (1) Government bonds and municipal bonds, etc. ........ — — — (2) Corporate bonds ...................... 12,110 12,158 36 (3) Other .................... 158,713 162,958 4,245 c. Other ..................... 12,303 12,687 384 [Operating investment securities*] ...... [—] [—] [—]With a carrying amount not exceeding the acquisition cost: a. Stocks .................... 124,954 99,434 (25,520) [Operating investment securities*] ...... [18,039] [18,039] [—] b. Bonds (1) Government bonds and municipal bonds, etc. ........ — — — (2) Corporate bonds ...................... 8,478 8,478 (0) (3) Other .................... 46,650 46,650 — c. Other ..................... 285,231 276,115 (9,116) [Operating investment securities*] ...... [204,209] [200,120] [4,076]

$759,699 $770,318 $10,607

* The amount in square brackets represents operating investment securities included as part of

respective line items.


Impairment losses on stocks classifi ed as other securities with fair value were recognized in the

amount of ¥71 million ($853 thousand) and ¥132 million for the years ended March 31, 2011

and 2010, respectively. Impairment losses on other classifi ed as other securities with fair value

were recognized in the amount of ¥17 million ($204 thousand) for the year ended March 31,

2011.

(4) Securities for which it is extremely diffi cult to determine the fair value:

Millions of yen

March 31, 2011 March 31, 2010

Carrying amount Carrying amount

a. Stocks .................................................................... ¥27,441 ¥29,530[Operating investment securities*] ............................. [9,229] [10,674]b. Bonds .................................................................... 0 0[Operating investment securities*] ............................. [0] [0]c. Other ..................................................................... 58,270 62,230[Operating investment securities*] ............................. [56,736] [60,551]

¥85,712 ¥91,760


March 31, 2011

Carrying amount

a. Stocks .................................................................... $ 330,018[Operating investment securities*] ............................. [110,992]b. Bonds .................................................................... 0[Operating investment securities*] ............................. [0]c. Other ..................................................................... 700,781[Operating investment securities*] ............................. [682,333]

$1,030,811

* The amount in square brackets represents operating investment securities included as part of

respective line items.

Impairment losses on stocks classifi ed as other securities for which it is extremely

diffi cult to determine the fair value were recognized in the amount of ¥4 million

($48 thousand) and ¥113 million for the years ended March 31, 2011 and 2010,

respectively.

Investment securities relating to non-consolidated subsidiaries and affi liates

totaled ¥2,951 million ($35,490 thousand) and ¥3,290 million as of March 31,

2011 and 2010, respectively.

(5) Proceeds, gross realized gains and losses on sales of other securities:

There is no sale of held-to-maturity bonds during the years ended March 31, 2011

and 2010.

Proceeds, gross realized gains and gross realized losses on sales of other securi-

ties for the years ended March 31, 2011 and 2010 consist of following.

Millions of yen

2011 2010

Gross Gross Gross Gross Proceeds realized gains realized losses Proceeds realized gains realized losses

Stocks ............ ¥ 5,718 ¥ 447 ¥ 461 ¥ 2,518 ¥ 967 ¥ 149Others ........... 17,716 3,894 1,422 8,677 757 1,952

¥23,434 ¥4,341 ¥1,884 ¥11,196 ¥1,724 ¥2,102


2011

Gross Gross Proceeds realized gains realized losses

Stocks ............ $ 68,767 $ 5,375 $ 5,544Others ........... 213,060 46,831 17,101

$281,828 $52,206 $22,657

(6) Trading activities

(a) Content and purpose of trading

Trading activities at securities companies aim to demonstrate sound market func-

tions, fair price-setting mechanisms, and the fl awless trading of fi nancial instru-

ments. The Companies conduct trading activities as follows: 1) customer

transactions that the Companies conduct to provide customers with services and

products to accommodate various customer needs; 2) transactions (dealing

activities) that the Companies conduct using proprietary accounts to complement

market functions; and 3) hedging transactions that enable the Companies to avoid

various risks, including market risk, associated with dealing activities. Specifi cally,

the Companies conduct transactions involving marketable securities such as stocks

and bonds, fi nancial derivatives traded on exchanges such as stock index futures,

bond futures and interest rate futures, and options on these futures instruments, as

well as fi nancial derivatives traded over the counter such as interest rate swaps,

foreign exchange forwards, and bonds with options.

(b) Trading philosophy

Through trading activities, the Companies strive to promote fairness and soundness

of market mechanisms and fl awless execution. Derivative transactions are used as a

means of providing fi nancial service functions such as development and provision

of new products designed to cope with diversifying customer needs and enhance-

ment of position risk management.

(c) Risks associated with trading activities

Risks associated with trading activities that may have an impact on the Companies’

fi nancial position include market risk and credit risk. Market risk refers to the risk of

suffering losses from changes in the value of the securities or derivatives held

caused by fluctuations in the market price of stocks, interest rates, foreign

exchange rates, etc. Credit risk refers to a deterioration of the value of the securi-

ties or derivatives which could result from default on the part of the counterparties

of the transactions entered into by the Companies.

(d) Risk management

As the Companies rapidly diversify their business and products, and expand their

trading activities, risk management has become one of the most important man-

agement challenges. The Companies have been upgrading and strengthening their

risk management systems in order to secure sound management and effi cient use

of management resources. Risk limits approved by the Executive Management

Committee, using value at risk or VAR, are allocated to each trading departments,

while establishing position limits and loss-cutting limits for market risk control, and

credit limits for each counterparty based on an internal credit rating for credit risk

control. Regarding the limitation control, the Risk Management Department and

Credit Risk Management Department, which are completely independent of the

trading departments, are responsible for assessing current risk volume and moni-

toring the changes in position, risk and profi t, on a daily basis. In addition, Risk

Management Committees, which are responsible for monitoring, analyzing and

discussing trading performance and risk positions, have been established at each of

the Companies.

5. LEASE TRANSACTIONS(1) Leased assets under fi nance lease transactions that do not transfer ownership

are mainly computer devices and stock-quote displays.

(2) Future lease payments for non-cancelable operating leases are summarized at

March 31, 2011 and 2010 as follows:


2011 2010 2011

Future lease payments:Within one year .................................................. ¥ 9,185 ¥ 8,780 $110,463Over one year ..................................................... 20,290 23,960 244,016

¥29,475 ¥32,741 $354,479


Notes

6. ASSETS PLEDGED AS COLLATERAL AND FAIR VALUE OF SECURITIES PLEDGED AND RECEIVED AS COLLATERALAssets pledged as collateral for borrowings as of March 31, 2011 are summarized

as follows:

Millions of yen

For borrowings For short-term on margin borrowings transactions

Liabilities collateralized by the respective pledged assets ................................................................ ¥3,320,622 ¥10,246 Pledged assets: Bank deposits ............................................................ 130 — Trading assets ............................................................ 2,680,319 — Equipment ................................................................. 126 — Investment securities .................................................. — 13,976

¥2,680,576 ¥13,976


For borrowings For short-term on margin borrowings transactions

Liabilities collateralized by the respective pledged assets ............................................................... $39,935,321 $123,223 Pledged assets: Bank deposits ........................................................... 1,563 — Trading assets ........................................................... 32,234,744 — Equipment ................................................................ 1,515 — Investment securities ................................................. — 168,081

$32,237,835 $168,081

As of March 31, 2011, besides those shown in the above table, shares received

as collateral from customers for margin transactions in the amount of ¥110 million

($1,322 thousand) and borrowed securities of ¥800,842 million ($9,631,292 thou-

sand) were pledged as collateral for short-term borrowings. In addition, bank

deposits of ¥1,300 million ($15,634 thousand), trading assets of ¥174,614 million

($2,099,987 thousand), securities of ¥457 million ($5,496 thousand), investment

securities of ¥3,082 million ($37,065 thousand) and securities borrowed of

¥19,031 million ($228,875 thousand) were placed with futures exchanges in lieu

of margin money.

Fair value of securities pledged as collateral, etc., excluding those in the above

table as of March 31, 2011 is as follows:


2011 2011

Securities loaned for margin transactions ...................... ¥ 13,083 $ 157,342Securities pledged for borrowing on margin transactions .................................................... 10,954 131,737Securities loaned for collateralized fi nancing agreements ................................................. 1,751,763 21,067,504Securities sold under agreements to repurchase ............ 9,460,813 113,780,072

Fair value of securities received as collateral, etc., as of March 31, 2011 is as fol-

lows:


2011 2011

Securities received from customers for loans under margin transactions .......................................... ¥ 22,470 $ 270,234Securities borrowed under margin transactions ............. 20,988 252,411Securities borrowed under fi nancing agreements .......... 5,331,038 64,113,505Securities purchased under agreements to resell ............ 8,583,064 103,223,860Securities pledged by customers as collateral mainly for margin transactions ............................................... 40,974 492,772Other securities pledged ............................................... 96,514 1,160,721

Assets pledged as collateral for borrowings as of March 31, 2010 are summa-

rized as follows:

Millions of yen

For short-term For borrowings on borrowings margin transactions

Liabilities collateralized by the respective pledged assets ........................................................... ¥2,259,685 ¥11,716 Pledged assets: Bank deposits ....................................................... 130 — Trading assets ....................................................... 1,756,938 — Equipment ............................................................ 224 — Investment securities ............................................. 4,946 13,146

¥1,762,240 ¥13,146

As of March 31, 2010, besides those shown in the above table, shares received

as collateral from customers for margin transactions in the amount of ¥3,018 mil-

lion and borrowed securities of ¥618,796 million were pledged as collateral for

short-term borrowings. In addition, bank deposits of ¥1,448 million, trading assets

of ¥406,370 million, investment securities of ¥6,183 million and securities bor-

rowed of ¥4,376 million were placed with futures exchanges in lieu of margin

money.

Fair value of securities pledged as collateral, etc., excluding those in the above

table as of March 31, 2010 is as follows:

Millions of yen

2010

Securities loaned for margin transactions ............................................... ¥ 9,378Securities pledged for borrowing on margin transactions ....................... 12,737Securities loaned for collateralized fi nancing agreements ....................... 2,054,775Securities sold under agreements to repurchase ..................................... 10,267,824

Fair value of securities received as collateral, etc., as of March 31, 2010 is as

follows:

Millions of yen

2010

Securities received from customers for loans under margin transactions ... ¥ 28,516Securities borrowed under margin transactions ........................................ 28,051Securities borrowed under fi nancing agreements ..................................... 4,552,434Securities purchased under agreements to resell ....................................... 9,486,202Securities pledged by customers as collateral mainly for margin transactions ............................................................................... 43,703Other securities pledged .......................................................................... 100,007

7. OTHER ASSETSOther included in other assets as of March 31, 2011 and 2010 consisted of the fol-

lowing:


2011 2010 2011

Short-term deposits ..................................... ¥ 92,722 ¥172,328 $1,115,117Securities: fail to deliver ............................... 10,249 14,477 123,259Others ......................................................... 19,843 16,916 238,641

¥122,815 ¥203,721 $1,477,029


8. SHORT-TERM BORROWINGS AND LONG-TERM DEBTShort-term borrowings and long-term debt at March 31, 2011 and 2010 consist of

the following:


2011 Average rate 2010 2011

Short-term borrowings ......... ¥3,747,079 0.13% ¥2,700,015 $45,064,088Long-term borrowings, payable within one year ..... 119,042 1.40% 66,069 1,431,653Long-term borrowings, maturity greater than one year ............................ 621,361 1.09% 578,563 7,472,7721.5% unsecured bonds and notes due March 7, 2011 ................... — 1.50% 19,907 —2.73% unsecured bonds and notes due June 21, 2018* .................. 12,837 2.73% 12,809 154,383Straight bonds and notes due April 2011 through February 2041 ................... 409,612 0.00~25.00% 350,017 4,926,181Straight bonds and notes due April 2011 through October 2038 .................... 180,788 0.00~10.00% 206,151 2,174,239Commercial paper ............... 484,100 0.13% 331,700 5,822,008

¥5,574,821 ¥4,265,234 $67,045,351

* Interest rate: 6-Month Euro Yen Libor plus 2.50% after June 22, 2013

Maturities of long-term debt after one year but within fi ve years at March 31,

2011 are as follows:


Year ending March 31,2012.............................................................................. ¥ 168,212 $ 2,022,9942013.............................................................................. 276,371 3,323,7642014.............................................................................. 142,058 1,708,4542015.............................................................................. 145,376 1,748,3582016.............................................................................. 217,785 2,619,1822017.............................................................................. 394,662 4,746,386

¥1,344,466 $16,169,164

Subordinated debt, as defi ned by the Cabinet Offi ce Ordinance Concerning

Financial Instruments Business (Cabinet Offi ce Ordinance No. 52 Art. 176), was

included in long-term debt in the amount of ¥308,300 million ($3,707,757 thou-

sand) and ¥323,300 million as of March 31, 2011 and 2010, respectively.

9. PROVISION FOR RETIREMENT BENEFITSThe following table sets forth the projected benefi t obligations, plan assets and

funded status of the Companies as of March 31, 2011 and 2010:


2011 2010 2011

Projected benefi t obligation at end of year ......... ¥(60,236) ¥(58,243) $(724,425)Fair value of plan assets at end of year ............... 50,372 46,724 605,796Unrecognized actuarial differences ..................... (200) (1,901) (2,405)Prepaid pension cost .......................................... (4,502) (1,344) (54,143)

Provision for retirement benefi ts recognized in the consolidated balance sheets ................... ¥(14,566) ¥(14,765) $(175,177)

Severance and pension costs of the Companies include the following compo-

nents for the years ended March 31, 2011 and 2010:


2011 2010 2011

Service cost .............................................................. ¥3,195 ¥3,351 $38,424Interest cost ............................................................. 1,383 1,252 16,632 Expected return on plan assets ................................. (1,112) (1,043) (13,373)Amortization of actuarial differences ........................ (119) 859 (1,431)

Net periodic pension cost ......................................... 3,346 4,419 40,240Contributions to the defi ned contribution pension plan .......................................................... 1,392 1,293 16,740

¥4,739 ¥5,712 $56,993

Certain domestic subsidiaries apply the simplifi ed method in calculating the pro-

vision for retirement benefi ts, and the related severance and pension costs are

included in service cost.

Assumptions used in determining pension costs and pension benefi t obligations

for the years ended March 31, 2011 and 2010 were as follows:

2011 2010

Basis for allocation of expected pension benefi ts ........... Straight-line basis Straight-line basisDiscount rate .................. Mainly 2.5% Mainly 2.5%Expected rate of return on plan assets ............... Mainly 2.0%~5.6% Mainly 2.5%~5.7%Amortization period for actuarial differences ...... 10 years; straight-line basis 10 years; straight-line basisAmortization period for prior year service cost .... — —

In addition, directors’ retirement benefi ts of ¥553 million ($6,650 thousand) and

¥555 million were included in provision for retirement benefi ts in the accompany-

ing consolidated balance sheets as of March 31, 2011 and 2010, respectively.

Severance and pension costs recorded in the consolidated statements of operations

for the years ended March 31, 2011 and 2010 were ¥168 million ($2,020 thou-

sand) and ¥429 million, respectively.

10. INCOME TAXESSignifi cant components of deferred tax assets and liabilities at March 31, 2011 and

2010 are as follows:


2011 2010 2011

Deferred tax assets: Statutory reserves ......................................... ¥ 486 ¥ 766 $ 5,844 Accrued employees’ bonuses ........................ 2,836 3,345 34,107 Provision for retirement benefi ts ................... 7,682 8,008 92,387 Allowance for doubtful accounts .................. 972 1,047 11,689 Unrealized loss on investments ..................... 8,049 184,772 96,800 Depreciation ................................................. 1,355 1,067 16,295 Losses incurred related to stock trading error ... 16,577 16,577 199,362 Tax loss carry forwards .................................. 102,074 98,704 1,227,588 Other ........................................................... 5,043 2,944 60,649

Gross deferred tax assets .............................. 145,077 317,234 1,744,762 Valuation allowance ..................................... (91,595) (272,782) (1,101,563)

Total deferred tax assets ............................... 53,482 44,451 643,199

Deferred tax liabilities: Net unrealized gain on (operating) investments securities, net of tax .................... 631 2,451 7,588 Customer related assets .................................... 26,693 28,790 321,022 Accrual of dividends to be paid ......................... 2,350 1,622 28,262 Other ................................................................ 7,166 4,095 86,181

Total deferred tax liabilities ................................ 36,841 36,959 443,066

Net deferred tax assets (liabilities) ..................... ¥ 16,640 ¥ 7,492 $ 200,120

A reconciliation of the statutory tax rate to the effective tax rate for the year

ended March 31, 2011 is not presented as a loss before income taxes and minority

interests was recorded.

As of March 31, 2010, reconciliation of the statutory tax rate to the effective tax

rate is as follows:

For the year ended March 31, 2010

Statutory tax rate ............................................................................................ 40.69%Increase (decrease) in taxes resulting from: Non-deductible items such as entertainment expenses ................................ 0.28% Dividends-received deduction ...................................................................... (0.47%) Deductable amortization of negative goodwill ............................................. (33.00%) Inhabitants tax (per capita levy) ................................................................... 0.09% Decrease in valuation allowance .................................................................. (0.72%) Other .......................................................................................................... (0.47%)

Effective tax rate ............................................................................................. 6.40%


Notes

11. STATUTORY RESERVESStatutory reserves in the accompanying consolidated balance sheets consist of a

reserve for financial instrument transactions required by Article 46-5 of the

Financial Instruments and Exchange Act. The amounts of the reserves to be main-

tained are determined by using the formulae stipulated in Article 175 of the

Cabinet Offi ce Ordinance Concerning Financial Instruments Business.

12. CONTINGENT LIABILITIESThe borrowings of the non-consolidated companies from fi nancial institutions

guaranteed by the Company are ¥528 million ($6,349 thousand) and ¥763 million

as of March 31, 2011 and 2010, respectively.

Certain obligations of the Company that are deemed to cause the Company to

be held liable as a guarantor are treated as quasi-guarantees in accordance with

Report No.61, “Auditing Procedures Concerning the Accounting for Guarantee

Obligations and Quasi-Guarantees” issued by the Auditing Committee of the

Japanese Institute of Certifi ed Public Accountants. The corresponding balances of

guarantee obligations included in the above amounts were ¥425 million ($5,111

thousand) and ¥578 million as of March 31, 2011 and 2010, respectively.

13. PER SHARE INFORMATIONPer share data as of March 31, 2011 and 2010 are as follows:

Yen U.S. dollars

2011 2010 2011

Net assets per share ................................................ ¥334.82 ¥361.84 $4.02Net income (loss) per share ..................................... (18.45) 83.37 (0.22)Net income per share, fully diluted .......................... — 83.33 —

Net income per share, fully diluted was not shown due to the net loss for the

year ended March 31, 2011.

The basis of calculation of per share data for the years ended March 31, 2011

and 2010 is as follows:


2011 2010 2011

Net income (loss) ............................................ ¥(29,312) ¥127,064 $(352,519)Amount not attributed to the shareholders of common stock .............................................. — — —

Net income (loss) attributed to the shareholders of common stock ..................... ¥(29,312) ¥127,064 $(352,519)

Thousands of shares

2011 2010

Average number of outstanding common stock ................................................. 1,588,881 1,524,105

Effect of dilutive securities: Stock subscription rights ................................. — 746

14. STOCK-BASED COMPENSATION(1) Stock-based compensation included in selling, general and administrative

expenses in the consolidated statements of operations was ¥372 million ($4,473

thousand) for the years ended March 31, 2011 and 2010.

(2) A benefi ciary qualifying for stock subscription rights acquires common stock

upon exercise of the right. The following tables summarize numbers of shares to

be acquired upon exercise of the stock subscription rights granted by the Company

outstanding at March 31, 2011 and 2010.

For the fi scal year 2010:

The Company has a stock option program (Mizuho Stock Subscription Rights No.3)

in place supported by its treasury stock acquisition program. It was approved at the

directors meeting held on June 22, 2010, facilitating the offer of stock options to

the incumbent directors. Details of the stock option program are as follows:

Granted on July 9, 2010Number of

shares Price* Period

Company 9 directors 1,972,000 ¥1

Applicable service period:April 1, 2010 through March 31, 2011

41 executive offi cers Exercise period:July 10, 2010 through July 9, 2030

* Subject to adjustment in the event of a stock split or new share issue with a price less than

market quotation takes place.

• Conditions for the exercise of the stock subscription rights:

The holder may exercise the stock subscription rights which have been allotted

based on his or her capacity as a director or an executive offi cer of the Company

immediately following the date on which such holder loses the status as a director

or an executive offi cer of the Company. In cases where the holder assumes the sta-

tus as a director or an executive offi cer of the Company immediately after the

holder loses the status as a director or an executive offi cer of the Company, the

holder may exercise the stock subscription rights immediately following the date on

which the said holder fi nally and defi nitely loses the status as the director or the

executive offi cer of the Company.

For the fi scal year 2009:

The Company has a stock option program (Mizuho Stock Subscription Rights No.2)

in place supported by its treasury stock acquisition program. It was approved at the

directors meeting held on July 31, 2009, facilitating the offer of stock options to

the incumbent directors. Details of the stock option program are as follows:

Granted on August 18, 2009Number of

shares Price* Period

Company 8 directors 1,217,000 ¥1

Applicable service period:July 1, 2009 through March 31, 2010

60 executive offi cersExercise period:August 19, 2009 through August 18, 2029

* Subject to adjustment in the event of a stock split or new share issue with a price less than

market quotation takes place.

• Conditions for the exercise of the stock subscription rights:

The condition is the same as the Mizuho Stock Subscription Rights No.3 stated

above.

(3) The following tables summarize changes in the stock option rights in terms of

number of shares during the years ended March 31, 2011 and 2010 and informa-

tion for exercise price per share at March 31, 2010 and 2011.


1) Changes in stock options:

Stock subscription Stock subscription rights granted on rights granted on resolution of general resolution of general shareholders’ meeting shareholders’ meetingStock option held on July 31, 2009 held on July 31, 2010

For the fi scal year 2009Non-vested Outstanding at March 31, 2009 .................. — — Granted ...................................................... 1,217,000 — Forfeited ..................................................... 2,000 — Vested ......................................................... 50,000 —

Outstanding at March 31, 2010 .................. 1,165,000 —Vested Outstanding at March 31, 2009 .................. — — Vested ......................................................... 50,000 — Exercised ..................................................... 16,000 — Expired or forfeited ..................................... — — Outstanding at March 31, 2010 .................. 34,000 —

For the fi scal year 2010Non-vested Outstanding at March 31, 2010 .................. 1,165,000 — Granted ...................................................... — 1,972,000 Forfeited ..................................................... — 14,000 Vested ......................................................... 444,000 58,000

Outstanding at March 31, 2011 .................. 721,000 1,900,000Vested Outstanding at March 31, 2010 .................. 34,000 — Vested ......................................................... 444,000 58,000 Exercised ..................................................... 478,000 58,000 Expired or forfeited ..................................... — — Outstanding at March 31, 2011 .................. — —

2) Information on exercise price per share:

(Mizuho Stock Subscription Rights No.2)

For the years ended March 31, 2011 March 31, 2010 March 31, 2011

Yen U.S. dollars

Stock subscription rights granted on

resolution of general shareholders’

meeting held on July 31, 2009




Exercise price ............................ ¥ 1 ¥ 1 $ 0.01Average stock price at exercise .. 252.77 265.00 3.039Fair value price at grant date ..... 306.21 306.21 3.682

Information on estimated fair value of Mizuho Stock Subscription Rights No.2 is

as follows.

(1) The method used in estimation of the fair value: The Black-Scholes option pric-

ing model.

(2) The assumptions used for the Black-Scholes option pricing model

1. Expected volatility of stock price: 51.64%

The volatility of the market price of the Company’s stock is calculated using its

prices for the past 158 weeks prior to August 18, 2009, which are equivalent

to the expected remaining period of 3.03 years.

2. Expected remaining period: 3.03 years

This period represented expected terms during which the Company’s directors

will presumably be on duty.

3. Expected dividends:

¥5 per share was estimated based on actual dividends in prior years with con-

sideration of the merger.

4. Risk-free interest rate: 0.375%

The interest rate is estimated by using the interest of Japanese Government

Bonds of which the term is equivalent to the estimated remaining period.

(3) Estimation method for total number of vested stock subscription rights:

The total number of rights which will be vested is estimated based on the actual

number of forfeited rights due to diffi culties in estimating reasonable number of

rights to be forfeited in the future.

(Mizuho Stock Subscription Rights No.3)

For the years ended March 31, 2011 March 31, 2011

Yen U.S. dollars




Exercise price ..................................................... ¥ 1 $ 0.01Average stock price at exercise ........................... 233.86 2.812Fair value price at grant date .............................. 190.28 2.288

Information on estimated fair value of Mizuho Stock Subscription Rights No.3 is

as follows.

(1) The method used in estimation of the fair value: The Black-Scholes option pric-

ing model.

(2) The assumptions used for the Black-Scholes option pricing model

1. Expected volatility of stock price: 50.47%

The volatility of the market price of the Company’s stock is calculated using its

prices for the past 171 weeks prior to July 9, 2010, which are equivalent to

the expected remaining period of 3.27 years.

2. Expected remaining period: 3.27 years

This period represented expected terms during which the Company’s directors

will presumably be on duty.

3. Expected dividends:

¥5 ($0.06) per share was estimated based on actual dividends in prior years

with consideration of the merger.

4. Risk-free interest rate: 0.178%

The interest rate is estimated by using the interest of Japanese Government

Bonds of which the term is equivalent to the estimated remaining period.

(3) Estimation method for total number of vested stock subscription rights:

The total number of rights which will be vested is estimated based on the actual

number of forfeited rights due to diffi culties in estimating reasonable number of

rights to be forfeited in the future.

15. COMMISSIONSCommissions earned for the years ended March 31, 2011 and 2010 consisted of

the following:


2011 2010 2011

Brokerage ........................................................ ¥ 32,466 ¥ 33,236 $ 390,450Underwriting and distribution .......................... 62,890 66,099 756,343Other ............................................................... 40,635 46,486 488,695

¥135,991 ¥145,822 $1,635,490

16. SELLING, GENERAL AND ADMINISTRATIVE EXPENSESSelling, general and administrative expenses for the years ended March 31, 2011

and 2010 were as follows:


2011 2010 2011

Transaction-related expenses .......................... ¥ 38,512 ¥ 34,495 $ 463,162Personnel expenses: Compensation ............................................ 71,834 67,965 863,908 Severance and pension costs ...................... 4,739 5,712 56,993 Provision for directors’ retirement benefi ts ... 121 249 1,455 Provision for executive offi cers’ retirement benefi ts ................................... 46 180 553 Stock-based compensation ......................... 372 372 4,473 Provision for accrued employees’ bonuses ... 17,464 20,518 210,030 Welfare expenses ....................................... 9,598 8,831 115,429Real estate expenses ...................................... 28,006 26,787 336,812Administrative expenses ................................. 22,316 19,707 268,382Depreciation and amortization ....................... 23,825 23,838 286,530Tax other than income taxes ........................... 3,349 2,537 40,276Amortization of goodwill ............................... 72 591 865Other ............................................................. 9,512 7,725 114,395

¥229,773 ¥219,513 $2,763,355


Notes

Real estate expenses described above consisted of expenses for tools and furni-

ture of ¥11,053 million ($132,928 thousand) and ¥9,432 million and expenses for

real estate of ¥16,952 million ($203,872 thousand) and ¥17,355 million for the

years ended March 31, 2011 and 2010, respectively.

The breakdown of transaction-related expenses was as follows:


2011 2010 2011

Commission fees ................................................... ¥17,899 ¥15,993 $215,261 Membership fees on exchanges ............................ 1,391 1,320 16,728Transportation and communication expenses ........ 12,830 11,867 154,299Traveling expenses ................................................ 3,636 2,961 43,728Advertising expenses ............................................. 1,626 1,489 19,555Provision for allowance for bonus points redemption .............................................. 239 1 2,874Entertainment expenses ........................................ 888 861 10,679

¥38,512 ¥34,495 $463,162

17. OTHER INCOME, OTHER, NETThe breakdown of other income, other net for the years ended March 31, 2011

and 2010 is as follows:


2011 2010 2011

Gain (loss) on sale of investment securities, net ... ¥ (61) ¥ 954 $ (733)Loss on impairment of investment securities ....... (93) (246) (1,118)Loss on disposal of noncurrent assets ................. (821) (1,735) (9,873)Gain (loss) on sale of noncurrent assets ............. — 8 —Equity in earnings (losses) of affi liates................. 73 (293) 877Loss on impairment of golf club memberships .... (63) (35) (757)Nonrecurring depreciation on noncurrent assets ............................................. (1,759) (420) (21,154)Gain on negative goodwill ................................. — 110,219 —Merger expenses ................................................ — (5,892) —Rental revenue ................................................... 864 954 10,390Rental expense ................................................... (602) (701) (7,239)Foreign exchange gains (losses) .......................... 520 (540) 6,253Dividend income ................................................ 630 749 7,576Other, net .......................................................... 1,305 2,009 15,694

¥ (8) ¥105,029 $ (96)

Merger expenses for the year ended March 31, 2010 mainly comprised advertis-

ing expenses of ¥1,329 million, expenses on real estate of ¥1,497 million and

expenses on IT-related services for the merger of ¥2,286 million.

The breakdown of loss on disposal of noncurrent assets is as follows:


2011 2010 2011

Buildings ..................................................................... ¥211 ¥1,175 $2,537Equipment .................................................................. 70 415 841Software ..................................................................... 349 — 4,197Other .......................................................................... 190 145 2,285

¥821 ¥1,735 $9,873

The breakdown of gain or loss on sale of noncurrent assets is as follows:


2011 2010 2011

Gain on sale of buildings .................................................. ¥— ¥8 $—Other ............................................................................... — 0

¥— ¥8 $—

Impairment losses on noncurrent assets were not recorded for the years ended

March 31, 2011 and 2010.

18. SEGMENT INFORMATIONFiscal 2010 (From April 1, 2010 to March 31, 2011)

(1) General information regarding reportable segments

The Companies report their operations in four segments: the Global Investment

Banking Division, the Global Markets & Products Division, the Corporate Investment

Services & Retail Business Division, and the Overseas Subsidiaries. These segments

are components of the Company for which discrete fi nancial information is avail-

able and whose operating results are regularly reviewed by the Company’s board of

directors to make decisions about resources to be allocated to the segments and

assess performance.

• The Global Investment Banking Division provides underwriting, M&A, securitiza-

tion, and other advisory services to institutional clients.

• The Global Markets & Products Division serves institutional clients through sales

and trading of equities, bonds, and other market instruments and provides ser-

vices related to asset management.

• The Corporate Investment Services & Retail Business Division markets equities,

bonds, investment trusts, and other instruments to clients, primarily individuals,

mid-tier small and medium-sized companies and provides services related to

fi nancing and business succession to institutional clients.

• The Overseas Subsidiaries provide services related to securities outside of Japan.


(2) Information regarding reportable segment income and loss

The reportable segment information for the years ended March 31, 2011 and 2010 is shown below:

Millions of yen

March 31, 2011

Global Investment Banking Division

Global Markets & Products Division

Corporate Investment Services & Retail Business Division

Overseas Subsidiaries Other Consolidated

Net operating revenues External customers ................................................................................................. ¥32,718 ¥56,756 ¥74,770 ¥22,992 ¥ 5,588 ¥192,827 Inter-segment or transfer ........................................................................................ — — — 10,297 (10,297) —

Total .......................................................................................................................... 32,718 56,756 74,770 33,290 (4,708) 192,827Income (loss) before income taxes and minority interests ............................................ 3,298 7,890 (6,143) (28,121) (13,877) (36,954)

Other items Depreciation and amortization ............................................................................... 453 4,583 7,243 1,224 10,321 23,825 Amortization of goodwill ........................................................................................ — — — — 72 72 Extraordinary gain .................................................................................................. — — — 67 1,265 1,333 Extraordinary loss ................................................................................................... 56 890 21 1,136 2,461 4,567 (including nonrecurring depreciation on noncurrent assets) .................................... (—) (628) (—) (—) (1,131) (1,759) (including litigation-related loss) ............................................................................. (—) (—) (—) (1,094) (—) (1,094)


March 31, 2011





Net operating revenues External customers ................................................................................................. $393,481 $682,573 $899,218 $276,512 $ 67,203 $2,319,025 Inter-segment or transfer ........................................................................................ — — — 123,836 (123,836) —

Total .......................................................................................................................... 393,481 682,573 899,218 400,360 (56,620) 2,319,025Income (loss) before income taxes and minority interests ............................................ 39,663 94,888 (73,878) (338,196) (166,891) (444,425)

Other items Depreciation and amortization ............................................................................... 5,447 55,117 87,107 14,720 124,125 286,530 Amortization of goodwill ........................................................................................ — — — — 865 865 Extraordinary gain .................................................................................................. — — — 805 15,213 16,031 Extraordinary loss ................................................................................................... 673 10,703 252 13,662 29,597 54,924 (including nonrecurring depreciation on noncurrent assets) .................................... (—) (7,552) (—) (—) (13,601) (21,154) (including litigation-related loss) ............................................................................. (—) (—) (—) (13,156) (—) (13,156)

Millions of yen

March 31, 2010





Net operating revenues External customers ................................................................................................. ¥45,552 ¥69,891 ¥85,420 ¥61,206 ¥ (11,669) ¥250,401 Inter-segment or transfer ........................................................................................ — — — 8,200 (8,200) —

Total .......................................................................................................................... 45,552 69,891 85,420 69,406 (19,869) 250,401Income (loss) before income taxes and minority interests ............................................ 11,302 22,217 4,852 12,248 85,296 135,917

Other items Depreciation and amortization ............................................................................... 484 3,370 5,539 1,426 13,018 23,838 Amortization of goodwill ........................................................................................ — — — — 591 591 Extraordinary gain .................................................................................................. 0 — 14 836 110,385 111,236 (including gain on negative goodwill) ..................................................................... (—) (—) (—) (—) (110,219) (110,219) Extraordinary loss ................................................................................................... 205 34 97 103 7,952 8,392 (including losses on disposal of noncurrent assets) .................................................. (205) (34) (97) (103) (1,296) (1,735) (including merger expenses) ................................................................................... (—) (—) (—) (—) (5,892) (5,892)

Notes: 1. “Other” includes operating segments not included in the reportable segments and head offi ce expenses.

2. Information on segment assets is omitted from this disclosure because the Company does not allocate assets to the reportable segments.

3. Inter-segment is based on prevailing market quotations.

(3) Differences between the total amounts of reportable segments and

the amounts on the consolidated fi nancial statements, and major break-

down of the differences


2011 2010 2011

(Net operating revenues)Net operating revenues per reportable segment information ........................................... ¥197,536 ¥270,270 $2,375,658 Inter-segment or transfer ................................... (10,297) (8,200) (123,836) Interest expenses ............................................... (3,242) (5,670) (38,989) Net operating revenues of former Shinko Securities Co. Ltd. for the term ended on May 6, 2009 ............................................. — (7,310) — Other ................................................................ 8,830 1,311 106,193

Consolidated ........................................................ ¥192,827 ¥250,401 $2,319,025


2011 2010 2011

(Income before income taxes and minority interests)Income before income taxes and minority interests per reportable segment information ...... ¥(23,076) ¥ 50,621 $(277,522) Head offi ce expenses ......................................... (10,137) (15,751) (121,912) Gain on negative goodwill ................................. — 110,219 — Amortization of goodwill ................................... (72) (591) (865) Other ................................................................ (3,667) (8,580) (44,101)

Consolidated ........................................................ ¥(36,954) ¥135,917 $(444,425)

Note: “Head offi ce expenses” mainly comprises selling, general and administrative expenses,

etc., not attributable to the reportable segments.


Notes

19. RELATED PARTY TRANSACTIONSTransactions of the Company with its related companies and individuals, excluding transactions with consolidated subsidiaries which are eliminated in the consolidated fi nan-

cial statements and other than those disclosed elsewhere in these fi nancial statements, for the years ended March 31, 2011 and 2010 are as follows:

(1) For the year ended March 31, 2011

(Transactions between the Company and its related companies and individuals)

a. Transactions with parent companies or major shareholding companies

Transactions Year-end balances

For the year ended March 31, 2011 March 31, 2011

Voting rights Name of Principal held by the Interlocking Thousands of Thousands of related company Paid-in capital business related company of directors Transactions Description Millions of yen U.S. dollars Account Millions of yen U.S. dollars

(A parent ¥1,404,065 Banking Directly 59.45% Change in Financing Loans payable ¥ 45,989* $ 553,084 Short-term ¥ 67,700 $ 814,191 company) million employment transactions borrowings Mizuho (intaking) Corporate 4 Bank, Ltd.

¥ 1,000 $ 12,026 Long-term ¥194,100 $2,334,335 debt

Interest expenses ¥ 3,985 $ 47,925 Prepaid ¥ — $ — expenses

Accrued ¥ 360 $ 4,329 expenses

Securities Securities Payables – ¥ 50,118 $ 602,742 transactions purchases ¥4,123,434 $49,590,306 unsettled trades

Securities sold ¥2,973,736 $35,763,511 Receivables – ¥ 30,354 $ 365,051 unsettled trades

Guarantee Outstanding ¥ 409,612 $ 4,926,181 — — — transactions liabilities Guaranteed

Guarantee charge ¥ 82 $ 986 Accrued ¥ 21 $ 252 expenses

Notes: Conditions and policies for transactions

(1) *Average balances at the month end are stated because these are short-term marketable transactions.

(2) Conditions for loans payable, securities purchase and sale, and liabilities guaranteed are determined using prevailing quotations such as interest rates, etc.

(3) Liabilities guaranteed are based on keep-well agreements over the Euro medium-term notes program.

[RELATED INFORMATION]

1. Information by product and service

A presentation is omitted because the same information is disclosed as a part of

segment information.

2. Geographical information

(1) Net operating revenues

Millions of yen

March 31, 2011

Japan Asia Europe Americas Consolidated

¥173,509 ¥3,473 ¥(2,877) ¥18,722 ¥192,827


March 31, 2011


$2,086,698 $41,767 $(34,600) $225,159 $2,319,025

Millions of yen

March 31, 2010


¥192,296 ¥2,520 ¥25,216 ¥30,366 ¥250,401

Notes: 1. Criterion for classifi cation of countries and regions into geographical segments: geo-

graphical proximity

2. Major countries or regions in segments other than Japan for the fi scal year 2010:

(1) Asia China, Singapore, etc.

(2) Europe The United Kingdom, Switzerland, etc.

(3) Americas The U.S.

Major countries or regions in segments other than Japan for the fi scal year 2009:

(1) Asia China, Singapore

(2) Europe The United Kingdom, Switzerland, etc.

(3) Americas The U.S.

(2) Property and equipment

A presentation is omitted because the amount of property and equipment located

in Japan exceeds 90% of that on the consolidated fi nancial statements as of March

31, 2011 and 2010.

(Additional information)

The Company applied “Accounting Standard for Disclosure about Segments of an

Enterprise and Related Information” (ASBJ Statement No.17, March 27, 2009) and

“Guidance on Accounting Standard for Disclosures about Segments of an

Enterprise and Related Information” (ASBJ Guidance No.20, March 21, 2008) from

this fi scal year.


b. Transactions with companies that have the same parent companies and subsidiaries of the Company’s other affi liated companies




(A company ¥700,000 Banking Directly 0% None Securities Securities ¥4,405,835 $52,986,590 Payables– ¥ — $ — that has the million transactions purchases unsettled same parent trades company) Mizuho Bank, Ltd.

Securities sold ¥5,243,721 $63,063,391 Receivables– ¥29,989 $360,661 unsettled trades




(A company ¥80,288 Financial Directly 0% None Securities Securities ¥ 1,048 $ 12,603 Payables– ¥ — $ — that has the million services transactions purchases unsettled same parent trades company) Mizuho Investors Securities Co., Ltd.

Securities sold ¥724,841 $8,717,269 Receivables– ¥285 $3,427 unsettled trades

Note: Conditions for securities purchase and sale are determined using prevailing quotations such as interest rates, etc.

(Transactions between consolidated subsidiaries and the Company’s related companies and individuals)




(A parent ¥1,404,065 Banking Directly 59.45% Change in Securities Securities ¥1,024,608* $12,322,405 Securities ¥699,244 $8,409,428 company) million employment transactions borrowing purchased Mizuho (intaking) under Corporate 4 agreements Bank, Ltd. to resell

Securities ¥ 231,721* $ 2,786,782 Securities ¥ 61,242 $ 736,524 lending sold under agreements to repurchase

Revenue from ¥ 4,443 $ 53,433 Accrued ¥ 99 $ 1,190 securities income borrowing transactions

Expenses from ¥ 708 $ 8,514 Accrued ¥ 1 $ 12 securities expenses lending transactions

Notes: Conditions and policies for transactions, etc.


(2) Conditions for bond repurchase agreements are determined using prevailing quotations such as interest rate, etc.

(Information on parent companies)

• Mizuho Financial Group, Inc.: Listed on the Tokyo Stock Exchange, Osaka Securities Exchange, and New York Stock Exchange. American Depository Receipts (ADRs) are listed

on the New York Stock Exchange.

• Mizuho Corporate Bank, Ltd. (Unlisted)


Notes

(2) For the year ended March 31, 2010

(Transactions between the Company and its related companies and individuals)

a. Transactions with parent companies or major shareholding companies



Voting rights Name of Principal held by the Interlocking related company Paid-in capital business related company of directors Transactions Description Millions of yen Account Millions of yen

(A parent ¥1,404,065 Banking Directly 59.48% Change in Financing Loans payable ¥ 20,323* Short-term borrowings ¥ 29,777 company) million employment transactions Mizuho (intaking) Corporate 3 Bank, Ltd. Indirectly 0.00%

Long-term debt ¥260,800

Interest expenses ¥ 4,441 Prepaid expenses ¥ —

Accrued expenses ¥ 448

Securities Securities ¥2,856,871 Payables–unsettled ¥301,184 transactions purchases trades

Securities sold ¥2,395,254 Receivables–unsettled ¥ 97,702 trades

Guarantee Outstanding ¥ 350,017 — ¥ — transactions liabilities Guaranteed

Guarantee charge ¥ 49 Accrued expenses ¥ 16



(2) Conditions for loans payable, securities purchase and sale, and liabilities guaranteed are determined using prevailing quotations such as interest rates, etc.

(3) Liabilities guaranteed are based on keep-well agreements over the Euro medium-term notes program.

b. Transactions with companies that have the same parent companies and subsidiaries of the Company’s other affi liated companies




(A company ¥700,000 Banking Directly 0% None Securities Securities purchases ¥5,205,681 Payables–unsettled ¥ — that has the million transactions trades same parent company) Mizuho Bank, Ltd.

Securities sold ¥6,342,350 Receivables–unsettled ¥13,785 trades




(A company ¥3,005 Financial Directly 0% None Securities Underwriting of ¥ 237,000 — ¥— that has the million services transactions Securities same parent transactions company) Mizuho Capital Investment (JPY) 5 Limited

Underwriting ¥ 1,437 — ¥— commission

Note: Conditions for securities purchase and sale are determined using prevailing quotations such as interest rate, etc.


(Transactions between consolidated subsidiaries and the Company’s related companies and individuals)




(A parent ¥1,404,065 Banking Directly 59.48% Change in Securities Securities borrowing ¥1,810,300* Securities purchased ¥1,607,196 company) million employment transactions under agreements Mizuho (intaking) to resell Corporate 3 Bank, Ltd.

Indirectly 0.00% Securities lending ¥ 450,324* Securities sold ¥ 655,346 under agreements to repurchase

Revenue from ¥ 8,409 Accrued income ¥ 64 securities borrowing transactions

Expenses from ¥ 1,400 Accrued expenses ¥ 1 securities lending transactions



(2) Conditions for bond repurchase agreements are determined using prevailing quotations such as interest rate, etc.

(Information on parent companies)

• Mizuho Financial Group, Inc.: Listed on the Tokyo Stock Exchange, Osaka Securities Exchange, and New York Stock Exchange. American Depository Receipts (ADRs) are listed

on the New York Stock Exchange.

• Mizuho Corporate Bank, Ltd. (Unlisted)

20. CHANGES IN NET ASSETSBelow is supplementary information on changes in net assets for the year ended March 31, 2011.

(1) Number of shares outstanding

As of March 31, 2010 Increase Decrease As of March 31, 2011

Number of shares issuedCommon stock

(thousands)1,626,688

(thousands)—

(thousands)—


Total 1,626,688 — — 1,626,688

(2) Treasury stock


Treasury stockCommon stock

(thousands)38,190

(thousands)127*1

(thousands)569*2

(thousands)37,749

Total 38,190 127 569 37,749

*1 The increase in the number of common stock held in treasury stock of 127 thousand shares is mainly due to the purchases of odd-lot shares.

*2 The decrease in the number of common stock held in treasury stock of 569 thousand shares consists of 28 thousand shares due to a request to purchase odd-lot shares and 536 thousand shares due to

the exercise of stock subscription rights.

(3) Stock subscription rights

Stock subscription rights granted under stock option program at March 31, 2011 amounted to ¥582 million ($6,999 thousand), all of which was attributable to the Company.

(4) Dividends

(a) Dividends paid during the year ended March 31, 2011

Date of resolution Class of shares Total amount of dividends Dividends per share Record date Effective date of payment

At the shareholders’ meeting on June 22, 2010

Common stock¥7,942 million

($95,514 thousand)¥5

($0.06)March 31, 2010 June 23, 2010

Note: Dividends per share included ordinary dividend of ¥3 ($0.03) and commemorative dividend ¥2 ($0.02).

(b) Dividends resolved during the fi scal year to be paid in the next fi scal year

Not applicable

Below is supplementary information on changes in net assets for the year ended March 31, 2010.

The Company merged with the former Mizuho Securities Co., Ltd. on May 7, 2009. Because the merger is accounted for as a reverse acquisition under the Accounting

Standards for Business Combinations, the beginning balance of consolidated shareholders’ equity at April 1, 2009, is that of the former Mizuho Securities Co., Ltd.

Consequently, the ending balance at March 31, 2009 does not correspond to the beginning balance at April 1, 2009. The following is to make an explanation of some line

items in the consolidated statements of changes in net assets:


Notes

(1) Acquired company’s beginning balance is the Company’s (consolidated) ending balance for the previous fi scal year.

(2) Balance of the acquiring company at March 31, 2009 represents the consolidated ending balance of the former Mizuho Securities Co., Ltd. for the previous fi scal year.

(3) Increase due to merger resulted from the application of the acquisition method to the business combination between the Company (acquired company) and the former

Mizuho Securities (acquiring company).

(4) ¥2,318 million of dividends paid from retained earnings was included in Increase (decrease) due to merger under Retained earnings since the Company’s dividend record

date was March 31, 2009 (effective June 26, 2009).

(1) Number of shares outstanding


Number of shares issuedCommon stock

(thousands)6,685*1

(thousands)1,620,003*2

(thousands)—


Total 6,685 1,620,003 — 1,626,688

*1 As the merger was accounted for as a reverse acquisition, the number of shares at the end of the previous fi scal year is that of the former Mizuho Securities Co., Ltd.

*2 The increase in the number of shares outstanding (common stock) of 1,620,003 thousand shares was due to the merger.

(2) Treasury stock


Treasury stockCommon stock

(thousands)—*1

(thousands)38,226*2

(thousands)35*3

(thousands)38,190

Total — 38,226 35 38,190

*1 As the merger was accounted for as a reverse acquisition, the number of shares at the end of the previous fi scal year is that of the former Mizuho Securities Co., Ltd.

*2 The increase in the number of common stock held in treasury stock of 38,226 thousand shares mainly consists of 38,135 thousand shares due to the merger and 90 thousand shares due to the pur-

chases of odd-lot shares.

*3 The decrease in the number of common stock held in treasury stock of 35 thousand shares consists of 5 thousand shares due to a request to purchase odd-lot shares and 30 thousand shares due to the

exercise of stock subscription rights.

(3) Stock subscription rights

Stock subscription rights granted under the stock option program at March 31, 2010 amounted to ¥367 million, all of which was attributable to the Company.

(4) Dividends

(a) Dividends paid during the year ended March 31, 2010

Date of resolution Class of shares Total amount of dividends Dividends per share Record date Effective date of payment


Common stock ¥2,318 million ¥3 March 31, 2009 June 26, 2009

(b) Dividends resolved during the fi scal year to be paid in the next fi scal year

Date of resolution Class of shares Total amount of dividends Source of dividend Dividends per share* Record date Effective date of payment


Common stock ¥7,942 million Retained earnings ¥5 March 31, 2010 June 23, 2010

* Dividends per share included ordinary dividend of ¥3 and commemorative dividend of ¥2.

21. FAIR VALUE OF FINANCIAL INSTRUMENTS(1) Difference between carrying amount and fair value

The carrying amounts of cash and bank deposits, collateralized short-term fi nanc-

ing agreements, payables-unsettled trades, deposits received, guarantee deposits

received, commercial paper and corporate bonds due within one year approximate

fair value because of their short-term maturities, and so do those of trading assets,

operating investment securities, trading liabilities and derivatives because they are

valued using prevailing market quotations. The carrying amount and estimated fair

value of the other fi nancial instruments as of March 31, 2011 and 2010 are sum-

marized as follows:


Millions of yen

Carrying amount Fair value Difference

Securities ............................................... ¥ 10,681 ¥ 10,687 ¥ 5Investment securities .............................. 38,749 38,759 10Short-term borrowings ........................... 3,866,122 3,866,582 460Bonds and notes due over one year ....... 554,068 548,248 (5,820)Long-term borrowings ........................... 621,361 620,237 (1,123)



Securities .............................................. $ 128,454 $ 128,526 $ 60Investment securities ............................. 466,013 466,133 120Short-term borrowings .......................... 46,495,754 46,501,286 5,532Bonds and notes due over one year ...... 6,663,475 6,593,481 (69,993)Long-term borrowings .......................... 7,472,772 7,459,254 (13,505)


Millions of yen


Securities ............................................... ¥ 47,469 ¥ 47,473 ¥ 4Investment securities .............................. 56,245 56,271 25Short-term borrowings ........................... 2,766,084 2,766,131 47Bonds and notes due over one year ....... 508,122 497,120 (11,001)Long-term borrowings ........................... 578,563 579,105 541

Notes:

Methods for determining estimated fair value of fi nancial instruments.

a. Securities and investment securities

The fair value of securities held for trading purposes is based on quoted market prices.

The fair value of investments in partnerships is derived from our equity in the partnerships with

assets fair valued using market prices when available.

The fair value of investment trusts is based on net asset value.


(2) Derivatives

The following table shows the notional amounts, fair value and unrealized gain (loss) on derivatives that are entered into for non-trading purposes.

The fair value and unrealized gain (loss) on derivatives are determined based on market prices, discounted cash fl ows, option pricing models and others.

a. Derivative instruments not qualifying for hedge accounting

March 31, 2011

Millions of yen Thousands of U.S. dollars

Notional amounts Fair value Unrealized gain (loss) Notional amounts Fair value Unrealized gain (loss)

Options ................................................................ ¥ — ¥— ¥— $ — $ — $ —Foreign exchange forwards .................................. (1,321) (4) (4) (15,886) (48) (48)Futures and forwards ........................................... (55) 1 1 (661) 12 12

Total .................................................................... ¥(1,377) ¥(3) ¥(3) $(16,560) $(36) $(36)

March 31, 2010

Millions of yen

Notional amounts Fair value Unrealized gain (loss)

Options ................................................................ ¥ — ¥ — ¥ —Foreign exchange forwards .................................. (4,195) (42) (42)Futures and forwards ........................................... 202 2 2

Total .................................................................... ¥(3,993) ¥(40) ¥(40)

Note: Claims and obligations arising from derivatives are stated in a net amount. Figures in parentheses represent net liability amounts.

b. Derivative instruments qualifying for hedge accounting

March 31, 2011

Millions of yen Thousands of U.S. dollars

Notional amounts Fair value Unrealized gain (loss) Notional amounts Fair value Unrealized gain (loss)

Options .............................................................. ¥ — ¥ — ¥ — $ — $ — $ —Foreign exchange forwards ................................ (67,348) (1,002) (1,002) (809,957) (12,050) (12,050)Futures and forwards ......................................... — — — — — —

Total .................................................................. ¥(67,348) ¥(1,002) ¥(1,002) $(809,957) $(12,050) $(12,050)

March 31, 2010

Millions of yen

Notional amounts Fair value Unrealized gain (loss)

Options ................................................................ ¥ — ¥ — ¥ —Foreign exchange forwards .................................. (36,262) (1,302) (1,302)Futures and forwards ........................................... — — —

Total .................................................................... ¥(36,262) ¥(1,302) ¥(1,302)

Notes: 1. Claims and obligations arising from derivatives are stated in a net amount. Figures in parentheses represent net liability amounts.

2. The fair value of the interest rate swaps qualifying for exceptional accrual method is included in the above fair value of related long-term borrowings.

(3) Expected collections of monetary assets and securities with maturities at March 31, 2011 are as follows:

Millions of yen

Other securities with maturities

Corporate bonds Corporate bonds Other bonds Others with Cash and deposits held-to-maturities with maturities with maturities maturities Total

Year ending March 31,2011........................................................................... ¥377,449 ¥2,000 ¥1,200 ¥ 4,042 ¥10,268 ¥394,9602012 to 2015 ............................................................. 1,500 500 10,206 38,332 50,5382016 to 2020 ............................................................. 2,536 15,451 17,9882021 and thereafter .................................................... 2,283 2,283


Other securities with maturities

Corporate bonds Corporate bonds Other bonds Others with Cash and deposits held-to-maturities with maturities with maturities maturities Total

Year ending March 31,2011........................................................................... $4,539,374 $24,052 $14,431 $ 48,610 $123,487 $4,749,9692012 to 2015 ............................................................. 18,039 6,013 122,742 460,998 607,7932016 to 2020 ............................................................. 30,499 185,820 216,3312021 and thereafter .................................................... 27,456 27,456

Also please refer to Note 4 FINANCIAL INSTRUMENTS for further information on fair value of

trading securities, securities and investment securities.

b. Short-term borrowings and long-term borrowings

The fair value of short-term borrowings and long-term borrowings is determined as the total of

principal and interest discounted by interest rates refl ecting the remaining maturities and credit

risk.

The fair value of the interest rate swaps qualifying for the exceptional accrual method is

included in the above fair value of related long-term borrowings.

c. Bonds and notes due over one year

The fair value of bonds and notes is based on either quoted market prices when available or the

total of principal and interest discounted by interest rates refl ecting the remaining maturities and

credit risk.

d. Derivatives

Please refer to the following section.


Notes

(4) Financial instruments and risk management

a. Basic policy for fi nancial instruments

The Companies provide various fi nancial services to a wide range of customers,

from individuals to institutional investors, fi nance companies, and public corpora-

tions both in and outside of Japan. The Companies are very active in supporting

capital markets as responsible securities companies. They carry out their trading

transaction businesses and strategic investments on their own accounts to contrib-

ute to the performance of sound market functions and fair price formation, and to

facilitate the smooth distribution of fi nancial instruments. Towards this end, the

Company is committed to achieving a more stable and effective fundraising struc-

ture by appropriately combining borrowings from fi nancial institutions, MTNs, CPs,

call money, transactions under repurchase and resale agreements, repo trading,

and other transactions.

b. Financial instruments and related risks

The Companies are engaged in trading transactions dealing in various fi nancial

instruments (including derivatives). As such, they are exposed to risks arising from

the fl uctuations of stock prices, interest rates and foreign exchange rates. The

Companies underwrite shares and bonds, and therefore, they are exposed to risk

arising from price fl uctuations when securities remain unsubscribed in the course

of offering them for sale. The Companies have certain investments in limited liabili-

ty investment partnerships and investments related to their venture capital busi-

ness. Impairment or losses of such investments may occur in conjunction with

defaults of investee companies. Investment securities, such as shares held for long-

term periods, are exposed to risk of stock price declines. In connection with making

bank borrowings to raise working capital for trading activities including derivatives,

the Companies are exposed to liquidity risk and market risk arising from fl uctua-

tions in interest rates.

c. Risk management structures for fi nancial instruments

The Companies have a shared comprehensive risk management structure under

the Mizuho Financial Group as a whole with the objectives of responding properly

to changes in the operating environment, including modifi cations in laws and regu-

lations, strengthening internal controls, and greater emphasis on risk management

within the corporate environment.

Firstly, the Companies’ basic stance regarding risk management and the com-

mon framework for management of various types of risk are set forth in the Basic

Policy for Comprehensive Risk Management, which was approved by a resolution

of the Board of Directors of the Company following deliberation by the Executive

Management Committee. Appropriate risk management is conducted based on

this Basic Policy and separate basic management policies have been determined for

each type of risk.

Then, throughout all internal organizational units responsible for risk manage-

ment, the management of risk is conducted in a manner that is appropriate to the

content of business operations as well as the scale and type of risk involved. At the

same time, the Company has formed the Risk Management Committee (chaired by

a Director and Deputy President in charge of risk management, with the Head of

the Global Risk Management Group as deputy chair) as a committee at which

important matters pertaining to risk management are examined and consulted

upon, and the Committee conducts comprehensive risk management.

Risk monitoring systems and other aspects of risk management are as follows:

The Global Risk Management Group’s Risk Management Department and Credit

Management Department, which are both independent from front-offi ce func-

tions, are responsible for market risk and credit risk. Their activities include gauging

the magnitude of risk and monitoring activities in the Company’s operations,

including overseas offi ces. At the same time, they conduct analysis of risks from a

variety of different perspectives. Especially in the case of credit and market risk

associated with securitization products that are relatively complex and are generally

traded in limited volumes in secondary markets, risk management measures are

executed by the Risk Management Department and the Credit Management

Department. With respect to funding liquidity risk, the Risk Management

Department and the Treasury Department sustain a controlling posture regarding

operational management and administration while collaboratively conducting daily

monitoring operations with the goal of governing and maintaining a proper bal-

ance between sources and uses of funds.

The Company has also put into place frameworks that support management

decision making on the development and creation of business opportunities from

the viewpoint of controlling risks through the allocation of risk capital to each

internal business group with the objective of securing an allocation of manage-

ment resources that is appropriate to the risks involved in their business activities.

A separate set of guidelines—the “Mizuho Securities Group Risk Control

Guiding Principles”—has been established for overseas offi ces in order to ensure

comprehensive risk management in accordance with this basic risk management

policy and framework throughout the Companies as a whole and these are thor-

oughly applied.

(1) Credit risk management

(Issuer and counterparty risk)

The Companies defi ne credit risk as their exposure to the risk of losses that may be

incurred: (a) when the issuer of a security or other fi nancial instrument that they

hold, or a transactions counterparty with which they have a lending or borrowing

relationship becomes unable to meet its obligations as a result of bankruptcy or

other circumstances, or (b) when the possibility of such non-performance of obliga-

tions increases, resulting in a loss of the value of the assets.

To manage the risk associated with issuers of securities and other instruments

held in the Companies’ trading accounts, an upper limit is set on holdings of

instruments issued by a single issuer based on the amount of expected losses that

may arise in a “credit event,” such as a reduction in the credit rating of, or the

default of, the issuer. The holding volume is monitored on a daily basis to control

and prevent the excessive concentration of risk exposure in certain issuers. In

addition, those issuers for which the judgment is made to treat with caution from

a credit risk perspective are subject to a “credit watch” and managed on an indi-

vidual basis.

Risk related to transaction partners arises when claims (involving the cost of repli-

cating the transaction) occur as a result of fl uctuations in the price of assets

involved in transactions and when the credit standing of the counterparty deterio-

rates. Therefore, credit limits are established based on the creditworthiness of the

counterparty, and the amount corresponding to credit exposure to each counter-

party is calculated on a daily basis. Risk is managed by confi rming compliance with

established credit limits and other means.

In determining the creditworthiness of counterparties, internal credit ratings are

assigned based on quantitative and qualitative analyses, and these ratings are

reviewed periodically.

The size of credit risk arising from issuer risk and counterparty risk for the port-

folio is measured on a daily basis using statistical methods. Based on these

results, reports, including at overseas offi ces, are made to the management on a

periodic basis.

Moreover, the Company and its subsidiaries perform the principal activities relat-

ed to the investment business using the capital of the Group by making invest-

ments through their own accounts in assets such as private equity funds, real

estate-backed fi nancial products, the stocks of unlisted companies, etc. for which

the invested principal is not guaranteed.

To manage the risk associated with these investments, the Investment

Examination Committee, chaired by a Director and Deputy President appointed by

the President, and the Investment Risk Assessment Sub-committee consisting of

personnel engaged in actual business are responsible for thoroughly examining the

existence of risk and monitoring risk after implementation of investments, principal

members of which are from the Credit Management Department that functions as

the offi ce of the activities. In addition, they control the size of loss in case of real-

ization of the risk by establishing the upper limit of investment for the principal as

a whole and for each investment category, and report the results of monitoring

periodically to the management.


(2) Market risk management

The Companies defi ne market risk as the risk of losses they may incur due to the

impact of fl uctuations of interest rates, stock prices, and foreign exchange rates on

the values of the securities they hold and the derivative transactions in which they

are counterparties. In addition, when managing market risk, the Companies

include the risk of losses incurred in the event that it becomes impossible to exe-

cute transactions in the market because of market turmoil as well as losses arising

from transactions forced to be made at prices signifi cantly less favorable than usual

(market liquidity risk).

To manage market risk, the Companies allocate a specifi ed amount of risk capital

to units engaged in market trading, including overseas offi ces, and set an upper

limit on exposure based on allocated capital as well as loss-cutting limits. These

position limits are monitored on a daily basis. The volume of market risk is mea-

sured using the value-at-risk (VAR) method, and sensitivities to various market fac-

tors and other risk indicators are measured and monitored on a daily basis. In

addition, they work to fully comprehend risk conditions during “event risk” (result-

ing from extreme market fl uctuations and other developments that cannot be fully

captured through the VAR approach) and sudden declines in prices resulting from

lower market liquidity through the use of periodic stress tests.

With regard to its VAR model, the Company has received approval from the

Japanese Financial Services Agency to adopt the internal management model

method, and this model is employed in the calculation of the capital adequacy

ratio.

The qualitative information about market risk is as follows:

i. Trading business

The table below shows the status of market risk by measuring VAR for the

Companies trading businesses for the year ended March 31, 2011.

VAR in trading business

Fiscal 2010(From April 1, 2010 to March 31, 2011)

Billions of yen Thousands of U.S. dollars

At end of period .................................................. ¥3.1 $37,282Maximum ............................................................ 3.7 44,497Minimum ............................................................. 1.9 22,850Average ............................................................... 2.6 31,268

For some securities held by overseas subsidiaries whose market liquidity declined,

the Company has carried out risk management based on the maximum loss

expected when any stress event similar to the Lehman Shock occurs instead of the

VAR method. Such maximum loss expected determined for the purpose of risk

management for the fi rst half of the year ending March 31, 2012 is ¥11.7 billion

($140,709 thousand).

[Defi nition of trading business]

(1) Trading conducted for the purpose of resale on a short-term basis;

(2) Trading conducted for the purpose of benefi ting from changes of fair values or

differences among markets;

(3) Trading having the features of (1) and (2) above; and

(4) Trading conducted for trading agency businesses among customers or through

market making

[Measurement of VAR of trading business]

Linear risk: Variance co-variance model (one-year observation period)

Non-linear risk: Historical simulation model (two-year observation period)

VAR: Simple aggregation of linear risk and non-linear risk

Quantitative criteria: 1) Confi dence interval: one-sided 99%; 2) Holding period:

one day

ii. Strategic equity holding

For strategic equity holdings, the Company has developed an outstanding holding

reduction plan and striven to curtail the outstanding balances and manage market

risk based on risk indicators. The risk indicator (sensitivity to a 1 percentage point

change in the TOPIX index) for such shares held as of March 31, 2011 is the market

value of ¥0.2 billion ($2,405 thousand).

iii. Non-trading business

The Company holds some fi nancial instruments with fair value in non-trading busi-

nesses. As these instruments are exposed to price fl uctuation risk, the Company

manages non-trading business risk by setting a position line for the non-trading

business and mitigates this type of risk by allocating risk capital in proportion to the

risk characteristics.

iv. Risk management through the VAR method

VAR represents maximum possible loss to be incurred for a portfolio held for a cer-

tain period (holding period) and a certain probability (confi dence interval) arising

from the movements of a market. Functionally speaking, VAR is a market risk mea-

surement approach based on the statistical assumptions. Therefore, the following

should be noted in using VAR.

– Values of VAR vary according to the holding period and confi dence interval set,

and the methods for measuring the holding period and confi dence interval;

– VAR estimated based on the historical experiences of markets may not always

derive actual maximum losses;

– VAR represents maximum loss when the Company continues to hold the portfo-

lio for the predetermined period. If liquidity is insuffi cient because of market tur-

moil or other events, the inability to sell a portfolio or hedge a transaction may

result in a loss in excess of the VAR; and

– Potential loss is not identifi ed if the probability of a loss is above a predetermined

confi dence interval.

With respect to the variance co-variance model used for measuring VAR by the

Company, it is assumed that market fl uctuations take place according to a normal

distribution. As such, in any circumstances where extreme market fl uctuations

beyond the assumption are likely, it may be possible that the risk is undervalued.

The assumption is that interest rate and stock price increases generally take place

at the same time. The risk may also be undervalued whenever this normal correla-

tion fails.

The Companies periodically verify the effectiveness of the measurement of mar-

ket risk by VAR by applying back testing procedures where VAR is compared with

gains and losses. The Companies also carry out stress tests periodically based on

various stress scenarios to identify any risk not grasped by VAR.

(3) Securitization product risk management

The Companies defi ne securitized product risk as the risk of deterioration in their

fi nancial position due to losses they may incur owing to a decline in the asset prices

of the securitization products they hold. In addition, securitization product risk also

includes the legal, reputational, and other risks that may be incurred as a result of

failing to provide appropriate disclosure regarding securitized products sold by the

Company to investors.

To manage securitization product risk, the Company calls on a number of units

responsible for risk management to conduct screenings from a variety of different

perspectives of individual securitization products originated by the Company or by

other parties, to assess the risk to its portfolio and ensure investment protection.

In addition, the Company monitors the market value of such products on a daily

basis to substantially improve the precision of methods for assessing the market

value of its holdings of securitization products, and, at the same time, to establish

an upper limit on the holding of such securities.

(4) Funding liquidity risk management

Funding liquidity risk is the risk of losses arising from funding diffi culties due to

deterioration in fi nancial position that makes it diffi cult for the Company to raise

the necessary funds or forces it to raise funds at signifi cantly higher interest rates

than usual.

The Company monitors its cash-in and cash-out positions, including at overseas

offi ces, on a daily, quantitative basis, and sets limits on the level of fund-raising by


Notes

source. In addition, restrictions are imposed at various levels and reports on liquidity

management are presented to top management on a periodic basis.

In addition to the above structural restrictions, the Company has also established

a set of guidelines aimed at understanding its cash-in and cash-out positions in

advance, and monitoring its liquidity positions on a daily basis.

d. Supplementary explanations of matters related to the fair value of fi nancial

instruments

Fair values of fi nancial instruments include values based on market prices and

values deemed as market prices obtained by the reasonable estimate when fi nan-

cial instruments have no market prices. Because certain fl uctuation and other fac-

tors are incorporated in calculating these values, they may differ when different

assumptions are adopted. Meanwhile, for any notional amount relating to deriva-

tive transaction, the value itself does not represent the market risk related to the

derivatives.

22. SUBSEQUENT EVENTSMizuho Financial Group, Inc. (“MHFG”), Mizuho Corporate Bank, Ltd. (“MHCB”),

and Mizuho Securities Co., Ltd. (“MHSC”) determined, at their respective meeting

of the board of directors held on April 28, 2011, to make MHSC a wholly-owned

subsidiary through a share exchange. The share exchange agreement was signed

by the parties on the same day.

Before the effective date of the share exchange, the common stock of MHSC

will be delisted from the Tokyo Stock Exchange, the Osaka Securities Exchange,

and the Nagoya Stock Exchange on August 29, 2011 (with the fi nal trading day

scheduled to be August 26, 2011).

(1) Name of company subject to share exchange; nature of business; effec-

tive date, legal framework and main purpose of the share exchange

1) Company to be made

wholly owned subsid-

iary via share exchange

Mizuho Securities

Financial Instruments Business

September 1, 2011 (planned)

In accordance with Article 767 of Japan’s Companies

Act, the share exchange will be conducted between

MHCB, which will become a wholly-owing parent,

and MHSC, which will become a wholly-owned sub-

sidiary of MHCB.

MHFG announced the Transformation Program as the

Medium-term Management Policy of Mizuho in May

2010, in order to respond promptly and appropriately

to the new business environment that surrounds

fi nancial institutions, including changes in economic

and social structures and revisions of international

fi nancial supervision and regulations after the global

fi nancial crisis. Mizuho has conducted a fundamen-

tal review of the management challenges it faces,

and the entire group is now implementing measures

to achieve sustainable growth through initiatives for

further enhancement of three areas, “profi tability,”

“fi nancial base” and “front-line business capabili-

ties,” while pursuing the group’s “customer first

policy”.

The transaction turning MHSC into a wholly

owned-subsidiary is intended to further enhance the

“group collective capabilities” by integrating group-

wide business operations, optimizing management

resources, such as workforces and branch networks,

and accelerating the implementation of the

2) Business

3) Effective date of share

exchange

4) Legal framework

5) Main purpose of share

exchange

Transformation Program. Specifi cally, the transaction

aims to (i) ensure a prompt decision-making process

and flexibility of strategies and establish a group

management structure that can respond with greater

flexibility to the changes in the external business

environment and challenges of the group as a whole

as well as of each group company, (ii) further

enhance Mizuho’s comprehensive fi nancial services

capabilities, which are Mizuho’s strengths, and rein-

force group collaboration that provides seamless full-

line services that include banking, trust and securities

functions, and (iii) pursue improvement of group

management efficiency by thoroughly promoting

the consolidation of operations and the cost struc-

ture reforms.

(2) Share exchange ratio, calculation method, number of shares to be

delivered

1) Share exchange ratio

Company

MHFG(holding company and sole parent company of MHCB)

MHSC(comwpany becoming a

wholly-owned subsidiary)

Share exchange ratio breakdown 1 1.48

2) Calculation method

MHFG, MHCB, and MHSC have determined on the above share exchange ratio at

their respective meetings of the board of directors held on April 28, 2011. The ratio

takes into consideration the results of analyses of the share exchange ratio provid-

ed by Merrill Lynch Japan Securities Co., Ltd., and JP Morgan Securities Japan Co.,

Ltd., and is the result of negotiations and consultations among the parties that

considered the fi nancial conditions, earnings trends, and share price trends of

MHFG and MHSC. Due consideration was also given to the interests of sharehold-

ers of MHFG and MHSC.

3) Number of shares to be transferred

Common shares of MHFG: 958,035,295 shares (subject to change)

23. BUSINESS COMBINATIONOn May 7, 2009, the Company merged with the former Mizuho Securities Co.,

Ltd., following Basic Merger Agreement signed on April 28, 2008 and Merger

Agreement signed on March 4, 2009. As a member of the Mizuho Financial

Group, the Company determined that it is necessary to leverage the Company’s

strength as a securities arm of a banking institution, to become more competitive

in a market where there is now greater uncertainty, to improve its service provid-

ing-capabilities to its clients and furthermore to reestablish its business to enable it

to offer competitive cutting-edge fi nancial services on a global basis.

1. Outline of the merger

a. Acquired company: The Company

b. Business type: Financial Instruments Business

c. Date of the business combination: May 7, 2009

d. Legal form of the business combination:

The Company is the surviving entity, and the former Mizuho Securities Co., Ltd.

is the dissolving entity.

e. Name of the company after the business combination: Mizuho Securities Co.,

Ltd.

f. Merger ratio: Common stock 1: 122

g. Calculation method of merger ratio:

In calculating the merger ratio, the Company and the former Mizuho Securities

Co., Ltd. appointed third-party appraisers respectively for the sake of fairness.

Both parties concluded the above merger ratio is appropriate, considering the

valuations of respective appraisers, fi nancial condition and asset situation of

each party, and other factors in a comprehensive manner.


h. Number of new shares issued: Common stock: 815,570,000 shares

i. Grounds of determination of the acquiring company:

As Mizuho Corporate Bank, Ltd., a shareholder of the former Mizuho Securities

Co., Ltd. which was the legal dissolving entity, holds over half of the new compa-

ny’s voting rights as a result of the Merger, the former Mizuho Securities Co.,

Ltd., was considered to be the acquiring company and the Company was the

acquired company under the Accounting Standards for Business Combinations.

2. Period of the acquired company’s result included in the consolidated

fi nancial statements

From May 7, 2009 to March 31, 2010

3. Acquisition cost and its breakdown of the acquired company

Consideration for acquisition:

Common stock of the former Mizuho Securities Co., Ltd ¥181,658 million

Expenses directly attributable to the combination:

Advisory fees and others ¥118 million

Total Acquisition cost: ¥181,777 million

4. Negative goodwill

a. Amount of negative goodwill recognized: ¥110,219 million

b. Cause:

The fair value of the Company’s net assets at the time of merger exceeded the

acquisition cost, and the difference was recognized as negative goodwill in the

consolidated fi nancial statements.

c. Accounting method:

Recorded as income for the fi scal year in which the negative goodwill is recognized,

with early adoption of “Accounting Standard for Business Combinations” (ASBJ

Statement No. 21, December 26, 2008).

5. Amount allocated to intangible fi xed assets other than goodwill, break-

down by major type, and weighted-average amortization period in total

and by major type

a. Amount allocated to intangible fi xed assets: ¥73,949 million

b. Breakdown by major type:

Customer-Related Assets: ¥73,949 million

c. Weighted-average amortization period in total and by major type:

Customer related assets 16 years

6. Approximate impact on consolidated statement of operations for the

year assuming the business combination had completed at the beginning

of the year. (Unaudited)

Operating revenues ¥8,670 million

Operating loss ¥966 million

Ordinary loss ¥174 million

Loss before income taxes ¥172 million

Net loss ¥465 million

Net loss per share ¥0.29

The above approximate fi gures represent consolidated results for the period from

the beginning of the year to the business combination date because it was deemed

to be a reverse acquisition and as such it should not be construed to represent con-

solidated results assuming the business combination had completed at the begin-

ning of the year.

Notes

OTHER INFORMATION (UNAUDITED)The following schedule presents a summary of quarterly consolidated operating

results for the year ended March 31, 2011.

Millions of yen

Quarter ended Quarter ended Quarter ended Quarter ended June 30, September 30, December 31, March 31, 2010 2010 2010 2011

Revenues ............................. ¥71,165 ¥91,978 ¥62,758 ¥42,694Income (loss) before income taxes and minority interests ............... 1,278 9,816 (9,518) (38,530)

Net income (loss) ................. 470 5,926 (6,829) (28,880)

Net income (loss) per share (¥) ...................... 0.30 3.73 (4.30) (18.18)


Quarter ended Quarter ended Quarter ended Quarter ended June 30, September 30, December 31, March 31, 2010 2010 2010 2011

Revenues ............................. $855,862 $1,106,169 $754,756 $513,457Income (loss) before income taxes and minority interests ............... 15,369 118,051 (114,467) (463,379)

Net income (loss) ................. 5,652 71,268 (82,128) (347,324)

Net income (loss) per share ($) ...................... 0.003 0.044 (0.051) (0.218)


Report of Independent Auditors


Financial Section421 5,952 113,301 Payments for purchases of investment securities ..... (5,330) (13,521) (64,101) Proceeds from sales and redemptions of investment securities .....

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