A n n u a l R e p o r t 2 0 0 4 N o m u r a H o d n g s , i l I n c . ア ニ ュ ア ル レ ポ ー ト 2 0 0 4 野 村 ホ ー ル デ ィ ン グ ス 株 式 会 社 Profile Nomura Holdings, Inc. (NHI) and its domestic and overseas subsidiaries, includ- ing Nomura Securities Co., Ltd., and Nomura Asset Management Co., Ltd., con- duct comprehensive business management as Nomura Group under a unified strat- egy, with NHI acting as the holding company. Aiming to carve out a solid position as a globally competitive Japanese financial services group, Nomura Group makes use of its strong domestic and overseas cus- tomer base and its global network spanning 28 countries to develop its businesses in securities and related fields. Nomura Group is engaged in a wide range of business activities, including invest- ment consultation services for domestic retail investors, securities brokerage services, underwriting of stocks and bonds issued by domestic and foreign governments and corporations, M&A and financial advisory services, merchant banking business, asset management including management of investment trusts and pensions, defined contribution pension business and investor education. As a group, we aim to combine our powers to offer competitive products, high- value-added services and advice, to contribute to the sustainable development of the Japanese economy. Contents Our Founder’s Principles Consolidated Financial Highlights To Our Shareholders and Customers Message from the COO Japan’s Securities Markets Have Entered a New Growth Phase Business Outline Business Portfolio Domestic Retail Global Wholesale Asset Management Research Nomura Group Corporate Governance Compliance Nomura Group’s Contribution to Society Research and Policy Pronouncements Directors and Executive Officers Subsidiaries and Affiliates Domestic Network Financial Section Corporate Data / Share Data 1 2 4 8 9 13 14 16 24 32 38 41 42 46 48 52 53 54 57 59 67 Tokushichi Nomura Our Founder’s Principles The words of wisdom of the founder, Tokushichi Nomura, were con- densed into ten business principles that guide our day-to-day business activities. While remaining true to the principles set out at our founding, we have been evolving dynamically in response to changes in the busi- ness environment. 1． Nomura’s raison d’eˆtre “Nomura’s mission is to enrich the nation through the securities business. This is something we must absolutely see through.” Empirical Research on Investment Trusts, compiled by Nomura Securities Research Department 2． Principle of putting the customer first “We must place our customers’ interests before our own.” 100th edition of Osaka Nomura Business News 3． Global ambition “Nomura is destined to become an active player on the international stage.” “Looking Back at My Life,” by Tsunao Okumura 4． Emphasis on rigorous research and analysis “We have a duty to research scientifically the intrinsic nature of all securities.” 5． Staying one step ahead “Always strive to stay one step ahead. Stagnation is retrogressive.” Autobiography ‘Tsutakatsura’ Biography ‘Nomura Tokuanden’ 6． Entrepreneurial spirit “If, as an entrepreneur, you can determine something to a 70% certitude, you must have the courage to take up the challenge even though some uncertainty remains.” Capital Market Research 7． Human resources “Nomura underscores the fact that the development of human resources, acquisition of talented personnel and ability to match the right talent with the most appropriate position are more formi- dable assets than sheer capital strength.” Autobiography ‘Tsutakatsura’ 8． Emphasis on team work “It is the management’s task to see that Nomura employees take responsibility and pride in their work and to form a unified team under the control of branch office managers.” Autobiography ‘Tsutakatsura’ 9． Business development frame of mind “We must have the courage to boldly follow the path of our convictions.” 10． Customer service mindset “If you conduct your work in a mechanical manner, believing simply that your role is over once the deal is done, there is no use in drawing on the strengths of those around you.” Autobiography ‘Tsutakatsura’ Autobiography ‘Tsutakatsura’ Nomura Holdings, Inc. Annual Report 2004 | 1 Consolidated Financial Highlights (U.S. GAAP) Operating Results: Millions of yen Millions of U.S. dollars 2000 2001 2002 2003 2004 2004(4) (1999.4.1〜 2000.3.31) (2000.4.1〜 2001.3.31) (2001.4.1〜 2002.3.31) (2002.4.1〜 2003.3.31) (2003.4.1〜 2004.3.31) (2003.4.1〜 2004.3.31) Revenue: Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fees from investment banking . . . . . . . . . . . . . . . . . Asset management and portfolio service fees . . . . . . . Net gain on trading . . . . . . . . . . . . . . . . . . . . . . . . . Interest and dividends . . . . . . . . . . . . . . . . . . . . . . . (Loss) gain on investments in equity securities . . . . . Gain from changes in equity of an affiliated company . . . . . . . . . . . . . . . . . . . PFG entities product sales . . . . . . . . . . . . . . . . . . . . PFG entities rental income . . . . . . . . . . . . . . . . . . . Gain on sales of PFG entities . . . . . . . . . . . . . . . . . . Gain (loss) on private equity investments . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-interest expenses . . . . . . . . . . . . . . . . . . . . . . . . Income before income taxes and ¥329,332 93,644 63,799 253,328 419,742 90,839 — 56,476 144,005 — — 48,616 1,499,781 437,131 1,062,650 690,430 ¥189,841 87,160 144,882 307,989 518,941 (98,968) — 117,523 103,339 — — 98,591 1,469,298 553,643 915,655 759,483 ¥140,001 75,255 109,985 162,228 500,541 (55,860) 3,504 294,931 177,053 116,324 232,472 68,965 1,825,399 504,048 1,321,351 1,148,379 ¥141,640 81,847 79,290 172,308 401,924 (41,288) — — — — (14,391) 19,589 840,919 274,645 566,274 518,865 ¥210,216 86,994 66,193 229,042 396,870 55,888 — — — — 13,138 41,205 1,099,546 296,443 803,103 520,427 cumulative effect of accounting change . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 372,220 203,549 156,172 57,410 172,972 168,046 47,409 119,913 282,676 172,329 $2,018 835 635 2,199 3,809 536 — — — — 126 396 10,554 2,845 7,709 4,996 2,713 1,654 Balance Sheet Data (period end): Shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥1,410,976 14,610,868 ¥1,436,428 17,146,024 ¥1,604,929 17,758,273 ¥1,642,328 21,169,446 ¥1,785,688 29,752,966 $17,140 285,592 Return on equity (ROE)(1) . . . . . . . . . . . . . . . . . . . . . 15.3% 4.0% 11.1% 7.4% 10.1% Per Share Data: Net income–Basic(2) . . . . . . . . . . . . . . . . . . . . . . . . . . Shareholders’ equity(3) . . . . . . . . . . . . . . . . . . . . . . . . Cash dividends(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥103.71 719.93 15.00 ¥29.25 731.77 17.50 Yen ¥85.57 816.48 15.00 ¥61.26 846.40 15.00 ¥88.82 919.67 15.00 U.S. dollars $0.85 8.83 0.14 Notes: (1) Calculated by dividing net income by average shareholders’ equity. (2) Calculated using the weighted average number of shares outstanding for the year (excluding treasury shares held by us). (3) Calculated using the number of shares outstanding (excluding treasury shares held by us) at year end. (4) Calculated using the yen-dollar exchange rate of U.S.$1.00=¥104.18, the noon buying rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York on March 31, 2004. 2 | Nomura Holdings, Inc. Annual Report 2004 Net revenue and Income before income taxes and cumulative effect of accounting change (Billions of yen) 1,500 1,000 500 0 00/3 01/3 02/3 03/3 04/3 (FY) Net revenue Income before income taxes and cumulative effect of accounting change Divisional Operating Results: Domestic Retail: Net income and Return on equity (ROE) Shareholders’ equity (Billions of yen) 250 200 150 100 50 0 00/3 01/3 02/3 03/3 04/3 (%) 25 20 15 10 5 0 (FY) (Billions of yen) 2,000 1,500 1,000 500 0 00/3 01/3 02/3 03/3 04/3 (FY) Net income (left) Return on equity (ROE) (right) Shareholders’ equity Millions of yen Millions of U.S. dollars 2000 2001 2002 2003 2004 2004 (1999.4.1〜 2000.3.31) (2000.4.1〜 2001.3.31) (2001.4.1〜 2002.3.31) (2002.4.1〜 2003.3.31) (2003.4.1〜 2004.3.31) (2003.4.1〜 2004.3.31) Non-interest revenues . . . . . . . . . . . . . . . . . . . . . ¥375,276 ¥260,193 ¥226,156 ¥246,938 ¥304,035 $2,919 Net interest revenue . . . . . . . . . . . . . . . . . . . . . . . 5,309 Net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 380,585 Non-interest expenses . . . . . . . . . . . . . . . . . . . . . 194,345 Income (loss) before income taxes . . . . . . . . . . . . 186,240 6,236 266,429 215,638 50,791 2,949 229,105 208,621 20,484 2,313 249,251 213,562 35,689 1,722 305,757 226,213 79,544 16 2,935 2,171 764 Global Wholesale: Non-interest revenues . . . . . . . . . . . . . . . . . . . . . ¥404,947 ¥487,644 ¥385,430 ¥196,675 ¥290,845 $2,792 Net interest revenue . . . . . . . . . . . . . . . . . . . . . . . (3,488) (24,839) Net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 401,459 Non-interest expenses . . . . . . . . . . . . . . . . . . . . . 198,117 Income (loss) before income taxes . . . . . . . . . . . . 203,342 462,805 210,062 252,743 54,505 439,935 248,657 191,278 101,794 298,469 207,436 91,033 74,891 365,736 227,227 138,509 719 3,511 2,182 1,329 Asset Management: Non-interest revenues . . . . . . . . . . . . . . . . . . . . . ¥2,154 ¥58,237 ¥46,840 ¥34,828 ¥34,300 $329 Net interest revenue . . . . . . . . . . . . . . . . . . . . . . . Net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-interest expenses . . . . . . . . . . . . . . . . . . . . . 432 2,586 2,751 Income (loss) before income taxes . . . . . . . . . . . . (165) 1,810 60,047 39,537 20,510 367 47,207 37,031 10,176 2,232 37,060 33,866 3,194 1,657 35,957 37,004 (1,047) 16 345 355 (10) * The results of the fiscal year ended March 31, 2000 does not include those of Nomura Asset Management, because it was consolidated effective March 31, 2000. Japanese Stock Market Data 2000 2001 2002 2003 2004 TOPIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,705.94 1,277.27 1,060.19 788.00 1,179.23 Year-on-Year increase (decrease) . . . . . . . . . . . . . . . . . 34.6% (25.1%) (17.0%) (25.7%) 49.6% Nikkei225 (Nikkei Stock Average) . . . . . . . . . . . . . . . 20,337.32 12,999.70 11,024.94 7,972.71 11,715.39 Year-on-Year increase (decrease) . . . . . . . . . . . . . . . . . 28.4% (36.1%) (15.2%) (27.7%) 46.9% Tokyo Stock Exchange 1st Section Data Trading Volume (Millions of shares) . . . . . . . . . . . . 163,675 167,734 206,250 209,720 344,367 Trading Value (Billions of yen) . . . . . . . . . . . . . . . . ¥228,311 ¥212,993 ¥199,046 ¥179,346 ¥284,034 Nomura Holdings, Inc. Annual Report 2004 | 3 Nobuyuki Koga President & CEO To Our Shareholders and Customers Japan’s economy is moving beyond the stage where its recovery was the subject of skeptical debate and into a phase of sustainable growth. For Nomura Group, this offers an unprecedented array of business opportuni- ties. By bridging corporations undergoing continuous restructuring with individuals shifting their financial assets to risk assets, Nomura Holdings, Inc. (NHI), is advancing toward the realization of its group management goal, which is to become a globally competitive Japanese financial servic- es group. Business environment and results For two consecutive years, Japan’s real GDP growth rate has exceeded 2%. One year ago, the Japanese economy stood at the crossroads of recovery and a slowdown in momentum, but now our view is that it has entered a phase of sustainable growth. The main forces fueling this growth are the recovery in the global economy, particularly in Asia, the progress in corporate restructuring, and the shift of individual financial assets to risk assets. The macroeconomy is gaining further strength through the recent increase in private capital investment in tandem with the expansion of exports. At the same time, the process of corporate restructuring itself has entered a new and different phase. Defensive restructuring moves such as personnel reductions and with- drawals from unprofitable lines of business have helped to improve profitability at many corporations. These corporations are now focusing management resources on making a transition to progressive restructuring, entering business- es where they are truly competitive and have strong future prospects. Until recently, individuals in Japan have shown a strong tendency to keep their financial assets in cash and bank deposits, but we are beginning to discern a trend toward shifting these assets to risk assets. This is evident from the increase in the stockholding ratio of individual investors and the growth in the outstanding balances of stock investment trusts. Tax reforms have also been encouraging this trend. For example, last year, while only a temporary measure, the tax rate on capital gains on and dividends of listed stocks was lowered. In January 2004, the tax rate on dividends of public stock investment trusts 4 | Nomura Holdings, Inc. Annual Report 2004 was also reduced. In addition, individuals are examining a wide variety of invest- ment opportunities and shifting their assets to seek the right balance of risk and return. Such investment behavior is manifest in the steady increase in popularity of foreign currency bonds. Responding to these changes in our business environment, through the capi- tal markets we have been able to offer our customers various solutions and investment opportunities, expanding and stabilizing our own profit opportuni- ties in the process by flexibly changing our revenue sources. As a result, under accounting principles generally accepted in the United States (U.S. GAAP), for the fiscal year ended March 2004, NHI posted consolidated net revenue of ¥803.1 billion, up 42% from a year earlier, and income before income taxes of ¥282.7 billion, up 496%. Net income was ¥172.3 billion, up 44% compared with the previous fiscal year. If the cumulative effect of account- ing changes were excluded, however, the gain would be 1,604%. Shareholders’ equity increased to ¥1.8 trillion as of the end of March 2004 from ¥1.6 trillion a year earlier, and return on equity (ROE) rose to 10.1% from 7.4%. Broken down by division, Domestic Retail posted income before income taxes of ¥79.5 billion, an increase of 123% from a year earlier. This division, which handles a wide variety of products, including stocks, investment trusts, foreign currency bonds and Japanese government bonds (JGBs) for individual investors, has now increased its client assets to a level exceeding the previous peak during the bubble era, and it has also greatly expanded its customer base. In Global Wholesale, income before income taxes totaled ¥138.5 billion. We captured the largest market share of initial public offerings (IPOs), public offer- ings, convertible bonds (CBs) and euro-yen bonds demonstrating the powerful synergy of our global network and solid customer base. Asset Management posted a loss of ¥1.0 billion due to a decline in asset man- agement fees and ¥2.8 billion in special charges related to Nomura Asset Management’s withdrawal from the Japan Securities Dealers Employees Pension Fund. However, Nomura Asset Management solidified the foundations of its busi- ness, as assets under management grew by ¥1.4 trillion, after hitting a trough at the end of March 2003. Nomura Holdings, Inc. Annual Report 2004 | 5 Group vision and divisional strategies that transcends organizational structures, and to promote our Nomura Group’s vision is to enhance its position as a globally Japan-focused globalization, that is, to use the Japanese market competitive Japanese financial services group. In quantitative as a pivot in the process of our global expansion. In terms of terms, we are aiming to secure an average ROE of 10-15% in our response to changing markets, to further strengthen the sig- the medium- to long-term. Amid the rapid changes in the eco- nificant experience we have already built up in securitization, nomic environment, we must successfully deal with three key asset finance and derivatives trading, we have started a new issues: broadening our client base, cooperating across division- business line, Global Markets, which has combined fixed al lines to draw upon our collective Group strengths, and income and equity trading functions along with syndicate func- responding as swiftly as possible to changes. tions. Similarly, in Nomura Securities’ Capital Market The goals of Domestic Retail are to broaden our customer Department, we have combined the stock and bond underwrit- base and to offer high-quality financial services. Our strategy to ing functions that were previously separated there. This will achieve this is to make further progress in our unique strategy help our efforts in securitization and asset finance as well as of “Core Value Formation.” To broaden our customer base, we strengthen our ability both to trade and to underwrite hybrid have long aimed to increase client assets. We have strengthened securities that share some of the characteristics of both stocks our consulting services in areas such as special accounts for and bonds, such as convertible bonds and preferred stocks. stocks, which have become popular as a result of securities tax Collaborations that transcend organizational structures will reform. We have also offered a wide variety of products, includ- synergize the integrated strength of our organization. Through ing foreign currency bonds and JGBs for individual investors. close cooperation between Domestic Retail and Global As a result, retail client assets grew to ¥35.2 trillion as of the Wholesale, we were able to achieve robust foreign currency end of March 2004, up 30% from ¥27.1 trillion a year earlier. bond sales of ¥2.0 trillion in the fiscal year ended March 2004. To provide high-quality financial services, we have long had a We also sold stocks to a wide variety of individual investors, system of specialized channels for each customer segment to including domestic public offerings aimed at helping corpora- accumulate expertise on how best to serve the needs of each tions expand their individual shareholder base, and China-relat- segment. In November 2003, we started the Hotto Direct ed offerings in Japan. In terms of progress with our Japan- Service Department, to serve asset builders. In April 2004, we focused globalization, we have been maximizing the strengths formed the Financial Management Division to serve wealthy of our global network, and we have commanded top shares in and affluent investors through a structure that transcends the underwriting secondary public offerings of Japanese blue-chip concepts of wholesale and retail. We have also enhanced our stocks, IPOs, CBs and euro-yen bonds. We have also acted as financial advisor (FA) capabilities. M&A advisor in several major deals. The goal of Global Wholesale is to play a key role in our The goals of Asset Management are to expand assets under plan to secure a position as a globally competitive financial serv- management in the asset management business overall and to ices group. Our strategies for achieving this are to respond expand our products and the number of client companies that appropriately to market changes, to encourage collaboration entrust us with administration and management in the defined 6 | Nomura Holdings, Inc. Annual Report 2004 contribution pension plan business. Our strategy is to strength- tomer base and, at the same time, strengthen cooperation en cooperation with other divisions to develop the full strength among our three divisions and bring the full power of Nomura of Nomura Group, to increase value-added in investment serv- Group to fruition. ices, to strengthen marketing, and to improve our consulting and investment education services. Nomura Asset Corporate governance system Management, the heart of the division, has been steadily At the June 2003 General Meeting of Shareholders, NHI and engaged in improving value-added in investment services. It has other domestic Group companies amended their articles of already taken many concrete policy steps, including integrating incorporation to adopt the Committee System. This change the investment decision-making process, establishing a team- had three aims: to separate execution and oversight functions, based management system, and widening its research coverage to transfer to executive officers the power to execute business with a strengthened pool of analysts. Looking forward, out- activities and to increase management transparency. standing issues in the improvement of value-added in invest- Under the Committee System, Junichi Ujiie serves as ment services include strengthening the process for continual Chairman of the Board of Directors of NHI and not as CEO. provision of added value in investment management and Outside directors form the majority of each committee, and enhancing our investment management capacity. At the same the Nomination Committee, Audit Committee and time, to strengthen its marketing efforts, Nomura Asset Compensation Committee are also headed by Board members Management has been updating its client service system and other than the CEO. The members of the Audit Committee strengthening its support structure for sales of existing fund all fulfill the requirements of independent directors as defined products, while working to develop new products that fulfill under the Sarbanes-Oxley Act of 2002. clients’ needs. As banks have been increasing their retail sales of investment trusts, we intend to expand our product lines and Nomura’s raison d’eˆ tre increase assets under management by leveraging our investment In my view, the role of Nomura Group is to help expand capi- expertise at NCRAM (Nomura Corporate Research & Asset tal markets by acting as a bridge between individual investors Management), Nomura BlackRock and elsewhere. With regard and Japanese corporations that are still in the process of restruc- to our defined contribution pension plan business, we aim to turing, and in so doing, to contribute to the sustainable devel- increase the number of client companies and expand our prod- opment of the Japanese economy. As Japanese corporations uct line by further increasing our competitiveness in consulting increasingly engage in proactive restructuring, the sustainable and investment education services, and promoting cooperation growth of the Japanese economy is dependent on making the between Asset Management and other divisions. financial assets of individuals, which are now largely held in Nomura Group’s mother market has been recovering rapid- cash and bank deposits, available to corporations as risk capital. ly. Given this environment, now is the time to strengthen our There is an increasingly important role for Nomura Group to Japan-focused global business and to increase our presence in act as a bridge between these two poles. I sincerely hope we global markets. To do this, we must further solidify our cus- may continue to rely on your help and support in this effort. Nobuyuki Koga President & Chief Executive Officer July 2004 Nomura Holdings, Inc. Annual Report 2004 | 7 Hiroshi Toda Deputy President & COO Message from the COO My role as COO (Chief Operating Officer) is to organically coordinate the business strategies of three divisions (Domestic Retail, Global Wholesale and Asset Management) with the efforts of Nomura Group to achieve its business goals. I have a strong feeling now that the tide is turning for the Japanese economy. Corporate earnings are beginning to show a full-fledged recovery, and factors negatively influencing supply and demand in the stock market, including the large-scale unwinding of cross-shareholdings, have mostly weakened. Japan’s stock market and other capital markets are starting to regain their true functions and appeal. In these circumstances, a great change may come about on both the supply side and the demand side of financing. For corporations, as borrowers, the funding needs for capital investment and corporate restructuring are grow- ing visibly. For investors, on the other hand, as providers of funds, due to recent market recovery, securities tax reform as well as the end of the full guarantee on bank deposits slated for April 2005, there are signs that individual investors’ financial assets will begin to flow strongly into the securities markets. My role as COO is to provide direction to ensure that the execution of the business strategies of our three divisions is closely coordinated with the business goals of Nomura Group as a whole. Our management goal of consolidating our position as a globally competitive Japanese financial services group will require a strengthening of the international position of Japan itself, as our mother mar- ket. In that sense, the current changes, which appear to be effective in the cre- ation of sustained growth in the Japanese economy, represent an enormous business opportunity for us in the capital markets, an area in which naturally we expect our involvement to grow. Cooperation among our three divisions can help to realize major synergies. By bringing the collective strengths of Nomura Group to fruition, we aspire to help create a virtuous cycle of sustainable growth both for ourselves at Nomura and for Japan. 8 | Nomura Holdings, Inc. Annual Report 2004 Japan’s Securities Markets Have Entered a New Growth Phase 1. Changes in the economic environment (1) Sustainable growth in the Japanese economy Sustainable Economic Growth in Japan In our view, Japan’s economy has entered a phase of sus- Economic Recovery Sustainable Economic Growth tainable growth. In the fiscal year ended March 2004, Japan’s GDP growth rate accelerated substantially to 3.2% from 1.2% the year before, for which exports and private capital investment were the main drivers. One major factor behind the growth in exports was China. Exports to China doubled between 2000 and 2003, becoming a new growth GDP Growth (%) 03/3 1.2 04/3 3.2 05/3 (f) 3.4 (FY) Key Drivers Recovery of Macroeconomy engine for external demand. Capital investment has Progress in Corporate Restructuring increased particularly in the field of digital products, where Shift of Individual Financial Assets to Risk Assets Japanese companies enjoy a comparative advantage. The Source: Nomura scope of the market in digital products, including DVD players, digital cameras, plasma TVs and LCD TVs, is growing rapidly on a global scale. Breakdown of Japanese Real GDP (QoQ % change, annualized) 12 10 8 6 4 2 0 -2 -4 -6 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2002 Private Consumption Exports (Gross) 2003 Private Capital Investment Other Components Private Inventory Real GDP 1Q 2004 (CY) Source: Nomura’ using Economic and Social Research Institute (ESRI), Cabinet Office, Government of Japan Nomura Holdings, Inc. Annual Report 2004 | 9 (2) Progress in corporate restructuring The number of publicly disclosed mergers and acquisitions between Japanese companies rose to 1,719 in 2003, more than five times the level of 1995. Particularly in M&A deals where both parties were Japanese, a large portion of these transactions were for the purpose of strengthening a compa- ny’s main line of business, whether through group restruc- turing or by strengthening an existing business area. Through restructuring, Japanese companies have been both strengthening their balance sheets and raising profitability. The Nomura Securities Financial & Economic Research Center estimates that in the fiscal year ending March 2005, ROE will rise to 8.9%, returning to a level last seen during the bubble era. Free cash flow turned negative in the fiscal year ended March 1990 and has been negative ever since, except for a brief period in the fiscal year ended March 2001 due to the so-called IT bubble. Now, however, for the second consec- utive year we are expecting to see record levels of positive cash flow since the 1980s. This demonstrates that compa- nies are beginning to generate for themselves the funds nec- essary for investment ahead of further growth, preparing basic financial conditions to create a virtuous financial cycle where corporate business activities are entering a sustain- able expansion phase. M&A Deals between Domestic Companies (Deals) 2,000 1,500 1,000 500 0 95 96 97 98 99 00 01 02 03 (CY) Entering new markets Group restructuring Strengthening existing business Other Note: Calculated on calendar year basis, excluding financials Source: Nomura, using newspaper and magazine data D/E Ratio & ROE (NOMURA400, excluding financials) (%) 200 180 160 140 120 100 15 10 5 0 105% 8.9% 80 85 90 95 00 04 (FY) D/E ratio (%) ROE (%) Source: Nomura (as of June 25, 2004) Free Cash Flow (NOMURA400, excluding financials) (Trillions of yen) (Trillions of yen) 30 25 20 15 10 5 0 -5 -10 -15 20 15 10 5 0 -5 -10 (FY) 80 85 90 95 00 03 (e) Cashflow （left: A） CAPEX （left: B） Free Cash Flow（right: A-B） Note: FY80–FY84: non-consolidated base; from FY85: consolidated base. Cashflow: Net income + depreciation costs CAPEX = Increase in tangible assets + depreciation costs (to FY99) = Announced (FY00–FY01) = Nikkei Company Database (FY02) = Nomura estimate (FY03) Source: Nomura 10 | Nomura Holdings, Inc. Annual Report 2004 2. Changes surrounding securities markets (1) Shift in individuals’ financial assets While the outlook for the macroeconomy and corporate profitability are bright, there are limitations on the supply of funds available to support growth momentum for corpo- rations as long as funding is overly dependent on banks, which has traditionally been the case. This will lead to ever greater demands and expectations of the capital markets. In other words, the key to sustainable economic growth in the near future lies in how much of the approximately ¥1,400 trillion in individual financial assets will contribute to cor- porate financing activities through the capital markets. Comparison of Individual Financial Assets, Japan and the U.S. Japan Total ¥1,410 trillion (2003.12) US Total US$32 trillion (2003.12) Investment Trusts Bonds Equities 2% 2% 7% Securities Assets Total 11% Investment Trusts 13% Bonds Equities 7% 32% Securities Assets Total 52% Insurance & Pensions 28% Cash & Deposits 56% Cash & Deposits 12% Insurance & Pensions 30% Source: Bank of Japan, Flow of Funds Accounts data, FRB “Flow of funds accounts of the United States” Comparing individual financial assets in Japan and the Stocks Held by Individual Investors U.S., we see that marketable securities make up 52% in the U.S. but only 11% in Japan. Still, there is a clearly visible shift emerging, and individual financial assets are starting to move from cash and deposits into risk assets. The ratio of individual investors who hold stocks had fallen quite steadily till it bottomed out at 18% in 1999. Although the increase is gradual, the recovery trend is certain. As for the shift of individual financial assets to risk assets, this can also be seen in individual holdings of foreign financial assets. At the end of December 2003, individuals’ holdings of foreign (%) 30 25 20 15 (Yen) 40,000 30,000 20,000 10,000 0 80 85 90 95 00 04 (FY) Nikkei Stock Average Ratio of Individual Investors who hold Stocks (Value base) * For the companies listed on either of the following stock exchanges: Tokyo, Osaka, Nagoya, Fukuoka, and Sapporo. securities and foreign currency deposits totaled ¥16.4 tril- Source: Nomura, using Tokyo Stock Exchange’s data lion, having tripled from the ¥5.4 trillion as of the end of Investments in Foreign Financial Assets by Individuals* (Trillions of yen) (Yen/US$) 1998. ¥16.4 trillion 20 15 10 5 0 ¥5.4 trillion 97 98 99 00 01 02 03 Investments in Foreign Financial Assets by Individuals Yen/US$ (right) * Total foreign currency deposits and foreign securities investments Source: Nomura, using Bank of Japan, Flow of Funds Accounts data 150 125 100 75 50 (CY) Nomura Holdings, Inc. Annual Report 2004 | 11 (2) Securities tax reform Tax breaks on stock investment trusts and other products Tax reform has also been progressing. In addition to divi- dends on stocks, from January 2004, while only for a limit- ed period, the tax rate for dividends on stock investment trusts has been lowered to 10%. From this we can see that the government is seriously trying to build infrastructure to use its tax policy to encourage individual financial assets to flow into the stock market. In addition to the tax incentives, April 2005 will mark the end of the full government guarantee on bank deposits, which is expected to help accelerate the shift of funds away from bank deposits and into other kinds of financial products. The role of securities firms, including Nomura Group, is becoming increasingly important in terms of acting as a cat- alyst to organically bridge these two trends—the recovery of corporate profitability and the shift of individual financial assets into risk assets—and in so doing, to build a large and sustainable virtuous cycle. • Tax rate for capital gains on listed stocks (Jan 1, 2003 – Dec 31, 2007) * Tax rate for annual capital gains lowered uniformly to 10% * Losses may be deferred up to three years by filing income tax returns • Tax rate for dividends of listed stocks (Apr 1, 2003 – Mar 31, 2008) * Uniform withholding tax of 10% regardless of dividend amount (no need for self-assessed taxation) 20％ 10％ 20％ 10％ • Tax rate on dividends of public stock investment trusts (Jan 1, 2004 – Mar 31, 2008) 20％ 10％ * Uniform withholding tax of 10% regardless of dividend amount (no need for self-assessed taxation) * From 2004, capital gains may be netted against capital gains on stocks by filing income tax returns Capital gains on listed stocks Jan. 2003 10％ tax break Jan. 2008 20% Dividends of listed stocks Apr. 2003 Apr. 2008 10％ tax break (withholding tax) 20% No need for self-assessed taxation regardless of amount Dividends of public stock investment trusts Jan. 2004 Apr. 2008 10％ tax break (withholding tax) 20% No need for self-assessed taxation regardless of amount Capital gains may be netted against capital gains on stocks Note: The integration of interest tax is also being discussed by the Government Tax Commission (June 15, 2004), an advisory body to the Prime Minister. The discussion on the integration of interest tax also includes tax on the savings and deposit interest. 12 | Nomura Holdings, Inc. Annual Report 2004 Business Outline Contents Business Portfolio Domestic Retail Global Wholesale Asset Management Research 14 16 24 32 38 Nomura Holdings, Inc. Annual Report 2004 | 13 Business Portfolio Nomura Group’s business portfolio is made up of Domestic Retail, Global Wholesale and Asset Management divi- sions. The strength of Nomura Group is in tapping its collective strength based on the high level of expertise in each division. Domestic Retail is responsible for meeting customers’ diverse investment needs through precise and accu- rately targeted consultations, and for supplying the products needed. Global Wholesale works with domestic and for- eign governments and companies, offering a wide range of financial solutions. Asset Management boasts sophisti- cated product development and asset management capabilities. Nomura has established its strong presence in mar- kets in Japan and abroad through collaboration among these three divisions. Domestic Retail Domestic Retail develops our investment consultation services by accurately grasping the nature of the funds available to invest, risk tolerance and cus- tomers’ lifestyles, analyzing the market environment and economic situation, and offering sound advice on asset-building over the long term. In addition, we are ready to recommend appropriate products and assemble a portfolio quickly from a variety of products including stocks, bonds, investment trusts and variable-annuity pension insurance, based on the values that each of our customers prizes most highly in his or her financial asset management. Global Wholesale Global Wholesale is made up of three business lines: Global Markets, Investment Banking and Merchant Banking. The umbrella concept of Global Markets provides a wide range of market capabilities, including fixed- income (bonds and others) and equities (stocks and others), as well as hybrid products and derivatives. By using this unique and flexible system, as well as our global network that extends to 28 countries, we offer a wide range of financial solutions through capital markets, including sales and trading oper- ations, underwriting, M&A and financial advisory and merchant banking. Asset Management Domestic Retail (Millions of yen) 80,000 60,000 40,000 20,000 0 1Q 3Q 2Q FY03/3 Net revenue 4Q Global Wholesale (Millions of yen) 120,000 80,000 40,000 0 1Q 2Q 3Q FY03/3 Net revenue 4Q Asset Management (Millions of yen) 1Q 3Q 2Q FY04/3 Income before income taxes 4Q 1Q 3Q 2Q FY04/3 Income before income taxes 4Q Asset Management supplies a diverse range of investment trust products and 12,000 investment advisory services to our clients, such as pension funds, leveraging our asset management and product development strengths derived from our global research and leading-edge financial technology. We also provide a comprehensive service in the field of defined contribution pension plans, ranging from support for system introduction to product supply. 8,000 4,000 0 -4,000 14 | Nomura Holdings, Inc. Annual Report 2004 1Q 3Q 2Q FY03/3 Net revenue 4Q 1Q 2Q 3Q FY04/3 Income before income taxes 4Q Market shares (April 2003~March 2004) Primary Market Share Data Japanese IPO* Japanese PO* CB* 27% 33% 28% Nomura Others Nomura Others Nomura Others Japanese Straight Bonds* Euro-Yen Bonds* JGBs for individual investors (Total 1st to 6th issue)** 19% 31% 29% Nomura Others Nomura Others Sources: * Thomson Financial Bookrunner League Tables (Value Base) ** Nomura (Value Base) Nomura Others Secondary Market Share Data Individual Equity Agency Transactions Off-floor/Off-exchange Equity Trading Secondary Bond Trading 10% 16% 16% Nomura Others Sources:Nomura (Value Base) Nomura Others Nomura Others Nomura Holdings, Inc. Annual Report 2004 | 15 Domestic Retail Kenichi Watanabe Senior Managing Director Head of Domestic Retail Domestic Retail promotes our basic strategy, known as “Core Value Formation,” giving the most appropriate advice and offering optimal products based on the market environment and the economic situation taking into account cus- tomers’ core values, having evaluated the nature of funds available to invest, risk tolerance and lifestyle. Business Results The number of stock-holding accounts grew to 1.4 million, In the fiscal year ended March 2004, Domestic Retail a rise of 67,000 from the year before. earned net revenue of ¥305.8 billion, up 23% from ¥249.3 By offering a variety of products in this way, based on billion the year before. Income before income taxes customers’ core values, we were able to record client assets, increased 123%, to ¥79.5 billion from ¥35.7 billion. Both including those from regional financial institutions, totaling stock brokerage commissions and investment trust distribu- ¥40.8 trillion as of the end of March 2004, up 30% from a tion fees recovered, and the placement and distribution of year earlier, surpassing the peak levels of the bubble era of foreign currency bonds and Japanese government bonds the late 1980s. (JGBs) for individual investors were also strong. Individual investors’ interest in these bonds was particularly strong, and we captured the largest distribution share of the No. 4 through No. 6 JGB issues, which were particularly large. Domestic Retail Division Business Results 2000 2001 2002 2003 2004 Years ended March 31 Domestic Retail: Non-interest revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥375,276 ¥260,193 ¥226,156 ¥246,938 ¥304,035 Net interest revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,309 Net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 380,585 Non-interest expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194,345 Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥186,240 6,236 266,429 215,638 ¥50,791 2,949 229,105 208,621 ¥20,484 2,313 249,251 213,562 ¥35,689 1,722 305,757 226,213 ¥79,544 (Millions of yen) 16 | Nomura Holdings, Inc. Annual Report 2004 Net Revenue and Income Before Income Taxes Revenue Breakdown (Millions of yen) 400,000 300,000 200,000 100,000 0 00/3 01/3 02/3 03/3 04/3 (FY) Net revenue Income before income taxes (%) 100 80 60 40 20 0 0% 24% 13% 3% 14% 15% 2% 8% 16% 35% 28% 40% Variable Annuity Insurance Investment Trusts (administration fees) Investment Trusts (distribution fees and others) Equities Bonds 28% 41% 34% 02/3 03/3 04/3 (FY) Key Issues and policies for the fiscal year ending cial services of the highest quality. March 2005 To serve the affluent investors, we have appointed an The goals of Domestic Retail are to broaden our customer executive officer heading financial advisors, and we have base and to offer high-quality financial services. To achieve set up an organizational system for training and developing these, we must make further progress in Core Value these financial advisors at our branch offices nationwide. Formation. Core value refers to the things that our cus- Furthermore, for asset builders, primarily salaried work- tomers most highly value, and perceive to be worth paying ers, we have set up the Hotto Direct Service Department for in terms of financial asset management. Taking into in addition to Nomura Home Trade to allow trading at consideration the fact that core values are different from nights and weekends, by phone or Internet. customer to customer, we provide professional financial As a new experiment, we have set up our first cashless services through specialized channels for different customer branch which does not handle cash settlements. This segments, which enables us to respond effectively to the branch specializes in planning and consultations, enabling needs of our customers. We have also taken the following us to offer high value-added financial services that better strategic measures to respond to increasingly diversified match our customers’ needs. and sophisticated customer needs. Through these kinds of innovations, we aim to broaden To serve the wealthy investors, we established the our customer base further by discerning the core values of Financial Management Division, going beyond the con- each and every customer. cepts of retail and wholesale to offer these customers finan- Odawara branch office entrance Nomura Holdings, Inc. Annual Report 2004 | 17 Expanding our customer base Domestic Retail aims to offer a wide variety of products suitable for all customers, from those who prefer low-risk, low-return investment to those with a taste for high risk and high returns. We aim to grow our customer base by bridging each customer’s core values with the appropriate investment opportunities in the capital markets through our optimal consultations. Client assets rise to record levels Growth in the number of stock-holding accounts and In the Japanese stock market, the Nikkei Stock Average retail client assets in equities still stands at only about one-third of its peak in 1989, but We have succeeded in steadily increasing the number of the value of Domestic Retail’s client assets (including stock-holding accounts to broaden our customer base for financial institutions) has now surpassed the previous peak equity products, even during the long period of stock mar- set around that time, reaching ¥40.8 trillion as of the end ket weakness. As a result, the number of stock-holding of March 2004. Until April 2003 the stock market accounts grew to 1.37 million as of the end of March remained in a slump, but we were able to minimize the 2004, an increase of 33% from a year earlier. Retail client decline in client assets by offering various products includ- assets in equities totaled ¥16.0 trillion, recovering nearly to ing domestic and foreign bonds and investment trusts. the peak of ¥16.3 trillion seen in the IT bubble era (when Since the stock market began to rebound, client assets have the Nikkei Stock Average stood at about ¥20,000). The been growing at a healthy pace. special accounts for stocks that we started to offer in October 2002 in relation to securities tax reform num- bered 1.1 million as of the end of March 2004. Client Assets (Domestic Retail, Including Financial institutions) (Trillions of yen) 40.8 trillion yen 37.2 trillion yen 40 30 20 10 0 (Yen) 40,000 30,000 1,400 20,000 1,200 10,000 1,000 0 800 86/3 91/3 96/3 01/3 04/3 (FY) Client Assets ( ) (left) 2H 1H Nikkei Stock Average (right) Stock-Holding Accounts and Retail Equity Assets (Thousands of accounts) (Trillions of yen) 1,600 16.3 trillion yen 20,337 yen 16.0 trillion yen 7,831 yen 20 15 10 5 0 18 | Nomura Holdings, Inc. Annual Report 2004 Stock-Holding Accounts (left) Retail Equity Assets (right) Nikkei Stock Average 3Q 4Q 00/3 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 01/3 02/3 03/3 04/3 (FY) In sales of JGBs to individual investors, Nomura had the Steady growth of assets in foreign currency bonds top share among all financial institutions Assets held in foreign currency bonds grew to ¥3.7 trillion Japanese government bonds for individuals were first as of the end of March 2004, more than double the level launched in 2003 and are an extremely effective tool for of March 2001. Currency movements, which are the stimulating the shift of individual financial assets from biggest risk with such bonds, were volatile, but investors cash and bank deposits to securities because they are high- remained strongly attracted by the gap between domestic ly safe and liquid. Also, their variable interest rates, which and foreign interest rates, as well as the need for interna- are adjusted every half-year, will rise if long-term interest tional portfolio diversification. We were able to boost the rates rise. We have been explaining to many customers the balance of client assets held in foreign currency bonds by merits of this product because we believe individual proactively responding to customers’ medium- to long- investors’ needs for JGBs will remain strong even if the term investment needs. prospect of economic recovery sparks expectations of a rise in interest rates. As a result, of the ¥4.8 trillion of these bonds that were sold from issue No. 1 in March 2003 to issue No. 6 in April 2004, we captured an overall share of 29%, more than any other financial institution including Japan Post. JGBs for Individual Investors (Billions of yen) Retail Foreign Currency Bond Assets (Trillions of yen) (Yen/U.S. dollar) 500 400 300 200 100 0 1st 32% 1st 31% 1st 37% 2nd 10% 2nd 18% 2nd 15% 1st Issue 2nd Issue 3rd Issue 4th Issue 5th Issue 6th Issue Sales Sales Share 4 3 2 1 0 3.7 trillion yen 200 150 100 50 1.6 trillion yen 00/3 01/3 02/3 03/3 04/3 (FY) 0 Bond Assets (left) Yen/U.S. Dollar Exchange Rate (right) Nomura Holdings, Inc. Annual Report 2004 | 19 The evolution of Core Value Formation In order for the Core Value Formation strategy to meet the needs of a variety customers, it must be constantly evolv- ing. In November 2003, we established the Hotto Direct Service Department to serve the needs of asset builders, and as part of our corporate reorganization in April 2004, we established the Financial Management Division to serve wealthy investors through a structure that transcends the concepts of wholesale and retail. We have also strength- ened our financial advisor (FA) system. Different operating systems for different customer Financial Advisor Section and Saving Advisor Section segments The Financial Advisor (FA) Section and Saving Advisor Domestic Retail works with the idea of customer segmenta- (SA) Section are, in principle, staffed by the employees who tion based on the assumed personal financial assets. Each have a long history in a given local community and have sales channel is clearly targeted at a particular type of cus- developed strong relationships of trust with their customers. tomer, offering the best kind of organization to respond to They help in expanding our business by advising senior citi- the core values of each customer segment. zens on life planning and responding to the resultant Financial Consulting Section demand for investment consultation. FA staff, in particular, have been specially trained in sophisticated investment con- The Financial Consulting Section targets wealthy investors, sultation techniques to offer comprehensive consultation who require the highest-quality advice, and offers them services to wealthy and affluent investors. SA staff, mean- comprehensive asset consulting services, ranging from while, work primarily with bonds, investment trusts and investment consultation and safeguarding to inheritance, other savings-type products, aiming to increase client assets thus working to increase the individual assets of our cus- among a broader group of affluent investors. tomers. This section is made up of employees with a partic- ularly sophisticated knowledge of tax treatment, a wide vari- ety of financial products and portfolio risk diversification to help customers manage their assets. Further Develop Core Value Formation Strategy Wealthy Investors / Affluent Investors Establish Financial Management Division Open Cashless Branch Office Strengthen Financial Advisor (FA) Section Asset Builders Open Hotto Direct Service Department WM Section Financial Consulting Section FA Section SA Section Customer Service Section Hotto Direct Service Dept. 20 | Nomura Holdings, Inc. Annual Report 2004 WM: Wealth Management FA: SA: Financial Advisor Saving Advisor Customer Service Section hours but also on Saturdays and Sundays, as well as on About 20,000 to 30,000 customers visit our main office and weekday nights. This department also handles Internet trad- branch offices each day, for a total of about 6 million visits a ing, allowing customers to take advantage of our services at year. The Customer Service Section deals with such cus- their own pace. This service makes it much more conven- tomers on a daily basis and is responsible for opening about ient for many salaried workers, who might find it hard to 70% of new accounts. The section helps clarify customer visit our offices during normal working hours. We think needs, responds directly to requests and offers reassuring that this channel will also help us broaden our customer advice when needed. For asset builders, they recommend the base. convenience of IT-based services, while for affluent investors they emphasize face-to-face services, investment seminar Financial Management Division planning and telephone marketing. In these ways, the In April 2004, we also established the Financial Customer Service Section is striving to efficiently expand Management Division, which is designed to serve wealthy our customer base. A variety of innovative measures investors through a structure that transcends the concepts of wholesale and retail, in order to reach a new investor class. To make it possible for this group to act with flexibility, we To expand our customer base and increase client assets, made it a fully independent division. we have been fortifying our past efforts, but we must also broaden our customer interface based on new ideas. To that end, we have implemented the following measures. Establishing the Hotto Direct Service Department In November 2003, we merged our call centers and Internet services to form a new channel, the Hotto Direct Service Department. The services provided by our highly trained operators are available not only during normal business Number of Newly Opened Accounts (Monthly Average) (Thousands of accounts) 40 30 20 10 0 00/3 01/3 02/3 03/3 04/3 (FY) Nomura Holdings, Inc. Annual Report 2004 | 21 Strengthening financial advisors (FAs) of our efforts to offer our customers better services. Our financial advisors, with their strong ties to their com- Streamlining the functions of branch offices allows us to munities and extended interaction with customers over offer a truly first-class, personalized atmosphere in which time, represent in some ways the cornerstone of our efforts our customers feel they are getting the very best in invest- to expand our customer base. Our FA staff act as an indis- ment consultation. pensable part of our strategy to build up our customer base over the medium- to long-term, and it is important for us Improving efficiency via IT to offer them our constant support so that they can main- We have recently come up with the name Nomura iT tain a high level of expertise. We gave an executive officer Support 21 for our services based on information technolo- special responsibility for supervising FAs and will strive to gy, including Nomura Home Trade, Nomura Telephone further enhance our educational programs such as FA train- Answer, Nomura Stock Price Dial and our ATM coopera- ing with over a five-year and even a 10-year time horizon. tive agreements with various financial institutions. Our aim Cashless branch offices is to make our services even more convenient for our cus- tomers. The number of Nomura Home Trade accounts has In March 2004, as a preliminary experiment we set up a grown steadily to about 1.37 million, giving us the top mar- branch that receives no cash and makes no payments. We ket share of 28%. set up our first cashless branch in Odawara, Kanagawa Our IT share rose to 49% by transaction volume and to Prefecture, and customers make cash transactions by bank 23% by transaction value in the fourth quarter of the fiscal transfer or through ATMs at postal offices and other places. year ended March 2004. Internet trading has been growing The mission of the cashless branch office is to offer a wide in proportion to the overall increase in client assets, and IT variety of sophisticated advice on customers’ assets. With its services are an important complement to over-the-counter small staff, our Odawara branch specializes in investment sales channels. Internet trading is convenient for our cus- consultation. We think it is important that our customers tomers, and it is also cost-effective for us, allowing us to free feel at home and comfortable in the branch when they up personnel for other services such as consulting, so that come to discuss their valuable assets. Looking ahead, we will we can offer our customers even higher-quality financial be flexible in setting up more of this type of branch as part services. Nomura Home Trade (online trading accounts) (Thousands of accounts) 1,500 1,000 500 0 00/3 01/3 02/3 03/3 04/3 (FY) Odawara branch consulting booth 22 | Nomura Holdings, Inc. Annual Report 2004 A more active approach to the corporate employees’ investment plan market We are entrusted with administrative services in respect of corporate employees’ investment plans from approximately 1,400 listed companies and 1,300 unlisted companies. Our share of this market for listed companies is 50%, making us No. 1 in Japan. This market gives us plenty of leads for our defined contribution pension plan business and is another nexus for encouraging new customers among asset builders. In the market for corporate employees’ investment plans, Approach to Corporate Employees’ Investment Plan Market Nomura IT Services Corporations E-Plan Investment Information & Services Employees Intra-corporate Information Systems Face-to-Face Services Account Opening E-Support IT transactions are handier than branch visits, so our basic Consultation strategy here is to offer services that do not require face-to- face meetings. At the same time, we strive to offer a variety of investment information, which is available through the computer systems of client companies (E-Plan). We are tak- ing active approaches toward this market, which should bring about valuable opportunities for post-retirement asset consultations with these corporate employees. Asset Building ESOP Shares Retirement Benefit IT Share* (%) 50 40 30 20 10 0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 03/3 04/3 (FY) No. of orders Transaction value * Ratio of domestic stock transactions executed through Nomura Home Trade or Nomura Telephone Answer (excluding odd lot transactions) to total domestic stock transactions Nomura Holdings, Inc. Annual Report 2004 | 23 Global Wholesale Takashi Yanagiya Senior Managing Director Head of Global Wholesale The strategies of Global Wholesale are to respond quickly to the changing market environment, to make use of Nomura Group’s integrated strength through collaboration that transcends organizational structures, and to pursue Japan-focused globalization. Under these strategies, we will play a key role in realizing Nomura Group’s management goal of becoming a globally competitive Japanese financial services group. Business Results revenue in Equity, and a 3% gain in Investment Banking. In Global Wholesale earned net revenue of ¥365.7 billion in Fixed Income, distribution of foreign currency bonds to retail the fiscal year ended March 2004, up 23% from ¥298.5 bil- investors led to a strong flow of orders, and net revenue grew lion the year before. Income before income taxes totaled 13%. In Merchant Banking, profit from exit transactions, as ¥138.5 billion, up 52% from ¥91.0 billion in the previous well as valuation gains, gave us a net revenue of ¥10.7 billion. fiscal year. A stock market rebound on the back of a recovery in the domestic economy, greater numbers of public offerings result- ing from corporations’ efforts to reform shareholder structure and the recovery in equity finance led to a 34% increase in net Global Wholesale Division Business Results 2000 2001 2002 2003 2004 Years ended March 31 Global Wholesale: Non-interest revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net interest revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fixed Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investment Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Merchant Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-interest expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fixed Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investment Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Merchant Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income (loss) before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fixed Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investment Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Merchant Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥404,947 (3,488) 401,459 96,883 169,674 134,902 — 198,117 58,578 78,296 61,243 — ¥203,342 38,305 91,378 73,659 — ¥487,644 (24,839) 462,805 78,390 241,291 143,124 — 210,062 56,171 73,617 80,274 — ¥252,743 22,219 167,674 62,850 — ¥385,430 54,505 439,935 90,753 125,076 88,349 135,757 248,657 66,739 66,475 57,406 58,037 ¥191,278 24,014 58,601 30,943 77,720 ¥196,675 101,794 298,469 153,966 82,025 69,125 (6,647) 207,436 76,759 65,675 56,374 8,628 ¥91,033 77,207 16,350 12,751 (15,275) ¥290,845 74,891 365,736 173,994 110,153 70,869 10,720 227,227 91,810 71,494 53,703 10,220 ¥138,509 82,184 38,659 17,166 500 (Millions of yen) * Investment Banking and Merchant Banking were separated from one another in October 2001 due to an organizational change. Consequently, through the first half of the fiscal year ended March 2002, figures for Investment Banking include those for Merchant Banking. 24 | Nomura Holdings, Inc. Annual Report 2004 Net Revenue and Income Before Income Taxes (Millions of yen) 500,000 400,000 300,000 200,000 100,000 0 00/3 01/3 02/3 03/3 04/3 (FY) Net revenue Income before income taxes Key issues and policies for the fiscal year ending viously divided between Investment Banking and Fixed March 2005 Income, and we have brought them together in Global Many Japanese corporations are making efforts to be winners Markets. This represents the establishment of an optimal sys- on a global basis. They have been increasing their equity tem to pursue further improvement in the quality of our servic- financing activities that are an essential part of their aggressive es to provide solutions for issuers in the primary market. We investment decisions, and accelerating the process of “selection have strengthened our ability to provide market-oriented credit and focus” in the form of business restructuring and industry products such as synthetic CDOs, making use of securitization consolidation to further strengthen corporate competitiveness. schemes, and we have also built up our ability to engage in asset In this environment, Global Wholesale has determined three finance, particularly in the real estate area. priorities: to respond quickly to a changing market environ- A second measure was the creation of our Capital Market ment, to make use of our integrated strength through collabora- Department, within Investment Banking. We have done away tion that transcends organizational structures, and to pursue with the walls between debt and equity products, developing a Japan-focused globalization. team that specializes in origination. This allows us to offer our One concrete measure designed for this purpose is the cre- clients comprehensive and customized solutions based on flexi- ation of Global Markets. Technical progress in financial deriva- ble thinking and top-grade professional skills. tives has narrowed the differences between the credit market— By responding flexibly to market changes, Global Wholesale represented by bonds—and the equity markets. In response to is evolving of its own accord; it is vigorously promoting collabo- this, we have united our trading operations for stocks and ration within the division that goes beyond traditional business bonds, which were previously separated into Equity and Fixed lines, and at the same time it is also strengthening its ability to Income. Also, we have taken syndicate functions that were pre- engage in collaboration that extends beyond the division itself. Equity trading floor (Otemachi) Nomura Holdings, Inc. Annual Report 2004 | 25 Evolution of Global Wholesale Global Markets In Global Markets, we will (1) break down the walls Financial technology is evolving rapidly, gradually wear- between products, strengthening our ability to trade ing away at the distinctions to be made between the derivative and hybrid products, supply related financial credit markets—represented by bonds and loans—and products, and provide information on product ideas in the equities market—represented by stocks—to give way the primary markets; (2) heighten our ability to supply to a growing intermediary market of hybrid securities, market-oriented credit products, including financing uti- such as CBs, that possesses the characteristics of both lizing securitization schemes; and (3) strengthen asset these markets. In response to this change in the market- finance business, mainly in real estate. place, we have united our Fixed Income, Equity and syn- The main businesses of Fixed Income and Equity that dicate functions to form Global Markets. now make up the Global Markets are as follows. Our aims in creating Global Markets Fixed Income (1) Global Markets strengthens our abilities to deal with In Fixed Income, we engage in bond sales and trading, hybrid products mainly by, combining Fixed making use of our global network, and also handle origi- Income’s credit derivative trading functions with nation and product supply as well as asset finance (in Equity’s derivative trading functions. cooperation with Investment Banking) primarily in real (2) We have also brought into the Global Markets our estate. In bond trading, we handle round-the-clock trad- syndicate functions, previously divided between ing in government bonds of major countries, position Investment Banking and Fixed Income, enabling us management backed by our sophisticated risk manage- to put together information about markets and ment technology, firm capital base and strong risk toler- investor needs and construct a system that helps us to ance to offer the kind of service our clients have come to further improve our capability to provide solutions expect of us. for issuers in the primary markets. New System of Global Wholesale Global Wholesale Investment Banking Global Markets Merchant Banking Consolidate underwriting functions Fixed Income Capital Market Department Equity Syndicate Department Separate syndicate functions 26 | Nomura Holdings, Inc. Annual Report 2004 Equity the country. Thus, we have secured a solid position with In Equity, we offer sales and trading of domestic and regard to investment banking deals related to Japanese foreign stocks on a global basis, primarily for institution- companies. al investors. In equity trading, we handle the global flow We have also built up an extensive track record in of orders from our solid domestic and foreign client base overseas and cross-border deals. For example, as repre- that we have established through the consistent provision sentative cross-border deals, we acted as advisor in set- of high-quality research and quantitative analyses. It also ting up a soft-drinks joint venture in China involving offers our clients solutions backed by our own positions, Asahi Breweries, Itochu and Tingyi (Cayman Islands) including block trades, basket trades and others. We Holding; we also assisted in Toyoda Machine Works have earned the trust and praise of our clients for the sys- purchase of the Torsen division from Bosch Automotive tems we have built that offer rapid execution without System, and Kyocera-Mita purchase of a stake in TA making a big impact on the market, even when we are Triumph Adler. We also worked with China Steel and handling a large volume of orders simultaneously. SMIC (Semiconductor Manufacturing International) in Investment Banking public offerings of stock on the Japanese market. As part of our corporate reorganization in April 2004, In Investment Banking, we are active in all the world’s we have united into the newly founded Capital Market major markets, including Japan, Europe and the U.S., Department our underwriting functions that were previ- offering a wide variety of investment banking services, ously separated into bonds and stocks. By specializing in such as the underwriting of stocks, bonds and other origination, this new department will enable us to offer securities, as well as M&A and financial advisory servic- our clients optimized financial solutions, based on our es. We have acted as lead underwriter for about 65% of flexible approach and sophisticated professionalism in the companies listed on Japan’s stock markets. We also the capital markets. In this way, we hope to make our have teams of investment banking specialists in 40 of contribution to maximizing corporate value at our client our domestic branches, which gives us close relation- corporations. ships with many major Japanese companies throughout Nomura Holdings, Inc. Annual Report 2004 | 27 Merchant Banking Merchant Banking operations refer to the private equity business targeting investment opportunities for capital appreciation that will offer attractive-returns on our investments. In Japan, Nomura Principal Finance Co., Ltd. (“NPF”), founded in 2000, has been active in the field of buy-outs and corporate revitalization. NPF has established a strong presence in Japan through its participation in a management buy-out of Tungaloy (previously Toshiba Tungaloy) and the corporate rehabilitation of Huis Ten Bosch. As the pace of corporate restructuring grows in Japan, we aim to identify additional investment oppor- tunities to realize investment returns, focusing on poten- tial improvements in corporate value. In Europe, the bulk of our private equity business consist of invest- ments now managed by Terra Firma, an independent asset management group. With respect to venture capital investment, we devel- op our business through the Nomura Research & Advisory Co., Ltd in Japan and through the London- based Private Equity Group (PEG) overseas. Looking ahead, we aim to continue to participate in high-quality investment opportunities, making use of our global net- work and backed by our extensive experience. 28 | Nomura Holdings, Inc. Annual Report 2004 Aspiring to be a Globally Competitive Japanese Financial Services Group Expanding asset finance holding, we used our extensive network of domestic and The securitization business has been expanding, as an overseas investors to conduct the execution without causing increasing number of companies seek to diversify their funds any market disruption. This was one of the largest block procurement and improve their balance sheets by securitiz- trades ever carried out in the Japanese stock market. ing real estate and money claims, while the low interest rate environment has been increasingly leading investors to seek Top underwriting position for our three equities- reliable, high-return financial products. In these circum- related sectors stances, we have been raising our profile in the domestic and We have acted as lead manager for Ito-Yokado, Sharp and foreign securitization markets. We securitized subordinated other Japanese companies interested in attracting more indi- loans for Dai-Ichi Mutual Life as well as airline ticket rev- vidual investors. We have also been joint lead manager for enues for Korean Airlines. We also handled the financing Shinsei Bank, a symbolic deal of a company offering stock through securitization for the Akihabara Office Building to the market following corporate revitalization, and for the Development Project, Japan’s first securitization for a major privatization of Petroleum Resource Development (JAPEX). Japanese redevelopment project. We also arranged Japan’s In the J-REIT market, we were joint lead manager for first large non-recourse financing* for the Catherina Mita Tokyu Real Estate, contributing to market product supply. Tower Suite Project, an apartment complex. In the convertible bond market, we lead-managed deals of * Financing where creditors can only claim against the collateral, in case of default Pioneer, Yokogawa Electric and CSK. In equity underwrit- One of the largest block trades ever in the Japanese position in all of the three sectors: initial public offerings market (IPOs), public offerings (POs) and convertible bonds ing for the fiscal year ended March 2003, we took the top When the Hitachi Group wanted to sell its share in Nitto (CBs). Denko, which Hitachi owned as a long-term strategic share- Major Deals as Lead Manager, and Market Share • Tokyu REIT • Shinsei Bank • JAPEX • Sharp • Ito-Yokado • Fuji Photo Film • Yokogawa Electric • Pioneer • CSK 1st Position 1st Position 1st Position 27% 33% 28% IPOs POs CBs Source: Thomson Financial Bookrunner League Tables (2003.4.1–2004.3.31), value base Nomura Holdings, Inc. Annual Report 2004 | 29 Developing custom-made equity funds-procurement Acting as advisor in M&A deals schemes More and more companies are tackling group restructur- We have been active in developing and proposing new ing, promoting “selection and focus” on their core busi- funds procurement methods based on tailor-made equity nesses. In the fiscal year ended March 2004, we acted as funding schemes. Representative examples would be the advisor for several high-profile transactions, including the solutions we offered through the multiple private offerings transformation of Matsushita Electric Works into a sub- (MPOs) we devised for Isuzu Motors and Tokyo Tomin sidiary of Matsushita Electric Industries through a takeover Bank. In the MPOs, which are an innovative financing bid, the merger of the ATM businesses of Omron and method, companies issue convertible bonds or warrants to Hitachi, and others. In cross-border M&A transactions, make a third-party allocation to us. we advised on the creation of a Japan-China beverages Accumulating track record in underwriting foreign Itochu. In May 2003, we converted our joint venture in currency bonds in collaboration with Domestic Retail China (formerly known as Nomura-CITIC) to a wholly- Japan has a wealth of financial assets in the hands of indi- owned subsidiary, helping us to expand our business in viduals, which overseas issuers with good credit risk have China and throughout Asia. joint venture involving Tingyi, Asahi Breweries and their eyes on. We have been able to greatly increase our sales of foreign currency bonds by matching these issuers with individual investors who are seeking higher yields. Given our impressive track record in this area, we were able to fur- ther solidify our presence in international capital markets by acting as joint lead manager for major bond issues, includ- ing European Investment Bank’s global dollar bond issue, Major M&A Deals Matsushita Electric Industries*= Matsushita Electric Works (MEI makes MEW into a subsidiary through a tender offer) Industrial Revitalization Corp. of Japan* = Kanebo (IRCJ acquires Kanebo’s cosmetics operations) the Austrian government’s euro bond issue, and the Spanish Asahi Breweries and Itochu* = Tingyi Instituto de Cre´dito Oficial’s issue of euro-dollar bonds. (Asahi Breweries and Itochu invest in Tingyi-Asahi-Itochu Beverages Holding) * Nomura served as advisor Retail Foreign Currency Bond Sales (Trillions of yen) Major Retail Foreign Currency Bond Sales 2.5 2.0 1.5 1.0 0.5 0 01/3 02/3 03/3 04/3 (FY) The International Bank for Reconstruction and Development (May 2003) ¥99.8 billion (denominated in Canadian dollars) European Investment Bank (September 2003) ¥60.9 billion (denominated in Australian dollars) Aktiebolaget Svensk Exportkredit (SEK) (November 2003) ¥68.3 billion (denominated in Australian dollars) Toyota Motor Credit Corp. (January 2004) ¥41.8 billion (denominated in U.S. dollars) General Electric Capital Corp. (February 2004) ¥80.4 billion (denominated in Australian dollars) 30 | Nomura Holdings, Inc. Annual Report 2004 Actively developing principal finance business in Japan Our principal finance business ranges from management buyout (MBO) plans, where managers and executives buy Major Investments – Daikuma Co., Ltd. Equity stake sold to Yamada Denki Co., Ltd. (May 2003) shares in a company from the current owners or the parent – DOWA WORKS, Ltd. company in an effort to boost the value of the company, and extends to investing in corporate rehabilitations, Equity stake sold to Taihei Co., Ltd. (January 2003) – MISAWA RESORT CO., LTD. where an earnings slump or excess indebtedness has led to – WANBISHI ARCHIVES CO., LTD. business failure, but the company is regarded as still worth – Huis Ten Bosch Co., Ltd. saving. Nomura Group is able to apply its investment experience and know-how in these cases, investing its own capital to develop this business. In the fiscal year ended March 2004, we were involved in major projects such as Huis ten Bosch, and Tungaloy (for- merly Toshiba Tungaloy). We sold our interest in Daikuma, and we are beginning to see the start of a favorable cycle of new investment and investment returns. – Tungaloy Corporation – SLIONTEC Corporation – TAIYO ELECTRIC IND.CO., LTD. Merchant Banking Exposure (Billions of yen) 400 300 200 100 0 02/3 03/3 04/3 (FY) Terra Firma NPF Nomura Holdings, Inc. Annual Report 2004 | 31 Kazutoshi Inano Deputy President & Co-COO Head of Asset Management Asset Management The aims of Asset Management are to expand assets under management by improving added value in asset manage- ment business and strengthening marketing, and to expand our defined contribution pension plan business through improvements in consulting, investment education and other services. Business Results entrusted with the administration and management of 59 In the fiscal year ended March 2004, Asset Management defined contribution pension as of the end of March 2004, up posted net revenue of ¥36.0 billion, down 3% from the year 23 from a year earlier, with 185,000 plan participants, more before, while income (loss) before income taxes showed a than any other administrator in Japan. Also, we provided loss of ¥1.0 billion due to special expenses stemming from financial products to 153 plans, up 94 from a year earlier. our withdrawal from the Japan Securities Dealers Employees Pension Fund, and the consolidation of our pen- Key issues and policies for the fiscal year ending sion-related subsidiaries. March 2005 At the core company, Nomura Asset Management, assets To improve profitability in Asset Management, we must under management totaled ¥15.7 trillion as of the end of make use of the full power of the Nomura Group to further March 2004, an increase of about 11% from ¥14.2 trillion a expand assets under management in our asset management year earlier. Similarly, the balance of assets under management business, and to strengthen our defined contribution pension grew steadily at Nomura BlackRock and Nomura Corporate plan business by increasing our pension administration share Research and Asset Management (NCRAM). We were and product lineup. Asset Management Business Results Asset Management: 2000 2001 2002 2003 2004 Years ended March 31 Non-interest revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥2,154 ¥58,237 ¥46,840 ¥34,828 ¥34,300 Net interest revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-interest expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 432 2,586 2,751 1,810 60,047 39,537 367 47,207 37,031 Income (Loss) before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ (165) ¥20,510 ¥10,176 2,232 37,060 33,866 ¥3,194 1,657 35,957 37,004 ¥ (1,047) (Millions of yen) * The results of the fiscal year ended March 31, 2000 do not include those of Nomura Asset Management, because it was consolidated effective March 31, 2000. 32 | Nomura Holdings, Inc. Annual Report 2004 Net Revenue and Income Before Income Taxes (Millions of yen) 80,000 60,000 40,000 20,000 0 -20,000 00/3 01/3 02/3 03/3 04/3 (FY) Net revenue Income before income taxes The first things we must do to increase assets under man- March 2004 and to launch new products such as funds agement are to hone our skills and strengths in asset manage- investing in high coupon bonds and high dividend stocks ment, and to improve added value in investment manage- (high-income products). ment services. In the year ended March 2004, we already Furthermore, by leveraging the asset management skills of integrated our decision-making process, established an invest- NCRAM, Nomura BlackRock and Nomura Funds Research ment team structure, and expanded our coverage by increas- & Technologies America (NFR&TA), we aim to strengthen ing the number of analysts. We continue to make efforts to our investment advisory business, and make further advances improve added value in asset management services, including in the market for private placement investment trusts. strengthening the process of providing perpetually value- In the defined contribution pension plan business, we have added services and enhancing asset management capacity. been working to improve our service. In January 2004, we Our second focus is to boost our marketing activities as founded Nomura Pension Support & Service (NSAS) by reor- part of our renewed customer service system. With regard to ganizing and streamlining our non-marketing functions, to collaboration with Domestic Retail, by strengthening our increase our competitiveness in consulting, investment educa- sales support system, we aim to increase assets in existing tion and other services. By cooperating with the relevant funds, and at the same time increase assets in new products departments in Nomura Securities, we aim to expand our busi- such as fund of funds products and alternative investment ness as a defined contribution pension plan administrator. We products. In addition, we intend to expand the scope of are also expanding the range of products we provide, adding financial institutions that sell our investment trust products foreign currency denominated money market funds (MMFs) set up especially for this channel in the fiscal year ended and other new products. Nomura Asset Management headquarters entrance Nomura Holdings, Inc. Annual Report 2004 | 33 Top market share in Japan in terms of assets under management Nomura Asset Management March 2004, our balance of assets under management Nomura Asset Management is Japan’s largest asset manage- under domestic investment advisory contracts was ¥3.0 tril- ment company, with a wide range of customers, from indi- lion, an increase of ¥152.6 billion from a year earlier. The viduals to institutional investors in Japan and abroad. As of balance under overseas investment advisory contracts was the end of March 2004, its balance of assets under manage- ¥1.4 trillion, an increase of ¥692.5 billion, thanks to an ment was ¥15.7 trillion, an increase of ¥1.4 trillion from a increase in mandates for Japanese equities. year earlier. NCRAM Investment Trust Business NCRAM is a U.S.-based investment management compa- Through over 200 companies, starting with Nomura ny offering the Nomura Bond & Loan Fund, the High Securities and including other brokerages, banks, trust Yield Bond Open, and the Nomura US High Yield Bond banks, life insurance companies and other financial institu- Income fund established in December 2003. As of the end tions, we offer a wide range of investment trust products, of March 2004, NCRAM’s assets under management from cash reserve products such as MMF to high-risk/high- totaled ¥801.4 billion, up ¥236.8 billion from a year earli- return products, including stock investment trusts. In Japan, er, supported by the continued strong popularity of for- Nomura Asset Management commands the top position in eign currency bond funds. public bond investment trusts and stock investment trusts with 40% and 19% shares, respectively. Nomura BlackRock Asset Management Investment Advisory Business Nomura BlackRock Asset Management is an investment advisory firm formed in April 1999 as a joint venture In our investment advisory business, we offer asset manage- between Nomura Asset Management and The BlackRock ment services to public and private pension funds and insti- Co., Inc. of the U.S. BlackRock utilizes sophisticated risk tutional investors in Japan and abroad. As of the end of management technology, and is recognized as one of the Assets under Management (Nomura Asset Management) (Trillions of yen) 25 20 15 10 5 0 00/3 01/3 02/3 03/3 04/3 (FY) Public Stock Investment Trusts Public Bond Investment Trusts Investment Advisory Others 34 | Nomura Holdings, Inc. Annual Report 2004 Market Share (Nomura Asset Management) Assets under Management (NCRAM) (%) 40 30 20 10 0 00/3 01/3 02/3 03/3 04/3 (FY) Bond Investment Trusts Total Public Investment Trusts Stock Investment Trusts (Billions of US$) 8 6 4 2 0 00/3 01/3 02/3 03/3 04/3 (FY) top firms in the U.S., particularly for bond investment financial institutions and pension funds. As of the end of management. Nomura BlackRock Asset Management man- March 2004, the outstanding balance of assets under man- ages the Nomura Short-Term Interest Fund and other agement was ¥1.2 trillion, an increase of ¥205.9 billion products and provides investment advisory services to from the year before. Increasing Our Assets under Management Strengthening asset management capability strengthening and computerizing our trading functions, and Improving value-added in investment management services make efforts to increase the efficiency of the execution process, Regarding the need to strengthen our asset management capa- right down to portfolio management. bilities and improve value-added in our investment manage- ment services, we have already enacted many kinds of measures, Marketing strategy but these still remain key points of focus for us. Of particular Updating customer service systems importance are the need to strengthen the process of providing We have updated our customer service systems, as part of perpetual added value, and the need to build up our asset man- strengthening our efforts to expand assets under management. agement capacity to deal with sheer quantitative expansion of To ensure that our customers and the financial institutions to assets under management. In the process of providing perpetual which we distribute our products are kept fully informed, we added value, as a means of efficiently grasping a wide variety of have shifted our disclosure functions to the marketing depart- investment opportunities, it is indispensable to have a sophisti- ments, and also reorganized the marketing team to improve cated method of screening securities that are potential invest- services for each customer group. To keep expanding assets in ment targets, so we have taken steps to update and improve our our existing funds, we are strengthening our sales support sys- screening systems. In strengthening our investment manage- tems in an effort to provide a continuous flow of information. ment capacity, to ensure that the growth of assets does not lead We already provide a wide variety of investment trust prod- to lower management efficiency, which could have a negative ucts, but we are perennially striving to uncover previously impact on investment performance, we will make advances in unknown investment management needs, to develop products Balances of funds established in FY04/3 Fund name Manager Launch date Balance, end-March 2004 Nomura Australian Bond Fund Nomura Asset Management September 2003 ¥47.9 billion (A,B,C,D courses) Nomura Real Growth Open Nomura Asset Management World Genome Technology Open Nomura Asset Management (A,B courses) Nomura US High-Yield Bond Income NCRAM Nomura Fund Masters Japan Small Nomura Asset Management Capitalization Stock October 2003 November 2003 December 2003 March 2004 ¥43.1 billion ¥97.2 billion US$1.68 billion ¥36.5 billion Nomura Holdings, Inc. Annual Report 2004 | 35 that stay a step ahead of ongoing changes in the social and mar- increase overseas investors’ mandates for Japanese equities. In ket environment. Specifically, we will strive to increase our the future, to meet the anticipated increase in funds to invest in assets under management by adding to our line of fund of the area of public pensions and public funds, we intend to funds products, and offering alternative investment funds that strengthen our penetration with traditional products, and also seek certain levels of absolute return. increase our efforts at cross-sales of NCRAM and Nomura BlackRock’s foreign currency bond products, NFR&TA’s fund Focus on sales of investment trusts at banks of funds, and other products. As sales of investment trusts at banks have already surpassed ¥10 trillion, tackling this market will be a very important task for us. Developing private placement investment trusts through In the fiscal year ended March 2004, we began offering our capacity to provide products, and integrated strengths Global High Income Stock Fund through Mitsubishi Trust & Our assets under management in the private placement invest- Banking. We also started offering our US-Euro Bond Income ment trust market have increased to ¥11 trillion, and Nomura Open through Bank of Yokohama, and both have seen steady Asset Management has also been entrusted with assets from finan- gains in assets. In the future, we aim to increase the number of cial institutions, including foreign life insurers, city banks and banks that offer our products. We will develop other high- regional banks. We believe there is still room to increase business income products and new foreign products, leveraging the man- with some extremely wealthy individuals and institutional agement skills of NCRAM, Nomura BlackRock and others; we investors. We will strengthen our interaction with customers, to also plan to launch new funds that invest in REITs. increase our assets under management. In the private placement investment trust market, it is essential to have the capacity to offer Strengthening investment advisory services order-made products that accurately reflect customers’ needs. After hitting a trough in March 2003, Nomura Asset Nomura Asset Management has established the Structured Management’s investment advisory assets are on the rebound, Products Investment Department, fortifying its ability to supply thanks mainly to strength in overseas investment advisory products that match our customers’ needs. Furthermore, we are assets. The increase in overseas investment advisory assets is the strengthening cooperation with related departments at Nomura result of strong performance, as well as the cooperation of Securities as well in an effort to increase our assets. Nomura Group’s overseas network, which has helped to List of specialized investment trusts for over-the-counter sales at banks Investment Advisory Assets (Nomura Asset Management) (Billions of yen) Global High Income Stock Fund US-Euro Bond Income Open Nomura Japan-US REIT Fund (launched on April 30, 2004) Hybrid Income Open (launched on June 23, 2004) 6,000 5,000 4,000 3,000 2,000 1,000 0 00/3 01/3 02/3 03/3 04/3 (FY) Domestic Foreign 36 | Nomura Holdings, Inc. Annual Report 2004 Defined contribution pension plan business elimination of the ceiling on the amount that can be transferred Pension administration contracts and product supply both from corporate pension plans, and the easing of conditions on increasing early withdrawal. Many corporations that offer pension plans In our defined contribution pension plan business, Asset are rethinking their pension and personnel systems, and in the Management provides a wide variety of services relating to future we expect that the introduction of defined contribution administration starting with support for the introduction and pension plans will be accelerated. In the fiscal year ended March designing of pension plan systems, supply of investment trust 2004, we reorganized and integrated our non-marketing func- products, product selection and information, as well as invest- tions into NSAS, strengthening cooperative relations between ment education. our consulting business and service-oriented businesses, such as Competition has been intensifying in the defined contribution investment education. We will redouble our efforts to enhance pension plan business. We have increased the number of pension our competitiveness in services, and in an effort to greatly plans for which we provide these administration and manage- increase our pension administration business, we will strengthen ment services on an outsourcing basis to 59 as of the end of our cooperation with Domestic Retail and Global Wholesale March 2004, up 23 from a year earlier. The number of partici- and draw on the collective strength of Nomura Group. pants in our plans increased to 185,000, giving us the top market share in a total universe of around 700,000 plan participants. Aggressively providing products The number of plans we supply products to has grown to When it comes to providing financial products, we aim to 153 as of the end of March 2004, increasing by 94 compared expand our business by providing products not only to pension to the previous fiscal year end. The outstanding value of the plans administrated by us but also to those administrated by investment trusts we supply has grown to ¥39.0 billion with an others. As part of this effort, we will launch new products, increase of ¥25.4 billion from a year earlier. including foreign currency denominated MMFs. We are also trying to increase the assets in the products we provide, and Drawing on our collective strengths to increase pension thereby improve our own profitability. administration contracts Deregulation in the pension system has been making steady progress, starting with the increase in the tax-free ceiling, the Value of Investment Trust Products Nomura Supplies and Number of Plans Nomura Supplies Products (Billions of yen) 40 30 20 10 0 02/9 02/12 03/3 03/6 03/9 03/12 04/3 Value of Investment Trust Products Nomura Supplies (left) Number of Plans Nomura Supplies Products (right) (plans) 160 120 80 40 0 (FY) Nomura Holdings, Inc. Annual Report 2004 | 37 Akihito Watanabe Senior Managing Director Head of Global Research Research Our founder, Tokushichi Nomura, realized from the outset the limitations of securities trading based on intuition and experience alone. He set up the first “research department” in Japan’s securities industry, emphasizing the impor- tance of scientific investment decisions. Our research division, proud to have the longest history and tradition in Japan, is highly ranked by our clients. We are carrying on our founder’s philosophy of research-driven business. Reorganizing the research functions Nomura Research Institute to the newly founded Nomura Nomura Group reorganized its research functions effective Institute of Capital Markets Research, a wholly-owned sub- April 1, 2004. Previously divided between Nomura sidiary of Nomura Holdings. This research institute issues Securities and Nomura Research Institute, our research policy statements and proposals independent of Nomura function has now been consolidated in the Nomura Securities. Securities Financial & Economic Research Center (previ- ously named Nomura Securities Financial Research Center), Nomura Securities Financial & Economic Research the in-house research arm of Nomura Securities. This move Center enables us to offer a full line of high-quality research from The Nomura Securities Financial & Economic Research macroeconomic analysis through equity analysis to invest- Center is made up of five departments: the Equity Research ment strategy. Department, Investment Strategy Department, At the same time, research functions relating to studies of Quantitative Research Department, Investment Banking financial and capital markets have been moved from Research Department, and the Economic Research Global Research Structure Financial & Economic Research Center (Tokyo) Equity Research Investment Strategy Quantitative Research Investment Banking Research Economic Research Corporate Office Industrial Strategy Research Group Akihito Watanabe Senior Managing Director Head of Global Research Asia Research (Hong Kong) Europe Research (London) U.S. Research (New York) Nomura Research & Advisory (Tokyo)* Hong Kong Korea Taiwan China Singapore Australia *Joint management with the Merchant Banking 38 | Nomura Holdings, Inc. Annual Report 2004 Department. These five departments conduct studies in nomic and earnings analysis from the analysts in the Equity their own field of specialty. In analyst rankings by The Research Department, the strategists formulate investment Nikkei Financial Daily and Institutional Investor, research strategies that reflect the global investment environment. conducted by the Nomura Securities Financial & Economic The monthly publication, Japanese equities investment Research Center has been consistently in the top class. In strategy, publishes our firm’s views on investment in October 2001, in light of the importance of global research, Japanese stocks, together with our analyses on macroeco- we reorganized our research operations in the U.S., Europe nomics, earnings trends for various industries and compa- and Asia, enhancing research coverage on a global scale. nies, and market supply and demand conditions. We also Equity Research Department About 60 corporate analysts belong to this department, publish reports on global asset allocation and stock markets in the U.S., Europe and Asia in a timely manner. studying and analyzing listed companies, estimating their Quantitative Research Department investment value and offering this information to investors At Nomura, approximately 50 quantitative analysts engage on a timely basis. Currently, we cover about 600 Japanese in cutting-edge financial engineering research, including on companies, accounting for approximately 85% of the mar- derivatives and portfolio theory, and develop databases and ket capitalization of the Tokyo Stock Exchange’s first and systems based on the results. Such research is widely appli- second sections as well as OTC stocks. cable, for example, to asset management, new product Investment Strategy Department development, trading, risk management and corporate finance, and helps Nomura Group stay at the forefront of About 20 strategists work in the Investment Strategy the finance and securities businesses. In addition to collabo- Department, studying and analyzing the macroeconomic lation with our overseas offices in New York, London and environment in various countries, and the international Hong Kong, we also have a global research and develop- flow of funds. Based on these factors as well as microeco- ment network and conduct avant-garde research activities in Nomura Holdings, Inc. Annual Report 2004 | 39 the international arena, including joint research projects Global Research Structure with leading universities and think tanks. To respond to economic and corporate globalization, we have research teams in our overseas offices where they con- Investment Banking Research Department duct integrated research with the Nomura Securities Nearly 10 analysts belong to the Investment Banking Financial & Economic Research Center. Including sector Research Department, offering advice to client companies analysts, strategists and economists, our global research net- on how to increase their corporate value. For publicly listed work comprises approximately 10 professionals both in New companies, we offer advice on fund raising and financial York and London, and 40 or so in Asia/Oceania. In quanti- management, group policies, investor relations, dealing with tative research, we have approximately 30 analysts working ratings agencies and others. at our offices in New York, London and Hong Kong. Economic Research Department Nomura Research & Advisory In our Economic Research Department, over 20 econo- Nomura Research & Advisory has approximately 20 ana- mists in Japan collaborate globally in the study and analy- lysts and specializes in research of unlisted privately-held sis of the macroeconomy and financial trends in various companies. It uses its experience and know-how to provide countries as well as foreign exchange markets, publishing total solutions tailored to industry trends and the growth the results of their research in various reports destined for stages of its client companies. Such services include venture investors. This research has a strong reputation for its con- capital business (managing and administering the funds of sistent forecasts covering more than 20 countries and venture capital partnerships) as well as stock offerings and regions, and the depth of its analysis of medium- and corporate alliances. Recently, Nomura Research & Advisory long-term social and economic structural problems such has been avidly conducting joint research into industry-uni- as the ageing and decline of birth rate in Japan. versity collaboration. 40 | Nomura Holdings, Inc. Annual Report 2004 Nomura Group Contents Corporate Governance Compliance Nomura Group’s Contribution to Society Research and Policy Pronouncements 42 46 48 52 Nomura Holdings, Inc. Annual Report 2004 | 41 Corporate Governance Corporate governance at Nomura Group has won praise around the world; we achieved top placement on various rankings of corporate governance. Adoption of the Committee System Nomination Committee and the Compensation Committee In June 2003, the domestic companies of Nomura Group is a director who is not the CEO. adopted the Committee System, with the aim of separating executive and oversight functions, transferring business exe- The advantages of the Committee System cution power to executive officers, and increasing our man- Since our adoption of the Committee System, business exe- agement transparency. Under our committee system, man- cution powers that were previously concentrated in the agement oversight functions are exercised mainly through hands of the Board of Directors have been more broadly the actions of the Nomination Committee, Audit delegated to the executive officers, speeding up the decision- Committee and Compensation Committee under the board making process. Since the executive officers have business of directors. Executive officers designated by the Board of execution power, there is a clear division between the over- Directors receive broad business execution powers from the sight functions of the directors and the business execution board, which gives executive officers the authority to make functions. Moreover, governance can be expected to operational decisions. The majority of members of the improve further because the Board of Directors exercises its Nomination Committee, Audit Committee and management oversight through the Nomination Compensation Committee are outside directors. At Committee, Audit Committee and Compensation Nomura Holdings (NHI), the chairman of the Audit Committee; in each of the three committees the majority of Committee is an outside director, while the chairmen of the members are outside directors. Adoption of Committee System Statutory Auditor System (Former System) Committee System Shareholders’ Meeting Shareholders’ Meeting Election / Dismissal Board of Directors Management Decision Oversight of Business Execution Audit Election/ Dismissal Election/ Dismissal Election/Dismissal of Committee Members Board of Statutory Auditors Board of Directors Audit Determination of Compensation Nomination of Director Candidates Nomination Committee Audit Committee Compensation Committee Election/ Dismissal Oversight of Business Execution Audit Representative Executive Officer(s) Executive Officers Determination of Compensation 42 | Nomura Holdings, Inc. Annual Report 2004 Meeting the challenges of corporate governance Management structure Operations of the Board of Directors – Appointed outside directors (2001) The Board of Directors is responsible for making decisions – Established Internal Controls Committee, in which outside on items specified by the Commercial Code. The executive directors also participated (2001) officers must report at least every three months on business – Established Compensation Committee, with majority of conditions as well as matters for deliberation by the Board of members outside directors (2001) – Established Advisory Board (2001) Executive Officers and the Executive Management Board. In addition, they must make a monthly financial report to the – Abolished retirement bonuses for directors directors. – Granted stock options for directors and certain employees (2002) – Adopted the Committee System (2003) Corporate governance ranking Institutional Shareholder Services’ (ISS) corporate gover- nance quotient (CGQ) ranks NHI as No. 1 among Japanese companies used in the MSCI EAFE index.* In addition, NHI is ranked No.2 in the Japan Corporate Governance Research Institute’s Corporate Governance Index. Three committees The Nomination Committee, Audit Committee and Compensation Committee have been given the authority to make decisions on issues including candidates for the Board of Directors, audits, and compensation for directors and executive officers, while the Board of Directors exercises oversight over management decisions. Nomination Committee The Nomination Committee is responsible for decisions regarding proposals made to the General Meeting of Shareholders concerning the appointment and dismissal of directors. The majority of the Nomination Committee must be outside directors, and the committee chairman is not the ISS Corporate Governance Quotient (CGQ) Index Ranking 90.7 Country Ranking 100.0 Industry Ranking 91.3 * Nomura Holdings Inc. outperformed 90.7% of the companies in the MSCI EAFE Index, 100.0% of Japanese companies and 91.3% of the companies in the Diversified Financial group. * The MSCI EAFE index is a stock price index computed by Morgan Stanley Capital International, covering Europe, Australia and the Far East, but not North America. Source: ISS as of July 6, 2004 Japan Corporate Governance Research Institute Corporate Governance Index Highest Nomura Holdings Lowest Average Source: Japan Corporate Governance Research Institute (2003) Points 73 72 12 37.6 (No. 2) Nomura Holdings, Inc. Annual Report 2004 | 43 CEO; the directors who are representative executive officers, Business execution system including the CEO, are not members of the Nomination NHI is a holding company and it does not engage in any Committee. Audit Committee particular business on its own. We believe, however, that the executive officers of NHI, who occupy key positions in the The Audit Committee is responsible for auditing the busi- management of Nomura Group, make it possible for the ness executions of executive officers, as well as the appoint- group to devise realistic management strategies, which are to ment and dismissal of accounting auditors. The majority of permeate the whole organization and to be carried out in a members of the Audit Committee are outside directors, and speedy fashion. At NHI, to ensure that executive officers’ the committee chairman is an outside director. Its members business decisions are made smoothly and appropriately, we do not act as a member of the other committees. In addition, have the Board of Executive Officers, the Executive the members of the Audit Committee all fulfill the require- Management Board and the Internal Controls Committee, ments of independent directors as defined under the Sarbanes-Oxley Act. Compensation Committee for all of which the CEO acts as chairman. Board of Executive Officers The Board of Executive Officers is responsible for delibera- The Compensation Committee makes decisions regarding com- tions and decisions regarding business planning, budgeting, pensation for directors and executive officers, both in terms of and the allocation of management resources for Nomura broad policy and specific decisions concerning individual mem- Group. The Board of Executive Officers is made up of all the bers. The majority of members of the Compensation Committee are outside directors. The committee chairman is a executive officers, currently 31 members. Executive Management Board board member other than the CEO. The directors who are rep- The Executive Management Board formulates the management resentative executive officers, including the CEO, are not mem- strategies of Nomura Group, and makes decisions about the bers of the Compensation Committee. fundamental policies for business lines to carry out the execu- tion of their business plans and operations. The Executive Nomura Holdings Management Structure Shareholders’ Meeting Board of Directors Nomination Committee Audit Committee Compensation Committee President & CEO Board of Executive Officers Executive Management Board Advisory Board Internal Controls Committee * Consultative body for the Executive Management Board Top managers of representative global Japanese companies offer management advice 44 | Nomura Holdings, Inc. Annual Report 2004 Management Board also monitors each business line on the the activities of the Audit Committee, and to ensure that suffi- basis of earnings indicators designed to accurately gauge the cient information is supplied from the Internal Audit Division state of their operations. Currently, the Executive Management to the Audit Committee. Board is made up of 10 executive officers. Internal Controls Committee Disclosure Committee The Internal Controls Committee is charged with the task of To ensure that we provide investors with opportunities for enhancing our internal controls and procedures and promot- fair access to information concerning Nomura Group, the ing proper corporate behavior throughout Nomura Group. group has established “Nomura Group’s Statement of Global Currently, the Internal Controls Committee is made up of Corporate Policy regarding Public Disclosure of Information,” four executive officers and two directors, including one out- which sets forth (1) policy directives that protect non-public side director. Internal controls information concerning Nomura Group companies while at the same time promoting timely and appropriate public dis- closures, and (2) the principle of U.S. Regulation FD. It is the Audit Committee that has primary responsibility for management supervisory functions in a company that operates * The U.S. Securities and Exchange Commission (SEC)regulations forbid companies from releas- ing important information to certain people such as analysts or institutional investors before it is released to the general public under the Committee System. The main members of the Audit Committee are outside directors, but we do designate full-time directors (Audit Mission Directors) who are not an executive officer, but who are intimately familiar with the organization and business operations of Nomura Group, to supplement the Audit Committee’s auditing activities and Key points of “Nomura Group’s Statement of Global Corporate Policy regarding Public Disclosure of Information” – Establishment of Disclosure Committee – Ban on selective disclosure of important information – Channeling important information through Disclosure Committee ensure an airtight audit system. Also, we have established the – Designating a single outlet for information disclosure Office of Audit Committee as a specialized team to support – Preparing statutory disclosure document by Disclosure Committee Internal Control System Internal Controls Committee Audit Committee Audit Mission Directors • 4 Executive Officers including CEO + Outside director (Chairman of Audit Committee) + Director (Audit Mission Director) • Promotes proper corporate behavior throughout the group and enhances internal controls and procedures Approval of Internal Audit Plan Audit Report Office of Audit Committee Audit Report • Assist Audit Committee • Assist Audit Mission Directors by providing operational support Audit Report Nomura Group Internal Audit Department Internal Audit Nomura Holdings and its Subsidiaries Management Business Risk Management Compliance Nomura Holdings, Inc. Annual Report 2004 | 45 Compliance At Nomura Group, we make great efforts to ensure that neither officers nor employees of Nomura Group will engage in behavior that might be seen as illegal. If such a problem occurs, it is to be reported to management without excep- tion and without delay. We are firmly aware of the necessity to create a system for handling such incidents in an appropriate manner. Establishment of code of ethics at Nomura Group to make reports directly to an executive officer or outside In March 2004, Nomura Group voluntarily established a director designated by NHI’s Board of Directors. The infor- code of ethics applicable to all directors, officers and mation provided via the Compliance Hotline is reviewed by employees, as an ethical guideline on a worldwide basis. the Internal Controls Committee. Nomura Group’s compliance systems Nomura Securities’ compliance systems Based on Nomura Securities’ compliance systems, all Establishment of Compliance Committee domestic member companies of Nomura Group must des- The Compliance Committee is made up of 13 executive ignate a Compliance Officer and report all relevant infor- officers, including the president & CEO and the Internal mation to the designated executive officer of the Group. Administration Supervisor, plus two outside lawyers who The compliance officers must participate in a joint training act as legal supervisors. In principle, this committee meets course once a year. twice a month to discuss internal administrative systems Beginning in October 2002, Nomura Group set up a and compliance rules, as well as other important matters Compliance Hotline, allowing Nomura Group employees relating to compliance. Nomura Securities’ Compliance Structure Operating Officers Internal Controls Officers Compliance Officers Internal Administration Supervisor (Executive Officer) Investigate and Formulate Solutions Employees Compliance Hotline External lawyers (two) Outside director Reporting Compliance Committee Report proceedings at least once every three months Board of Executive Officers 46 | Nomura Holdings, Inc. Annual Report 2004 Installment of Compliance Officer in all departments and Activities undertaken to ensure compliance with the law branch offices Compliance manuals designed to ensure a clear understand- We have installed a Compliance Officer to further ensure ing of laws and regulations are made available via the that internal administrative measures are firmly in place in Intranet. We have established a compliance training system, all locations, and to ensure that all employees are mindful of in which all directors, officers and employees are required to their obligation to respect the law. participate. Establishment of Compliance Hotline Compliance training materials are prepared and distrib- uted on a monthly basis for use in branch offices. Each The Compliance Hotline is an internal information system branch office conducts monthly training sessions based on for use by employees who discover acts contrary to the law these materials and reports to administrators on the imple- or Company regulations, or other anti-social behavior. We mentation of these sessions. have also set up contact points outside Company offices. We have set up systems to ensure that persons who supply information are completely protected from any negative consequences of supplying that information. We have also taken steps to ensure that employees are able to supply information directly to the responsible internal administra- tors, external lawyers, and/or an outside director. Nomura Holdings, Inc. Annual Report 2004 | 47 Nomura Group’s Contribution to Society Concerning Nomura Securities’ raison d’être, our founder Tokushichi Nomura once said, “Nomura’s mission is to enrich the nation through the securities business. This is something we must absolutely see through.” In keeping with these words, Nomura Group believes the healthy development of the economy is necessary for an affluent society. To this end, we are actively engaged in promoting educational opportunities to broaden understanding of financial and securities markets. Since we also believe in the importance of heartly attitude towards society, we are active supporters of academia, culture, the arts and sports. Lessons on the economy and securities markets the global securities business. In the fiscal year ended March Individuals are beginning to rethink the way they manage 2004, more than 400 our executives and employees taught their assets, and people are becoming very interested in such classes based on their own experience. The classes were learning more about the economy and finance. To promote attended by more than 20,000 students at over 110 univer- the dissemination of financial knowledge, we believe in the sities. need to provide programs for people who are especially We did not stop with Japan. We offered similar securities keen. We are making great efforts to create opportunities education courses in Asia, to promote understanding of for people to learn more about the economy and securities Japan’s capital markets and financial systems. In 2003, we markets, from educational programs for children who will offered a course at Chulalongkorn University in Thailand. be the next generation of investors, to older citizens. Providing courses on securities Securities education courses at universities The economy, finance and money have deep connections to The students of today will support Japan’s economy of the our everyday life, but formal opportunities to learn about future. To give these students a better picture of how the them are rare. To rectify this situation, we offer courses on economy really works, we provide universities across Japan finance and securities in regional communities and at vari- with courses about capital markets, securities markets and ous workplace adult education venues. Education Program Elementary schools Junior high schools Senior high schools Universities The Secret of Money The Book for a Happy Economy Adults Company employees Communities Activities to disseminate defined-contribution pension plan scheme Publications Events Lectures Education programs Internet CATV stations 48 | Nomura Holdings, Inc. Annual Report 2004 Nomura Money Fair Seminars at Nomura Securities’ branches Securities education programs Securities learning programs Special sponsor of Nikkei Stock League Nikkei Education Program Nikkei Education Forum Educational contents on the Internet Doki Doki Waku Waku Okane no Hanashi Nomura Free School Chulalongkorn University The Nikkei Stock League In these courses, we introduce the concepts of life plan- Educational support for junior and senior high ning and money planning in an effort to teach people in a school students way that is easily understandable even for beginners so that We also offer our help and support for the Nikkei they can create a comfortable life for themselves and a com- Education Forum, a series of events aimed at helping senior fortable retirement. In 2003, about 10,000 people partici- high school students learn about society, the economy and pated in these courses. industry from people who are actually active in business. The forum is held during summer vacation each year, under Special Sponsor of the Nikkei Stock League the main theme of “Innovation.” In 2003, our course The Nikkei Stock League is a portfolio training and report- focused on the mechanisms of the stock market, role-play to ing contest aimed at junior and senior high school, and col- illustrate how entrepreneurs create innovations, the role of lege students, sponsored by the Nihon Keizai Shimbun, Inc. the investors who support them, and how individual Since the first contest, held in the fiscal year ended March investors can build their assets. 2001, over 17,000 participants have so far taken part. We also participate in the Nikkei Education Program, The contest involves Internet-based buying and selling of which was started in April 2003. The Nikkei Education virtual stocks. Teams can build virtual portfolios based on Program is aimed at junior and senior high school students, their own investment themes, and create reports about helping them learn about the facts of the economy and soci- them. This experience is aimed at helping participants ety, and develop a zest for participating in society. These sharpen their understanding of the mechanisms of our courses aim at encouraging students to think about what financial and economic systems. Teams are judged based on the job is, who they are, and what kind of life they want to their investment performance and reporting, and the best lead. We make our contribution as one of the companies team wins a study trip to the U.S. offering “corporate access courses” that help students under- Direct contact with finance and economy via ‘man@bow’ through various experiences related to corporate life. stand more about occupations and what companies do, (Let’s learn!) To help a broad spectrum of people deepen their under- Educational television programs on finance standing of the economy and finance, we have worked with About 150 cable television stations around Japan carry the the Nihon Keizai Shimbun to set up the economics web site financial education program “Doki Doki Waku Waku man@bow. The name is based on the Japanese word for Okane no Hanashi,” which deals with the importance of “learning.” The site includes easy-to-understand explana- managing assets. Thinking about the future is important for tions of topics related to economics, investment, current everyone, and it is important to prepare early and correctly. events and market trends. People can use the site as a self- This program offers a nationwide audience reports on a education tool for investment management. wide range of subjects, from the fundamental concepts of (http://manabow.com) money to investment techniques to Q&As on money. Some reports cover such things as students’ first adventures in investing, and the program offers a corner where viewers can discuss their questions about money. Nomura Holdings, Inc. Annual Report 2004 | 49 Oxford University Cooperation between universities and industry, and Columbia University other forms of support for education We support, as lead corporate sponsor, the alternative Nomura Foundation for Academic Promotion investment program at the Columbia University Center on Nomura Foundation for Academic Promotion was estab- Japanese Economy and Business. This program is unprece- lished in 1986 to commemorate Nomura Securities’ 60th dented in that research is conducted and published focusing anniversary. The fund was created to promote academic primarily on alternative investment in Japan. The main research and education in Japan, as well as international contact point is Nomura Funds Research and Technologies. exchanges. It focuses its support mainly on the fields of law, political science and economics. Support for culture and the arts To date, in its support for research projects the fund has Nomura Cultural Foundation supported 365 projects, and in its support for international In May 1990 we founded the Nomura Cultural Foundation exchanges it has helped possible research trips and meetings to realize true mutual understanding in international socie- for 700 individuals. Cooperation with universities ty, and with the aim of supporting personal education and international exchanges in music and the visual arts. The foundation supports about 80 projects each year, We work with the following universities, helping to pro- including lectures, exhibitions, and symposia aimed at inter- mote leading-edge academic research in the field of finance. national exchanges, and training for young artists. We also Oxford University University of Tokyo Kyoto University Hitotsubashi University The Nomura Centre for Quantitative Finance was established within the university. We provide a practical course on derivatives, and offer sup- port for leading-edge research in financial engi- neering. At the University of Tokyo’s Office of University Corporate Relations, we worked on the first joint research project, “Development of a Model for Industry-University Collaboration Based on Market Principles.” The University of Tokyo’s Office of University Corporate Relations was opened in November 2002 as the University’s sole contact point for joint research. Established in 2001, the Research Section for Application of Financial Engineering (Contributed by we Group) at the Institute of Economic Research, Kyoto University conducts research on various topics, including broad appli- cations for financial engineering, improving cor- porate value through business risk management, increasing the sophistication of asset management, and financial sector structural reform. Established the Financial and Capital Markets Research Center as a venue to encourage the exchange of opinions and research among officials from academia, government and industry. 50 | Nomura Holdings, Inc. Annual Report 2004 offer support for foreign students in Japan, who are expect- ed to form future bridges between Japan and other coun- tries. Pacific Music Festival (PMF) The late Leonard Bernstein founded the Pacific Music Festival in 1990, as an international music festival aimed at the spread and development of musical culture through music education. The festival takes place for about one month each year start- ing in early July and is held primarily in Hokkaido. About 100 young musicians assemble from all over the world to take part in educational programs led by world-class artists such as the principals from the Vienna Philharmonic Orchestra. The festi- val publishes the results of its work, and includes open lessons for local schoolchildren and music teachers. Together with the Nomura Cultural Foundation, we have supported the Pacific Music Festival since its inception, as an opportunity for the training of young musicians, and for the development of music on the world stage. We offer special Awards Ceremony for the Nomura Prize held at the Tokyo National University of Fine Arts and Music financial support to ensure the smooth execution of the pro- Expo 2005 Aichi Japan grams. In 1999, our efforts were recognized by the Association We are also a supporter of Expo 2005 Aichi Japan, scheduled for Corporate Support of the Arts, which accorded us its Japan to take place from March 25 to September 25, 2005. The Mecenat Award given for outstanding corporate philanthropic theme of the expo is “Nature’s Wisdom,” aiming for cultural activities. The Nomura Prize innovation and the participation of many countries from around the world. In keeping with the concept of Expo 2005, Nomura In 1996, to mark the 70th anniversary of the founding of Group’s Tokai Three Prefectures Project “Discover Tokai” Nomura Securities and the 5th anniversary of the Nomura was recognized as a partnership project and refers to the three Cultural Foundation, we established the Nomura Prize at the Tokyo National University of Fine Arts and Music (Art prefectures that make up the region: Aichi, Gifu, and Mie. 1) Project to support the strengthening of technological Museum); the prize was awarded for the first time in 1998. and industrial competitiveness in the three prefectures The aim of the prize is to foster the development of figura- of the Tokai region tive art in Japan, to support young sculptors, and to support This project highlights and analyzes the sources of the museum work in collecting, preserving and presenting Tokai region’s industrial competitiveness, examining how works to the public. the region’s various industries have influenced one another The prize is aimed mainly at doctoral candidates in figu- to create the current prosperity, aiming to uncover the his- rative art at the Tokyo National University of Fine Arts and torical background and regional distinctions that made this Music. It is awarded to particularly outstanding students, possible. As one element of this project, we held a first semi- and the fund is used to purchase their works for the univer- nar in May 2003 entitled “Discover Tokai, Rediscover the sity museum’s collection. We make our contribution by reg- Region.” A second seminar was held in September, and fur- ularly purchasing works by outstanding young sculptors, as well as by offering scholarships for young artists. ther events will be held regularly in the future. 2) Tokai capital markets research committee Other activities JOC official partnership Regional groups, financial institutions, universities and local government bodies will be invited to discuss the region’s financial and capital markets, with a special focus on the Since the 2000 Olympics in Sydney, we have also offered financial problems confronting entrepreneurs in the three our support as an official partner of the Japan Olympic prefectures of the Tokai region. We will research these top- Committee, which organizes Japan’s athletes and acts to ics, in keeping with the concept of Expo 2005, to realize promote the ideals of Olympism in Japan. We hope that new kinds of growth in the 21st century, from the perspec- our support for the JOC and its “Good luck Japan” cam- paigns will also support the further development of the tive of financial and capital markets. 3) Asset consulting fair for the three prefectures of the Japanese economy. Tokai region The three prefectures of the Tokai region enjoy an abun- dance of personal financial assets, and the people of the region exhibit a strong interest in asset consultation. We Nomura Holdings, Inc. Annual Report 2004 | 51 Research and Policy Pronouncements held an asset consulting fair in Nagoya in September 2003, The Nomura Institute of Capital Markets Research allowing individual investors in the region to come in con- The Nomura Institute of Capital Markets Research, which tact with the latest investment information, for which we opened its doors on April 1, 2004, with the aim of producing received warm feedback. We plan to continue to provide objective, highly expert and practicable research and policy useful corporate information and investment information to pronouncements, following in the Nomura Research be of assistance to the people of the region. Institute’s tradition since 1965, of research into systems, structures and trends regarding financial and capital markets Survey on household budgets and the costs of as well as financial institutions. raising children With the rise in standards of living, the Engel’s Coefficient The mission of the Nomura Institute of Capital was falling year by year, but the costs of raising children Markets Research continued to rise until 1993. After that, however, the More people are rapidly becoming aware that in order for impact of the economic slump caused these costs to fall. Japan’s economy to develop, a money flow structure leveraging Child-raising costs became an important barometer of the market mechanisms is urgently required. Today, the most relationship between the economy and household budgets. important role of the institute is to conduct research that con- We have conducted this survey every other year since it tributes to reforms of financial systems and securities markets started in 1989. For the past 15 years, we have studied aimed at the establishment of market-based finance. At the quantitative economic data on the state of household budg- same time, we are engaged in research that focuses not only on ets from the perspective of child-raising costs. We discov- Japan but also on global, leading-edge topics in other market ered the importance of this principle and named it the economies. We also see as an important part of our mission “Angel Coefficient” (the proportion of child-raising costs to our engagement in comparative research on the best ways to total household budgets), which is now widespread in manage financial and capital markets in China and emerging Japanese society. nations, firmly based on the analysis of the fundamentals and the study on past experiences in Japan, Europe and the U.S. We publish some of the results of our research in Japanese in the Capital Markets Quarterly, and also in the English-lan- guage Capital Research Journal, for distribution in Japan and throughout the world. 52 | Nomura Holdings, Inc. Annual Report 2004 Directors and Executive Officers Directors Chairman Junichi Ujiie Directors Nobuyuki Koga Hiroshi Toda Kazutoshi Inano Nobuyuki Shigemune Shozo Kumano Masaharu Shibata* Hideaki Kubori* Haruo Tsuji* Fumihide Nomura Koji Tajika* Executive Officers Senior Managing Director Junichi Ujiie President & CEO (Representative Executive Officer) Nobuyuki Koga Chief Executive Officer (CEO) Deputy President & COO (Representative Executive Officer) Hiroshi Toda Chief Operating Officer (COO) Deputy President & Co-COO (Representative Executive Officer) Kazutoshi Inano Co-Chief Operating Officer and Head of Asset Management *Outside director Senior Managing Director Takashi Tsutsui Takashi Yanagiya Kenichi Watanabe Takumi Shibata Hiromi Yamaji Manabu Matsumoto Yoshifumi Kawabata Shogo Sakaguchi Masanori Itatani Yoshimitsu Oura Yusuke Yamada Hitoshi Tada Yasuo Agemura Akihiko Nakamura Hideyuki Takahashi Hiroshi Tanaka Noriyuki Ushiyama Noriyasu Yoshizawa Yasuo Yoshihara Akira Maruyama Head of Global Wholesale Head of Domestic Retail Head of Corporate Regional Management of Europe Region Head of Global Merchant Banking Head of Internal Audit Head of Global Markets Head of Global IT&Operations Regional Management of Americas Region Head of Global Corporate Communications and in charge of General Affairs Dept.and Secretariat Head of Global Investment Banking Regional Management of Asia&Oceania Region In charge of Ethics & Discipline Dept. Chief Financial Officer, Head of Global Risk Management/ Treasury/ Controller/ IR and in charge of Tax Management Dept. Akihito Watanabe Head of Global Research Tetsu Ozaki Head of Global Equity Shigesuke Kashiwagi Head of Global Fixed Income Co-Regional Management of Europe Region Yugo Ishida Kamezo Nakai Takahide Mizuno Atsushi Yoshikawa Nomura Holdings, Inc. Annual Report 2004 | 53 Subsidiaries and Affiliates (As of March 31, 2004) Major Subsidiaries Japan NOMURA SECURITIES CO., LTD. Nihonbashi Head Office: 1-9-1, Nihonbashi, Chuo-ku Tokyo 103-8011, Japan Tel: 81 (3) 3211-1811 Fax: 81 (3) 3278-0420 Otemachi Head Office: 2-2-2, Otemachi, Chiyoda-ku Tokyo 100-8130, Japan Tel: 81 (3) 3211-1811 Fax: 81 (3) 3278-0420 NOMURA ASSET MANAGEMENT CO., LTD. 1-12-1, Nihonbashi, Chuo-ku Tokyo 103-8260, Japan Tel: 81 (3) 3241-9511 Fax: 81 (3) 3241-8275 THE NOMURA TRUST & BANKING CO., LTD. 2-2-2, Otemachi, Chiyoda-ku Tokyo 100-0004, Japan Tel: 81 (3) 5202-1600 Fax: 81 (3) 3275-0760 NOMURA BABCOCK & BROWN CO., LTD. 1-11-1, Nihonbashi, Chuo-ku Tokyo 103-0027, Japan Tel: 81 (3) 3281-7141 Fax: 81 (3) 3281-0215 NOMURA CAPITAL INVESTMENT CO., LTD. 2-2-2, Otemachi, Chiyoda-ku Tokyo 100-8130, Japan Tel: 81 (3) 3278-5151 Fax: 81 (3) 3278-1432 NOMURA INVESTOR RELATIONS CO., LTD. 1-26-2, Nishi-Shinjuku, Shinjuku-ku Tokyo 163-0537, Japan Tel: 81 (3) 3340-0300 Fax: 81 (3) 3340-0308 NOMURA PRINCIPAL FINANCE CO., LTD. 2-2-2, Otemachi, Chiyoda-ku Tokyo 100-8130, Japan Tel: 81 (3) 3278-0243 Fax: 81 (3) 3271-2498 NOMURA FUNDS RESEARCH AND TECHNOLOGIES CO., LTD. 2-2-2, Otemachi, Chiyoda-ku Tokyo 100-8130, Japan Tel: 81 (3) 3276-2151 Fax: 81 (3) 3275-9360 NOMURA PENSION SUPPORT & SER- VICE CO., LTD 1-11-1, Nihonbashi, Chuo-ku Tokyo 103-0027, Japan Tel: 81 (3) 3275-0401 Fax: 81 (3) 3275-2277 NOMURA RESEARCH & ADVISORY CO., LTD. 2-2-2, Otemachi, Chiyoda-ku Tokyo 100-8130, Japan Tel: 81 (3) 5255-9416 Fax: 81 (3) 5255-1775 NOMURA BUSINESS SERVICES CO., LTD. 1-7-2, Nihonbashi-honcho, Chuo-ku Tokyo 103-0023, Japan Tel: 81 (3) 3278-9711 Fax: 81 (3) 3241-8187 NOMURA SATELLITE COMMUNI- CATIONS CO., LTD. 1-9-1, Nihonbashi, Chuo-ku Tokyo 103-8011, Japan Tel: 81 (3) 3271-6372 Fax: 81 (3) 3271-6377 NOMURA INSTITUTE OF CAPITAL MARKETS RESEARCH 1-9-1, Nihonbashi, Chuo-ku Tokyo 103-8011, Japan Tel: 81 (3) 5203-1821 Fax: 81 (3) 5203-1825 Americas NOMURA HOLDING AMERICA INC. 2 World Financial Center, Building B New York, New York 10281-1198, U.S.A. Tel: 1 (212) 667-9300 Fax: 1 (212) 667-1058 NOMURA SECURITIES INTERNA- TIONAL, INC. New York Head Office: 2 World Financial Center, Building B New York, New York 10281-1198, U.S.A. Tel: 1 (212) 667-9300 Fax: 1 (212) 667-1058 Chicago Office: 311 South Wacker Drive, Suite 6100 Chicago, Illinois 60606, U.S.A. Tel: 1 (312) 408-9500 Fax: 1 (312) 408-9555 Los Angeles Office: 6100 Center Drive Suite 1050 Los Angeles, CA90045, U.S.A. Tel: 1 (310) 348-3000 Fax: 1 (310) 348-3144 San Francisco Office 425 California Street, Suite 2600, San Francisco, CA94104, U.S.A. Tel: 1 (415) 445-3800 Fax: 1 (415) 445-3891 São Paulo Representative Office: Av. Brigadeiro Faria Lima no. 2179 6th Floor-cj. 61, São Paulo, S.P. Brazil CEP 01452-000 Tel: 55 (11) 3034-2258 Fax: 55 (11) 3034-2259 NOMURA ASSET CAPITAL CORPORATION 2 World Financial Center, Building B New York, New York 10281-1198, U.S.A. Tel: 1 (212) 667-9300 Fax: 1 (212) 667-1058 THE CAPITAL COMPANY OF AMERICA, LLC 2 World Financial Center, Building B New York, New York 10281-1198, U.S.A. Tel: 1 (212) 667-2250 Fax: 1 (212) 667-1095 NOMURA DERIVATIVE PRODUCTS, INC. 2 World Financial Center, Building B New York, New York 10281-1198, U.S.A. Tel: 1 (212) 667-9416 Fax: 1 (212) 667-1400 NOMURA GLOBAL FINANCIAL PRODUCTS, INC. 2 World Financial Center, Building B New York, New York 10281-1198, U.S.A. Tel: 1 (212) 667-2357 Fax: 1 (212) 667-1047 NOMURA SECURITIES (BERMUDA) LTD. Chesney House, 96 Pitts Bay Road Pembroke HM 08, Bermuda Tel: 1 (441) 296-4050 Fax: 1 (441) 296-4061 54 | Nomura Holdings, Inc. Annual Report 2004 Vienna Budapest Zurich Geneva Frankfurt Amsterdam Paris Luxembourg Dublin London Madrid Milan Beijing Seoul Shanghai Tokyo San Francisco Los Angeles Bahrain Taipei Manila Hong Kong Hanoi Bangkok Kuala Lumpur Singapore Jakarta Toronto Chicago New York Bermuda Sydney São Paulo NOMURA CANADA INC. 2 Bloor Street, West Suite 700, Toronto, Ontario M4W 3R1, Canada Tel: 1 (416) 868-1683 Fax: 1 (416) 359-8956 NOMURA CORPORATE RESEARCH AND ASSET MANAGEMENT, INC. 2 World Financial Center, Building B New York, New York 10281-1198, U.S.A. Tel: 1 (212) 667-9300 Fax: 1 (212) 667-1058 NOMURA FUNDS RESEARCH AND TECHNOLOGIES AMERICA, INC. 2 World Financial Center, Building B New York, New York 10281-1198, U.S.A. Tel: 1 (212) 667-9590 Fax: 1 (212) 667-1251 NOMURA ASSET MANAGEMENT U.S.A. INC. 180 Maiden Lane, 26th Floor New York, New York 10038-4936, U.S.A. Tel: 1 (212) 509-8181 Fax: 1 (212) 509-8835 Europe & Middle East NOMURA SECURITIES CO., LTD. Vienna Representative Office: “Kärntner Ring Hof”Kärntner Ring 5-7, A-1010 Vienna, Austria Tel: 43 (1) 513-2322 Fax: 43 (1) 513-2321 NOMURA EUROPE HOLDINGS PLC Nomura House, 1, St. Martin’s-le-Grand London, EC1A 4NP, U.K. Tel: 44 (207) 521-2000 Fax: 44 (207) 521-2121 NOMURA INTERNATIONAL PLC London Head Office: Nomura House, 1, St. Martin’s-le-Grand London, EC1A 4NP, U.K. Tel: 44 (207) 521-2000 Fax: 44 (207) 521-2121 Madrid Office: Alcala 44, 3-A, 28014, Madrid, Spain Tel: 34 (91) 532-0920 Fax: 34 (91) 521-6010 NOMURA BANK INTERNATIONAL PLC Nomura House, 1, St. Martin’s-le-Grand London, EC1A 4NP, U.K. Tel: 44 (207) 521-2000 Fax: 44 (207) 626-0851 NOMURA GLOBAL FUNDING PLC Nomura House, 1, St. Martin’s-le-Grand London, EC1A 4NP, U.K. Tel: 44 (207) 521-2000 Fax: 44 (207) 521-2121 BANQUE NOMURA FRANCE 164, rue de Rivoli, 75001, Paris, France Tel: 33 (1) 42971900 Fax: 33 (1) 42971888 NOMURA NEDERLAND N.V. Atrium 1st Floor, Strawinskylaan 3109 1077 ZX, Amsterdam, The Netherlands Tel: 31 (20) 5999000 Fax: 31 (20) 4684682 NOMURA EUROPE FINANCE N.V. Atrium 1st Floor, Strawinskylaan 3109 1077 ZX, Amsterdam, The Netherlands Tel: 31 (20) 5999000 Fax: 31 (20) 4684682 NOMURA PRINCIPAL INVESTMENT PLC Nomura House, 1, St. Martin’s-le-Grand London, EC1A 4NP, U.K. Tel: 44 (207) 521-2000 Fax: 44 (207) 521-2121 NOMURA BANK (LUXEMBOURG) S.A. 6, avenue Emile Reuter, L-2420 Luxembourg Grand Duchy of Luxembourg Tel: 352-4638888 Fax: 352-463333 NOMURA BANK (DEUTSCHLAND) GmbH MesseTurm D-60308 Frankfurt am Main Federal Republic of Germany Tel: 49 (69) 97508-0 Fax: 49 (69) 97508-600 NOMURA BANK (SWITZERLAND) LTD. Zurich Head Office: Kasernenstrasse 1, P.O. Box CH-8021 Zurich Switzerland Tel: 41 (1) 2957111 Fax: 41 (1) 2422141 Geneva Office: 10, Quai du Seujet, P.O. Box CH-1211 Geneva 11, Switzerland Tel: 41 (22) 9098400 Fax: 41 (22) 7328314 NOMURA ITALIA S.I.M.p.A. Via Palestro, 2, 20121 Milan, Italy Tel: 39 (02) 76461 Fax: 39 (02) 76317106 NOMURA CORPORATE ADVISORY (CENTRAL EUROPE) LTD. East-West Business Center 7th Floor, 1088 Budapest Rákóczi út 1-3, Hungary Tel: 36 (1) 235-5200 Fax: 36 (1) 235-5299 NOMURA INVESTMENT BANKING (MIDDLE EAST) E.C. 7th Floor, BMB Centre Diplomatic Area, P.O. Box 26893 Manama, Bahrain Tel: 973-530531 Fax: 973-530365 Nomura Holdings, Inc. Annual Report 2004 | 55 NOMURA FUNDING FACILITY CORPORATION LIMITED International House, 3 Harbourmaster Place IFSC, Dublin 1, Ireland Tel: 353 (1) 667-0200 Fax: 353 (1) 670-0288 NOMURA ASSET MANAGEMENT U.K. LIMITED 6th Floor, Nomura House, 1, St. Martin’s-le-Grand, London EC1A 4NT, U.K. Tel: 44 (207) 521-3333 Fax: 44 (207) 796-1246 Asia & Oceania NOMURA SECURITIES CO., LTD. Seoul Branch Office: 12th Floor, Youngpoong Building 33 Seorin-dong, Chongro-ku, Seoul, Korea Tel: 82 (2) 399-6100 Fax: 82 (2) 399-5222 Taipei Branch Office: 14th Floor, 109 Min-Sheng East Road Sec. 3, Taipei, Taiwan R.O.C. Tel: 886 (2) 2547-9300 Fax: 886 (2) 2547-9388 Beijing Representative Office: 1212, Beijing Fortune Building 5 Dongsanhuan-Beilu, Chaoyang District Beijing, People’s Republic of China Tel: 86 (10) 6590-8181 Fax: 86 (10) 6590-8182 Shanghai Representative Office: 601, Garden Hotel Shanghai 58 Maoming Nan-lu, Shanghai People’s Republic of China Tel: 86 (21) 6415-1565 Fax: 86 (21) 6415-1317 Hanoi Representative Office: Unit 1103, 11th Floor, Hanoi Central Office Building 44B Ly Thuong, Kiet Street, Hanoi, Vietnam Tel: 84 (4) 8250-414 Fax: 84 (4) 8250-219 NOMURA ASIA HOLDING N. V. Atrium 1st Floor, Strawinskylaan 3109 1077 ZX, Amsterdam, The Netherlands Tel: 31 (20) 5999000 Fax: 31 (20) 4684682 NOMURA INTERNATIONAL (HONG KONG) LIMITED 30/F, Two International Finance Centre, 8 Finance Street,Central, Hong Kong Tel: 852 (2536) 1111 Fax: 852 (2536) 1888 NOMURA SINGAPORE LIMITED 6 Battery Road, #34-01, Singapore 049909 Singapore Tel: 65 (6420) 1811 Fax: 65 (6420) 1888 NOMURA ADVISORY SERVICES (MALAYSIA) SDN. BHD. Suite No16. 3, Level 16, Letter Box No.46 Menara IMC, 8 Jalan Sultan Ismail 50250 Kuala Lumpur, Malaysia Tel: 60 (3) 2079-6811 Fax: 60 (3) 2079-6888 P.T. NOMURA INDONESIA 7th Floor, Resona Perdania Bank Jl. Jend. Sudirman Kav. 40-41 Jakarta 10210, The Republic of Indonesia Tel: 62 (21) 571-8888 Fax: 62 (21) 571-8881 NOMURA SECURITIES PHILIP- PINES, INC. 18F, Tower The Enterprise Center 6766 Ayala Avenue Corner, Paseo de Roxas Makati City 1200, Philippines Tel: 63 (2) 886-5240 Fax: 63 (2) 886-5250 NOMURA AUSTRALIA LIMITED Level 32, Colonial Centre, 52 Martin Place, Sydney, N.S.W. 2000, Australia Tel: 61 (2) 9321-3500 Fax: 61 (2) 9321-3599 NOMURA ASSET MANAGEMENT SINGAPORE LIMITED 6 Battery Road #34-02 Singapore 049909 Singapore Tel: 65 (6420) 1788 Fax: 65 (6420) 1799 NOMURA ASSET MANAGEMENT HONG KONG LIMITED 30/F Two International Finance Centre 8 Finance Street, Central, Hong Kong Tel: 852 (2524) 8061 Fax: 852 (2536) 1067 Major Affiliates and Group Companies Japan NOMURA LAND AND BUILDING CO., LTD. 1-7-2, Nihonbashi-honcho, Chuo-ku Tokyo 103-0023, Japan Tel: 81 (3) 3231-6221 Fax:81 (3) 3231-4625 NOMURA RESEARCH INSTITUTE, LTD. 2-2-1, Otemachi, Chiyoda-ku Tokyo 100-0004, Japan Tel: 81 (3) 5255-1800 Fax:81 (3) 5255-9312 NOMURA REAL ESTATE DEVELOP- MENT CO., LTD. 1-26-2, Nishi-Shinjuku, Shinjuku-ku Tokyo 163-0566, Japan Tel: 81 (3) 3348-8811 Fax:81 (3) 3345-0381 JAFCO CO., LTD. 1-8-2, Marunouchi, Chiyoda-ku Tokyo 100-0005, Japan Tel: 81 (3) 5223-7536 Fax:81 (3) 5223-7561 Asia & Oceania NOMURA CORPORATE ADVISORY (CHINA) CO., LTD. 1218, Beijing Fortune Building 5 Dongsanhuan-Beilu, Chaoyang District, Beijing, People’s Republic of China Tel: 86 (10) 6590-9091 Fax:86 (10) 6590-9088 CAPITAL NOMURA SECURITIES PUBLIC COMPANY LIMITED 21/3 Thai Wah Tower, Ground Floor South Sathorn Road, Bangkok 10120 Thailand Tel: 66 (2) 285-0060 Fax:66 (2) 285-0620 INTERNATIONAL UNION LEASING CO., LTD. 420, Beijing Fortune Building 5 Dongsanhuan-Beilu, Chaoyang District, Beijing, People’s Republic of China Tel: 86 (10) 6590-8989 Fax:86 (10) 6590-8999 56 | Nomura Holdings, Inc. Annual Report 2004 Domestic Network (Alphabetical order for each region) (As of April 1, 2004) Hokkaido Tohoku Kanto Office Name Head Office Asahikawa Branch Office Hakodate Branch Office Kushiro Branch Office Sapporo Branch Office Akita Branch Office Aomori Branch Office Fukushima Branch Office Koriyama Branch Office Morioka Branch Office Sendai Branch Office Yamagata Branch Office Aobadai Branch Office Atsugi Branch Office Chiba Branch Office Fujisawa Branch Office Funabashi Branch Office Hiratsuka Branch Office Kashiwa Branch Office Kawagoe Branch Office Kawaguchi Branch Office Kawasaki Branch Office Kofu Branch Office Matsudo Branch Office Mito Branch Office Odawara Branch Office Omiya Branch Office Saitama Branch Office Shinyurigaoka Branch Office Takasaki Branch Office Tama Plaza Branch Office Tokorozawa Branch Office Totsuka Branch Office Tsuchiura Branch Office Urawa Branch Office Utsunomiya Branch Office Yokohama Branch Office Yokohama-eki Nishiguchi Branch Office Yokosuka Branch Office Tokyo metropolitan area Chofu Branch Office Fuchu Branch Office Gotanda Branch Office Hachioji Branch Office Ikebukuro Branch Office Ikebukuro Metropolitan Plaza Branch Office Jiyugaoka Branch Office Kamata Branch Office Kichijoji Branch Office Koiwa Branch Office Kokubunji Branch Office Machida Branch Office Mita Branch Office Nakano Branch Office Nerima Branch Office Ogikubo Branch Office Omori Branch Office Seijo Branch Office Senju Branch Office Shibuya Branch Office Shinbashi Branch Office Shinjuku Branch Office Shinjuku-eki Nishiguchi Branch Office Shinjuku Nomura Building Branch Office Tachikawa Branch Office Tamagawa Branch Office Tokyo Branch Office Toranomon Branch Office Telephone Address 81 (3) 3211-1811 1-9-1, Nihonbashi, Chuo-ku, Tokyo 103-8011 81 (166) 23-1181 81 (138) 26-8111 81 (154) 23-1171 81 (11) 261-7211 81 (18) 831-2111 81 (17) 723-4111 81 (24) 522-2111 81 (24) 923-8711 81 (19) 653-5000 81 (22) 221-3111 81 (23) 622-1313 81 (45) 985-1171 81 (46) 224-8666 81 (43) 227-2161 81 (466) 25-1311 81 (47) 433-2211 81 (463) 21-2111 81 (4) 7163-2011 81 (49) 225-5151 81 (48) 256-3811 81 (44) 233-6751 81 (55) 237-1781 81 (47) 362-1221 81 (29) 224-5231 81(465) 24-8511 81 (48) 641-8111 81 (48) 645-8100 81 (44) 953-6511 81 (27) 323-9111 81 (45) 902-1122 81 (4) 2923-3811 81 (45) 881-1181 81 (29) 821-8811 81 (48) 833-1881 81 (28) 636-2181 81 (45) 641-2101 81 (45) 311-1671 81 (46) 823-2550 81 (424) 98-6011 81 (42) 369-8111 81 (3) 3491-9101 81 (426) 46-3811 81 (3) 3983-1111 81 (3) 3988-1181 81 (3) 3718-3371 81 (3) 3783-5101 81 (422) 22-8181 81 (3) 3657-1141 81 (42) 328-6011 81 (42) 725-2111 81 (3) 3769-6651 81 (3) 3228-7755 81 (3) 3994-7711 81 (3) 3392-6011 81 (3) 3774-1181 81 (3) 3482-2011 81 (3) 3882-8411 81 (3) 3400-7111 81 (3) 3572-0111 81 (3) 3205-1001 81 (3) 3342-1281 81 (3) 3348-8211 81 (42) 524-1111 81 (3) 3708-1811 81 (3) 3211-2411 81 (3) 3583-2301 1 Migi, 9 Gojo-dori, Asahikawa-shi, Hokkaido 070-0035 7-15, Wakamatsu-cho, Hakodate-shi, Hokkaido 040-0063 12-1-4, Kitaodori, Kushiro-shi, Hokkaido 085-0015 4, Kitasanjo-nishi, Chuo-ku, Sapporo-shi, Hokkaido 060-0003 4-2-7, Nakadori, Akita-shi, Akita 010-0001 2-6-29, Shin-machi, Aomori-shi, Aomori 030-0801 4-1, O-machi, Fukushima-shi, Fukushima 960-8041 2-5-12, Ekimae, Koriyama-shi, Fukushima 963-8002 2-2-18, Odori, Morioka-shi, Iwate 020-0022 2-1-1, Chuo, Aoba-ku, Sendai-shi, Miyagi 980-8730 1-7-30, Toka-machi, Yamagata-shi, Yamagata 990-0031 2-6-1, Aobadai, Aoba-ku, Yokohama-shi, Kanagawa 227-0062 2-2-20, Naka-cho, Atsugi-shi, Kanagawa 243-0018 1-14-13, Fujimi, Chuo-ku, Chiba-shi, Chiba 260-0015 1-5-10, Kugenumaishigami, Fujisawa-shi, Kanagawa 251-0025 2-1-33, Hon-cho, Funabashi-shi, Chiba 273-0005 2-14, Beniya-cho, Hiratsuka-shi, Kanagawa 254-0043 1-4-29, Kashiwa, Kashiwa-shi, Chiba 277-8769 105, Wakita-machi, Kawagoe-shi, Saitama 350-1122 3-10-1, Sakae-cho, Kawaguchi-shi, Saitama 332-0017 5-2, Higashida-cho, Kawasaki-ku, Kawasaki-shi, Kanagawa 210-8604 1-17-10, Marunouchi, Kofu-shi, Yamanashi 400-0031 1281-29, Matsudo, Matsudo-shi, Chiba 271-0092 1-3-37, Miya-machi, Mito-shi, Ibaraki 310-0015 1-6-1, Sakae-cho, Odawara-shi, Kanagawa 250-0011 1-24, Daimon-cho, Omiya-ku, Saitama-shi, Saitama 330-0846 2-155, Sakuragi-cho, Omiya-ku, Saitama-shi, Saitama 330-0854 1-5-3, Kamiaso, Aso-ku, Kawasaki-shi, Kanagawa 215-0021 58-1, Yashima-cho, Takasaki-shi, Gunma 370-0849 5-1-2, Utsukushigaoka, Aoba-ku, Yokohama-shi, Kanagawa 225-0002 10-19, Hiyoshi-cho, Tokorozawa-shi, Saitama 359-1123 489-1, Kamikurata-cho, Totsuka-ku, Yokohama-shi, Kanagawa 244-0816 1-10-8, Kawaguchi, Tsuchiura-shi, Ibaraki 300-0033 2-13-8, Takasago, Saitama-shi, Saitama 330-0063 2-1-1, Babadori, Utsunomiya-shi, Tochigi 320-0026 4-52, Onoe-cho, Naka-ku, Yokohama-shi, Kanagawa 231-0015 1-5-10, Kitasaiwai, Nishi-ku, Yokohama-shi, Kanagawa 220-0004 1-9, Odaki-cho, Yokosuka-shi, Kanagawa 238-0008 1-36-9, Fuda, Chofu-shi, Tokyo 182-0024 1-8-1, Fuchu-cho, Fuchu-shi, Tokyo 183-8691 1-5-1, Nishi-Gotanda, Shinagawa-ku, Tokyo 141-0031 11-6, Asahi-cho, Hachioji-shi, Tokyo 192-0083 1-27-10, Minami-Ikebukuro, Toshima-ku, Tokyo 171-0022 1-11-1, Nishi-Ikebukuro, Toshima-ku, Tokyo 171-0021 2-10-9, Jiyugaoka, Meguro-ku, Tokyo 152-0035 5-15-8, Kamata, Ota-ku, Tokyo 144-0052 2-2-16, Kichijoji-honcho, Musashino-shi, Tokyo 180-0004 7-22-6, Minami-Koiwa, Edogawa-ku, Tokyo 133-0056 2-12-2, Hon-cho, Kokubunji-shi, Tokyo 185-0012 6-3-9, Haramachida, Machida-shi, Tokyo 194-0013 5-20-14, Shiba, Minato-ku, Tokyo 108-0014 5-65-3, Nakano, Nakano-ku, Tokyo 164-0001 5-17-10, Toyotama-kita, Nerima-ku, Tokyo 176-0012 1-8-8, Kamiogi, Suginami-ku, Tokyo 167-0043 2-5-10, Sanno, Ota-ku, Tokyo 143-0023 5-8-1, Seijo, Setagaya-ku, Tokyo 157-0066 2-18, Senjukotobuki-cho, Adachi-ku, Tokyo 120-0033 1-14-16, Shibuya, Shibuya-ku, Tokyo 150-0002 1-9-6, Shinbashi, Minato-ku, Tokyo 105-0004 5-17-9, Shinjuku, Shinjuku-ku, Tokyo 163-8691 1-6-1, Nishi-Shinjuku, Shinjuku-ku, Tokyo 163-1590 1-26-2, Nishi-Shinjuku, Shinjuku-ku, Tokyo 163-0502 2-5-1, Akebono-cho, Tachikawa-shi, Tokyo 190-0012 3-7-18, Tamagawa, Setagaya-ku, Tokyo 158-0094 1-8-2, Marunouchi, Chiyoda-ku, Tokyo 100-0005 2-1-1, Toranomon, Minato-ku, Tokyo 105-0001 Nomura Holdings, Inc. Annual Report 2004 | 57 Office Name Telephone Address Chubu/Hokuriku Kinki Chugoku/Shikoku Kyushu/Okinawa Ueno Branch Office Fukui Branch Office Gifu Branch Office Hamamatsu Branch Office Kanayama Branch Office Kanazawa Branch Office Matsumoto Branch Office Nagano Branch Office Nagoya Branch Office Nagoya-ekimae Branch Office Niigata Branch Office Numazu Branch Office Okazaki Branch Office Shizuoka Branch Office Toyama Branch Office Toyohashi Branch Office Toyota Branch Office Tsu Branch Office Yokkaichi Branch Office Akashi Branch Office Higashiosaka Branch Office Himeji Branch Office Hirakata Branch Office Kishiwada Branch Office Kobe Branch Office Kyoto Branch Office Nanba Branch Office Nara Branch Office Nishinomiya Branch Office Osaka Branch Office Otsu Branch Office Sakai Branch Office Senri Branch Office Takatsuki Branch Office Tennoji-eki Branch Office Toyonaka Branch Office Tsukaguchi Branch Office Uehonmachi Branch Office Umeda Branch Office Wakayama Branch Office Fukuyama Branch Office Hiroshima Branch Office Kochi Branch Office Kurashiki Branch Office Matsue Branch Office Matsuyama Branch Office Okayama Branch Office Shimonoseki Branch Office Takamatsu Branch Office Tokushima Branch Office Tokuyama Branch Office Yonago Branch Office Fukuoka Branch Office Kagoshima Branch Office Kitakyushu Branch Office Kumamoto Branch Office Kurume Branch Office Miyazaki Branch Office Nagasaki Branch Office Naha Branch Office Oita Branch Office Saga Branch Office 58 | Nomura Holdings, Inc. Annual Report 2004 81 (3) 3831-9211 81 (776) 22-8011 81 (58) 262-3101 81 (53) 454-3151 81 (52) 322-1261 81 (76) 221-3145 81 (263) 33-6781 81 (26) 228-1811 81 (52) 201-2311 81 (52) 561-5251 81 (25) 225-7777 81 (55) 962-4444 81 (564) 23-1811 81 (54) 254-6151 81 (76) 421-7561 81 (532) 53-1121 81 (565) 33-1300 81 (59) 223-2111 81 (593) 53-2141 81 (78) 918-1155 81 (6) 6783-5241 81 (792) 22-6101 81 (72) 846-2511 81 (724) 38-8188 81 (78) 321-2201 81 (75) 221-7211 81 (6) 6632-5081 81 (742) 22-0351 81 (798) 64-8181 81 (6) 6201-1281 81 (77) 526-3131 81 (72) 221-9241 81 (6) 6831-1661 81 (72) 681-2111 81 (6) 6779-1431 81 (6) 6845-8401 81 (6) 6421-1400 81 (6) 6772-1261 81 (6) 6313-3431 81 (73) 431-2111 81 (84) 921-3111 81 (82) 247-4131 81 (88) 823-3311 81 (86) 421-1511 81 (852) 22-1515 81 (89) 941-0131 81 (86) 224-1181 81 (832) 31-3211 81 (87) 851-4111 81 (88) 623-0161 81 (834) 22-0811 81 (859) 34-2851 81 (92) 771-3111 81 (99) 226-8141 81 (93) 521-7581 81 (96) 352-3181 81 (942) 33-7151 81 (985) 24-7191 81 (95) 821-1161 81 (98) 864-2471 81 (97) 535-1211 81 (952) 22-7111 2-1-8, Ueno, Taito-ku, Tokyo 110-8501 3-4-1, Ote, Fukui-shi, Fukui 910-0005 7-15, Kanda-machi, Gifu-shi, Gifu 500-8833 330-5, Tamachi, Hamamatsu-shi, Shizuoka 430-0944 1-12-14, Kanayama, Naka-ku, Nagoya-shi, Nagoya, Aichi 460-0022 3-25, Takaoka-machi, Kanazawa-shi, Ishikawa 920-0864 2-1-34, Chuo, Matsumoto-shi, Nagano 390-0811 1361, Suehiro-cho, Minami-Nagano, Nagano-shi, Nagano 380-8640 2-19-22, Nishiki, Naka-ku, Nagoya-shi, Aichi 460-8689 3-22-8, Mei-eki, Nakamura-ku, Nagoya-shi, Aichi 450-8666 1215-7, Rokuban-cho, Kamiokawamaedori, Niigata-shi, Niigata 951-8068 3-4-21, Otemachi, Numazu-shi, Shizuoka 410-8691 2-11, Koseidori-nishi, Okazaki-shi, Aichi 444-0059 6-6, Miyuki-cho, Shizuoka-shi, Shizuoka 420-0857 1-4-3, Tsutsumichodori, Toyama-shi, Toyama 930-0046 1-38, Ekimaeodori, Toyohashi-shi, Aichi 440-0888 1-200, Nishi-machi, Toyota-shi, Aichi 471-0025 371, Hadokoro-cho, Tsu-shi, Mie 514-0009 1-15, Suwasakae-machi, Yokkaichi-shi, Mie 510-0086 2-1-26, Hon-machi, Akashi-shi, Hyogo 673-0892 2-2-18, Chodo, Higashiosaka-shi, Osaka 577-0056 18, Shirogane-cho, Himeji-shi, Hyogo 670-0902 5-15, Okahigashi-machi, Hirakata-shi, Osaka 573-0032 6-10, Sujikai-cho, Kishiwada-shi, Osaka 596-0057 1-5-32, Sannomiya-cho, Chuo-ku, Kobe-shi, Hyogo 650-0021 Sakai-machi kado, Shijo-dori, Shimogyo-ku, Kyoto-shi, Kyoto 600-8006 4-1-15, Nanba, Chuo-ku, Osaka-shi, Osaka 542-0076 45, Hayashikoji-cho, Nara-shi, Nara 630-8227 1-3-8, Kofuen, Nishinomiya-shi, Hyogo 662-0832 2-5-4, Kitahama, Chuo-ku, Osaka-shi, Osaka 540-8604 3-1-27, Nagara, Otsu-shi, Shiga 520-0046 59, Miyukidori, Mikunigaoka, Sakai-shi, Osaka 590-0028 1-1-5, Shin-senrihigashi-machi, Toyonaka-shi, Osaka 560-0082 3-1-101, Konya-cho, Takatsuki-shi, Osaka 569-0804 10-48, Hidenin-cho, Tennoji-ku, Osaka-shi, Osaka 543-0055 1-2-33, Hon-machi, Toyonaka-shi, Osaka 560-0021 1-10-20, Tsukaguchi-cho, Amagasaki-shi, Hyogo 661-0002 6-5-28, Uehonmachi, Tennoji-ku, Osaka-shi, Osaka 543-0001 2-4, Komatsubara-cho, Kita-ku, Osaka-shi, Osaka 530-0018 9-2, Juban-cho, Wakayama-shi, Wakayama 640-8152 3-1, Higashisakura-machi, Fukuyama-shi, Hiroshima 720-0065 2-23, Tate-machi, Naka-ku, Hiroshima-shi, Hiroshima 730-0032 1-2-6, Harimaya-cho, Kochi-shi, Kochi 780-0822 3-9-10, Achi, Kurashiki-shi, Okayama 710-0055 484-16, Asahi-machi, Matsue-shi, Shimane 690-0003 5-7-3, Chifune-machi, Matsuyama-shi, Ehime 790-8691 6-24, Nishiki-machi, Okayama-shi, Okayama 700-8640 1-3-15, Hosoe-cho, Shimonoseki-shi, Yamaguchi 750-8691 10-5, Furushin-machi, Takamatsu-shi, Kagawa 760-0025 3-14, Yaoya-machi, Tokushima-shi, Tokushima 770-0841 1-3, Hon-machi, Shunan-shi, Yamaguchi 745-0036 1-27-13, Kakuban-cho, Yonago-shi, Tottori 683-0812 2-14-8, Tenjin, Chuo-ku, Fukuoka-shi, Fukuoka 810-0001 1-4, Sennichi-cho, Kagoshima-shi, Kagoshima 892-0843 3-1-1, Kyo-machi, Kokurakita-ku, Kitakyushu-shi, Fukuoka 802-0002 12-30, Hanabata-cho, Kumamoto-shi, Kumamoto 860-8604 24-18, Hiyoshi-machi, Kurume-shi, Fukuoka 830-0017 4-1-2, Tachibanadori-higashi, Miyazaki-shi, Miyazaki 880-8607 6-5, Doza-machi, Nagasaki-shi, Nagasaki 850-8691 1-1-19, Matsuyama, Naha-shi, Okinawa 900-0032 1-3-20, Chuo-machi, Oita-shi, Oita 870-0035 3-15, Ekiminami-honmachi, Saga-shi, Saga 840-0816 Financial Section Contents Five-Year Summary Quarterly Financial Data Consolidated Balance Sheets Consolidated Income Statements Changes in Additional Paid–in Capital and Retained Earnings Consolidated Statements of Comprehensive Income Consolidated Statements of Cash Flows 60 61 62 64 65 65 66 Nomura Holdings, Inc. Annual Report 2004 | 59 Please note that these consolidated financial statements are prepared solely for the convenience of the readers and do not include the notes herein. The readers are strongly recommended to refer to the notes contained in the Form 20-F. Five-Year Summary (U.S. GAAP) Operating Results: Millions of yen Millions of U.S. dollars 2000 2001 2002 2003 2004 2004 (1999.4.1〜 2000.3.31) (2000.4.1〜 2001.3.31) (2001.4.1〜 2002.3.31) (2002.4.1〜 2003.3.31) (2003.4.1〜 2004.3.31) (2003.4.1〜 2004.3.31) Revenue: Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fees from investment banking . . . . . . . . . . . . . . . . . . . . . . Asset management and portfolio service fees . . . . . . . . . . . Net gain on trading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest and dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Loss) gain on investments in equity securities . . . . . . . . . . Gain from changes in equity of an affiliated company . . . . PFG entities product sales . . . . . . . . . . . . . . . . . . . . . . . . . PFG entities rental income . . . . . . . . . . . . . . . . . . . . . . . . Gain on sales of PFG entities . . . . . . . . . . . . . . . . . . . . . . . Gain (loss) on private equity investments . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-interest expenses: Compensation and benefits . . . . . . . . . . . . . . . . . . . . . . . . Commissions and floor brokerage . . . . . . . . . . . . . . . . . . . Information processing and communications . . . . . . . . . . . Occupancy and related depreciation . . . . . . . . . . . . . . . . . Business development expenses . . . . . . . . . . . . . . . . . . . . . PFG entities cost of goods sold . . . . . . . . . . . . . . . . . . . . . PFG entities expenses associated with rental income . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total non-interest expenses . . . . . . . . . . . . . . . . . . . . . Income before income taxes and cumulative ¥329,332 93,644 63,799 253,328 419,742 90,839 — 56,476 144,005 — — 48,616 1,499,781 437,131 1,062,650 286,268 21,342 54,961 71,191 20,418 37,408 51,706 147,136 690,430 ¥189,841 87,160 144,882 307,989 518,941 (98,968) — 117,523 103,339 — — 98,591 1,469,298 553,643 915,655 305,190 26,393 70,998 65,319 29,940 84,004 43,760 133,879 759,483 ¥140,001 75,255 109,985 162,228 500,541 (55,860) 3,504 294,931 177,053 116,324 232,472 68,965 1,825,399 504,048 1,321,351 379,540 20,962 87,252 73,787 26,652 200,871 111,529 247,786 1,148,379 ¥141,640 81,847 79,290 172,308 401,924 (41,288) — — — — (14,391) 19,589 840,919 274,645 566,274 244,167 20,844 77,389 57,152 24,361 — — 94,952 518,865 ¥210,216 86,994 66,193 229,042 396,870 55,888 — — — — 13,138 41,205 1,099,546 296,443 803,103 259,336 19,169 80,031 54,221 23,100 — — 84,570 520,427 effect of accounting change . . . . . . . . . . . . . . . . . . . . . . . . 372,220 156,172 172,972 47,409 282,676 Income tax expense: Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income before cumulative effect of accounting change . . . Cumulative effect of accounting change . . . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,866 155,805 168,671 203,549 — ¥203,549 53,693 45,069 98,762 57,410 — ¥57,410 Cash Flow: Net cash (used in) provided by operating activities . . . . . . Net cash (used in) provided by investing activities . . . . . . . . Net cash (used in) provided by financing activities . . . . . . Cash and cash equivalents at end of the year . . . . . . . . . . . ¥599,968 (326,099) (72,386) ¥522,970 ¥366,237 (271,403) (101,396) ¥503,676 Balance Sheet Data (period end): Cash and cash deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loans and receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trading assets and private equity investments . . . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Payables and deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trading liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-recourse PFG entities loans and bonds . . . . . . . . . . . . Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . Total liabilities and shareholders’ equity . . . . . . . . . . ¥1,074,691 6,812,323 4,365,382 2,358,472 14,610,868 1,059,275 6,256,084 3,068,711 556,441 1,712,124 547,257 13,199,892 1,410,976 ¥14,610,868 ¥828,649 9,811,149 3,625,195 2,881,031 17,146,024 948,269 8,732,502 2,857,316 609,557 1,692,738 869,214 15,709,596 1,436,428 ¥17,146,024 60 | Nomura Holdings, Inc. Annual Report 2004 61,898 (56,972) 4,926 168,046 — ¥168,046 Millions of yen ¥(1,303,384) (52,182) 1,195,507 ¥356,635 Millions of yen ¥775,734 10,690,291 4,877,257 1,414,991 17,758,273 1,471,384 9,497,084 2,693,746 518,156 1,972,974 — 16,153,344 1,604,929 ¥17,758,273 25,519 11,776 37,295 10,114 109,799 ¥119,913 108,434 1,913 110,347 172,329 — ¥172,329 ¥34,113 134,053 (24,612) ¥491,237 ¥(1,825,894) 45,471 1,945,536 ¥637,372 ¥955,509 13,100,242 5,926,700 1,186,995 21,169,446 1,183,535 11,773,794 3,888,720 411,699 2,269,370 — 19,527,118 1,642,328 ¥21,169,446 ¥930,637 19,128,028 8,609,096 1,085,205 29,752,966 3,024,341 16,164,637 5,976,966 415,865 2,385,469 — 27,967,278 1,785,688 ¥29,752,966 $2,018 835 635 2,199 3,809 536 — — — — 126 396 10,554 2,845 7,709 2,489 184 768 520 222 — — 813 4,996 2,713 1,041 18 1,059 1,654 — $1,654 Millions of U.S. dollars $(17,526) 436 18,675 $6,118 Millions of U.S. dollars $8,933 183,605 82,637 10,417 285,592 29,030 155,161 57,371 3,992 22,898 — 268,452 17,140 $285,592 Quarterly Financial Data Millions of yen 2003 2004 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q (2002.4.1〜 2002.6.30) (2002.7.1〜 2002.9.30) (2002.10.1〜 2002.12.31) (2003.1.1〜 2003.3.31) (2003.4.1〜 2003.6.30) (2003.7.1〜 2003.9.30) (2003.10.1〜 2003.12.31) (2004.1.1〜 2004.3.31) Revenue: Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥46,091 ¥34,685 ¥34,303 ¥26,561 ¥33,752 ¥55,967 ¥57,590 ¥62,907 Fees from investment banking . . . . . . . . . . . . . . . . . . . Asset management and portfolio service fees . . . . . . . . Net gain on trading . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest and dividends . . . . . . . . . . . . . . . . . . . . . . . . . (Loss) gain on investments in equity securities . . . . . . . Gain (loss) on private equity investments . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,632 24,190 36,964 91,065 (3,325) 3,037 3,317 18,281 21,905 29,185 16,937 17,541 48,340 115,848 107,190 (7,094) (5,929) 6,401 (21,912) (1,991) 3,729 30,997 15,654 57,819 87,821 (8,957) (9,508) 6,142 14,498 13,735 80,432 19,860 17,022 67,097 113,844 104,036 16,168 15,601 (669) 8,030 7,267 6,738 24,408 16,792 33,800 78,333 2,788 (2,105) 5,845 28,228 18,644 47,713 100,657 21,331 8,645 20,592 Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216,971 213,282 204,137 206,529 279,790 293,588 217,451 308,717 Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74,305 72,533 71,990 55,817 79,703 78,901 67,220 70,619 Net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥142,666 ¥140,749 ¥132,147 ¥150,712 ¥200,087 ¥214,687 ¥150,231 ¥238,098 Non-interest expenses: Compensation and benefits . . . . . . . . . . . . . . . . . . . . . ¥63,595 ¥57,688 ¥59,472 ¥63,412 ¥65,903 ¥67,686 ¥61,823 ¥63,924 Commissions and floor brokerage . . . . . . . . . . . . . . . . Information processing and communications . . . . . . . . Occupancy and related depreciation . . . . . . . . . . . . . . . Business development expenses . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,477 18,176 14,563 5,895 17,589 5,553 19,233 14,537 7,782 13,690 3,564 18,801 14,118 4,823 12,379 7,250 21,179 13,934 5,861 51,294 4,904 18,890 13,319 4,983 20,788 4,625 19,520 13,506 5,428 15,971 3,482 19,155 12,929 5,495 17,416 6,158 22,466 14,467 7,194 30,395 Total non-interest expenses . . . . . . . . . . . . . . . . . . 124,295 118,483 113,157 162,930 128,787 126,736 120,300 144,604 Income (loss) before income taxes and cumulative effect of accounting change . . . . . . . . . . . . . 18,371 22,266 18,990 (12,218) 71,300 87,951 29,931 93,494 Income tax expense (benefit): Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . 15,100 (4,775) 10,325 (1,256) 10,297 9,041 2,085 1,934 4,019 9,590 4,320 13,910 27,093 5,159 32,252 38,418 1,895 40,313 15,265 27,658 (1,065) (4,076) 14,200 23,582 Income (loss) before cumulative effect of accounting change 8,046 13,225 14,971 (26,128) 39,048 47,638 15,731 69,912 Cumulative effect of accounting change . . . . . . . . . . . . 109,799 — — — — — — — Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥117,845 ¥13,225 ¥14,971 ¥(26,128) ¥39,048 ¥47,638 ¥15,731 ¥69,912 Per share of common stock: Basic Income (loss) before cumulative effect of accounting change Cumulative effect of accounting change . . . . . . . . . . . . Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted Income (loss) before cumulative effect of accounting change Cumulative effect of accounting change . . . . . . . . . . . . Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥4.09 55.86 ¥59.95 ¥4.09 55.86 ¥59.95 ¥6.73 — ¥6.73 ¥6.73 — ¥6.73 Yen ¥7.65 ¥(13.46) ¥20.14 ¥24.58 ¥8.10 ¥36.01 — — — — — — ¥7.65 ¥(13.46) ¥20.14 ¥24.58 ¥8.10 ¥36.01 ¥7.65 ¥(13.46) ¥20.14 ¥24.58 ¥8.10 ¥36.01 — — — — — — ¥7.65 ¥(13.46) ¥20.14 ¥24.58 ¥8.10 ¥36.01 Nomura Holdings, Inc. Annual Report 2004 | 61 Consolidated Balance Sheets Millions of yen Millions of U.S.dollars 2003 (2003.3.31) 2004 (2004.3.31) 2004 (2004.3.31) ASSETS Cash and cash deposits: Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥491,237 ¥637,372 $6,118 Time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deposits with stock exchanges and other segregated cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 422,570 41,702 955,509 248,737 44,528 930,637 2,388 427 8,933 Loans and receivables: Loans receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Receivables from customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Receivables from other than customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 436,371 404,388 311,665 543,894 10,744 464,776 Receivables under resale agreements and securities borrowed transactions . . . . . . . . . . . . . . . . . . . . . . . 8,603,170 12,881,752 Securities pledged as collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,359,807 5,232,640 5,221 103 4,461 123,648 50,227 Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (15,159) (5,778) (55) Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,100,242 19,128,028 183,605 Trading assets and private equity investments: Securities inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,152,393 7,837,663 Derivative contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Private equity investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 503,417 270,890 479,659 291,774 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,926,700 8,609,096 75,232 4,604 2,801 82,637 Other assets: Office buildings, land, equipment and facilities (net of accumulated depreciation and amortization of ¥177,374 million in 2003 and ¥182,449 million ($1,751 million) in 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lease deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-trading debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investments in equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investments in and advances to affiliated companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184,868 65,211 270,120 138,084 223,970 112,313 192,429 200,700 64,764 202,896 169,459 207,668 105,901 133,817 1,926 622 1,948 1,627 1,993 1,017 1,284 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,186,995 1,085,205 10,417 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥21,169,446 ¥29,752,966 $285,592 62 | Nomura Holdings, Inc. Annual Report 2004 LIABILITIES AND SHAREHOLDERS’ EQUITY Short–term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥1,183,535 ¥3,024,341 $29,030 Millions of yen Millions of U.S.dollars 2003 (2003.3.31) 2004 (2004.3.31) 2004 (2004.3.31) Payables and deposits: Payables to customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Payables to other than customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180,565 384,910 772,964 355,429 Payables under repurchase agreements and securities loaned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,952,135 14,780,541 Time and other deposits received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 256,184 255,703 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,773,794 16,164,637 Trading liabilities: Securities sold but not yet purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,401,715 5,559,598 Derivative contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 487,005 417,368 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,888,720 5,976,966 Other liabilities: Accrued income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued pension and severance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,608 86,582 296,509 411,699 93,538 86,439 235,888 415,865 Long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,269,370 2,385,469 Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,527,118 27,967,278 Shareholders ’equity: Common stock Authorized—6,000,000,000 shares Issued—1,965,919,860 shares at March 31, 2003 and 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182,800 151,328 182,800 154,063 Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,407,028 1,550,231 Accumulated other comprehensive (loss) income: Minimum pension liability adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cumulative translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (41,558) (22,329) (63,887) (34,221) (34,380) (68,601) 7,420 3,412 141,875 2,454 155,161 53,365 4,006 57,371 898 830 2,264 3,992 22,898 268,452 1,755 1,479 14,880 (328) (331) (659) Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,677,269 1,818,493 17,455 Less—Common stock held in treasury, at cost—25,556,340 shares and 24,263,831 shares at March 31, 2003 and 2004, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (34,941) (32,805) Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,642,328 1,785,688 (315) 17,140 Total liabilities and shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥21,169,446 ¥29,752,966 $285,592 Nomura Holdings, Inc. Annual Report 2004 | 63 Consolidated Income Statements Millions of yen (%) 2003 2004 (2002.4.1〜 2003.3.31) (2003.4.1〜 2004.3.31) YoY increase (decrease) Millions of U.S. dollars 2004 (2003.4.1〜 2004.3.31) Revenue: Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥141,640 ¥210,216 Fees from investment banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Asset management and portfolio service fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net gain on trading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest and dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Loss) gain on investments in equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain (loss) on private equity investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81,847 79,290 172,308 401,924 (41,288) (14,391) 19,589 840,919 274,645 566,274 86,994 66,193 229,042 396,870 55,888 13,138 41,205 1,099,546 296,443 803,103 Non-interest expenses: Compensation and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244,167 259,336 Commissions and floor brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Information processing and communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Occupancy and related depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Business development expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,844 77,389 57,152 24,361 94,952 19,169 80,031 54,221 23,100 84,570 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 518,865 520,427 48.4 6.3 (16.5) 32.9 (1.3) — — 110.3 30.8 7.9 41.8 6.2 (8.0) 3.4 (5.1) (5.2) (10.9) 0.3 $2,018 835 635 2,199 3,809 536 126 396 10,554 2,845 7,709 2,489 184 768 520 222 813 4,996 Income before income taxes and cumulative effect of accounting change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,409 282,676 496.2 2,713 Income tax expense (benefit): Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,519 11,776 37,295 108,434 1,913 110,347 324.9 (83.8) 195.9 1,041 18 1,059 Income before cumulative effect of accounting change . . . . . . . . . . . . . . . . . . . . . . . . . 10,114 172,329 1,603.9 1,654 Cumulative effect of accounting change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109,799 — — — Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥119,913 ¥172,329 43.7 $1,654 Per share of common stock: Basic— Yen (%) U.S. dollars Income before cumulative effect of accounting change . . . . . . . . . . . . . . . . . . . . . . . . . . Cumulative effect of accounting change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥5.17 56.09 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥61.26 ¥88.82 1,618.0 — ¥88.82 — 45.0 Diluted— Income before cumulative effect of accounting change . . . . . . . . . . . . . . . . . . . . . . . . . . Cumulative effect of accounting change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥5.17 56.09 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥61.26 ¥88.82 1,618.0 — ¥88.82 — 45.0 $0.85 — $0.85 $0.85 — $0.85 64 | Nomura Holdings, Inc. Annual Report 2004 Changes in Additional Paid–in Capital and Retained Earnings Millions of yen Millions of U.S. dollars 2003 2004 2004 (2002.4.1〜 2003.3.31) (2003.4.1〜 2004.3.31) (2003.4.1〜 2004.3.31) Additional paid-in capital Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥150,979 ¥151,328 $1,453 Gain on sales of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Issuance of common stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 349 1,807 928 17 9 Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥151,328 ¥154,063 $1,479 Retained earnings Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥1,316,221 ¥1,407,028 $13,506 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119,913 Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (29,106) 172,329 (29,126) 1,654 (280) Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥1,407,028 ¥1,550,231 $14,880 Consolidated Statements of Comprehensive Income Millions of yen Millions of U.S. dollars 2003 2004 2004 (2002.4.1〜 2003.3.31) (2003.4.1〜 2004.3.31) (2003.4.1〜 2004.3.31) Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥119,913 ¥172,329 $1,654 Other comprehensive (loss) income: Change in cumulative translation adjustments, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Minimum pension liability adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total other comprehensive (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,644) (16,586) (19,230) (12,051) 7,337 (4,714) (116) 71 (45) Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥100,683 ¥167,615 $1,609 Nomura Holdings, Inc. Annual Report 2004 | 65 — 324 (536) 18 1,673 (72) (27,231) 20,659 (46,190) 43,513 (17,650) 5,690 771 (149) Consolidated Statements of Cash Flows Cash flows from operating activities: Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥119,913 ¥172,329 $1,654 Millions of yen Millions of U.S.dollars 2003 2004 2004 (2002.4.1〜 2003.3.31) (2003.4.1〜 2004.3.31) (2003.4.1〜 2004.3.31) Adjustments to reconcile net income to net cash (used in)provided by operating activities: Cumulative effect of accounting change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (109,799) Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss (gain) on investments in equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income tax (benefit) expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,249 41,288 11,776 — 33,706 (55,888) 1,913 Changes in operating assets and liabilities: Time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deposits with stock exchanges and other segregated cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (36,585) (6,271) 174,331 (7,485) Trading assets and private equity investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,167,700) (2,836,906) Trading liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,242,333 2,152,243 Receivables under resale agreements and securities borrowed transactions . . . . . . . . . . . . . . . . . . . . . (2,315,743) (4,812,090) Payables under repurchase agreements and securities loaned transactions . . . . . . . . . . . . . . . . . . . . . . 3,236,698 4,533,150 Loans, receivables and securities pledged as collateral, net of allowance . . . . . . . . . . . . . . . . . . . . . . . (590,802) (1,838,725) Time and other deposits received and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (477,756) Accrued income taxes,net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (31,738) Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash (used in) provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87,250 34,113 592,779 80,273 (15,524) (1,825,894) (17,526) Cash flows from investing activities: Payments for purchases of office buildings, land, equipment and facilities . . . . . . . . . . . . . . . . . . . . . . . (45,235) (39,303) Proceeds from sales of office buildings, land, equipment and facilities . . . . . . . . . . . . . . . . . . . . . . . . . . 690 Payments for purchases of investments in equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,299) Proceeds from sales of investments in equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Decrease in non-trading debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Decrease in other investments and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,067 152,209 6,621 Net cash provided by investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134,053 1,341 (61) 24,309 61,705 (2,520) 45,471 Cash flows from financing activities: Increase in long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 654,407 712,675 Decrease in long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (324,232) (551,897) Increase (decrease) in short-term borrowings, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (290,775) 1,824,501 Proceeds from sales of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Payments for repurchases of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Payments for cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (34,527) (29,485) 8,027 (4,084) (43,686) (377) 13 (1) 233 592 (24) 436 6,841 (5,298) 17,513 77 (39) (419) Net cash provided by (used in) financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (24,612) 1,945,536 18,675 Effect of exchange rate changes on cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,952) (18,978) Net increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents at beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134,602 356,635 146,135 491,237 (182) 1,403 4,715 Cash and cash equivalents at end of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥491,237 ¥637,372 $6,118 66 | Nomura Holdings, Inc. Annual Report 2004 Corporate Data / Share Data Corporate Data Type of Business Nomura Holdings, Inc., is a holding company with controlling stakes in compa- Listings The common shares of Nomura Holdings, Inc. are listed on the Tokyo, Osaka, nies that conduct investment and financial services businesses with an emphasis Nagoya and Singapore stock exchanges. The shares are also listed on the New on securities businesses. Date of Incorporation December 25, 1925 Representative Nobuyuki Koga, President and Chief Executive Officer Capital ¥182,799,788,854 (As of March 31, 2004) Number of Common Stock Issued 1,965,919,860 shares (As of March 31, 2004) York Stock Exchange in the form of American Depositary Receipts and on the Amsterdam Stock Exchange (Euronext) both through the Amsterdam Securities Account System and in the form of Continental Depositary Receipts. Head Office 1-9-1, Nihonbashi, Chuo-ku, Tokyo 103-8011, Japan Tel: 81 (3) 5255-1000 Fax: 81 (3) 5255-1064 http://www.nomura.com Transfer Agent and Registrar UFJ Trust Bank Limited Corporate Agency Department 81 (3) 5683-5111 Number of Shareholders 196,734 (Unit shareholders: 154,273) (As of March 31, 2004) Depositary for American Depositary Receipt (ADRs) The Bank of New York ADR Division 1 (212) 815-2042 http://www.adrbny.com Ratio: 1 ADR = 1 ordinary share Share Data Number of Unit Shareholders Component Ratio of Shareholders 日米個人金融資産比較 (%) （兆円） 160,000 120,000 80,000 40,000 0 00/3 01/3 02/3 03/3 04/3 (FY) 100 300 80 200 60 40 100 20 0 0 12.37 10.38 9.53 8.67 8.47 For further information, please contact: 17.93 18.46 19.41 21.55 21.58 0.76 0.66 0.63 0.70 1.10 29.30 30.11 28.27 28.97 40.44 Investor Relations Department Nomura Group Headquarters Nomura Securities Co., Ltd. 1-9-1, Nihonbashi, Chuo-ku, Tokyo 103- 39.64 40.39 42.15 40.10 28.40 8011, Japan 00/3 00 01/3 01 02/3 02 03/3 03 04/3 (FY) 04 Financial Institutions Graph Space Foreign Legal Entities Securities Firms Graph Space Individuals and Others Other Legal Entities Tel: 81 (3) 3211-1811 URL: http://www.nomura.com Credit Ratings S&P Moody’s R&I JCR *As of July 14, 2004 Nomura Holdings, Inc. Nomura Securities Co., Ltd. Long-term Short-term Long-term Short-term BBB Baa1 A+ AA A-2 — a-1 — BBB+ A3 A+ AA A-2 P-2 a-1 — Nomura Holdings, Inc. Annual Report 2004 | 67 A n n u a l R e p o r t 2 0 0 4 N o m u r a H o d n g s , l i I n c . ア ニ ュ ア ル レ ポ ー ト 2 0 0 4 野 村 ホ ー ル デ ィ ン グ ス 株 式 会 社
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