Nomura
Annual Report 2006

Plain-text annual report

A n n u a l R e p o r t 2 0 0 6 N o m u r a Knows How Annual Report 2006 for the Year Ended March 31, 2006 Printed on 100% Recycled Paper Printed in Japan on 100% recycled paper using soy ink N o m u r a H o d n g s , l i I n c . Profile Corporate and Other Data Structured under Nomura Holdings, Inc., Nomura Group is committed to a management vision of firmly establishing itself as a globally competitive Japanese financial services group. We have also set a management target of achieving an average consolidated return on equity (ROE) of 10%-15% over the medium to long term. In pursuing this vision, we will achieve a dominant position in terms of our customer base and establish a solid revenue base—one resilient to the changing market environment. As Japan’s economy recovers and deregulation moves forward, we are seeing a significant increase in business opportunities. To capitalize on these opportunities and provide superior services for all investment needs, we are posi- tioning ourselves for higher levels of growth by enlarging the scope of our operations, without being confined to the tra- ditional bounds of the securities business. To underline our determination to expand the scope of our business, we have removed the word “Securities” from the name of the Group in Japanese. It is now simply “Nomura Group” as in English. The theme of this year’s annual report is “Nomura Knows How.” This theme emphasizes our ability to provide solu- tions to the issues our customers face. By delivering these solutions along with financial services that exceed the stan- dards our customers have come to expect, we aim to build even stronger relationships, thereby expanding our earnings base and continuing to increase shareholder and corporate value. Corporate Data Date of Incorporation December 25, 1925 Head Office 1-9-1, Nihonbashi, Chuo-ku, Tokyo 103-8645, Japan Tel: 81 (3) 5255-1000 Fax: 81 (3) 5255-1064 Share Data Number of Common Stock Issued 1,965,919,860 shares (As of March 31, 2006) Listings The common shares of Nomura Holdings, Inc., are listed on the Tokyo, Osaka, Nagoya, and Singapore stock exchanges. The shares are also listed on the New York Stock Exchange in the form of American Depositary Receipts. (As of June 30, 2006) Transfer Agent and Registrar Mitsubishi UFJ Trust & Banking Corporation Corporate Agency Department 81 (3) 5683-5111 0120-232-711 (Toll free in Japan) Major Shareholders (Top 10) Share of Number of Total Voting Shares Held (Thousands) Rights (%) Ranking Shareholder Name 01 Japan Trustee Services Bank, Ltd. (trust account) 02 Japan Master Trust Bank of Japan, Ltd. (trust account) 86,808 107,478 03 Depositary Nominees Inc. 04 State Street Bank and Trust Company 05 State Street Bank and Trust Company—505103 06 07 The Chase Manhattan Bank, N.A. London Japan Trustee Services Bank, Ltd. (trust account 4) 83,975 82,467 54,795 44,345 26,282 08 Mitsubishi UFJ Trust & Banking Corporation (trust account) 19,309 09 Nippon Life Insurance Company 19,007 10 The Sumitomo Trust & Banking Co., Ltd. (trust account B) 18,684 5.66 4.57 4.42 4.34 2.88 2.33 1.38 1.02 1.00 0.98 Capital ¥182,799,788,854 (As of March 31, 2006) Group Employees 14,668 (As of March 31, 2006) Fiscal Year-End March 31 Depositary for American Depositary Receipts (ADRs) The Bank of New York ADR Division 1 (212) 815-8161 U.S. Toll Free: (888) 269-2377 (888-BNY-ADRS) www.adrbny.com Ratio: 1 ADR = 1 ordinary share Number of Shareholders 226,488 (Unit shareholders: 197,450) (As of March 31, 2006) Component Ratio of Shareholders (%) 100 80 60 40 20 0 9.53 8.67 8.47 8.88 8.09 19.41 0.63 21.55 21.58 0.70 1.10 24.61 0.83 22.73 0.93 28.27 28.97 40.44 37.90 43.66 42.15 40.10 28.40 27.77 24.60 3/02 3/03 3/04 3/05 3/06 ■ Financial Institutions ■ Foreign Legal Entities ■ Securities Firms ■ Individuals and Others ■ Other Legal Entities Contents 01 Consolidated Financial Highlights (U.S. GAAP) 02 Nomura Knows How 04 To Our Shareholders and Customers 12 Business Portfolio 14 Business Outline 14 Domestic Retail 20 Global Markets 26 Global Investment Banking 32 Global Merchant Banking 38 Asset Management 44 Global Research 46 Topic: Joinvest Securities 48 Corporate Governance 52 Compliance 54 Risk Management 55 Directors and Executive Officers 56 Corporate Citizenship 58 A Better Workplace 60 Product Policies 61 Financial Section 71 Corporate and Other Data Credit Ratings S&P Moody’s R&I JCR *As of June 30, 2006 Nomura Holdings, Inc. Nomura Securities Co., Ltd. Long-term Short-term Long-term Short-term A- A3 A+ AA A-2 ― a-1 ― A A2 A+ AA A-1 P-1 a-1 ― For More Information Investor Relations Nomura Group Headquarters Nomura Securities Co., Ltd. Otemachi Nomura Building 2-1-1, Otemachi, Chiyoda-ku Tokyo 100-8170, Japan Tel: 81 (3) 3211-1811 www.nomuraholdings.com/investor/ E-mail Alerts Our e-mail alert service informs subscribers when a news release is issued or new content is uploaded to our website. Forward-Looking Statements This annual report contains forward-looking statements about the future plans, strategies, beliefs, and performance of Nomura Group. These forward-looking statements are not historical facts. They are expectations, estimates, forecasts, and projections based on information currently available to the Company and are sub- ject to a number of risks, uncertainties, and assumptions, which, without limitation, include market trends, economic trends, competition in the Japanese financial industry, laws and regulations, and the tax system. As such, actual results may differ materially from those projected. Nomura Holdings Website www.nomura.com The Nomura Holdings website has been redesigned to become the first JIS-compliant website in Japan’s securities industry. The site can now be used more easily by people of all ages and individuals with disabilities. In addition, further improvements have been made with regard to ease of use and accessibility. Nomura Holdings, Inc. 77 Consolidated Financial Highlights (U.S. GAAP) Years ended March 31 2002 2003 2004 2005 2006*1 2006 Millions of yen Millions of U.S. dollars*6 Operating Results: Total revenue ..................................................... ¥01,825,399 ¥00,807,651 ¥01,045,936 ¥01,126,237 ¥01,792,840 $015,261 Net revenue ........................................................ Income before income taxes*2 ............................. Net income ......................................................... 1,321,351 172,972 168,046 566,274 47,409 119,913 803,103 282,676 172,329 799,190 204,835 94,732 1,145,650 545,013 304,328 9,752 4,639 2,590 Balance Sheet Data (Period End): Total assets ........................................................ ¥17,758,273 ¥21,169,446 ¥29,752,966 ¥34,488,853 ¥35,026,035 $298,145 Total shareholders’ equity .................................. Return on equity (ROE)*3...................................... 1,604,929 1,642,328 1,785,688 1,868,429 2,063,327 17,563 11.1% 7.4% 10.1% 5.2% 15.5% Per Share Data: Net income—basic*4 .......................................... ¥00,0085.57 Shareholders’ equity*5 ......................................... 816.48 Cash dividends*5 ................................................. 15.00 ¥00,0061.26 ¥00,0088.82 ¥00,0048.80 ¥00,0159.02 $0001.35 846.40 15.00 919.67 15.00 962.48 20.00 1,083.19 48.00 9.22 0.41 Yen U.S. dollars*6 *1 Figures in this publication are for fiscal years beginning on April 1 and ended on March 31 of the following year. *2 Total for continuing and discontinued operations for the fiscal year under review. *3 Calculated by dividing net income of the current fiscal year by average shareholders’ equity of the current and previous fiscal years. *4 Calculated using the weighted average number of shares outstanding for the year (excluding treasury shares). *5 Calculated using the number of shares outstanding (excluding treasury shares) at year-end. *6 Calculated using the yen-dollar exchange rate of U.S.$1.00=¥117.48, 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, 2006. Note: These consolidated financial highlights are prepared solely for convenience. Readers are recommended to refer to the Form 20-F. Net revenue Income before income taxes*2 Net income & return on equity (ROE)*3 (Millions of yen) 1,500,000 1,200,000 900,000 600,000 300,000 0 (Millions of yen) 600,000 500,000 400,000 300,000 200,000 100,000 0 Net income (lhs) ROE (rhs) (Millions of yen) 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 (%) 35 30 25 20 15 10 5 0 2002 2003 2004 2005 2006 2002 2003 2004 2005 2006 2002 2003 2004 2005 2006 Nomura Holdings, Inc. 1 N o m u r a K n o w s H o w Nomura Group is organized to realize synergies across its operations by bringing together the respective strengths of each business division. We are committed to optimizing the effectiveness of this management system by responding accurately to customer needs and strengthening our customer base and earnings power. Global Mar kets Sales and trading of bonds, equities, foreign exchange, and derivatives for institu tional investors in Japan and international markets ➤Strengths ➤ A strong customer base ➤ Financial product origination capabilities based on sophisticated financial technology Offers financial products and services Domestic Retail Offers consulting services and financial products mainly to individual investors to meet their asset man- agement needs ➤Strengths ➤ Superior consulting expertise ➤ Broad lineup of financial products Offers financial products and services Custo mers Offers financial solutions Global Investment Banking Underwrites bond and equity issues, provides M&A and financial advisory services ➤Strengths ➤ High level of origination, syndication, and execution capabilities ➤ Extensive global network Asset Management Delivers a diverse lineup of investment trusts and asset management services as well as administrative services for defined contribution pension plans ➤Strengths ➤ Japan’s largest asset management company ➤ Creative products ➤ Top-quality asset management capabilities ➤ Full support of Nomura Group Offers financial products and services Offers financial solutions Global Merchant Banking Uses Nomura’s own capital to make private equity investments and investments in venture companies base of Nomura Group➤Strengths ➤ Extensive merchant banking expertise ➤ Comprehensive capabilities and strong client 2 Nomura Holdings, Inc. Nomura Holdings, Inc. 3 To Our Shareholders and Customers N o m u r a K n o w s H o w to Be a Top Performer We are deeply committed to increasing shareholder value and achieving sustainable growth. As a financial services group that delivers superior services and solu- tions for all forms of investment, we will expand into new areas, going beyond the framework of the securities business. In fiscal 2005, ended March 31, 2006, we achieved record net income and celebrated our 80th anniversary. To build on this strong result, we are constantly looking to improve performance and position ourselves for higher levels of growth. We believe this is the best course of action to return the benefits of growth to our shareholders. 4 Nomura Holdings, Inc. Nomura Holdings, Inc. 5 Fiscal 2005 in Review Net revenue for fiscal 2005 increased 43% year on year to ¥1,145.7 billion, income before income taxes*1 grew 166% to ¥545.0 billion, and net income jumped 221% to a record ¥304.3 billion.*2 As a result of this strong performance, return on equity (ROE) was 15.5%, a significant increase from 5.2% the previous year. Amid a robust stock market environment, Domestic Retail has worked to deliver customer-focused products and services by strengthening its consulting services and developing products that meet the needs of its customers. This heightened customer focus allowed us to achieve our target of ¥50 trillion in Domestic Retail client assets (includ- ing regional financial institutions) a year and a half ahead of schedule. Net revenue in Domestic Retail was ¥446.5 billion, up 47% compared with the prior year. In Global Markets, strong trading in bonds and equities on the back of an upturn in market conditions combined with our ongoing drive to diversify revenue sources through such businesses as asset finance, equity derivatives, and loan-related businesses to push up net revenue by 53% year on year to ¥371.1 billion. Global Investment Banking saw net revenue grow 32% to ¥99.7 billion due to an increase in equity underwriting, including a large privatization and public offering deals, and as we acted as financial adviser in a number of large mergers and acquisitions (M&A) and other deals. We also topped the global equity and equity-related and M&A advisory league tables (Japan-related) for the second straight year*3. In Global Merchant Banking, net revenue surged 830% to ¥68.2 billion, boosted by the sale of stakes in investee companies held by Nomura Principal Finance. Asset Management continued to expand its product lineup in response to growing needs for asset management as the shift from savings to investment gained traction and equity investment trusts approached record levels in Japan. As a result, assets under management grew further and net revenue increased 34% to ¥65.8 billion. As the economic recovery in Japan gains traction, we are seeing increased demand for asset management services and consulting services for financial strategies. Indeed, we are seeing changes in the business and financial behavior of individuals and the corporate 6 Nomura Holdings, Inc. sector. By extending our client base, building our business portfolio, and delivering high- value-added solutions, we were able to respond to the changing needs stemming from this growth in demand and, in turn, increase revenue in all five business divisions. *1: Total for continuing and discontinued operations. *2: Results through fiscal 1998 are based on Japanese GAAP (generally accepted accounting principles). Subsequent years are based on U.S. GAAP. *3: Source: Thomson Financial, based on April 1 to March 31 fiscal year. Business Environment Our business environment is changing dramatically. With this transformation comes an unprecedented wave of business opportunities. Looking at the macroeconomic environment, the Japanese economy is gradually expanding, underpinned by healthy corporate profitability and rising consumer spending. As such, confidence in a full-fledged recovery of the domestic economy is growing. The corporate goods price index, a gauge for wholesale prices, is also on the rise due partly to surging international commodities markets. The financial environment has started shifting following the end of the Bank of Japan’s policy of quantitative easing. The legal environment in Japan is also being transformed. In May 2006, the new Corporation Law of Japan took effect. In addition, a new law covering a wide range of issues related to investor protection is slated to go into effect in 2007. Another significant change set to take place in Japan from 2007 is the retirement of baby boomers, which is expected to have an impact on the economy as they alter their lifestyles. Amid this dynamic environment, signs of a shift of the ¥1,500 trillion in personal finan- cial assets in Japan from savings to investment are emerging. The shift is clearly evident in the record levels of trading in equities by individual investors and stock investment trust assets. We believe this trend will continue gaining momentum. In the corporate sector, companies are starting to look to capital investments and M&A for growth and are increasingly tapping the capital markets to raise funds to support that growth. Internationally, the rapid economic growth across Asia is prompting global funds to flow back into the region in the form of direct investment and investment in securities. Asian companies, meanwhile, are taking their operations global. Nomura Holdings, Inc. 7 Extending the Nomura Brand Our goal as a globally competitive Japanese financial services group is to build a strong position and achieve an average consolidated ROE of 10%-15% in the medium to long term. As we extend the Nomura brand into new areas, we need to be responsive to change and capitalize on all business opportunities as they arise. With this in mind, we will aggressively take on new businesses that go beyond the framework of the securities business to shift Nomura Group into a new phase of growth. To underline our determination to expand the scope of our business, we have removed the word “Securities” from the name of the Group in Japanese. It is now simply “Nomura Group” as in English. In a move to create a nimbler organization, we overhauled our operating structure in April 2006. The number of executive officers at Nomura Holdings was reduced from 32 to 11, and all executives now dedicate themselves to managing Nomura Group as a whole under the holding company framework. At the business division level, we have delegated greater authority and responsibility to our five business divisions and reappointed the heads of each business as division chief executive officers (CEOs). Three Strategies for Further Growth To build on the strong performance of fiscal 2005, we have mapped out three strategies to take Nomura Group to a higher level of growth. First, we are stepping up our drive for a deeper, broader domestic client base and seeking opportunities to expand our revenue sources. Second, we are increasing our focus on revamping our international operations. Third, we are developing new businesses. 1. Strengthening domestic client base; increasing revenue sources By enhancing our financial consulting services, we have successfully doubled Domestic Client Assets over the past three years. We are now working to achieve new goals of ¥100 trillion in Domestic Client Assets and 5 million accounts ahead of schedule by embarking on a proactive expansion of our domestic branch office network and increasing the number of financial advisers. To tap into the growing investor popula- tion, we are expanding external sales channels for our products to complement our own 8 Nomura Holdings, Inc. network. Our product lineup is also growing in line with customer needs, giving more investors access to our leading product development and trading capabilities. For corporate clients, we draw on our extensive global network, solid capital base, and professional expertise to deliver top-quality services for raising capital and M&A. Our focus remains on our clients and anticipating their increasingly diverse and complex needs to offer high-value-added solutions. 2. Revamping international operations Our previous approach to international operations was to apply the same management style that we used in Japan. As we evolve, however, we will implement different business models in each region that leverage regional characteristics and tap our respective strengths in order to boost profitability in each region. We have positioned Europe as a global hub for product innovation, origination, and delivery. This global supply function in Europe will be increased further as we move for- ward. In the Americas, we are focusing on our core competencies, building up local busi- nesses that offer more opportunity to generate revenue. In the fast-growing markets of Asia, we are looking to capitalize on growing business in the region by further expanding our long-standing client base, including forging alliances with Asia-based companies. To execute our international strategies smoothly and effectively, we have appointed Deputy President and Chief Operating Officer (COO) Hiroshi Toda to directly oversee our international operations and speed up reforms. 3. Developing new businesses Our third strategy for further growth is to develop new businesses to act as future drivers of revenue in addition to our existing five business divisions. Some recent examples of our efforts in this area include Unified Partners, set up in June 2005 as a lending and investment firm focusing on real estate and loans; and Joinvest Securities, an online financial services firm that opened for business in May 2006. Going forward, we will aggressively invest in areas that we have not focused on as much in the past to create new business opportunities. Nomura Holdings, Inc. 9 We are also building up our portfolio by further developing existing operations in Nomura Group, such as our loan-related business. Our ultimate goal is to ensure ongoing growth across the Group’s entire portfolio. Moving Forward Together Based on our founding spirit of contributing to the communities in which we operate, we are committed to playing a role in social and economic development by offering a broad range of financial services. We also believe we have much to offer in terms of educating the public on investment. We teach courses on securities investment at over 120 universities and financial and securities courses in local communities and workplaces throughout the country. Through these efforts, we are increasing the pool of investors by promoting a sound understanding of the significance of investing and the risks involved. In terms of enhancing corporate governance, we adopted a Committee System in 2003 and have bolstered management oversight and ensured transparency to maintain a healthy relationship with our stakeholders (for more information on our corporate citizen- ship and corporate governance initiatives, please see pages 48 to 60). To better respond to the expectations of our shareholders, we are working to continu- ally increase shareholder value while looking into the best way to return profits to share- holders. In fiscal 2005, we increased our dividend to a record ¥48 per share from ¥20 per share the previous year. For the medium to long term, we have adopted a more flexible capital management policy. In addition, we recently announced a new dividend policy based on the dividend- on-equity ratio (DOE) and a target dividend payout ratio, making it clearer for shareholders to understand how we set dividends. We have raised DOE, which sets the minimum level for dividends, to 3.0% and seek to ensure sustainable growth of our target dividend in the medium to long term. In keeping with this guideline, we have raised our target dividend from ¥24 for fiscal 2005 to ¥32 for fiscal 2006. 10 Nomura Holdings, Inc. When we achieve a sufficient level of profit, we will look to return profits to shareholders based on a payout ratio of 30%. To deliver dividends to shareholders more flexibly, we will offer quarterly dividends, made possible by the new Corporation Law of Japan, which abolishes restrictions on the frequency of dividend payments. To move forward together, we will reinforce our position as a globally competitive Japanese financial services group by creating an earnings structure geared to achieving an average consolidated ROE of 10%-15% in the medium to long term and boosting shareholder value. The New Nomura Throughout our 80-year history, we have grown along with our customers. We will continue to grow by transforming from the Nomura of the past, based firm- ly in the securities business, to a new Nomura of tomorrow, one that goes beyond the traditional framework of the securities business, expanding into new areas. We have an 80-year legacy of challenging conventional wisdom with innovative think- ing. The new Nomura must be quick to sense change and respond with this culture, drawing on the full strengths of the Group. The new Nomura is committed to supporting the expansion and development of Japan’s financial and capital markets, and in turn rais- ing our corporate value and delivering results for you. July 2006 President & Chief Executive Officer Nobuyuki Koga Nomura Holdings, Inc. 11 Business Portfolio N o m u r a K n o w s H o w to Provide In-Depth Fiscal years ended March 31 Domestic Retail 41% Domestic Retail offers investment consulting services, mainly to individual investors, based on an understanding of their investment objec- tives, risk tolerance, life stage, and other parameters. By providing products and services that closely match the needs of individual cus- tomers, we seek to work with them over the long term and offer advice that assists them in building their asset portfolios. (For further infor- mation, please see page 14.) (Millions of yen) 500,000 400,000 300,000 200,000 100,000 0 2002 2003 2004 2005 2006 Global Markets 33% Global Markets provides services principally for institutional investors, including sales of and trading in equities, bonds, foreign exchange, and derivatives. We are working to strengthen our trading and financial product supply capa- bilities in response to the increasing complexity and diversity of client needs, while also expand- ing our asset finance business. (For further information, please see page 20.) (Millions of yen) 400,000 300,000 200,000 100,000 0 2002 2003 2004 2005 2006 Global Investment Banking 11% Global Investment Banking provides a wide range of services, including underwriting bonds, equities, and other securities as well as M&A and financial advisory services in Japan, Europe, the Americas, Asia outside Japan, and other major financial markets. We also offer tailor-made solutions to meet specific client needs. (For further information, please see page 26.) (Millions of yen) 100,000 80,000 60,000 40,000 20,000 0 2002 2003 2004 2005 2006 Global Merchant Banking 11% Global Merchant Banking engages in private equity investments using Nomura’s own capital to invest in companies that show promise for future growth and improved performance. In Japan, Nomura Principal Finance conducts buyouts and corporate restructurings. Moreover, activities include investing in venture companies and funds in Japan and Europe. (For further information, please see page 32.) (Millions of yen) 150,000 100,000 50,000 0 -50,000 2002 2003 2004 2005 2006 Asset Management 4% Asset Management delivers a diverse lineup of investment trust products for investors through a range of sales channels and offers investment advisory services for pension funds and institu- tional investors. Our activities also include offer- ing an integrated set of services for defined contribution pension plans that range from assistance in introducing these plans to provid- ing investment trust products. (For further infor- mation, please see page 38.) (Millions of yen) 75,000 50,000 25,000 0 2002 2003 2004 2005 2006 Note: Pie charts based on income before income taxes of the five business segments. Net revenue Income before income taxes 12 Nomura Holdings, Inc. Services in All Markets No. 1 across a number of financial markets No.1 31% Source: Disclosure documents As of March 31, 2006 Nomura was No. 1 in terms of domestic client assets as of March 31, 2006, with 31% of the total ¥257 trillion in assets in custody of the 27 listed securities companies in Japan. 26% Nomura was No. 1 in equity and equity-related financing for Japanese 22% Nomura was No. 1 in straight bond financing for Japanese companies, with 27% Nomura was the No. 1 advisor for deals involving M&A for Japanese com- companies, with a 26% share. a 22% share.* panies, with a 27% share.* Source: Thomson Financial Source: Thomson Financial Source: Thomson Financial For the period April 1, 2005, to March 31, 2006 For the period April 1, 2005, to March 31, 2006 For the period April 1, 2005, to March 31, 2006 * Excluding self-funding * Announced deals (value basis) 21% 75% Nomura Asset Management was No. 1 in Japan in publicly offered investment trusts, with a 21% share. Nomura’s Global 6 Assets Diversified Fund ranked No. 1 in investment trust sales by Japan Post, with a 56% Nomura ranked No. 1 in adminis- trating corporate employee investment plans for companies listed on the TSE*, 75% share of total assets under as measured by the number of partici- management. pating employees—approximately 1.8 million, representing a 56% share of total participants. Source: The Investment Trusts Association of Japan Source: Japan Post Source: Tokyo Stock Exchange Fact Book 2006 As of March 31, 2006 As of March 31, 2006 * TSE: Tokyo Stock Exchange Nomura Holdings, Inc. 13 Business Outline Domestic Retail (cid:1) N o m u r a K n o w s H o w to Make You “ Nothing makes us happier than seeing our customers smile. Domestic Retail offers investment consulting services that meet the diverse needs of our customers by leveraging our superior consult- ing expertise and broad lineup of financial products. We want to open up the world of invest- ing for our customers by building closer relationships with a wider range of investors. By extension, we aim to expand the investing community in Japan and, in turn, contribute to economic growth. ” Kenichi Watanabe Chief Executive Officer, Domestic Retail Outline Domestic Retail offers investment consulting services mainly to individual investors through an integrated network that includes 139 branch offices,* call centers, and web-based services. The essence of our investment consulting is to provide the best products and services to each customer based on individual investment goals, risk tolerance, life stage, and other parameters. We provide such services through discussions with customers, mainly at our branch offices, to support their long-term asset-building goals. These face-to-face services are backed up by call center operations and web-based services, which allow customers convenient access to the information they need at any time. These services provide a diverse range of information on financial products and access to transaction services such as placing orders for trades, together with account-related services, including retrieving data on asset balances and other information. We are also working to deliver investment products to an even broader range of customers through our partner financial institu- tions, which act as intermediaries for our products and services. * Please see pages 75 and 76 for a full list of Nomura Securities domestic branch offices. 14 Nomura Holdings, Inc. Smile In addition to our high-level consulting capabilities, we offer a wide range of financial products, including equities, bonds, invest- ment trusts, and insurance annuities. As customers demand increasingly diverse products, ranging from principal-guaranteed invest- ments to high-yield investments, we have responded with a broader lineup of products and services that goes beyond the traditional framework of the securities business to include deposits and other bank agency services, real estate intermediary services, and inheritance-related trust services. Domestic Retail Business Results Years ended March 31 2002 2003 2004 2005 Millions of yen 2006 Net revenue ....................................................................................... ¥229,105 ¥249,251 ¥305,757 ¥304,367 ¥446,535 Non-interest expenses....................................................................... 208,621 Income before income taxes.............................................................. ¥020,484 213,562 ¥035,689 226,213 ¥079,544 223,200 ¥081,167 249,330 ¥197,205 Nomura Holdings, Inc. 15 Domestic Retail Overview (cid:1) N o m u r a K n o w s H o w t o M a k e Y o u S m i l e Business Results addition, we upgraded Nomura Home Trade online services and • Increased Revenue from Equities and Investment Trusts increased our order taking, execution functions, and In fiscal 2005, ended March 31, 2006, Domestic Retail reported investment-related content. We also initiated services for bonds, net revenue of ¥446.5 billion, 47% higher than for the previous fis- foreign investment trusts, and margin transactions. cal year. Non-interest expenses totaled ¥249.3 billion, an increase In terms of the securities intermediary business, we proactive- of 12% compared to the previous year. Income before income ly expanded alliances with regional financial institutions. As taxes jumped 143% to ¥197.2 billion, the highest level since of March 31, 2006, we had partnerships with 47 financial Nomura adopted U.S. GAAP in fiscal 1999. institutions. Stock brokerage commissions, sales credit, and commis- In October 2005, we started offering discretionary asset man- sions on sales of investment trusts all posted marked gains as a agement services through separately managed accounts result of strong demand from retail investors for equities trading (SMAs) for affluent investors. and investment trusts, spurred on by a robust stock market environment and firm sales of bonds, particularly foreign currency Business Environment bonds. Highlights of the Year • Accelerating Shift from Savings to Investment As conditions in Japan’s stock market improved and the econo- my entered a full-fledged recovery, individual investors began to • Domestic Retail Client Assets Top ¥50 Trillion increase their risk assets through investment trusts and bonds. During fiscal 2005, we took further steps to substantially Risk assets in personal financial assets had been on a declining enhance our capabilities for meeting the increasingly diverse trend since the collapse of Japan’s bubble economy, falling below needs of our customers, including boosting staff levels, con- 10% as of March 2003, even after taking into account equities, ducting training programs, and adopting other proactive meas- bonds, and investment trusts. ures to expand our investment consulting services. As a result, Since then, however, this ratio has increased and climbed to in September 2005 we attained the goal we set in October 17% at the end of 2005. Along with this trend, the balance of 2003 of raising Domestic Retail client assets (including regional public investment trusts rose from ¥34.4 trillion as of the end of financial institutions) to ¥50 trillion by the end of March 2007, a March 2003 to ¥58.5 trillion as of March 31, 2006. As these full year and a half ahead of schedule. developments suggest, the trend for individuals in Japan—who In February 2006, we established a branch in Kariya City, hold an estimated ¥1,500 trillion in financial assets—to shift from Aichi Prefecture, employing mainly financial advisers. This savings to investment appears to be gaining momentum. branch focuses on financial consulting and services carefully tai- Japan’s baby boomers will start retiring en masse from 2007, lored to the requirements of customers in the region. and their search for an enhanced lifestyle in the next stage of We also established call centers to support our branch offices their lives is expected to bring a significant rise in demand for and supplement our investment consulting infrastructure. In asset management services. Also, in March 2006 the Bank of 16 Nomura Holdings, Inc. Japan lifted its quantitative easing policy, and signs of change in intensifying, we believe these developments will bring an expan- the interest-rate policy are beginning to appear. sion in business opportunities. Domestic and foreign securities companies as well as banks and other financial institutions are taking greater interest in the growing individual investor market. Although competition is Nomura Money Fair Since 2000, we have been holding investment events for individual investors to offer as many people as possible the information and know-how they need for investing in securities and acquaint them with the importance of asset management. These events provide opportunities for participants to attend lectures by established financial and economic specialists as well as seminars on equities, bonds, investment trusts, and foreign currency assets. The Kansai Nomura Money Fair 2006 proved extremely popu- lar, with 138 companies sponsoring investor relations booths to distribute their corpo- rate information, 7 asset management companies setting up corners to explain their services, and more than 40,000 participants attending. The Kansai Nomura Money Fair 2006 in Osaka Dome Fiscal 2005 Money Fair Events • September 2005: The Tokai Tri-Prefectural Nomura Money Fair 2005, held in the Nagoya Congress Center • December 2005: The Eighth Nomura Money Fair, held in the Tokyo International Forum • February 2006: The Kansai Nomura Money Fair 2006, held in Osaka Dome Risk Assets and Cash and Deposits in Personal Financial Assets (Trillions of yen) Risk Assets Equities Investment trusts Bonds 300 200 100 0 (Trillions of yen) Cash and Deposits 800 600 400 200 0 3/1980 Source: Bank of Japan 2006/3 3/1990 3/2000 3/2005 3/2005 Dec. Nomura Holdings, Inc. 17 Domestic Retail Issues and Strategies (cid:1) N o m u r a K n o w s H o w t o M a k e Y o u S m i l e Issues and Strategies steadily working to broaden the range of products and services • Aiming for Domestic Client Assets of ¥100 Trillion we offer. To win even greater trust from our customers, we believe that it is important to continue expanding our extensive customer • Strengthening Area Marketing base, already the largest in Japan. For fiscal 2006, we are work- As the shift from savings to investment continues, we are imple- ing toward the early attainment of the goals we originally set for menting various measures that take full account of the features of fiscal 2009 of reaching ¥100 trillion in Domestic Client Assets particular geographical areas to expand our business activities. In (total of client assets in Domestic Retail, including regional finan- the major metropolitan areas of Tokyo, Nagoya, and Osaka, we cial institutions, and the Financial Management Division) and 5 are increasing staff levels and aggressively adding branch offices million accounts. with features suited to the surrounding areas, with the aim of We believe that our client assets are a sign of the trust that expanding our opportunities for interacting with customers. our customers place in Nomura, and our goal of 5 million In addition, we are advertising through a wide range of media, accounts shows our strong will to offer a broad range of top- including TV, newspapers, magazines, and the Internet. In areas quality investment products to as many customers as possible. outside the major urban centers, we are working to significantly As more customers make investments with us, we can con- strengthen our ties with regional financial institutions that have tribute to the sustained growth of the Japanese economy. extensive branch networks able to perform the role of securities During fiscal 2006, we are strengthening our marketing intermediary and large customer bases in their respective regions. efforts, including stepped-up area marketing targeted at We are also hiring and training an increasing number of financial specific geographic regions and segment marketing aimed at advisers and other staff who have close ties with local communi- specific customer segments. Along with these activities, we are ties to build closer relationships with our customer base. Domestic Client Assets*1 Early Attainment of ¥100 Trillion in Domestic Client Assets Equities Foreign currency bonds Domestic bonds*2 Equity investment trusts Bond investment trusts (Trillions of yen) 100 Foreign investment trusts Others*3 80 60 40 20 0 ¥80 trillion 3.78 million accounts ¥40 trillion 3.42 million accounts ¥100 trillion 5 million accounts Investing in Infrastructure (cid:1)Add 50 to 100 new branch offices to current network of 139 (cid:1)Improve Nomura Home Trade functions and services, (cid:1)Toku Wari Plan (cid:1)Increase call center staff to 1,000 Segmented Approach to Investors (cid:1)Wealthy investors: Offer Nomura SMA services (cid:1)nationwide (cid:1)Retirees: Expand number of financial advisers to 3,000 (cid:1)Asset builders: Hotto Wari Plan 3/02 3/03 3/04 3/05 3/06 3/03 3/06 3/10 *1: Domestic Client Assets: Total of client assets in custody in Domestic Retail (including regional financial institutions) and Financial Management Division *2: Includes convertible bonds and warrants *3: Includes variable annuity insurance 18 Nomura Holdings, Inc. • Strengthening Our Segment Approach Asset Builders: We offer face-to-face consultations through Our aim is to select the best products and services that deliver our branch office network as well as our Hotto Direct service, the greatest value for our customers depending on their individ- which is delivered via telephone and web-based connections. ual financial status and life stage. For customers relatively new to investing, we have introduced Wealthy and Affluent Investors: For wealthy and affluent the Beginner’s Dial service, which has been designed to put new investors, personnel with in-depth asset management experi- customers at ease and encourage them to use our services. In ence assist customers in managing their assets and offer indi- April 2006, we introduced the Hotto Wari Plan, following a revi- vidual consulting services. In April 2006, we started offering sion of our fee structure to make it more attractive to customers. SMAs nationwide (SMAs were originally introduced in October We plan to continue to improve and upgrade our services for 2005). In addition, by expanding the number of sales represen- asset builders. tatives and reinforcing our education and training systems, we brought our financial planner staff to the 7,000 level, the largest • Broader Lineup of Products and Services in the industry, thereby enhancing our consulting capabilities One of our main focuses in Domestic Retail is to continue offer- and services. ing a lineup of products and services that accurately match the Retirees and Salary Earners: In 2007, Japan’s baby needs of our customers through further increasing our product boomers will start retiring en masse. For these people, we offer offerings. Moreover, we are adding other services to meet a our Life Plan services to help manage retirement allowances. more diverse range of customer needs. For example, following During fiscal 2006, we are substantially increasing the number the revision of the Banking Law in Japan, which deregulated of financial advisers who have close ties with regional areas. By certain services, we will start offering deposit services, acting as continuing to hold Nomura Retirement Seminars and other such the agent for Nomura Trust & Banking, as well as customer activities, we are working to provide services carefully tailored to introduction services for real estate transactions. Also, in part- the needs of retirees. nership with certified tax advisers, we have expanded our In addition, about 1,400 listed companies have selected inheritance-related services. Nomura to administer and manage the assets of their employee We are working toward the seamless integration of our face- stock ownership plans. As of March 31, 2006, plans adminis- to-face services at branches and our telephone and web-based tered by Nomura had approximately 1 million participants, about functions to create service capabilities that are highly responsive 56% of all such corporate employee investment plans in Japan. to our growing customer base. To enhance our in-person ser- The asset management needs in this area are rising, and we are vices, we are aiming to increase the number of financial advisers offering a number of related services, including consulting on from about 2,000 at present to 3,000, to offer responsive con- asset management following retirement and holding lifetime sulting services to an even broader range of customers. financial planning seminars as well as our Hotto Direct and other Moreover, we are adding to our menu of web-based services services that integrate call center and web-based functions. and planning to increase staff at our call centers from 600 at Through these activities, we plan to continue offering compre- present to about 1,000, to offer our customers even more effi- hensive services suited to individual life stages. cient services. Nomura Holdings, Inc. 19 Global Markets (cid:1) N o m u r a K n o w s H o w to Deliver The strong customer base and financial product origination capabilities based on sophisticated financial technology that we have developed with a diverse range of clients allow us to precisely anticipate client needs and deliver unique products. Global Markets is committed to building on this heritage of trust by offering clients optimum solutions through flexible and creative product “ origination.” Yasuo Agemura Chief Executive Officer, Global Markets Outline Global Markets consists of three businesses: Global Fixed Income*1, Global Equity*2, and Asset Finance*3. We have a proven track record of sales and trading bonds, stocks, and foreign exchange, as well as derivatives based on these financial instruments, main- ly to institutional investors. In response to the increasingly diverse and complex needs of our clients, we are building up our trading and product origination capabilities to offer superior products not only to institutional investors but also to our Domestic Retail and Asset Management divisions. This cross-divisional approach also extends to Global Investment Banking, where close collaboration leads to high-value-added solutions for our clients. In Asset Finance, we use our broad client base to maximum advantage and offer sophisticated financial solutions for raising cap- ital through real estate and other asset securitization schemes. Our greatest strength is in the extensive ties we have forged with institutional investors in Japan and international markets; wealthy and affluent investors, public-sector agencies, and regional financial institutions in Japan; and government agencies, finan- cial institutions, and corporations around the world. These ties enable us to pinpoint what types of products investors are currently 20 Nomura Holdings, Inc.  Creative Solutions looking for and then develop and deliver a line of products that meet their needs. This edge sets Nomura apart from other companies in today’s highly competitive environment. *1: Global Fixed Income handles mainly bonds and foreign currencies as well as related derivatives. *2: Global Equity focuses on equities and equity-linked derivatives. *3: Asset Finance helps clients raise capital through asset securitization and other schemes. Global Markets Business Results Years ended March 31 2002 2003 2004 2005 Millions of yen 2006 Net revenue ....................................................................................... ¥215,829 ¥235,991 ¥284,147 ¥243,087 ¥371,108 Non-interest expenses....................................................................... 133,214 Income before income taxes.............................................................. ¥082,615 142,434 ¥093,557 163,304 ¥120,843 182,901 ¥060,186 213,387 ¥157,721 Notes: 1. In April 2004, Fixed Income, Equity, and certain functions in Investment Banking were consolidated to create Global Markets. 2. Figures for prior fiscal years are totals of the previous Fixed Income and Equity and thus differ in composition from figures shown for the years ended March 31, 2005 and 2006. Nomura Holdings, Inc. 21 Global Markets Overview (cid:1) N o m u r a K n o w s H o w to Deliver Creative Solutions Business Results In certain key businesses, we made solid progress during fis- • Increased Client Order Flow and Trading Revenue cal 2005. For example, in equity derivatives we began sales of In fiscal 2005, ended March 31, 2006, Global Markets reported equity-linked products. In addition to interest-rate and currency net revenue of ¥371.1 billion, up 53% year on year. Non-interest products, we expanded our structured products lineup. In our expenses rose 17% to ¥213.4 billion, and income before loan-related business, we handled a total volume of approxi- income taxes grew 162% to ¥157.7 billion. mately ¥470 billion during the fiscal year. Our asset finance busi- In Global Fixed Income, sales of foreign currency bonds and ness provided financing for the acquisition of a restaurant chain interest-rate and foreign exchange related structured bonds in Germany in August 2005 and reported a number of success- were strong. Improvements in the market environment and ful deals in Europe, building on the momentum of the previous other factors led to an increase in derivatives trading. The asset year. In Japan, in August 2005 we arranged a refinancing pack- finance business contributed to the performance during the fis- age for the securitization of the flagship Ikebukuro store of Seibu cal year under review. In Global Equity, a stock market rally Department Stores. In November 2005, working jointly with helped boost order flow from institutional investors. Block regional financial institutions, we arranged a PFI*6 loan with a trades*4, MPOs*5, and derivatives trading also contributed to the view to eventual asset securitization for refurbishment and equipment upgrades for a research center at Kyushu University. Along with the recovery in the Japanese market in September 2005, we arranged for the first trip in over 10 years by a group of top strategists and analysts to visit investors in Japan and major international centers, including London, Paris, New York, and Hong Kong. The aim of the trip was to hold a series of sem- inars to encourage investors to reevaluate Japanese equities. These events resulted in winning a steady order flow from insti- tutional investors in Japan and overseas. *6: Private finance initiative (PFI) arrangements involve the use of private-sector funding and expertise in infrastructure improvement and other public works projects that were for- merly conducted through the initiatives of national and local governments. revenue growth. *4: Block trades involve large volumes of securities and are conducted outside the markets directly among major market participants. *5: Multiple private offerings (MPOs) are issues of convertible-bond-type instruments to securities companies via private placement. Highlights of the Year • Key Businesses Make a Firm Start; “Reevaluate Japan” Seminars Prove Effective During fiscal 2005, Global Markets successfully originated and sold a diverse lineup of products to match a wide range of client needs. In response to the ongoing ultra-low interest-rate environ- ment in Japan and accompanying the trend towards diversifica- tion to take advantage of international interest-rate spreads, we acted as lead manager for a New Zealand dollar denominated bond for KfW Bankengruppe (KfW) in the second quarter of the fiscal year. With this deal, we started handling bonds denominat- ed in New Zealand dollars. 22 Nomura Holdings, Inc. Business Environment model has proved successful, and we have steadily expanded • Further Shift to Direct Financing and Expansion in Loan- our operations. In 2002, we entered the asset finance business Related Business in Europe, and these operations are becoming an increasing We believe the trend in Japan towards securitization of financial source of earnings for Global Markets. In Japan, although the institution assets will continue to gather momentum. Moreover, leveraged buyout (LBO*7) market is still relatively small, we antici- as a result of fiscal reforms and changes to the Japanese gov- pate that this market will grow substantially, considering the ernment’s Fiscal Investment and Loan Program, there is a grow- trend towards consolidation in certain industries and the rise of ing need to securitize and sell off the assets of public financial private equity funds. To capitalize on this opportunity, we are institutions and to arrange loans, opening the door to new busi- working to further expand our loan-related business in Japan. ness opportunities. *7: LBO schemes involve collateralizing the assets of a company that is to be acquired to Based on our analysis of interest-rate differences between raise the funds needed to acquire the company. Japan and other financial markets since around 2000, we have positioned Europe as a product supply base. We have estab- lished a business model for underwriting foreign currency bonds and structured bonds, selling them to investors in Japan. This “Reevaluate Japan” Seminars Held around the World We are convinced that the time is right to reevaluate the Japanese economy, Japanese companies, and the stock market in Japan. The Japanese economy has entered a new phase, and to bring this message to investors around the world we organized a series of seminars in key international financial centers in September and October 2005. A team of 25 top economists, strategists, and ana- lysts gave presentations in 15 cities in 10 countries in Europe, the Americas, and Asia including Japan. The first overseas presenta- tions were held in Paris on September 12, and subsequent presentations conveyed a consistent investment message to investors. This was the first global seminar series we have organized since the collapse of the bubble economy in Japan, and it attracted considerable attention. Over 1,600 investors attended in all, far exceeding our initial target of 1,000. Nomura Holdings, Inc. 23 Global Markets Issues and Strategies (cid:1) N o m u r a K n o w s H o w to Deliver Creative Solutions Issues and Strategies • Strengthening Core Businesses • Expanding Our Business Portfolio and Diversifying As ultra-low interest rates have persisted in Japan, we have met Revenue Sources the needs of our clients by expanding the origination and supply We have leveraged our expertise in financial engineering to of foreign currency bonds and interest-rate and foreign deliver a broader lineup of products including interest-rate, for- exchange related structured bonds, while also increasing our eign exchange, and equity-linked structured bonds. Beginning profits from trading. Client needs for equity-linked products in fiscal 2005, we have steadily expanded our activities in new increased along with the strong performance of the stock mar- fields, including the loan-related and asset finance businesses. ket. Therefore, in addition to interest-rate and foreign currency We are committed to maintaining a high level of client satis- related products, sales of equity-linked structured products faction and trust by accurately identifying the diverse and com- expanded steadily in the second half of fiscal 2005. plex needs of our clients and developing original products and Looking ahead, we intend to further strengthen our global services that match their requirements. We intend to diversify origination and supply capabilities for products that incorporate and strengthen our sources of earnings by continuing to cutting-edge financial technology. With the commencement of improve our product origination and development capabilities bank agency operations and other new businesses, we will be with the goal of expanding our order flow, while also using our positioned to offer a wider range of products. We also intend to own capital aggressively to capture the trading opportunities work closely with Global Investment Banking to continue created by this flow. aggressively developing new products that respond to specific client requirements, such as the exchangeable bond issued for Fuji Photo Film. Trading-Related Revenue and Consolidated VaR Strengthening Product Development and Origination Trading-related revenue*1 (lhs) Consolidated VaR*2 (rhs) Equities Credit Interest rate Foreign currency Real estate (Billions of yen) 400 300 200 100 0 (Billions of yen) 12 Equity derivatives/structured bonds 9 6 3 0 e u l a v r e h g i h d d A Loans/asset finance Hybrid private offerings (HPOs)*3 MPOs Block trades Structured bonds REITs Foreign currency bonds 3/02 3/03 3/04 3/05 3/06 *1: Trading-related revenue is revenue from trading equities, bonds, and other securities plus net interest revenue. *2: Consolidated value at risk (VaR) is the statistically estimated maximum loss that could be incurred given a fixed holding period and a specified statistical confidence level. *3: Hybrid private offerings (HPOs) are a derivative of MPOs in which convertible bonds are issued to a special-purpose vehicle. The bond portion is sold on to institutional investors and the stock acquisition rights are purchased by securities firms. 24 Nomura Holdings, Inc. • Building Up Our Business Portfolio shopping for the full range of classes of asset financing, such as We have positioned loan-related, asset finance, and equity senior loans, mezzanine loans, and investing in a portion of derivatives businesses as new sources of earnings and are equity. A number of deals were successfully concluded during making investments to promote growth in these areas. During the past fiscal year and we boosted earnings from this source. fiscal 2006, ending March 31, 2007, we intend to substantially We are working to win more business in this area through mak- strengthen our position in these three areas and implement ini- ing full use of our network, and we plan to offer larger and more tiatives to create other new businesses and expand our busi- varied types of asset financing services by originating funds to ness portfolio. bring capital from a wide range of sources. Loan-Related Business: The loan-related business, which real estate, such as hotels, shopping malls, and office buildings, as collateral. *8: Commercial mortgage-backed securities (CMBS) are securities issued with commercial we entered in 2005, includes originating and offering structured loans to regional financial institutions and providing non- recourse loans for real estate financing through our loan-related subsidiary, Nomura Capital Investment (NCI). Our track record in this area continues to grow, and total loans handled during fis- cal 2005 amounted to approximately ¥470 billion. We believe the potential for LBOs and other loan-related business is con- siderable and intend to take advantage of these opportunities. During the current fiscal year, we will expand NCI’s functions to take a varied approach to real estate finance and corporate finance (leveraged finance). Asset Finance Business: We are steadily building up results in the asset finance business in the United States through secu- ritization activities related to CMBS*8, RMBS*9, and other types of securities. We will continue to strengthen our capabilities and presence in these areas and expand their contributions to earn- ings. In Europe, to help clients meet their financing needs for asset purchases and corporate acquisitions, we offer one-stop *9: Residential mortgage-backed securities (RMBS) are securities issued with residential mortgage loans as collateral. Equity Derivatives Business: In equity derivatives, we have begun to offer high-value-added fund derivative products to affluent investors, including principal-guaranteed privately placed investment trusts that embody cutting-edge financial technology. These products are being developed jointly by our equity derivatives teams in Europe and Tokyo. Looking ahead, we are planning to continue to expand our sales channels for these products into Asia, the Middle East, and other areas. Other New Businesses: During fiscal 2005, we invested in Unified Partners, which makes investments in nonperforming loans and real estate. Unified Partners is steadily expanding its operations, including the conclusion of a capital tie-up with SxL, a leading manufacturer of prefabricated housing. We will continue making such investments that go beyond the traditional frame- work of the securities business to build up our business portfolio. Nomura Holdings, Inc. 25 Global Investment Banking (cid:1) N o m u r a K n o w s H o w to Keep You Our mission is to always be there as a partner for our clients, helping them grow and stay ahead. As an independent investment bank, we offer clients high-value-added solutions that draw on our high level of origination, syndication, and execution capabilities backed by a solid track record as well as our extensive global network. We are working to establish ourselves as Asia’s leading investment bank and leverage our strengths to expand our services for clients based in Europe and “ the United States.” Takashi Yanagiya Chief Executive Officer, Global Investment Banking Outline Global Investment Banking offers a wide range of services, including underwriting bonds, equities, and other securities; M&A adviso- ry; and tailor-made solutions for various clients such as corporations, financial institutions, governments, and public-sector agencies. Our services are backed by a high level of origination, syndication, and execution capabilities and an extensive track record. We strive to identify the exact needs of each client, prepare customized proposals, and offer products that draw on close collaboration between our retail and wholesale operations, as well as develop tailor-made financial solutions. As corporate governance draws increasing public attention, companies are obliged to fulfill their social responsibilities to shareholders and other stakeholder groups. In line with this, our position as an independent investment bank gives us a competitive edge when it comes to enhancing corporate value and providing market-focused advice. As the Japanese economy continues to expand, many corporations are shifting to growth strategies. Along with the increased demand in emerging markets, many industries will move into a new era of growth and major structural changes are taking place. 26 Nomura Holdings, Inc.  Ahead of the Game We have set our sights on becoming Asia’s leading investment bank and leveraging our strengths to expand our services for clients based in Europe and the United States. With this as our guiding strategy, based on our strong domestic and global network, we will offer our high-value-added solutions to clients in Asia, including Japan, as well as in Europe and the Americas. Global Investment Banking Business Results Years ended March 31 2002 2003 2004 2005 Net revenue ....................................................................................... ¥88,349 Non-interest expenses....................................................................... 57,406 Income before income taxes.............................................................. ¥30,943 ¥69,125 56,374 ¥12,751 ¥70,869 53,703 ¥17,166 ¥75,445 46,231 ¥29,214 Notes: 1. In April 2004, Fixed Income, Equity, and certain functions in Investment Banking were consolidated to create Global Markets. 2. Figures for prior fiscal years are for the previous Investment Banking and thus differ in composition from figures shown for the years ended March 31, 2005 and 2006. Millions of yen 2006 ¥99,666 48,127 ¥51,539 Nomura Holdings, Inc. 27 Global Investment Banking Overview (cid:1) N o m u r a K n o w s H o w to Keep You Ahead of the Game Business Results Major M&A deals in Japan included acting as financial adviser • Increased Revenue through Large Deals for the establishment of a joint holding company for Ito-Yokado, In fiscal 2005, ended March 31, 2006, Global Investment Banking Seven-Eleven Japan, and Denny’s Japan. We also acted as reported net revenue of ¥99.7 billion, 32% above the previous fiscal adviser for the sale of Kanebo by the Industrial Revitalization year. Non-interest expenses totaled ¥48.1 billion, a 4% increase Corporation of Japan and for other large deals. Thanks to this over the prior year. Income before income taxes increased 76% to high level of M&A advisory work, we took the top position in the ¥51.5 billion, the highest level since Global Merchant Banking was league table for M&A advisory deals involving Japanese compa- turned into an independent division in fiscal 2001. nies for the second consecutive year. During fiscal 2005, we accurately identified corporate funding Among equity underwriting for non-Japanese companies, we needs that emerged with the recovery in the domestic econo- acted as lead manager for the listing of POSCO, the leading my. As a result of expansion in public offerings and other issues, South Korean steel company, on the Tokyo Stock Exchange equity underwriting commissions increased. M&A and financial (TSE). POSCO became the first South Korean company to list on advisory fees also grew substantially as we acted as financial the TSE. We also acted as global coordinator for the IPO*2 of adviser for major M&A deals and continued to build on our track leading South Korean retailer Lotte Shopping, the largest offering record of successful deals. Highlights of the Year to date by a private company in Asia excluding Japan. In addi- tion, we acted as joint global coordinator for a public offering of ICICI Bank, the largest issue, domestically or internationally, to • Captured Top Position in Most Domestic League Tables date by a private company based in India. These deals dramati- We acted as lead manager for a number of major equity under- cally increased our presence in Asian investment banking. writing deals for Japanese companies, including the large priva- In cross-border M&A, we advised Japan’s Autobacs Seven tization offering of Central Japan Railway and global offerings for on an investment in the largest retailer of automobile parts and Mitsui & Co. and All Nippon Airways. As a result, in fiscal 2005 accessories in the United Kingdom. This was our first cross- we won the No. 1 position for the fifth consecutive year in the border deal with Rothschild. global equity and equity-related underwriting league table To increase access to companies in the life science and (Japan)*1. We also topped the league table for bond underwriting healthcare sectors in Europe, we acquired Nomura Code (excluding self-funding), as we won the mandates as lead man- Securities, a U.K. investment bank specializing in the life ager for straight bond issues of Sharp, Sony, and other compa- sciences. nies. In view of these accomplishments, we were selected as *1: Source: Thomson Financial, April 1, 2005, to March 31, 2006 the House of the Year in five categories, including the overall *2: Initial public offerings (IPOs) take place when a company’s shares are newly listed on a ranking, in the Thomson Financial DealWatch Awards. In the tailor-made financial solutions business, we arranged major deals, including a ¥60 billion MPO for Sojitz and a ¥200 billion HPO II issue incorporating an exchangeable bond scheme for Fuji Photo Film. stock exchange. 28 Nomura Holdings, Inc. Business Environment the Japanese market are rising steadily. We believe these devel- • Business Opportunities Expanding in Japan and opments will provide us with a substantially broader range of Elsewhere in Asia as Corporates Become More Active business opportunities. The Japanese economy is expected to continue to expand, and corporate performance is forecast to remain strong. Following the League Tables lifting of the Bank of Japan’s quantitative easing policy in March 2006, the interest-rate environment is beginning to show major changes. In May 2006, a new Company Law went into effect that Global Equity & Equity-Related (Japan) Bookrunner (April 1, 2005, to March 31, 2006) No. of Issues Proceeds (US$ mn) Mkt. Share specifies new frameworks and rules for corporate governance and 1 Nomura company realignments. Changes of this magnitude are expected 2 Daiwa Securities SMBC to have a major impact on corporate financial strategies. More companies are carefully examining trends in stock prices, interest rates, and other market developments as they choose the meth- 3 Nikko Citigroup 4 Goldman Sachs 5 Mizuho Financial Group 14,118.0 10,379.7 7,718.7 5,714.6 5,523.0 26.0% 19.1% 14.2% 10.5% 10.2% 130 89 63 9 40 ods of raising capital best suited to their strategies from among Any Japanese Involvement M&A Advisory equity and bond issues, securitization, and borrowings. As more companies aim to strengthen global competitiveness and concerns rise about possible hostile takeovers, M&A-related business opportunities, including cross-border deals, are on the rise. In addition, financing methods are becoming more diverse, and M&A deals are growing in size and complexity. As such, the ability to provide corporate clients with the best mix of financing in line with their individual growth strategies and the capability to respond with precise execution to meet the diverse needs in M&A Adviser 1 Nomura 2 UBS 3 Nikko Citigroup 4 Mizuho Financial Group 5 Goldman Sachs Note: Announced deals (value basis) (April 1, 2005, to March 31, 2006) No. of Deals Rank Value (US$ mn) Mkt. Share 40,043.7 37,791.5 37,537.9 35,162.2 34,585.5 27.0% 25.4% 25.3% 23.7% 23.3% 134 21 27 119 44 Straight Bonds (Excluding Self-Funding) deals are both becoming increasingly key challenges. Bookrunner In Asia, the current robust economic trends are forecast to continue as private consumption grows and exports recover. Amid this environment, as the Japanese economy moves 1 Nomura 2 Daiwa Securities SMBC 3 Mizuho Securities toward a full-scale recovery, Asian companies’ expectations for 4 Mitsubishi UFJ Securities 5 Nikko Citigroup Source: Thomson Financial. As of April 2006. (April 1, 2005, to March 31, 2006) No. of Issues Proceeds (JPY mn) Mkt. Share 2,080,699 1,787,484 1,603,745 1,588,515 1,187,258 22.2% 19.1% 17.1% 16.9% 12.7% 121 110 99 82 73 Major Asia-Related Deals Major Deals as Lead Manager (Fiscal 2005) November 2005 First ADRs listed on TSE POSCO US$691 million Lead manager December 2005 Public offering in India and international markets ICICI Bank US$1.7 billion Joint global coordinator January 2006 Largest IPO by a private-sector company in Asia ex-Japan Lotte Shopping US$3.5 billion Joint global coordinator Nomura Holdings, Inc. 29 Global Investment Banking Issues and Strategies (cid:1) N o m u r a K n o w s H o w to Keep You Ahead of the Game Issues and Strategies industries and position ourselves to offer tailor-made solutions • Aiming to Be Asia’s Leading Investment Bank with that are suited to the corporate strategies of individual client a Global Presence companies. We have focused on providing our clients with optimal solutions An important trend in recent years has been the growing to match their needs while steadily adding to our record of suc- presence of private equity funds. Business opportunities from cessful deals in Japan and other markets in Asia. Our objective these funds are expanding beyond exiting investments through for fiscal 2006 is to build our position to be Asia’s leading invest- M&A and IPOs to include participating in raising funds for corpo- ment bank with a global presence. To achieve this, we are con- rate acquisitions and offering other assistance. To provide more tinuing to bolster our position in Asia and use the strengths and responsive services for private equity funds that show promise track record we have developed in the region to expand our of further development, we established the Financial Sponsor earnings in Europe and the Americas and further enhance our Department in December 2005. We plan to collaborate closely global presence. with this department and our international offices to expand pri- We are working to substantially strengthen our deal origina- vate equity related business. tion and execution capabilities as well as enhance our global Additionally, the increasing presence of bank-affiliated securi- network. We will increase our focus on cross-border businesses ties companies in the IPO business means we need to increase involving Japan and other Asian countries by forging stronger our competitiveness and ensure that we have a solid market ties with our main clients in international markets. In turn, we position. With this in mind, in April 2006 we appointed an exec- aim to win finance deals targeted at the Japanese market as utive officer to take charge of integrating our services along the well as cross-border M&A business involving Japan and the rest entire IPO process, from the development of unlisted companies of Asia. with potential to building relationships with them and helping Through these initiatives, we are committed to raising our them list. We are stepping up our initiatives to develop IPO- global profile as an investment bank with a strong network in related business by building stronger ties with client companies Asia, while competing on the same field as the leading in the Tokyo, Nagoya, and Osaka metropolitan areas, develop- European and U.S. players. ing overseas companies that are considering listing in the Japanese market, and conducting other activities. • Strategies for Japan Improving Our Responsiveness to Client Needs: As Offering Comprehensive Services for M&A and Corporate Japan’s leading investment bank, in December 2005 we creat- Finance: We have acted as adviser for cross-border deals ed an integrated and seamless structure for responding much and industry realignments and have increased our presence in more effectively to the requirements of clients ranging from list- M&A-related business by drawing on the considerable know- ed to private companies. We are working to gain a solid under- how and experience we have accumulated regarding defenses standing of industry trends and share information effectively, to against hostile takeovers. clarify the position of client companies within their respective 30 Nomura Holdings, Inc. To strengthen our comprehensive services and make the increasing our efforts to help European healthcare and technol- most effective use of our resources, we have formed a ogy companies as well as Eastern and central European com- Leveraged Finance Group. In addition to providing M&A advisory panies conduct IPOs and public offerings on AIM, the venture services, this group offers a full range of services to help compa- company section of the London Stock Exchange. Nomura Code nies raise capital, including leveraged financing secured by the Securities has already established a solid track record in the life cash flow of acquisition-target companies as well as bridge sciences sector and is planning to apply its business model to financing to meet the financial requirements of companies mak- other sectors. ing acquisitions until they can secure ample long-term funding. During the current fiscal year, we plan to draw more fully on the The Americas: In the Americas, we have identified opportu- capabilities of this group and offer a wider range of services. nities related to the ongoing consolidation of medium-sized • Global Strategy financial institutions in the United States and have recruited a specialist team to develop business in this area. As we build out Asia: We are responding accurately and rapidly to customer our business in the Americas, we are strengthening our network needs through our organizational setup. We have regional rep- with Japanese clients. We are working to win deals by drawing resentatives in major cities in Asia, and have assigned project on our strengths and collaborating with our operations in Japan team leaders to execute M&A deals and originate products in and Europe. Some examples include deals targeting Japan, Hong Kong and other major financial centers. We have a long- such as listing U.S. real estate investment trusts (REITs) and standing presence and an extensive network in Asia and have start-ups on Japanese markets, and winning cross-border M&A steadily won the trust of our clients over the years. With this plat- deals between U.S. firms and companies in Asia including form, we are working to win mandates for equity underwriting Japan. and M&A advisory deals and are positioned to capture major deals in Asia on an ongoing basis. We are also working to expand our business platform in Asia through providing support for fast-growing Asian companies by committing our own capi- tal and assisting them in conducting IPOs. Europe: In Europe, we have selected healthcare, TMT (telecommunications, media, and technology), automotive, and finance as key sectors. We are adding professional staff in these areas to enhance our ability to respond to client needs. In the healthcare field, we are using Nomura Code Securities, a U.K. investment bank specializing in the life sciences that we acquired in December 2005, to move forward with initiatives to bolster our activities in this area. In equity underwriting, we are Basic Strategies for Global Investment Banking Nomura Code Securities Rothschild Establish a pan-European investment banking franchise focused on specific sectors Thomas Weisel Partners Bolster position as Asia’s leading investment bank Strengthen collaboration with Japan and Europe Expand business relationships with European and U.S. clients based on our track record in Asia including Japan Nomura Holdings, Inc. 31 Global Merchant Banking (cid:1) N o m u r a K n o w s H o w to Enhance Global Merchant Banking is committed to providing solutions to clients by using our own capital to increase the corporate value of the companies we invest in. Our high-value-added approach based on extensive merchant banking expertise and the comprehensive capabilities and strong client base of Nomura Group position us to deliver results. We are at the leading edge of the investing business, helping our corporate clients tackle management issues. We are increasing our pres- “ ence and contributing to growth across Nomura Group.” Akira Maruyama Chief Executive Officer, Global Merchant Banking Outline Global Merchant Banking engages in private equity investments, primarily in Japan and Europe, using Nomura’s own capital to invest in companies with prospects for future growth and improved earnings. In Japan, Nomura Principal Finance (NPF) conducts buyouts and corporate rehabilitations, while Nomura Research & Advisory (NR&A) makes venture capital investments through funds. In Europe, we invest in funds that are operated and managed by Terra Firma, an independent private equity firm, while Nomura Phase4 Ventures (NPV) invests in the biopharma area and the Private Equity Group (PEG) invests in the technology and healthcare fields. As we invest our own capital in companies that show prospects of growth and improving performance, we work with these com- panies to address the issues they confront, and after increasing their corporate value we exit through IPOs and other methods. Our competitive edge comes from expertise in merchant banking gained from our experience in Europe, especially in London. Strengths we bring to this business are our know-how, the largest client base in Japan, global research capabilities, and the ample financial 32 Nomura Holdings, Inc.  Corporate Value resources of Nomura Group. Another feature that sets us apart is that at each stage, from the development of new investment oppor- tunities through raising the value of portfolio companies and securing returns on these investments, we work with other divisions and draw on Nomura Group’s comprehensive capabilities. Global Merchant Banking Business Results Years ended March 31 2002 2003 2004 2005 2006 Net revenue ....................................................................................... ¥135,757 ¥ (6,647) Non-interest expenses....................................................................... 58,037 Income (loss) before income taxes . ................................................... ¥077,720 8,628 ¥(15,275) ¥10,720 10,220 ¥00,500 ¥ 7,338 10,370 ¥ (3,032) ¥68,244 12,809 ¥55,435 Millions of yen Nomura Holdings, Inc. 33 Global Merchant Banking Overview (cid:1) N o m u r a K n o w s H o w to Enhance Corporate Value Business Results Highlights of the Year • Revenue Increased Due to Gains on Exit Transactions • Major Exit of Investments through Selling Stakes In fiscal 2005, ended March 31, 2006, as a consequence of During fiscal 2005, we exited major investments through selling selling our interests in certain companies in our portfolio, Global stakes in NPF investee companies. Merchant Banking reported net revenue of ¥68.2 billion, up In January 2006, we sold the stake we purchased in fiscal 830% year on year. Non-interest expenses increased 24% to 2004 in Millennium Retailing—the holding company for Sogo ¥12.8 billion and income before income taxes expanded ¥58.5 and Seibu Department Stores—to Seven & I Holdings for billion to ¥55.4 billion. approximately ¥130 billion. We also sold a part of our stake in As of March 31, 2006, after excluding investments in Terra Wanbishi Archives, which we held jointly with Tokio Marine Firma, our total investments in Japan*1 and Europe*2 amounted Capital, to Toyota Industries for approximately ¥23 billion. In to ¥98.7 billion, ¥33.4 billion lower than at March 31, 2005. Our March 2006, we sold a portion of our interest in Resort investment in Terra Firma was ¥340.4 billion at the end of fiscal Solutions to Konami and other investors. 2005, ¥14.9 billion higher than a year earlier. Global Merchant Banking Business Exposure Global Merchant Banking Operating Structure Japan*1 Europe (excluding Terra Firma)*2 Terra Firma (Billions of yen) 500 400 300 200 100 0 3/02 3/03 3/04 3/05 3/06 *1: Business exposure in Japan is the total of investments by NPF and NR&A. *2: Business exposure in Europe (excluding Terra Firma) is the total of investments by PEG and NPV. 34 Nomura Holdings, Inc. Global Merchant Banking Nomura Principal Finance (NPF) Private equity investments for buyouts and corporate rehabilitations Nomura Research & Advisory (NR&A) Investments in venture companies through funds Europe Nomura Phase4 Ventures (NPV) Venture investments in the biopharma area Private Equity Group (PEG) Venture investments in the technology and healthcare fields New investments during fiscal 2005 included a ¥25.8 billion to increase returns on their investment portfolios. Leading pri- capital increase in June 2005 for Misawa Homes Holdings, a vate equity funds based in the United States and Europe are company receiving restructuring support from Toyota Motor. entering the Japanese market, leading to steady expansion of This capital increase was conducted via private placement, and Japan’s private equity market. The number of buyout funds we participated jointly with Toyota Motor and Aioi Insurance. established has increased in recent years. Since the first fund of In Europe, we sold a portion of our holdings in companies in this type was established in Japan in 1997, total commitments the biopharma field and exited other investments through IPOs. by these funds have surpassed ¥1,800 billion. In the U.K., we invested in companies in the healthcare-related In addition, as the issues confronting corporations have business sector. Business Environment • Private Equity Market Expands become more diverse, private equity funds have offered a broader range of services, such as consulting and assistance in expanding marketing channels through the networks of these funds as well as more diverse investment methods, including Although the number of corporate rehabilitation deals is minority investments and investment in listed shares (PIPEs, pri- decreasing along with the recovery in the Japanese economy, vate investments in public equities). other types of deals are expanding. These include funding for M&A buyouts aimed at capturing growth opportunities, the sale of corporate group companies or divisions accompanying cor- porate group restructuring, the strategic delisting of companies, and assisting in the transfer of corporate ownership to the next generation. Moreover, because of ultra-low interest rates in Japan compared with those in other countries, pension and other types of funds are expanding their alternative investments*3 *3: Alternative investments include the use of investment management techniques based on derivatives and other financial technologies and other new forms of investment aside from conventional stocks and bonds. Sale of Major Holdings NPF, the core company in Global Merchant Banking, identified the requirements of Millennium Retailing, a company undergoing restructuring, for an increase in capital through information obtained from Nomura’s domestic network. On two occasions, in July 2004 and January 2005, we invested a total of ¥50.0 billion in Millennium Retailing. Subsequently, the corporate value of this retailing group increased as the management team restructured the group’s main businesses and undertook other successful measures, including the full refinancing of its liabilities covered by agreements and securitization of retail outlets. As a result, the needs of Millennium Retailing and Seven & I Holdings, implementing the realignment of group companies in the retail industry, were satisfied, and NPF sold its interest for approximately ¥130 billion in January 2006. Looking ahead, we will continue to deliver high-value-added solutions to our clients and assist them with the various issues they face by utilizing our broad client base and the specialized capabilities of each business division. Nomura Holdings, Inc. 35 Global Merchant Banking Issues and Strategies (cid:1) N o m u r a K n o w s H o w to Enhance Corporate Value Issues and Strategies By implementing these initiatives, we are working toward the • Enlarging Our Investment Portfolio steady expansion of our business activities and creating an Awareness of private equity investment is increasing in Japan, earnings base that is not susceptible to market fluctuations. This and our earnings in this area are growing steadily. However, to will position us to play a role in sustaining the growth of Nomura continue progressing toward our goal of further stabilizing our Group. To make this possible, we are also working closely with earnings, we believe it is essential to structure deals that take other members of the Group. maximum advantage of the comprehensive resources of the Group in all aspects of the investment process, from the develop- • Offering High-Value-Added Solutions ment of new investment opportunities through raising the value of In addition to demand stemming from corporate group reorgani- portfolio companies and securing returns on these investments. zations and downsizing to focus on core operations, we are To contribute to the diversification of the earnings of Nomura seeing steady growth in demand for capital increases for busi- Group, we need to expand our business exposure by offering ness expansion and strategic delistings. As providers of risk solutions to our clients and maximize revenue from our invest- capital, this is opening the door for us to play a more significant ments in the medium to long term. To this end, we have set a role in helping our clients achieve their strategic objectives. goal of raising our investment portfolio to between ¥250 billion Amid this changing environment, we are active in providing and ¥300 billion (excluding Terra Firma) mainly in NPF over the not only risk capital but also other solutions, drawing on the coming three to four years. Specific initiatives are to adopt a specialized capabilities of Nomura Group. This includes assist- flexible investment stance regarding which industries to invest ing in strengthening the balance sheets of our clients, providing in, the form of investment, and the geographic location and to risk management, offering management consulting, and helping be responsive to changes in the operating environment in order arrange strategic alliances. By offering these services, we work to enlarge our investment portfolio to meet our objectives. NPF to restructure and revitalize the companies we invest in and is targeting an internal rate of return of 20% or more over a peri- contribute to society as a whole by helping to realize the poten- od of three to five years and is working to increase its exposure, tial of untapped corporate resources. This, in turn, brings even focusing mainly on investments in Japan. greater dynamism to the Japanese economy. Tender Offer for Skylark In July 2006, NPF and Asia Eateries Holdings NV (AEH), which was established by funds advised by CVC Asia Pacific, acquired shares in Skylark through a tender offer via SNC Investment, in which NPF holds a 63.33% stake and AEH holds a 36.67% stake. Skylark is one of the largest companies in Japan’s restaurant-chain industry. As a result, the takeover of Skylark was larger than the management buyout (MBO) in July 2005 of World, a leading company in Japan’s apparel industry, the largest such deal in Japan to date. SNC Investment held discussions with the chairman of Skylark, Kiwamu Yokokawa, and formulated a medium- to long-term management strategy that would enable Skylark to respond more flexibly to changes in the operating environment and create sys- tems that would allow it to make the correct moves quickly, without being influenced by short-term fluctuations in performance. After agreeing on this strategy, SNC Investment moved ahead with the tender offer. 36 Nomura Holdings, Inc. Nomura Principal Finance (NPF) Support Structure—Drawing on the Comprehensive Capabilities of Nomura Group to Enhance Corporate Value Management team NPF Share common values Analyze management Plan a growth scenario Business strategies Management systems Financial strategy Developing alliance partners Management support Assisting in marketing, developing ties with customers and suppliers, and identifying strategic partners through Nomura’s close relationships with approximately 9,000 leading companies Support for entry into international markets Assistance for entering international markets through Nomura’s global network Seconding of personnel Introducing and providing support for management systems Providing capable personnel from Nomura’s large pool of management talent Assistance for upgrading various management systems, including SCM and ERP*4 Financial support Support for IPOs Support for raising capital based on high-level financial technology Assistance in listing shares Enhancement of corporate value *4: SCM: Supply chain management ERP: Enterprise resource planning Nomura Holdings, Inc. 37 Asset Management (cid:1) N o m u r a K n o w s H o w to Help You M As Japan’s largest asset management company, we are best positioned to assist our customers in creating a prosperous and affluent future. We deliver creative products and top-quality asset management capabilities born from original concepts, along with the full support of Nomura Group. We remain highly focused on providing our customers with the best asset manage- “ ment services available, while paving the way for future growth.” Takumi Shibata Chief Executive Officer, Asset Management Outline We are engaged in asset management and defined contribution pension plan businesses. In the asset management business, we offer a wide range of asset management services through a number of channels based on our extensive global research network and asset management and product development skills, backed by sophisticated financial technologies. We also offer custody services for foreign investment trusts. In the investment trust field, we offer individual customers a diverse lineup of products, including money market funds and equity investment trusts. In recent years, customers have shown a preference for new types of products, including funds offering frequent distributions. In response to this trend, we have expanded our product range. Moreover, in the investment advisory field we provide various asset management services to domestic and overseas pension plans and institutional investors, including management of alternative investments*1 as well as conventional management services to meet the needs of our customers. In the defined contribution pension plan business, we now offer a broad range of integrated services, principally through Nomura Pension Support & Service. These services range from support for introducing defined contribution plans, through consultation on plan design and investment education programs for companies introducing these plans, to investment trust products. We have been committed to continuously strengthening the investment management capabilities of Nomura Asset Management, Japan’s largest asset management firm, and other asset management companies in Nomura Group. As a result, our track record in 38 Nomura Holdings, Inc. anage Your Future the asset management business is now highly regarded within the industry and our name has become synonymous with high-quality services for Japanese equity investments. Total assets under management have expanded to about ¥23 trillion*2, with ¥21 trillion of this managed by Nomura Asset Management, placing us in the No. 1 position in Japan. Looking ahead, we plan to draw fully on the strengths of Nomura Group and its support structure to continue expanding our operations. *1: Alternative investments include a broad range of investment products whose performance is not correlated with stocks and bonds. Specific examples include hedge funds, commodity funds, and real estate. *2: Adjusted for asset overlap among group companies. Asset Management Business Results Years ended March 31 2002 2003 2004 2005 2006 Net revenue ....................................................................................... ¥51,529 Non-interest expenses....................................................................... Income before income taxes.............................................................. 39,502 ¥12,027 ¥40,363 36,322 ¥04,041 ¥40,276 39,783 ¥00,493 ¥48,993 39,005 ¥09,988 ¥65,843 45,220 ¥20,623 Note: In January 2006, certain functions of other business activities were integrated into Asset Management. Certain reclassifications of previously reported amounts have been made to conform to the current presentation. Millions of yen Nomura Holdings, Inc. 39 Asset Management Overview (cid:1) N o m u r a K n o w s H o w to Help You Manage Your Future Business Results As a result of two consecutive years of major increases in rev- • Second Consecutive Major Increase in Revenues enue, both net revenue and net income reached their highest In fiscal 2005, ended March 31, 2006, Asset Management levels since Nomura adopted U.S. GAAP in fiscal 1999. reported net revenue of ¥65.8 billion, 34% higher than the previ- ous fiscal year. Non-interest expenses were ¥45.2 billion, 16% Highlights of the Year higher than the prior year. Income before income taxes jumped • Assets under Management Expand as Bank Channel 106% to ¥20.6 billion. Sales Increase and Japan Post Sales Begin Rising investments in newly introduced investment trusts with During fiscal 2005, Asset Management reported strong sales of frequent distributions and those investing in emerging markets investment trusts through Nomura channels as well as through contributed to the increase in assets under management and, in Japan Post and bank channels. turn, the marked increase in revenue. Other contributions came We introduced 34 public investment trusts in the domestic from the expansion of investment trusts sold through Japan Post market during the year and boosted our marketing and sales and bank channels. support. We expanded the range of investment products sold through banks, and as a result assets under management in Assets under Management Nomura Asset Management (Trillions of yen) 25 20 15 10 5 0 Japan’s largest asset management company, Nomura Asset Management serves a customer base of individual and institutional investors in Japan and abroad. The company delivers invest- ment trusts through sales channels that include Nomura Securities, other securities companies, banks, and Japan Post. Nomura Asset Management also provides investment advisory services to institutional investors. As of March 31, 2006, assets under management totaled about ¥21 tril- lion. In Japan’s public investment trust market, Nomura Asset Management ranks No. 1 with a 21% share. Nomura Corporate Research and Asset Management (NCRAM) An investment management company established in the U.S. in 1991, NCRAM manages assets mainly by using its expertise in high-yield bonds and leveraged loans. The company manages investment trusts sold in Japan, including the Nomura Bond & Loan Fund and Nomura U.S. High Yield Bond Income Fund. NCRAM also offers investment advisory services to domestic and foreign institutional investors. As of March 31, 2006, assets under management totaled about ¥1.2 trillion. 3/02 3/03 3/04 3/05 3/06 Note: These figures are the total assets under management of Nomura Asset Management, Nomura Corporate Nomura Funds Research and Technologies (NFR&T) NFR&T is a unique investment advisory company that manages assets based on evaluations of Research and Asset Management, Nomura asset management products. NFR&T searches for high-quality investment products through its BlackRock Asset Management, Nomura Funds Research and Technologies, MAINTRUST (Germany), and Nomura Funds Research & Technologies America after adjustments for asset overlap among group companies. 40 Nomura Holdings, Inc. access to asset management companies around the world. The company had total assets under management of ¥1.4 trillion as of March 31, 2006. funds for bank customers posted a major increase from about Business Environment ¥87 billion as of the prior fiscal year-end to about ¥518 billion as • Japan’s Investment Trust Market Approaches of March 31, 2006. ¥100 Trillion Accompanying the start-up of investment trust sales through The investment trust market in Japan is growing rapidly as a Japan Post in October 2005, Nomura Group lent its full support result of the inflow of funds from bank sales channels and the to marketing efforts. As a result, the Nomura Global 6 Assets shift from deposits to investment trusts offering frequent distri- Diversified Fund was selected as one of the products to be sold butions. As of March 31, 2006, the balance of investment through Japan Post, which has a network covering the entire trusts—including public and private investment trusts, foreign country, making it the most extensive sales channel of its kind in bond funds, and REITs—had risen sharply to about ¥96.3 tril- Japan. Along with the increased shift from savings to investment, lion, compared with ¥67.5 trillion as of March 31, 2005. The bal- sales of investment trusts through Japan Post are forecast to ance of public investment trusts showed the largest increase in expand substantially. As of March 31, 2006, Japan Post had sold history, driven by the continuing shift of personal financial assets about ¥90 billion of our investment products, which represented into equity investment trusts. Propelled by the momentum of the 75% of all investment trusts marketed by Japan Post. shift from savings to investment, the investment trust market in Sales of investment trusts through Nomura Securities were also Japan is set to top ¥100 trillion. robust during the fiscal year. As a result, our total assets under We are noticing a steady and clear trend towards global management increased ¥5.4 trillion year on year to ¥23.2 trillion. diversification in asset management. Over the past several Additionally, strong efforts were made to implement policies to years, domestic investors have taken note of the difference further strengthen investment management capabilities and add between interest rates in Japan and overseas markets and have higher value to asset management services. As a result, our strong been increasing their investments in foreign bond investment record in asset management has been recognized by third-party trusts. Recently, the trend has been toward even greater diversi- consultants. For example, Nomura Japan Stock Strategic Fund ty in asset management as investors have increasingly shifted and Nomura Japan Open, both managed by Nomura Asset toward investments in emerging markets and hedge funds, Management, were selected by Morningstar, a leading provider while their interest has also diversified from equities and bonds of investment research, for awards for excellence in the Domestic Equity Fund and Domestic Hybrid Fund cate- gories. Moreover, our Global High Income Stock Fund received the top award for excel- lence in the International Equity Fund and International Hybrid Fund categories. to real estate, commodities, and other asset classes. Amid this market environment, baby boomers are eyeing investment trusts as a means for investing their retirement allowances and other financial assets. In addition, asset builders are focusing on investment trusts for their defined contribution pension plans and other investing activities. With rising sales through banks and the start of investment trust sales through Japan Post, our asset management business should continue to experience rapid expansion. Nomura Holdings, Inc. 41 Asset Management Issues and Strategies (cid:1) N o m u r a K n o w s H o w to Help You Manage Your Future Issues and Strategies • Path to Growth and Expansion ending March 31, 2007, expanding our range of products and our marketing channels as well as taking other measures, such Nomura Asset Management is presently Japan’s leading asset as strengthening our position in the defined contribution pension management company in terms of assets under management. plan business. In addition to conventional asset management products, Nomura Group has pioneered new investment products in • Wider Range of Products Japan such as high-yield funds and funds of funds. In the Our policy has been to develop and offer new investment prod- defined contribution pension plan business, we have built up a ucts that respond quickly and accurately to the increasingly considerable track record by increasing our defined contribution diverse needs of our customers by applying various investment plan administration services and our offerings of products suited styles to the management of domestic and international equities to these plans. and bonds. The fast-growing investment trust and asset management For example, we have introduced a range of investment market, however, is now undergoing rapid structural change as trusts that invest in various assets and offer frequent distribu- the flow of funds from savings into investment accelerates. To tions in response to growing demand for such products. These create an even stronger earnings base in this changing environ- include the My Story Profit Distribution Type Fund and Nomura ment, we need to seize business opportunities and take an Multi-currency Japan Stock Fund. Moreover, we offer region- aggressive approach. To move toward the goal of becoming specific index funds, with the goal of contributing to regional one of the world’s leading asset management groups, we are development by providing support to locally based companies, shifting management resources towards growth in fiscal 2006, as well as emerging market stock investment trusts. To build on this momentum, we are working to deliver new, timelier funds and respond faster to market trends to meet the diverse needs of our customers more effectively. • Expansion of Sales Channels A key issue to address as we work to increase assets under management is expanding the scope of our sales channels. During fiscal 2005, our Nomura Global 6 Assets Diversified Fund was selected by Japan Post. This channel is just as important to us as bank sales channels and will play a key role in the future development of Japan’s investment trust industry. Looking ahead, we will expand the market for investment trusts through Japan Post’s nationwide network, thereby increasing assets under management. Assets under Management in Main Funds Offering Frequent Distributions* (Billions of yen) 2,000 1,500 1,000 500 0 12/03 3/04 6/04 9/04 12/04 3/05 6/05 9/05 12/05 3/06 *Total of Nomura U.S. High Yield Bond Income Fund, Nomura Fund Masters Global Bond *Fund, Global Attractive Dividend Stock Fund, Nomura U.S. Loan Income Fund, Japan *Attractive Dividend Stock Fund, My Story Profit Distribution Type Fund (6 times/year), *and Nomura Global REIT Fund 42 Nomura Holdings, Inc. Source: Bloomberg Professional Services Along with our drive to strengthen relationships with Japan’s Given these conditions, our aim is to expand our administra- megabanks, one of our funds, the Nomura Small Cap Stock tion services for these plans and our product offerings with the Open, was selected by Mizuho Bank during fiscal 2005, follow- target of further increasing assets under management of invest- ing the selection of a REIT fund by Sumitomo Mitsui Banking ment trusts. We aim to remain the industry leader in this area by Corporation in the previous fiscal year. We are placing even greater always offering the best asset management services to our cus- emphasis on marketing to consolidate our investment trust sales tomers. Based on these objectives and vision, and by imple- channels, such as Japan’s megabanks and financial institutions. menting various measures, we have won contracts for administering the defined contribution plans of 187 companies • Improvements in Customer Service with about 280,000 participants, as of March 31, 2006. We are We believe that strengthening our investment management also working to provide investment trust products for partici- capabilities to boost customer satisfaction and delivering value- pants in plans where we are not acting as administrator. The added services will lead to an increase in assets under manage- total balance of related investment trusts we supply for defined ment. During fiscal 2006, we will establish a strong client service contribution pension plans is about ¥130 billion. structure to improve our services for securities companies During the current fiscal year, our objectives are to bolster our including Nomura Securities, banks, Japan Post, and other marketing activities and improve competitiveness, especially in financial institutions. customer service, including investor education, with the goal of Specific initiatives include working to offer investment prod- winning new mandates for the administration of defined contri- ucts that are most suited to the needs of customers in each bution pension plans. We will also be working to expand the sales channel and to provide seminars and other services that lineup of investment products we offer by developing new prod- actively support marketing activities. Moreover, we plan to ucts and improving collaboration with Domestic Retail and expand our investment education program and strive to Global Investment Banking, which act as customer interface increase our base of investors. We are also aiming to offer addi- points. We will also pursue alliances with other financial institu- tional support for marketing and improve service for customers tions and pension administration service companies. by distributing sales promotion materials. • Strengthening Defined Contribution Pension Plan Services Under defined contribution pension plans, the future amounts of Investment Trusts Nomura Supplies to Defined Contribution Pension Plans Defined contribution pension plan investment trust assets (lhs) Number of accounts for products offered (rhs) the pensions are determined by investment performance of partici- 150 (Billions of yen) pants in these plans. Since these plans were introduced in Japan in 2001, the number of companies adopting the plans has contin- ued to increase. In view of upcoming pension reforms and the planned abolishment of the tax qualified pension plan system in 2012, the market for defined contribution pension plans is expect- ed to grow considerably. However, competition among companies providing services for these plans is likely to become more intense. 120 90 60 30 0 (Accounts) 500 400 300 200 100 0 9/02 3/03 9/03 3/04 9/04 3/05 9/05 3/06 Nomura Holdings, Inc. 43 Global Research Global Research (cid:1) N o m u r a K n o w s H o w to Identify Global Opportunities Tokushichi Nomura, the founder of Nomura Group, was fully aware of the limitations of securities trading based on instinct and experience alone. He was the first to set up a research department in Japan’s securi- ties industry and consistently emphasized the importance of scientific investment decisions. Our founder’s emphasis on research is still a strong guiding principle within today’s Nomura Group. Global Research Structure Global Research Financial & Economic Research Center (Tokyo) Asia Research (Hong Kong) Europe Research (London) U.S. Research (New York) Nomura Research & Advisory (Tokyo)* Corporate Office Economic Research Department Asia and Emerging Markets Research Department Investment Strategy Department Equity Research Department Quantitative Research Department Hong Kong Korea Taiwan China Singapore Malaysia Australia *Jointly managed with Global Merchant Banking Conducting a Full Range of Research Globally Global Research consists of approximately 500 people. About 300 of these staff members belong to the Nomura Securities Financial & Economic Research Center, and the remaining 200 are stationed at overseas offices and at Nomura Research & Advisory. The activities of the Financial & Economic Research Center are divided into fundamental and quantitative research. Fundamental research involves providing reports for investors while gathering information and analyzing fundamentals of national economies and individual companies. In the center’s Economic Research Department, economists analyze trends in the macroeconomy. In the Investment Strategy Department, strategists analyze the stock market investment environment and provide advice on investment strategies. Equity Research Department analysts prepare forecasts on corporate performance and assess share price valuations. In July 2006, we formed the Asia and Emerging Markets Research Department to expand our coverage of the economies and equity markets of Asia excluding Japan and other emerging markets. These departments work together closely and collaborate with over- seas offices as necessary to supply investors with insightful, high-quality research. Quantitative research involves the use of mathematical methods to analyze securities. The Quantitative Research Department works with overseas offices to conduct its analyses on a global scale. Nomura Securities’ research consistently receives high rat- ings in the analyst rankings of The Nikkei Financial Daily and Institutional Investor magazine. The Financial & Economic Research Center and overseas offices write about 10,000 reports annually and deliver them to investors around the world. We also hold seminars and forums, which provide a venue for discussions between top management of leading companies and investors and act as a bridge between financial and securities markets on the one hand and investors on the other. 44 Nomura Holdings, Inc. • Economic Research Department • Quantitative Research Department A team of more than 20 economists in Japan works closely with Quantitative Research has more than 70 staff members and, economists in our international network to study and analyze drawing on their core skills in financial engineering and IT, macroeconomic and financial as well as foreign currency markets engages in research and development necessary for being an in Japan and major countries around the world. During fiscal 2005, active player in cutting-edge financial businesses. The scope of ended March 31, 2006, the department wrote approximately 700 activities is broad and includes asset management, trading, reports and held about 1,700 seminars for domestic and global financial product development, risk management, and financial investors. It also analyzes medium- and long-term social and eco- management, all of which are key support pillars of Nomura nomic structural issues, including demographic trends in Japan Group’s financial technology. Research targets the study and toward smaller families and aging of the population and regional application of the latest advances in financial engineering, such economic differences. Asset Formation in an Era of Declining as portfolio and derivative theory, and the latest developments Population, issued by Toyo Keizai, was very well received. in IT, such as global databases and leading-edge application • Asia and Emerging Markets Research Department systems. In addition, our financial technology expertise is used to With a staff of around 10 economists and strategists, the Asia and provide consulting services to assist institutional investors, cor- Emerging Markets Research Department analyzes the economies porates, and other clients in asset management and risk man- and stock markets of Asia excluding Japan and other emerging agement. The department also conducts many joint research markets. Along with receiving information from our overseas projects with leading universities and research institutes in Japan offices and conducting its own research in the region, the depart- and overseas to stay abreast of and apply the latest theories. ment issues a number of periodical publications, including Results of the department’s research are made available through Economic Quarterly Asia-Pacific Outlook, Asian Equity Strategy, 2,000 reports issued annually and various seminars. and China Weekly. It also holds seminars for institutional investors • International Network in Japan and at Nomura’s branch offices throughout Japan to Nomura Group has economists, strategists, and analysts in New promote investments in Asia and other emerging markets. York, London, and seven locations in Asia-Pacific and quantitative • Investment Strategy Department research teams in New York, London, and Hong Kong. Over 15 strategists of this department in Japan provide advice on Researchers in each office and region work closely, giving us a investment strategies, mainly for stock markets in Japan. Their worldwide research network. As capital movements become research spans many fields from the viewpoints of economic and increasingly global, global information-gathering capability is indis- corporate performance; the investment environment, including pensable to conducting research. This research infrastructure interest rates and foreign currency; demand and supply condi- enables us to make global comparative analyses of corporations, tions for equities as well as trends among investors; and system- which is an important service for assisting institutional investors in atic analyses regarding financial, accounting, and capital policies. making globally diversified investments. It works in collaboration with other departments of the Financial & • Distribution of Research Reports Economic Research Center as well as with international research Research reports issued by the Financial & Economic Research departments. Based on the results of its analyses, the department Center reach customers through our branch offices in Japan and currently issues about 600 reports annually. In addition, it holds a a number of other channels such as Nomura websites, including range of seminars for institutional investors in Japan and over- Nomura Home Trade, and information vendor sites that serve seas, including its annual strategists’ seminar. institutional investors. For foreign institutional investors, we trans- • Equity Research Department In this department, some 60 analysts in Japan follow listed companies, analyzing their cor- porate value and making judg- ments regarding their current and future value as investments. Analysts are assigned specific late reports into English and make them available through Nomura Group offices. Also, reports prepared by research staff outside Japan that are of interest to domestic investors are translated and edited for Japanese investor audiences. • Nomura Research & Advisory A wholly owned subsidiary of Nomura Holdings, Nomura Research & Advisory assists privately owned companies to grow and list their shares. It has about 30 staff, organized into Research reports industries and companies and cover about 600 corporations research and investment departments. The research department that account for approximately 80% of the market capitalization is responsible for conducting research to evaluate companies of the first and second sections of the TSE and JASDAQ. Their and provide consultation to support management and provide activities include issuing more than 600 extensive background other assistance. The investment department takes equity posi- reports annually and about 3,500 flash reports on the compa- tions in selected companies through venture funds. Other activi- nies they cover. The department also holds various seminars, ties include holding seminars in the fields of biotechnology and including an annual forum for overseas institutional investors new energy to help stimulate the growth of new industries. and three seminars a year for institutional investors in Japan. Other activities include meetings to provide timely information to domestic and foreign institutional investors. Nomura Holdings, Inc. 45 Topic: Joinvest Securities Nomura Group is working to expand its business portfolio and is investing aggressively in new areas that have the potential for contributing to future earnings. As a first step, Joinvest Securities opened for business online, and we are now looking to develop the scope of its operations. Joinvest Securities offers online services with the objectives of con- tributing to the expansion of our individual investor base and increasing earnings. An advertisement for Joinvest Securities featuring the popular singing duo Puffy Joinvest Securities’ user-friendly website puts inexperienced investors at ease. 46 Nomura Holdings, Inc. • Developing as the Group’s Internet Financial Services Joinvest Securities’ strengths include its access to the strong Company management base and support of Nomura Group, offering As part of Nomura Group’s drive to enter new businesses that investors a reliable trading environment; its systems, which boast go beyond the framework of the securities business, Nomura high transaction processing capacity and stability; and its IT Securities took the lead with Joinvest Securities, which opened base, which features a high level of information security, espe- for business in May 2006. Under its business model, Joinvest cially for the protection of customer information. Joinvest Securities is responsible for developing a new interface with Securities is looking to take full advantage of these strengths and customers that is differentiated from Nomura Securities and is offering services—which competitors took several years to expands Nomura Group’s customer base. develop and introduce—speedily, with the goal of developing a The number of individual investors trading online is growing customer base different from the one already served by Nomura rapidly. In the second half of fiscal 2005, ended March 31, Securities. 2006, the value of equity transactions executed by individuals To extend its customer base among individual investors, over the Internet had risen to approximately 80% of the total. Joinvest Securities is offering attractive services, including the This growth comes on the back of the accelerating shift among lowest level of transaction fees in the industry and online content individuals from savings to investment and the reduction in equi- that helps investors familiarize themselves with investing. Also, ty transaction commissions, both of which have led to a broad- Joinvest Securities is looking to provide support for long-term ening of the individual investor base. While the efforts of online individual investors by gradually offering a more diverse range of brokers have played a part, the main factor behind this trend is investment services to assist its customers in building their assets. the rise in IT literacy in Japan, which has attracted many investors to online trading as a way of building wealth and • Delivering the Joy of Investing and Creating a Full Offering brought with it heightened interest in investing in shares. These of Online Businesses factors have led to solid growth in the volume of online transac- Joinvest Securities looks to introduce its customers, ranging tions. Many of these Internet-oriented investors are younger from those with no previous experience to seasoned investors, people who do not trade much with Nomura Securities. This will to the joy of investing by offering a broad range of products and give us the opportunity to build relations with a wider range of services to meet their needs. This joy is the sense of satisfaction asset builders who will be valuable customers for Nomura that comes from using money effectively. To enable more cus- Group. Nomura saw these trends as a major opportunity, and tomers to feel this sense of satisfaction, Joinvest Securities is decided to seek to expand its customer base through offering creating a “core money station” that investors can visit whenev- comprehensive web-based financial services. When we set up er they want. To this end, Joinvest Securities is working to Joinvest Securities, we decided not to use the Nomura name— expand its services to allow customers to participate inter- and thus broke with the established practice in the securities actively and upload information. Through this, we will be able to industry—to show our commitment to developing our business develop new services that meet customer requirements. In turn, activities freely. Joinvest Securities aims to offer new value appropriate to its role • Expanding the Customer Base through Responsive Joinvest Securities will continue to seek out new business Services and Individual Investors opportunities and meet the challenges of being a full-fledged as an online financial services company. Joinvest Securities has set management targets of 500,000 online business. accounts by the end of March 2007 and reaching breakeven by the end of March 2008. Nomura Holdings, Inc. 47 Corporate Governance (cid:1) N o m u r a K n o w s H o w to Enhance Nomura Group companies in Japan adopted the Committee System in June 2003. Under this system, the Group has formed Nomination, Audit, and Compensation committees, each with a majority of outside directors*1, thus creating a corporate governance structure that substantially strengthens the oversight of management and heightens manage- ment transparency. The system also helps to accelerate decision making across the Group by delegating additional authority for operations to the executive officers. In 2004, the Group drew up the “Code of Ethics of Nomura Group”*2 and is working to fulfill its responsibilities to all stakeholders. *1: Outside directors: Directors who do not perform operating duties on behalf of the Company and have never been an executive officer, director, manager, or other type of employee in the Company or any of its subsidiaries and are not currently an executive officer or director of a subsidiary or a manager or other type of employee of the Company or any of its subsidiaries. *2: For further details, please refer to CSR Report 2006. Characteristics of the Committee System Meeting the Challenges of Corporate Governance Under the Committee System, the directors are primarily • Appointed outside directors (2001) responsible for the oversight of management. Executive officers • Established Internal Controls Committee, which includes an chosen by the directors conduct business operations within the outside director (2001) scope of authority delegated by the directors. • Established Compensation Committee with a majority of out- Of the 11 Nomura Holdings directors, three serve concurrent- side directors (2001) ly as executive officers: the president (CEO) and deputy presi- • Established Advisory Board (2001) dents (COO and Co-COO). Four of the remaining eight directors • Abolished retirement bonuses for directors (2001) meet the requirements of outside directors as defined under the • Began granting stock options to directors and certain employ- Corporation Law of Japan. The majority of Nomination, Audit, ees (2002) and Compensation committee members are outside directors. • Adopted the Committee System (2003) The Audit Committee is chaired by an outside director and the • Established “Code of Ethics of Nomura Group” (2004) Nomination and Compensation committees are chaired by the • Began holding meetings of outside directors (2004) chairman of the board, who is not serving concurrently as an executive officer. Management Structure Shareholders’ Meeting Board of Directors President & CEO 48 Nomura Holdings, Inc. Nomination Committee Audit Committee Compensation Committee Board of Executive Officers Group Executive Management Committee Advisory Board Group Management Council Commitment Committee Internal Controls Committee (cid:2)Consultative body for the Group Executive (cid:2)Management Committee (cid:2)Top managers of representative global (cid:2)Japanese companies offer management advice Management Transparency Management Structure • Operations of the Board of Directors The Board of Directors is responsible for making decisions on items specified by the Corporation Law of Japan. The executive officers report to the directors on business conditions as well as matters for deliberation by the Group Executive Management Committee and other committees one or more times every three months. In addition, the executive officers make a monthly financial report to the directors. • 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 concerning the business execution of directors and executive officers, and compensation for directors and executive officers. As such, management oversight is conduct- ed by the Board of Directors. • Nomination Committee members of the Audit Committee fulfill the requirements of independent directors as defined under the Sarbanes-Oxley Act, and Koji Tajika fulfills the requirements of an audit committee financial expert pursuant to this act. The Audit Committee met 23 times during fiscal 2005. • Compensation Committee The Compensation Committee makes decisions regarding com- pensation for directors and executive officers, both in terms of broad policy and compensation for specific individuals. The majority of members of the Compensation Committee are out- side directors. The current members are Nomura Holdings Chairman Junichi Ujiie, who is committee chairman, and outside directors Masaharu Shibata and Hideaki Kubori. Directors who are representative executive officers, including the CEO, are not members of the Compensation Committee. The Compensation Committee met three times during fiscal 2005. Compensation for Directors and Executive Officers The Nomination Committee is responsible for decisions regard- Nomura Holdings has two basic compensation policies for ing proposals made to the General Meeting of Shareholders directors and executive officers. One is a flexible system for concerning the appointment and dismissal of directors. The determining compensation based on performance relative to majority of the members of the Nomination Committee must be management targets. This is aimed at increasing motivation and outside directors. The current members are Nomura Holdings empowering individuals to maximize performance. The second Chairman Junichi Ujiie, who is committee chairman, and outside is the introduction of equity-based compensation to enhance directors Masaharu Shibata and Hideaki Kubori. Directors who long-term incentives. Compensation for directors and executive are representative executive officers, including the CEO, are not officers is composed of the following three components. members of the Nomination Committee. The Nomination Committee met twice during fiscal 2005, ended March 31, 2006. • Base Salary • Audit Committee The base salary of each director and executive officer is the sum of amounts based on each individual’s career, post and respon- The Audit Committee is responsible for auditing the business sibilities, and the degree to which the consolidated ROE target execution of the directors and executive officers and preparing has been achieved. The ROE-linked portion is determined as audit reports. It also makes decisions regarding proposals to be shown in the table below. submitted to the General Meeting of Shareholders concerning the appointment and dismissal of independent auditors. In addi- tion, the Audit Committee discusses and approves compensa- tion for the independent auditors based on a proposal submitted by the chief financial officer (CFO). The majority of members of the Audit Committee are outside directors. The current members are outside directors Haruo Tsuji, who is committee chairman, Koji Tajika, and Fumihide Nomura, who is not an executive officer. Audit Committee mem- bers do not serve on the other committees. In addition, all ROE-Linked Base Salary Consolidated ROE Base salary Under 0% 0% to 5% 0 1/3 of standard salary 5% to 10% 2/3 of standard salary 10% to 15% Standard salary Over 15% 4/3 of standard salary Nomura Holdings, Inc. 49 • Cash Bonus • Internal Controls Committee The cash bonus is based on quantitative factors such as con- The Internal Controls Committee is responsible for establishing solidated net income, ROE, and earnings of business divisions. internal controls concerning Nomura Group operations as well This bonus is also based on qualitative items, such as the as deliberations and decisions regarding proper corporate degree to which management targets and personal targets have behavior. Currently, the committee is made up of three execu- been met, assessments of individual contributions, and other tive officers, two directors, and one executive officer of a sub- factors. The aggregate cash bonuses of directors and executive sidiary. It is chaired by the CEO. officers may not exceed 1% of consolidated net income. • Board of Executive Officers • Stock Bonus The Board of Executive Officers is responsible for sharing infor- The stock bonus is determined separately for each individual by mation related to the business of Nomura Holdings, the Group’s taking into consideration all applicable factors. These include holding company, and for conducting discussions on related parameters such as consolidated net income and ROE, as well matters. The Board of Executive Officers is made up of all 11 as the level of this compensation relative to the base salary, executive officers and is chaired by the CEO. cash bonus, and other stock bonuses and the benefits relative to the cost of providing such bonuses. • Group Management Council Business Execution System The Group Management Council is composed of 17 members drawn from the management of Nomura Holdings and compa- To ensure that executive officers make business decisions nies under the holding company. Although not a venue for deci- smoothly and appropriately, Nomura Holdings has formed a sion making, the council’s responsibilities include sharing Group Executive Management Committee, a Commitment information and promoting the conduct of business through the Committee, an Internal Controls Committee, a Board of exchange of opinions and free discussion regarding business Executive Officers, and a Group Management Council. The strategy. It is chaired by the CEO. Group Executive Management Committee, Internal Controls Committee, Board of Executive Officers, and Group Internal Controls Management Council are chaired by the CEO, and the The Audit Committee, with a majority of outside directors, has Commitment Committee is chaired by the COO. primary responsibility for management oversight functions in companies that operate under the Committee System. The main • Group Executive Management Committee members of the Audit Committee are part-time outside directors. The Group Executive Management Committee deliberates and To supplement the Audit Committee’s auditing activities and makes decisions on major items related to management, includ- ensure an airtight auditing system, Nomura Holdings designates ing the business plans of Nomura Group, budgets, and alloca- Audit Mission Directors. In addition, Nomura Holding’s Office of tion of management resources. This board is made up of three Audit Committee supports the activities of the Audit Committee. representative executive officers and is chaired by the CEO. Internal Audit is charged with distributing sufficient information to individuals responsible for business execution as well as the • Commitment Committee Audit Committee and Audit Mission Directors. The Commitment Committee is responsible for deliberations and decisions regarding important items involving Nomura Disclosure Committee Group positions having a low liquidity and positions that are To ensure that investors receive fair access to information on material with regard to risk management. The Commitment Nomura Group, the Group has established “Nomura Group’s Committee is made up of five executive officers plus three of the Statement of Global Corporate Policy Regarding Public CEOs of business divisions and is chaired by the COO. Disclosure of Information.” This sets forth policy directives that protect non-public information while at the same time promoting timely and appropriate public disclosures. The statement 50 Nomura Holdings, Inc. adheres to the principle of U.S. Regulation FD.* Based on this Crisis Management Structure The information management and disaster prevention strategies that were prepared mainly in individual Nomura Group depart- ments have been centralized and upgraded on a continuing basis following the terrorist attacks in the United States on September 11, 2001. In October 2001, Nomura Securities cre- ated a Crisis Management Committee to ensure the effective dissemination of information and confirmation of employee safe- ty following disasters. In addition, our Information Security Committee is responsible for developing systems to safeguard information and conduct internal training on information security. In April 2005, a Nomura Group Crisis Management Committee was formed to create Groupwide crisis management systems. Information Security The information Nomura Group has accumulated, including per- sonal information related to its clients, is critical to the Group’s business activities and requires a rigorous system of controls. All Nomura Group companies have prepared an information security policy and conduct employee training programs as part of their activities to keep information secure. Going forward, the Group will continue to do its utmost to ensure the protection of client data. global corporate policy, Nomura Holdings has established a Disclosure Committee that is chaired by the Nomura Holdings executive officer responsible for global corporate communica- tions. The Disclosure Committee is responsible for deliberations and decisions regarding disclosure of material information, legal- ly mandated documents such as SEC Form 20-F, the Japanese annual securities reports, and other reports. The Disclosure Committee is taking the lead in documenting internal controls, as well as in evaluating the effectiveness of those controls, for financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. Internal controls over financial reporting must be formulated by the CEO and CFO or under the supervision of these two executives. To fulfill this requirement, the related divisions of Nomura Holdings along with Nomura Securities and other major consolidated subsidiaries (including overseas subsidiaries) are currently preparing an extensive range of documents on processes involving important financial statement items and items to be disclosed. Internal Audit is responsible for performing tests and assess- ments concerning the effectiveness of internal controls. Progress with these tests and evaluations is reported not only to the Disclosure Committee but also to the Audit Committee and Internal Controls Committee. *Regulation Fair Disclosure (FD): Under this regulation, the U.S. Securities and Exchange Commission (SEC) forbids companies from releasing important information to certain people, such as analysts or institutional investors, before it is released to the general public. Internal Controls System Internal Controls Committee Audit Committee Audit Mission Directors (cid:2)3 executive officers including CEO + subsidiary’s (cid:2)executive officer + outside director (chairman of Audit (cid:2)Committee) + director (Audit Mission Director) (cid:2)Promotes proper corporate behavior throughout (cid:2)the Group and enhances internal controls and (cid:2)procedures Audit Report Approval of Audit Plan Audit Report Internal Audit Internal Audit Office of Audit Committee (cid:2)Assist Audit Committee (cid:2)Assist Audit Mission Directors by providing (cid:2)operational support Audit Report Nomura Holdings and Its Subsidiaries Management Business Risk Management Compliance Nomura Holdings, Inc. 51 Compliance (cid:1) N o m u r a K n o w s H o w to Structure to Deliver (cid:1) N o m u r a K n o w s H o w Nomura Group places strong emphasis on preventing behavior that is or could be seen as illegal. Should a problem occur, there is a framework for submitting reports to management without exception or delay and for responding appro- priately. Each Group company must ensure steadfast compliance and adherence to the relevant rules and regulations, as well as sufficiently manage operations based on the “Regulations of Nomura Group Management Structure.” Group companies must also properly supervise their operations based on their own internal rules. However, they work in a uni- fied manner on such issues as appointing Compliance Officers and setting up Compliance Hotlines. The Nomura Securities Compliance Department holds regular meetings of Group company Compliance Officers to strengthen coop- eration within the Group. Employees who report violations to the Compliance Hotline can choose to remain anonymous. Employees are also informed that measures are in place to ensure they are completely pro- tected from any negative consequences should they use their real names. Addressing Legal Risk Globally Because Nomura Group conducts business on a global scale, adequate measures are taken with regard to legal risks associ- ated with overseas compliance and cross-border transactions. Nomura Group is heightening its professional expertise con- cerning the regulatory environment for its international activities. We are also refining skills in the development of cross-border products and services that take into account the requirements of laws and regulations of various regulatory regimes. Overseas legal risk is managed primarily on a regional basis. As part of the management of legal risk associated with global business activities, Nomura Group periodically holds a global legal conference and a global compliance conference. These provide a forum for examining problems involved with cross- border and other business activities. Compliance Officers Each domestic Nomura Group company appoints a Compliance Officer who is responsible for confirming that all employees are aware of their obligations to respect the law and that business operations are conducted in a manner that complies with laws and regulations. Due to the differing nature of operations, each Group company may appoint a Compliance Officer for each department or one or more Compliance Officers at each head office or company. Compliance Officers are responsible not only for monitoring adherence to laws and regulations but also for ensuring that activities conform to social standards from the standpoint of corporate ethics. Group Compliance Officers attend an annual training seminar to reinforce awareness of their responsibilities and raise aware- ness within Nomura Group of the need to observe a unified compliance policy and set of regulations. Compliance Hotline The Nomura Holdings Compliance Hotline was set up in October 2002 (Nomura Securities began operating its own Compliance Hotline in October 1997). The purpose of the Group Compliance Hotline is to provide a means for employees to relay information directly to management at Nomura Holdings if they discover acts that violate laws or company regulations or other antisocial behavior. Information can be supplied directly to the designated Nomura Holdings executive officer and to an outside director. Information provided through the Compliance Hotline and the status of responses are reported to and exam- ined by the Nomura Holdings Internal Controls Committee. 52 Nomura Holdings, Inc. Creative Solutions Effective Compliance Systems These lawyers are the legal supervisors of Nomura Securities’ Compliance Committee. Employees who report violations to the Compliance Hotline can choose to remain anonymous. Employees are also informed that measures are in place to ensure they are completely protected from any negative conse- quences should they use their real names. • Compliance Training Compliance manuals designed to ensure a clear understanding of laws and regulations are made available via Nomura Securities’ intranet, providing a compliance education frame- work for all directors, officers, and employees. Training programs are conducted in accordance with the duties of employees, and training materials are used for monthly training sessions at branch offices. Reports on the implementa- tion of these sessions are submitted to administrators. Nomura Securities Compliance Structure Nomura Securities has established a Compliance Program, which is a detailed action plan for compliance, and developed its compliance structure based on this program. • Compliance Committee The Compliance Committee is made up of 13 executive officers including the CEO, the Internal Administration Supervisor, and two external lawyers who act as legal supervisors. As a rule, the committee meets twice each month to discuss the internal con- trols system, compliance rules, and other important matters concerning compliance. • Compliance Management at Departments and Branch Offices In accordance with Japan Securities Dealers Association regula- tions, Internal Controls Officers are assigned within front-office departments and Compliance Officers are assigned at each department and branch office. • Compliance Hotline The Nomura Securities Compliance Hotline provides another means, separate from the Nomura Holdings channels, for Nomura Securities employees to submit information directly to the Internal Administration Supervisor and external lawyers. Nomura Securities Compliance Hotline Employees External Lawyers Internal Administration Supervisor Nomura Holdings Designated Executive Officer Outside Director Compliance Committee Audit Committee Audit Mission Directors Board of Executive Officers Nomura Holdings, Inc. 53 Risk Management (cid:1) N o m u r a K n o w s H o w to Optimize Risk and Return Our business is subject to various risks. These risks can be divided generally into portfolio risks, which are linked to market price changes or the situations of clients that affect the positions held by Nomura Group, and non-portfolio risks, which are not directly linked to our positions. The process of managing these risks is an integral part of management’s responsibilities. Financial innovation in global business activities can lead to complex interactions among risks. We rec- ognize the importance of identifying, evaluating, monitoring, and managing our risk profile. • Monitoring and Management by the Global Risk In addition, in May 2006 we formed the Operational Risk Management Unit Team within Tokyo risk management. This team will enable us We have an independent global risk management unit headquar- to manage portfolio risk on a global basis in cooperation with tered in Tokyo in addition to the units that manage risk at each our offices in Japan and overseas as well as to manage non- level of our business. The global risk management unit monitors portfolio risk. and manages the various risks that Nomura Group faces in its business activities based on the capital allocation rule or the glob- • Commitment Committee al risk control policy, which the Group Executive Management In addition to the previously mentioned structure, the Committee establishes. Furthermore, our global risk management Commitment Committee was set up in order to control risks unit quantifies risk for each of our businesses and provides risk relating to the less-liquid asset investments and important information to senior management. investments from a risk management perspective. Our The Group Executive Management Committee of Nomura Commitment Committee is made up of the executive officers Group determines the strategic direction and allocates assigned by the chairman of the Commitment Committee, while resources and capital to each business division—Domestic the chairman is appointed by our president and CEO. Retail, Global Markets, Global Investment Banking, Global Merchant Banking, and Asset Management—based on busi- • Global Risk Management System ness plans, budgets, and risk-adjusted performance to ensure Nomura Group has made a significant commitment to the proper diversification of risks and revenues. Our Group development and continuous enhancement of an appropriate Executive Management Committee also sets each business divi- risk management system and procedures. This system enables sion’s risk limit that applies across business divisions to all of us to calculate risk amounts, including value at risk (VaR), and our trading and investment portfolios for our global business. other risk-related items based on global market data and coun- Each business division utilizes allocated resources and capital terparty, position, exposure, and other risk information world- within its risk limit. wide. The system also enables us to make various kinds of Simultaneously, our global risk manager monitors the extent analyses regarding credit standing and evaluation. of risk exposure at each of our trading units relative to the in- house risk limit assigned to that unit and reports it to senior • Model Review management daily. In April 2006, Nomura Group introduced Nomura Group uses pricing models when certain financial capital management and risk management within a new frame- instruments cannot be valued based on quoted market prices. work. The objective of this new framework is to practice more The global risk management unit, independent of the business, detailed risk control that accords with actual business situations reviews the models and assesses model appropriateness and while at the same time enhancing the maneuverability and flexi- consistency. bility of capital management by pushing forward quantification of various risks. 54 Nomura Holdings, Inc. Note: For more detailed information on risk management, please refer to the Form 20-F, which is filed with the U.S. Securities and Exchange Commission. Directors and Executive Officers (As of June 30, 2006) Directors Chairman Junichi Ujiie Nobuyuki Koga Hiroshi Toda Kazutoshi Inano Nobuyuki Shigemune Yukio Suzuki Masaharu Shibata* Hideaki Kubori* Haruo Tsuji* Director Director Director Director Director Director Director Director Director Director Executive Officers President & CEO (Serving concurrently as Director) (Representative Executive Officer) Nobuyuki Koga Chief Executive Officer (CEO) Deputy President & COO (Serving concurrently as Director) (Representative Executive Officer) Hiroshi Toda Chief Operating Officer (COO) International Operations Deputy President & Co-COO Kazutoshi Inano (Serving concurrently as Director) Co-Chief Operating Officer (Co-COO) Fumihide Nomura (Representative Executive Officer) Koji Tajika* *Outside director Executive Managing Director Masanori Itatani Head of Internal Audit Executive Managing Director Akihiko Nakamura Senior Managing Director Akihito Watanabe Senior Managing Director Tetsu Ozaki Chief Information Officer (CIO) Head of Group Human Resources Development Head of Group Corporate Strategy Senior Managing Director Masafumi Nakada Chief Financial Officer (CFO) Senior Managing Director Noriaki Nagai Head of Corporate Office Senior Managing Director Hideyuki Takahashi Regional Management of Senior Managing Director Yugo Ishida Americas Region Regional Management of Europe Region Nomura Holdings, Inc. 55 Corporate Citizenship (cid:1) N o m u r a K n o w s H o w to Be a Valued to Deliver (cid:1) N o m u r a K n o w s H o w Our founder, Tokushichi Nomura, set forth Nomura’s raison d’être as follows: “Nomura’s mission is to enrich the nation through the securities business. This is something we must absolutely see through.” Based on this founding spirit, Nomura Group believes that the healthy development of the economy is essential to creating an affluent society. As such, we focus heavily on generating opportunities for educational activities that promote the understanding of financial and securities markets. We also believe in the importance of creating a well-rounded society. To that end, we support academic initiatives, culture, the arts, sports, and other activities. Economics and Securities Education Sound economic development through the creation of a bal- anced financial system forms the backbone of any affluent, sus- tainable society. Nomura Group’s approach to educating the public on economics and investing is wide ranging, with some- thing for everyone, from young children to lifelong learning courses for middle-aged people and senior citizens. • Donation of T-Shirt Shop, a Practical Economics Textbook Previously, we donated an educational comic book, The Secret of Money, to elementary school children throughout Japan and anoth- er book, Finance for Beginners, a finance primer for junior high school children. In March 2006, we distributed T-Shirt Shop, a free textbook that introduces students to finance and economics, to 11,000 junior high Hong Kong, and Macao. Also, in regional communities and the work- place we offer lifelong learning cours- es for beginners that are easy to understand and promote knowledge of finance and securities. • Sponsor of Nikkei Stock League We are a special sponsor of the Nihon Keizai Shimbun’s Nikkei Stock League. This contest for junior and senior high school and university students offers an opportunity for students to learn Securities education course in progress Award ceremony for the Sixth Nikkei Stock League about portfolio management by selecting a research topic and reporting their findings. Students learn how the economy works Cover of T-Shirt Shop through simulated investing in stocks and are made to take the initiative and think for themselves. Fiscal 2005, ended March 31, schools nationwide. This book offers an easy-to-understand expla- nation of the workings of the economy and has been well received. • Courses for Studying and Learning About Securities To provide students with an understanding of the economy and practical knowledge, we provide securities education courses at more than 120 universities in Japan. Internationally, we provide such courses at a total of five universities in Thailand, China, 2006, marked the sixth time the contest was held. More than 33,000 students have participated since the contest first started. • man@bow Economic Training Website To encourage a wider interest and understanding of economics and finance, we have partnered with the Nihon Keizai Shimbun to sponsor man@bow, a website to learn about economics. The site explains current topics and market trends, including topics Education Initiatives Publications Events Lectures Education programs Internet Cable TV Elementary schools Junior high schools Senior high schools Universities The Secret of Money T-Shirt Shop textbook Finance for Beginners Enjoying Economics Adults Company employees Communities Activities to promote defined contribution pension plan schemes Nomura Money Fair Nomura Money Fair Seminars at Nomura Securities’ branches Seminars at Nomura Securities’ branches Securities learning programs Securities education programs Securities learning programs Securities education programs Special sponsor of Nikkei Stock League Quest Education Program Nikkei Education Challenge Educational content on the Internet Nomura Free School Doki Doki Waku Waku Okane no Hanashi 56 Nomura Holdings, Inc. Creative Solutions Member of the Global Community related to economics and investment, in simple terms. It is wide- ly used as a textbook for asset management by individuals. Cooperation between Universities and Industry Nomura works with educational institutions and other organiza- tions to support research on a range of topics with the medium- to long-term objectives of fostering the leaders of tomorrow and promoting technology and industry. Of note is the Nomura Foundation for Academic Promotion, established in 1986 to com- memorate the 60th anniversary of the establishment of Nomura Securities. It provides assistance for furthering academic research and contributing to international exchange in research and educa- tion, primarily in the fields of law, politics, and economics. Support for Culture and the Arts Environmental Conservation Nomura Group places a high priority on global environmental issues, including global warming, and is fully aware that system- atic, comprehensive responses to these issues are essential. We have made energy conservation, green procurement, and other initiatives integral parts of our operations. Nomura Group plans to conduct these environment-related activities on an ongoing basis and establish clearer, systematic objectives. Our main environmental activities include adopting policies to prevent global warming (reduce CO2 emissions) through reducing electric power and fuel consumption, following a green procure- ment program that focuses on purchasing environment-friendly products, and reducing waste emissions by recycling used paper products and other initiatives. In May 2006, we signed an agreement with Japan Natural We believe that economic development is not enough itself to Energy for Green Power Certificates* to reduce the amount of create true prosperity. Our support for a variety of cultural and CO2 emissions across Group companies. Nomura will purchase artistic pursuits is grounded in the belief that people should be 5.9 million kWh of power annually through the certificates, the well-rounded. We provide support for a variety of cultural and highest amount ever for a Japanese company, equating to CO2 artistic pursuits as well as other similar activities. In May 1990, we emissions of 2,300 tons or that absorbed by about 164,000 founded the Nomura Cultural Foundation to support the develop- cedar trees in one year. ment of talent and promotion of international exchange in music and fine arts. The foundation assists in performances, exhibitions, symposia, and other events aimed at nurturing young artists and promoting international cultural and artistic exchanges. It also grants scholarships to foreign exchange students who hold the promise of bridging the gap between Japan and their countries. * Green Power Certificates are issued for power generated by clean energy means such as wind power and biomass at generation plants certified by the Green Power Certification Council, Japan. Certificate purchasers can claim the amount they purchase as having been generated by such sources. Other Initiatives In addition, Nomura Securities and the Nomura Cultural • Disaster Relief Support Activities Foundation have been special corporate sponsors of the Pacific The members of Nomura Group, in their role as corporate citi- Music Festival (PMF), an international music education festival zens, and the employees of its companies, as individuals, have envisioned by the late Leonard Bernstein in 1990, since its inception. The festival aims to contribute to the development of musical culture around the world through fostering young musicians. worked on numerous occasions to collect disaster relief contribu- tions to help rescue victims and assist them in returning to a nor- mal life as quickly as possible. Recent activities have included raising funds for recovery following Hurricane Katrina in the United States and the recent major earthquake in Pakistan. Funds donated are provided to inhabitants of regions struck by disaster The 2005 PMF concert through the Japan Red Cross and other organizations. Nomura-Backed Industry–Academia Affiliations University of Tokyo Founded the Research Center for Finance to enhance collaboration between industry and academia in Japan. Junichi Ujiie became the center’s first director. Kyoto University Kyoto University’s Institute of Economic Research and Nomura Group jointly established the Nomura Group–sponsored Research Section for Application of Financial Engineering. Hitotsubashi University Holding study group sessions on socially responsible investing and corporate governance. University of Oxford Established the Nomura Centre for Quantitative Finance to support research in cutting-edge financial engineering. Columbia University Sponsoring the Program on Alternative Investments at the Columbia University Center on Japanese Economy and Business. Chulalongkorn University Holding courses and special lectures on securities education at Chulalongkorn University, a national university in Thailand. Nomura Holdings, Inc. 57 A Better Workplace (cid:1) N o m u r a K n o w s H o w to Reward to Deliver (cid:1) N o m u r a K n o w s H o w Our people form the basis of our very existence. The finance and securities businesses are based on intellect and cre- ativity. Employees must feel they are part of Nomura Group. They need to be able to make full use of their originality and creativity and become well acquainted with customers, understand their needs, and provide them with top-quality ser- vices. We believe companies should provide a pleasant environment where employees can work productively. In addi- tion, it is important for all employees to feel a sense of pride in belonging to Nomura Group. We observe all laws and regulations regarding basic human rights. Our efforts are focused not only on improving human rights and the working environment but also ensuring that our activities benefit all stakeholders. Creating a Better Workplace Human Rights Nomura Group works to provide all employees with a fulfilling Based on the recognition that human resources are Nomura and pleasant working environment. We are fully aware of the Group’s most important asset, we take extensive measures to importance of being able to work in comfortable surroundings protect the rights of each individual and prevent discrimination and continually strive to improve our workplace environments. and harassment. • Communication • Fundamental Principle of Human Rights Awareness Training We believe that active internal communication is essential to Nomura Group’s fundamental principle is that employees must motivating employees. To provide for this communication, we not discriminate, let others discriminate, or condone discrimina- use our intranet, internal publications, and other means to com- tion. We endeavor to improve understanding and awareness municate messages from senior management, important deci- regarding human rights issues as well as impress on all employ- sions, and other information. • Workplace Safety ees that these matters should be of concern to them and encourage them to act appropriately in addressing these issues. Nomura Group exercises care in providing safe and comfortable • In-house and External Training Programs workplaces. Attention is paid to desk space, lighting, air condi- Based on our fundamental principle, we have formed the Human tioning, temperature settings, and other items. • Mental Health Care Rights Education Committee and conduct human rights awareness training for Nomura Group executives at least once each year. In addition, training programs covering all aspects of human rights Mental health care measures are part of our actions to provide all issues are conducted for employees based on the human rights pro- employees with a better work environment. Healthcare centers motion framework, which is centered on the Human Rights offer psychiatric examinations and employees also have access Education Committee of Nomura Securities. To incorporate a broad to counseling through the Counseling Room. To access physi- range of external views on human rights, we participate in seminars cians and counselors outside the Group, employees and their and training programs conducted by government agencies, human family members can use the 24-hour Nomura Health Dial 24. In rights groups, nonprofit organizations, and others. This is done mainly addition, we offer a telephone counseling service and guidelines through the Human Rights Education Department and Human Rights for self-checkups. Awareness Promotion Committee members at branch offices. • Rigorous Health Management • Prevention of Harassment and Discrimination Nomura Group has departments specializing in the promotion of Nomura Group takes measures to prevent harassment by con- healthy lifestyles and operates internal clinics to help employees ducting awareness training programs and has prepared a Sexual take care of their health. Guidelines have been established for Harassment Prevention Guide and Sexual and Power periodic checkups. Employees over 30 are required to undergo Harassment Prevention Card. We have also established three comprehensive physical examinations, and employees who internal units where employees can obtain advice. For the pro- work long hours are also given health checkups. 58 Nomura Holdings, Inc. tection of those with HIV, we have prepared a “Basic Policy Regarding Persons with HIV” and we work to eliminate discrimi- nation and prejudice against these individuals. Creative Solutions Talented People Employment Nomura Group strives to maintain employment practices that reflect the employment environment and nature of business activities in the finance and securities industries. The personnel system complies with all laws and regulations and reflects employment terms for individual countries and regions as well as for different types of employment contracts. • New Personnel System Nomura Securities introduced a new personnel system in Japan in October 2005 with the objective of applying a merit-based system throughout the organization. This system is based on the principle that employees should be treated as individuals, and those with ability and drive should be provided with oppor- tunities to fulfill their full potential, without discrimination by gen- der or age. Under the new system, there are two types of employees: zeniki-gata shain (whole area employees), who are subject to transfers that require a change of residence, and chiiki-gata shain (specific area employees), who are exempt from such transfers. Employees in both categories are engaged in the same scope of business activities. All employees may apply to switch to the other category. To compensate employees fairly based on their performance, more authority to conduct employee evaluations is being transferred to work sites. For financial advisers (FAs), who are community-based sales professionals, employment contracts are being changed from • Employee Training System Nomura Group is building a personnel training system that enhances the overall vitality of the Group and contributes to the thorough execution of a merit-based personnel system, in which employees are properly treated based on their performance and motivation. • Instructor System Experienced employees are appointed as on-the-job instructors for newly hired employees. This system makes it possible to conduct comprehensive monitoring of improvements in busi- ness knowledge, practical skills, and other capabilities that con- tribute to a new employee’s development. • Training Application System To better motivate employees and encourage them to acquire more specialized knowledge, Nomura Group offers training courses such as study abroad, Financial & Economic Research Center analyst training, Investment Banking Division training, and fund management training. • International Business Skill Training Nomura Securities offers training programs to give individuals the practical English language skills they need to work in the securities industry. • Support for Acquisition of Qualifications Nomura Securities offers specialized training programs for the acquisition of specific qualifications. Through these programs, extensive support is offered for individuals seeking securities deal- er, financial planner, securities analyst, and other qualifications. fixed-term contracts to ones without a fixed term. In addition, Note: Refer to the CSR Report 2006 for more information. compensation will be more weighted toward performance. Outline of Training Programs Career training Career training Knowledge/skill training Knowledge/skill training Human resources Human resources training training Management training Management training e v i t u c e x E r o t c e r i d d n a h c n a r B r e g a n a m e c i f f o r o t c u r t s n I Mid-career Mid-career education education Early career Early career education education d e z i l i a c e p s r o f s n o i t p O n o i t a c u d e l l i k s Common companywide Common companywide education education i g n v o m l e n n o s r e p r o f n o i t a c u d E i i i s n o s v d w e n o t n o i t a c u d e e c n a i l p m o C n o i t a c u d e s e c r u o s e r n a m u H ) s t n e m t r a p e d l l a n i d e t n e m e p m l I ( Introductory education Introductory education i g n n a r t i t n e m e g a n a M r o t c u r t s n I n o i t a c u d e e v i t u c e x e r o f l e v e l r o t c e r i d r o f n o i t a c u d E s r o t c u r t s n i A F h c n a r b r o f g n n a r T i i s r e g a n a m e c i f f o d n a d e n g s s a i l y w e n r o f g n n a r T i i s r e g a n a m e c i f f o d n a h c n a r b d e n g s s a i l y w e n d n a s f e h c i n o i t c e s d e n g s s a i l y w e n l a i r e g a n a m l e n n o s r e p r o f g n n a r T i i Whole area and specific area arrangements Whole area and specific area Nomura Holdings, Inc. 59 Product Policies (cid:1) N o m u r a K n o w s H o w to Help Clients Make Informed Decisions Nomura Group carefully analyzes the financial products it offers and provides customers with accurate information and easy-to-understand instructions. We also consider customers’ knowledge of financial products, their financial status, and other factors before fully explaining appropriate product choices. This ensures that customers are able to make informed investment decisions. Our approach to soliciting business is in full compliance with the Securities Exchange Law and other relevant laws and regulations. Nomura Group is committed to providing services worthy of a financial services company. Specific Approaches by Nomura Securities The specific approaches taken to develop products, provide information, and solicit business at Nomura Securities, a core subsidiary of Nomura Group, are described below. • Formulating Products Nomura Securities has established a range of design guidelines for its product head offices to follow in developing attractive products. We also exercise due diligence with regard to the schemes and propriety of private subscription products devel- oped by other companies and sold by Nomura Securities. • Providing Information A comprehensive understanding of customer circumstances is particularly important for IPOs, other offerings, and sales, as stated in the “Basic Policies on Sales.” Special guidelines have been established regarding the timing and volume of distribu- tions to avoid excessive sales efforts focusing on particular cus- tomers. Candor and fairness are the principles at the heart of all solicitation and sales efforts. Nomura Securities Sales Policies (cid:1) Nomura Securities employees consult with customers regarding their knowledge of financial products, experience in investing, financial status, Nomura Securities provides accurate product information and and other related matters and consider these issues to ensure they take explains product risk in detail to customers, in keeping with the Law on Sales of Financial Products and other relevant laws and regulations. Nomura Securities has developed “Guidelines on Preparing Sales Brochures for Customers” in accordance with the Japan Securities Dealers Association’s “Guidelines Concerning Advertisement Brochures.” All written materials provided to cus- tomers are duly examined to ensure they conform to the guidelines. • Soliciting Business the proper approach in solicitation and consultation. (cid:2) Employees endeavor to ensure that customers understand material matters related to the Law on Sales of Financial Products. To encourage customers to make appropriate judgments on their own initiative, employees give a sufficient and accurate description of the nature of the products and the risks involved. (cid:3) Employees provide accurate information to avoid misunderstandings among customers. (cid:4) Employees respond quickly and appropriately to customer inquiries. They also listen carefully to customer opinions and requests and use this information in conducting solicitations and providing advice. (cid:5) Employees give proper consideration to the time, place, and methods for conducting solicitations and providing consultation services to In accordance with “Nomura Securities Sales Policies,” Nomura ensure the utmost customer convenience. Securities consults with customers regarding their investment strategies and experience and financial status prior to suggest- ing appropriate product choices. The company is also considerate in selecting sales meeting times, places, and methods to ensure the utmost customer convenience. (cid:6) Nomura Securities provides internal education and training to ensure that the solicitation activities of its personnel are conducted properly. (cid:7) Nomura Securities ensures that product descriptions and explanations are correct and easy for its customers to understand, not only in face- to-face discussions but also on its website and Nomura Home Trade online service. 60 Nomura Holdings, Inc. F i n a n c i a l S e c t i o n (cid:1) 62 Overview of the Financial Statements 64 Consolidated Five-Year Summary (U.S. GAAP) 65 Quarterly Financial Data 66 Consolidated Balance Sheets 68 Consolidated Income Statements 69 Changes in Additional Paid-in Capital and Retained Earnings Consolidated Statements of Comprehensive Income 70 Consolidated Statements of Cash Flows Nomura Holdings, Inc. 61 Overview of the Financial Statements Results of Operations year. The increase in non-interest expenses was mainly due • Consolidated Income Statements (p. 68) to higher compensation and benefit costs. As a conse- Net revenue for fiscal 2005, ended March 31, 2006, quence of our business expansion, compensation and bene- increased 43% from ¥799,190 million to ¥1,145,650 million. fit costs increased 18% to ¥325,431 million, compared with Commissions were up 61% to ¥356,325 million, reflecting ¥274,988 million in the previous fiscal year. an expansion in the lineup of Domestic Retail products and Income from continuing operations before income taxes services to meet customer needs. Asset managements and and cumulative effect of accounting changes was ¥445,600 portfolio service fees expanded 31% year on year to million, increasing 118% from ¥204,835 million in the previ- ¥102,667 million, mainly reflecting an increase in the net ous fiscal year. Net income was ¥304,328 million, up 221% assets of stock investment trusts. Net gain on trading from the ¥94,732 million reported in the previous fiscal year. increased 51% from the previous fiscal year to ¥304,223 Return on equity (ROE) rose to 15.5%, above the target million, owing primarily to improvements in trading condi- range of 10%-15%. tions of the foreign exchange and stock markets. Gain on private equity investments expanded 59% to ¥12,328 mil- • Consolidated Balance Sheets (p. 66, p. 67) lion, reflecting gains from the sale of certain investee compa- Total assets stood at ¥35,026,035 million as of March 31, nies and unrealized gain on valuation. Gain on investments in 2006. This represented an increase of ¥537,182 million, or equity securities rose to ¥67,702 million, representing a jump 1.6%, over the previous fiscal year-end. The principal factors of 342%, owing to the strong performance of the Japanese accounting for this increase in assets were higher balances stock market. for securities purchased under agreements to resell, accom- Net interest revenue, which is interest and dividends panying the increase in repurchase transactions, and higher minus interest expense, was ¥46,623 million, compared with balances of securities borrowed, which together rose ¥74,332 million for the previous fiscal year. Net interest rev- ¥2,638,762 million or 18.3%. enue is a function of the level and mix of total assets and lia- Trading assets and private equity investments totaled bilities, including trading assets as well as financing and ¥13,697,441 million as of March 31, 2006, representing a lending transactions, the level term structure, and volatility of decline of ¥1,903,080 million or 12.2% compared to the interest rates. The aggregate of net gain on trading and net previous fiscal year-end. This was primarily due to a decline interest revenue represents the profitability of our overall in the balance of securities inventory, which includes equi- business of trading-related activities. ties, Japanese government bonds, corporate bonds, and Non-interest expenses increased 18% to ¥700,050 mil- other securities that are held for trading purposes. lion, compared with ¥594,355 million in the previous fiscal 62 Nomura Holdings, Inc. Total liabilities rose to ¥32,962,708 million, an increase of decrease in trading assets and private equity investments ¥342,284 million or 1.0% over the end of the previous fiscal and an increase in trading liabilities, this was more than off- year. The principal factors for this increase were a rise in set by a ¥3,868,781 million cash outflow caused by a net long-term borrowings of ¥771,047 million or 27.3% and an increase in securities purchased under agreements to resell increase in trading liabilities (sum of securities and derivative and securities borrowed with cash collateral. The move- trading) of ¥1,195,454 million or 22.4%. ments in these cash flow items substantially outweighed Total shareholders’ equity rose to ¥2,063,327 million, rep- income from continuing operations, which amounted to resenting a gain of ¥194,898 million or 10.4% from the pre- ¥256,628 million, and depreciation and amortization, which vious fiscal year-end. The main factor contributing to this was ¥42,812 million for the fiscal year under review. increase was a rise in retained earnings of ¥212,901 million. Net cash provided by investing activities from continuing operations amounted to ¥27,439 million. This was primarily • Consolidated Statements of Cash Flows (p. 70) due to a net decrease in non-trading debt securities of In fiscal 2005, cash and cash equivalents rose ¥406,846 mil- ¥56,824 million and a net decrease in investments in and lion to ¥991,961 million. The principal factor accounting for advances of affiliated companies of ¥49,268 million, which this increase was net cash of ¥798,215 million provided by together more than offset payments for purchases of office financing activities from continuing operations. Due to strong buildings, land, equipment and facilities of ¥83,983 million. demand for medium-term notes (MTNs)* from a broad range * MTNs are debt securities issued under a diverse range of schemes and in of investors, net cash inflow from long-term borrowings (including MTNs) totaled ¥713,231 million (net total of an various currencies as part of an issuance program (referred to as an MTN program). Note: On January 31, 2006, we sold our stake in Millennium Retailing, Inc. increase in long-term borrowings of ¥1,656,317 million and (MR). MR was one of the investments in our private equity business and a decrease in long-term borrowings of ¥943,086 million). accounted for as a consolidated subsidiary. In fiscal 2005, MR has been classified as discontinued operations in accordance with Net cash of ¥566,327 million was used in operating activi- Statement of Financial Accounting Standards (SFAS) No. 144, ties from continuing operations. Although there was a “Accounting for the Impairment or Disposal of Long-Lived Assets,” and its results of operations, including the gain on sale, and cash flows are ¥3,386,662 million cash inflow from the combination of a reported separately. Dividend Policy The Company has set a target (minimum level) dividend based on a dividend-on-equity ratio (DOE) of 3%. When a sufficient level of profit is achieved, the year-end cash dividend will be increased, taking into consideration a payout ratio of over 30%. In addition, in the medium to long term, the Company will aim to increase its target dividend. Regarding retained earnings, the Company will continue to invest effectively in businesses that are expected to show high profitability and growth as well as in improvements in its operating infrastructure with the aim of increasing shareholder value. Nomura Holdings, Inc. 63 Consolidated Five-Year Summary (U.S. GAAP) Years ended March 31 Note: These consolidated financial statements are prepared solely for conven- ience and do not include the notes herein. Readers are strongly recom- mended to refer to the notes contained in the Form 20-F. Operating Results: Revenue: 2002 2003 2004 2005 2006 2006 Millions of yen U.S. dollars Millions of Commissions................................................................ ¥(0,140,001 ¥00,141,640 ¥00,210,216 ¥00,221,963 ¥00,356,325 108,819 75,255 Fees from investment banking ..................................... 102,667 109,985 Asset management and portfolio service fees................... 304,223 162,228 Net gain on trading ....................................................... 12,328 232,472 Gain (loss) on private equity investments....................... 693,813 500,541 Interest and dividends................................................... 67,702 (55,860) Gain (loss) on investments in equity securities............... — Gain from changes in equity of an affiliated company.... 3,504 — 294,931 PFG entities product sales ............................................ — 177,053 PFG entities rental income ............................................ — 116,324 Gain on sales of PFG entities ........................................ 88,210 Private equity entities product sales .............................. ― 58,753 68,965 Other ............................................................................ 81,847 79,290 172,308 (14,391) 368,656 (41,288) ― ― ― ― 6,229 13,360 92,322 78,452 201,686 7,744 401,379 15,314 ― ― ― ― 75,061 32,316 86,994 66,193 229,042 13,138 343,260 55,888 ― ― ― ― 17,640 23,565 1,045,936 242,833 1,126,237 327,047 1,792,840 647,190 803,103 799,190 1,145,650 Total revenue .......................................................... Interest expense ........................................................... 1,825,399 504,048 Net revenue............................................................. 1,321,351 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 ... Private equity entities cost of goods sold ...................... Other ............................................................................ 379,540 20,962 87,252 73,787 26,652 200,871 111,529 ― 247,786 Total non-interest expenses .................................. 1,148,379 807,651 241,377 566,274 244,167 20,844 77,389 57,152 24,361 ― ― 4,968 89,984 518,865 259,336 19,169 80,031 54,221 23,100 ― ― 11,852 72,718 520,427 274,988 23,910 81,408 53,534 28,214 ― ― 44,681 87,620 594,355 Income from continuing operations before income taxes and cumulative effect of accounting change................................................... Income tax expense ....................................................... 172,972 4,926 47,409 37,295 282,676 110,347 204,835 110,103 Income from continuing operations before cumulative effect of accounting change ..................... 168,046 Gain on discontinued operations .................................. Cumulative effect of accounting change ...................... ― ― 10,114 ― 109,799 172,329 94,732 ― ― ― ― 325,431 32,931 89,600 55,049 32,790 — — 48,802 115,447 700,050 445,600 188,972 256,628 47,700 — $003,033 926 874 2,590 105 5,906 576 — — — — 751 500 15,261 5,509 9,752 2,770 280 763 469 279 — — 415 983 5,959 3,793 1,609 2,184 406 — Net income...................................................................... ¥(0,168,046 ¥00,119,913 ¥00,172,329 ¥0,0094,732 ¥00,304,328 $002,590 Cash Flow: Net cash provided by (used in) operating activities Millions of yen U.S. dollars Millions of from continuing operations.......................................... ¥(1,303,384) ¥00,031,706 ¥ (78,375) ¥ (278,929) ¥ (566,327) $ (4,821) Net cash provided by (used in) investing activities from continuing operations.......................................... (52,182) 134,053 45,471 (121,824) 27,439 234 Net cash provided by (used in) financing activities from continuing operations.......................................... 1,195,507 (22,205) 198,017 Discontinued operations, net......................................... ― ― ― 385,061 (50,262) 798,215 131,100 6,794 1,116 Net increase (decrease) in cash and cash equivalents.... ¥ (147,041) ¥00,134,602 ¥00,146,135 ¥ (52,257) ¥00,406,846 $003,463 Balance Sheet Data (Period End): Millions of yen Cash and cash deposits................................................. ¥00,775,734 ¥00,955,509 ¥00,930,637 ¥01,047,234 ¥01,555,636 1,363,681 1,046,014 Loans and receivables ................................................... 17,027,807 6,680,001 Collateralized agreements ............................................. 13,697,441 7,841,533 Trading assets and private equity investments................ 1,381,470 1,414,991 Other assets.................................................................... 1,221,083 14,389,045 15,600,521 2,230,970 1,013,636 12,881,752 13,838,396 1,088,545 1,137,265 8,603,170 9,286,507 1,186,995 Millions of U.S. dollars $013,242 11,608 144,942 116,594 11,759 Total assets ................................................................ ¥17,758,273 ¥21,169,446 ¥29,752,966 ¥34,488,853 ¥35,026,035 $298,145 Short-term borrowings ................................................... ¥00,629,279 ¥00,343,837 ¥00,437,124 ¥00,520,605 ¥00,691,759 1,239,731 1,251,592 Payables and deposits................................................... 20,263,012 9,087,597 Collateralized financing.................................................. 6,527,627 2,693,746 Trading liabilities ............................................................ 518,156 Other liabilities................................................................ 641,980 3,598,599 1,972,974 Long-term borrowings ................................................... 963,965 21,666,185 5,332,173 1,309,944 2,827,552 1,384,096 17,367,758 5,976,966 415,865 2,385,469 821,659 11,791,833 3,888,720 411,699 2,269,370 $005,888 10,553 172,480 55,564 5,465 30,632 Total liabilities............................................................. 16,153,344 19,527,118 27,967,278 32,620,424 32,962,708 280,582 Total shareholders’ equity ......................................... 1,604,929 1,642,328 1,785,688 1,868,429 2,063,327 17,563 Total liabilities and shareholders’ equity ................. ¥17,758,273 ¥21,169,446 ¥29,752,966 ¥34,488,853 ¥35,026,035 $298,145 Note: Certain reclassifications of previously reported amounts have been made to conform to the current year presentation. 64 Nomura Holdings, Inc. Quarterly Financial Data 2005 2006 Millions of yen 1Q 2Q 3Q 4Q (4/1/2004〜 (7/1/2004〜 (10/1/2004〜 (1/1/2005〜 3/31/2005) 6/30/2004) 12/31/2004) 9/30/2004) 1Q (4/1/2005〜 6/30/2005) 2Q 3Q (7/1/2005〜 (10/1/2005〜 (1/1/2006〜 3/31/2006) 12/31/2005) 9/30/2005) 4Q Revenue: Commissions ........................................ ¥069,533 ¥045,585 ¥046,275 ¥060,570 ¥055,152 ¥077,498 ¥106,187 ¥117,488 Fees from investment banking............... 15,434 32,339 18,412 26,137 14,719 24,068 28,569 41,463 Asset management and portfolio service fees ......................................... Net gain on trading................................ Gain (loss) on private equity investments .... 18,185 53,567 498 19,845 23,073 (2,097) 19,287 54,709 (2,165) Interest and dividends ........................... 81,891 101,102 122,035 Gain (loss) on investments in equity securities .................................. Private equity entities product sales....... Other..................................................... 10,271 17,368 8,548 (11,624) 15,858 4,747 7,752 20,250 7,206 21,135 70,337 11,508 96,351 8,915 21,585 11,815 Total revenue................................... 275,295 228,828 293,761 328,353 Interest expense.................................... 61,367 71,987 99,873 93,820 19,942 70,802 (2,490) 24,949 43,847 2,247 25,589 90,578 7,615 32,187 98,996 4,956 132,914 183,334 216,162 161,403 (2,825) 24,520 6,900 31,199 21,960 5,735 36,249 23,916 19,115 3,079 17,814 27,003 319,634 132,101 414,837 142,220 553,980 504,389 194,200 178,669 Net revenue ..................................... 213,928 156,841 193,888 234,533 187,533 272,617 359,780 325,720 Non-interest expenses: Compensation and benefits................... Commissions and floor brokerage ......... 65,943 6,409 64,206 6,502 67,441 4,068 77,398 6,931 72,612 5,915 73,792 8,881 87,876 8,472 91,151 9,663 Information processing and communications.................................. Occupancy and related depreciation ..... Business development expenses .......... 19,281 13,274 5,429 20,136 12,986 7,767 20,404 13,152 6,824 21,587 14,122 8,194 20,621 12,518 6,766 20,624 13,971 8,167 20,952 13,396 7,622 27,403 15,164 10,235 Private equity entities cost of goods sold................................ Other..................................................... 11,171 19,955 9,921 19,116 11,501 21,306 12,088 27,243 14,999 25,004 13,009 21,903 13,712 30,505 7,082 38,035 Total non-interest expenses........... 141,462 140,634 144,696 167,563 158,435 160,347 182,535 198,733 Income from continuing operations before income taxes ............................. 72,466 16,207 49,192 66,970 29,098 112,270 177,245 126,987 Income tax expense................................ 31,634 12,991 24,051 41,427 19,966 51,600 73,201 44,205 Income from continuing operations .......... 40,832 3,216 25,141 25,543 9,132 60,670 104,044 82,782 Discontinued operations: Income from discontinued operations before income taxes............................ Income tax expense ........................... Gain (loss) on discontinued operations ... — — — — — — — — — — — — 1,606 2,417 (811) 5,339 5,128 211 9,863 7,415 2,448 82,605 36,753 45,852 Net income .......................................... ¥040,832 ¥003,216 ¥025,141 ¥025,543 ¥008,321 ¥060,881 ¥106,492 ¥128,634 Per share of common stock: Basic— Yen Net income ........................................... ¥0021.03 ¥0001.66 ¥0012.95 ¥0013.16 ¥0004.30 ¥0031.89 ¥0055.92 ¥0067.54 Diluted— Net income ........................................... ¥0021.03 ¥0001.66 ¥0012.94 ¥0013.15 ¥0004.30 ¥0031.83 ¥0055.80 ¥0067.42 Note: In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” income from operations that were reclassified to discontinued operations during the current period are separately reported as income from discontinued operations, and such amounts of the previous year were not significant. Nomura Holdings, Inc. 65 Consolidated Balance Sheets As of March 31, 2005 and 2006 ASSETS Cash and cash deposits: Cash and cash equivalents ..................................................................................................... ¥00,585,115 ¥00,991,961 $008,444 Millions of yen 2005 2006 Millions of U.S. dollars 2006 Time deposits ......................................................................................................................... Deposits with stock exchanges and other segregated cash.................................................... 419,606 42,513 518,111 45,564 Total .............................................................................................................................. 1,047,234 1,555,636 Loans and receivables: Loans receivable..................................................................................................................... Receivables from customers................................................................................................... Receivables from other than customers .................................................................................. 514,313 12,037 697,534 Allowance for doubtful accounts............................................................................................. (2,801) 682,824 26,810 656,925 (2,878) 4,410 388 13,242 5,812 228 5,592 (24) Total .............................................................................................................................. 1,221,083 1,363,681 11,608 Collateralized agreements: Securities purchased under agreements to resell.................................................................... 7,201,791 Securities borrowed................................................................................................................ 7,187,254 8,278,834 8,748,973 70,470 74,472 Total .............................................................................................................................. 14,389,045 17,027,807 144,942 Trading assets and private equity investments (including securities pledged as collateral of ¥7,743,424 million in 2005 and ¥5,610,310 million ($47,755 million) in 2006): Securities inventory................................................................................................................. 14,757,597 12,739,805 108,443 Derivative contracts ................................................................................................................ Private equity investments ...................................................................................................... 515,946 326,978 592,360 365,276 5,042 3,109 Total .............................................................................................................................. 15,600,521 13,697,441 116,594 Other assets: Office buildings, land, equipment and facilities (net of accumulated depreciation and amortization of ¥199,863 million in 2005 and ¥211,521 million ($1,800 million) in 2006) ...................................................................... Lease deposits ....................................................................................................................... Non-trading debt securities (including securities pledged as collateral of ¥10,208 million in 2005 and ¥0 ($0) in 2006) ........................................................................ Investments in equity securities............................................................................................... Investments in and advances to affiliated companies .............................................................. Deferred tax assets................................................................................................................. Assets of discontinued operations .......................................................................................... Other ...................................................................................................................................... 300,553 44,843 277,330 172,067 226,394 111,191 931,674 166,918 330,964 47,582 220,593 219,486 223,912 145,024 — 193,909 2,817 405 1,878 1,868 1,906 1,234 — 1,651 Total .............................................................................................................................. 2,230,970 1,381,470 11,759 Total assets ............................................................................................................................. ¥34,488,853 ¥35,026,035 $298,145 Note: In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” assets and liabilities of the previous year that became discontinued operations during the current period have been reclassified. 66 Nomura Holdings, Inc. Millions of yen 2005 2006 Millions of U.S. dollars 2006 LIABILITIES AND SHAREHOLDERS’ EQUITY Short-term borrowings ............................................................................................................. ¥00,520,605 ¥00,691,759 $005,888 Payables and deposits: Payables to customers ........................................................................................................... Payables to other than customers .......................................................................................... Time and other deposits received ........................................................................................... 248,089 385,660 330,216 247,511 619,271 372,949 2,107 5,271 3,175 Total .............................................................................................................................. 963,965 1,239,731 10,553 Collateralized financing: Securities sold under agreements to repurchase .................................................................... 12,603,211 10,773,589 Securities loaned .................................................................................................................... 5,643,782 Other secured borrowings ...................................................................................................... 3,419,192 6,486,798 3,002,625 91,706 55,216 25,558 Total .............................................................................................................................. 21,666,185 20,263,012 172,480 Trading liabilities: Securities sold but not yet purchased ..................................................................................... 4,895,054 Derivative contracts ................................................................................................................ 437,119 5,880,919 646,708 Total .............................................................................................................................. 5,332,173 6,527,627 Other liabilities: Accrued income taxes ............................................................................................................ Accrued pension and severance costs ................................................................................... Liabilities of discontinued operations....................................................................................... Other ..................................................................................................................................... 31,336 77,958 881,025 319,625 Total ............................................................................................................................. 1,309,944 188,770 65,041 — 388,169 641,980 Long-term borrowings ............................................................................................................ 2,827,552 3,598,599 Total liabilities .......................................................................................................................... 32,620,424 32,962,708 Shareholders’ equity: Common stock: Authorized—6,000,000,000 shares Issued—1,965,919,860 shares at March 31, 2005 and 2006 ............................................. 182,800 Additional paid-in capital......................................................................................................... 155,947 182,800 159,527 Retained earnings................................................................................................................... 1,606,136 1,819,037 Accumulated other comprehensive (loss) income: Minimum pension liability adjustment .................................................................................. Cumulative translation adjustments..................................................................................... (24,645) (18,083) Subtotal.......................................................................................................................... (42,728) (14,096) (1,129) (15,225) 50,059 5,505 55,564 1,607 554 — 3,304 5,465 30,632 280,582 1,556 1,358 15,484 (120) (10) (130) Total .............................................................................................................................. 1,902,155 2,146,139 18,268 Less—Common stock held in treasury, at cost (24,657,971 shares and 61,055,664 shares at March 31, 2005 and 2006, respectively)............................................. (33,726) (82,812) Total shareholders’ equity ....................................................................................................... 1,868,429 2,063,327 (705) 17,563 Total liabilities and shareholders’ equity................................................................................. ¥34,488,853 ¥35,026,035 $298,145 Nomura Holdings, Inc. 67 Consolidated Income Statements Years ended March 31 Millions of yen (%) Millions of U.S. dollars 2005 2006 YoY increase 2006 Revenue: Commissions .................................................................................................... ¥0,221,963 ¥0,356,325 Fees from investment banking........................................................................... Asset management and portfolio service fees ................................................... 92,322 78,452 Net gain on trading ........................................................................................... 201,686 Gain on private equity investments.................................................................... 7,744 Interest and dividends ....................................................................................... 401,379 Gain on investments in equity securities ............................................................ Private equity entities product sales .................................................................. Other ................................................................................................................ 15,314 75,061 32,316 108,819 102,667 304,223 12,328 693,813 67,702 88,210 58,753 Total revenue .............................................................................................. 1,126,237 1,792,840 Interest expense................................................................................................ 327,047 647,190 Net revenue ................................................................................................. 799,190 1,145,650 Non-interest expenses: Compensation and benefits .............................................................................. 274,988 325,431 Commissions and floor brokerage..................................................................... Information processing and communications .................................................... Occupancy and related depreciation................................................................. Business development expenses ...................................................................... Private equity entities cost of goods sold........................................................... Other ................................................................................................................ 23,910 81,408 53,534 28,214 44,681 87,620 Total............................................................................................................. 594,355 Income from continuing operations before income taxes ................................ 204,835 Income tax expense ........................................................................................... 110,103 Income from continuing operations............................................................. 94,732 Discontinued operations: Income from discontinued operations before income taxes (including gain on disposal of ¥74,852 million ($637 million) in 2006)............... Income tax expense.......................................................................................... Gain on discontinued operations....................................................................... — — — 32,931 89,600 55,049 32,790 48,802 115,447 700,050 445,600 188,972 256,628 99,413 51,713 47,700 60.5 17.9 30.9 50.8 59.2 72.9 342.1 17.5 81.8 59.2 97.9 43.4 18.3 37.7 10.1 2.8 16.2 9.2 31.8 17.8 117.5 71.6 170.9 — — — $03,033 926 874 2,590 105 5,906 576 751 500 15,261 5,509 9,752 2,770 280 763 469 279 415 983 5,959 3,793 1,609 2,184 846 440 406 Net income .......................................................................................................... ¥0,094,732 ¥0,304,328 221.3 $02,590 Per share of common stock: Basic— Yen (%) U.S. dollars Income from continuing operations ................................................................... ¥0,0048.80 ¥ 134.10 Gain on discontinued operations....................................................................... — 24.92 Net income ....................................................................................................... ¥0,0048.80 ¥ 159.02 Diluted— Income from continuing operations ................................................................... ¥0,0048.77 ¥ 133.89 Gain on discontinued operations....................................................................... — 24.89 Net income ....................................................................................................... ¥0,0048.77 ¥ 158.78 174.8 — 225.9 174.5 — 225.6 $ 1.14 0.21 $ 1.35 $ 1.14 0.21 $ 1.35 Note: In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” income from operations that were reclassified to discontinued operations during the current period are separately reported as income from discontinued operations, and such amounts of the previous year were not significant. 68 Nomura Holdings, Inc. Changes in Additional Paid-in Capital and Retained Earnings Years ended March 31 Millions of yen 2005 2006 Millions of U.S. dollars 2006 Additional paid-in capital Balance at beginning of year......................................................................................................... ¥0,154,063 ¥ 155,947 $ 1,327 Gain on sales of treasury stock .................................................................................................... Issuance of common stock options .............................................................................................. 14 1,870 192 3,388 2 29 Balance at end of year.................................................................................................................. ¥0,155,947 ¥ 159,527 $ 1,358 Retained earnings Balance at beginning of year......................................................................................................... ¥1,550,231 ¥1,606,136 $13,672 Net income................................................................................................................................... Cash dividends............................................................................................................................. 94,732 (38,827) 304,328 (91,427) 2,590 (778) Balance at end of year.................................................................................................................. ¥1,606,136 ¥1,819,037 $15,484 Consolidated Statements of Comprehensive Income Years ended March 31 Net income ......................................................................................................................................... ¥094,732 ¥304,328 Other comprehensive income: Change in cumulative translation adjustments, net of tax................................................................. 16,297 Minimum pension liability adjustment............................................................................................... 9,576 Total other comprehensive income, net of tax ..................................................................................... 25,873 16,954 10,549 27,503 Millions of yen 2005 2006 Millions of U.S. dollars 2006 $2,590 144 91 235 Comprehensive income....................................................................................................................... ¥120,605 ¥331,831 $2,825 Nomura Holdings, Inc. 69 Consolidated Statements of Cash Flows Years ended March 31 Millions of yen 2005 2006 Millions of U.S. dollars 2006 Cash flows from operating activities from continuing operations: Income from continuing operations............................................................................................... ¥0,094,732 ¥ 256,628 $ 2,184 Adjustments to reconcile income from continuing operations to net cash used in operating activities: Depreciation and amortization .................................................................................................. Stock-based compensation...................................................................................................... Gain on investments in equity securities ................................................................................... Equity in earnings of affiliates, net of dividends received............................................................ Loss on disposal of office buildings, land, equipment and facilities............................................ Deferred income tax (benefit) expense ...................................................................................... 38,163 1,870 (15,314) (7,416) 1,642 5,710 Changes in operating assets and liabilities: Time deposits .......................................................................................................................... (157,971) Deposits with stock exchanges and other segregated cash...................................................... 3,036 Trading assets and private equity investments.......................................................................... (1,552,822) Trading liabilities ....................................................................................................................... (738,575) Securities purchased under agreements to resell, 42,812 3,388 (67,702) (26,695) 8,777 (23,540) (81,193) (440) 2,302,636 1,084,026 364 29 (576) (227) 75 (200) (691) (4) 19,600 9,227 net of securities sold under agreements to repurchase ........................................................... 1,402,270 (3,107,197) (26,449) Securities borrowed, net of securities loaned............................................................................ Other secured borrowings ........................................................................................................ 483,804 831,974 Loans and receivables, net of allowance................................................................................... (158,640) Payables and deposits received ............................................................................................... (478,796) Accrued income taxes, net ....................................................................................................... Other, net ................................................................................................................................. (69,418) 36,822 (761,584) (416,566) (75,773) 157,956 171,016 (32,876) Net cash used in operating activities from continuing operations .................................. (278,929) (566,327) Cash flows from investing activities from continuing operations: Payments for purchases of office buildings, land, equipment and facilities .................................... (59,348) (83,983) Proceeds from sales of office buildings, land, equipment and facilities .......................................... Payments for purchases of investments in equity securities .......................................................... Proceeds from sales of investments in equity securities ................................................................ Decrease (increase) in non-trading debt securities ........................................................................ Business combinations, net of cash acquired ............................................................................... Decrease in investments in and advances of affiliated companies, net .......................................... Other, net ..................................................................................................................................... 2,645 (79) 12,985 (71,604) (25,704) 19,284 (3) Net cash provided by (used in) investing activities from continuing operations ............... (121,824) 1,557 (2,126) 10,523 56,824 (4,711) 49,268 87 27,439 Cash flows from financing activities from continuing operations: Increase in long-term borrowings ................................................................................................. 844,659 1,656,317 Decrease in long-term borrowings ................................................................................................ Increase in short-term borrowings, net ......................................................................................... (495,455) 70,181 Proceeds from sales of common stock......................................................................................... Payments for repurchases of common stock................................................................................ 143 (475) Payments for cash dividends ........................................................................................................ (33,992) Net cash provided by financing activities from continuing operations ........................... 385,061 Effect of exchange rate changes on cash and cash equivalents ................................................ 13,697 Discontinued operations................................................................................................................ (50,262) Net increase (decrease) in cash and cash equivalents ................................................................ (52,257) Cash and cash equivalents at beginning of the year ................................................................... 637,372 (943,086) 175,910 871 (49,507) (42,290) 798,215 16,419 131,100 406,846 585,115 (6,483) (3,546) (645) 1,345 1,456 (280) (4,821) (715) 13 (18) 90 484 (40) 419 1 234 14,099 (8,028) 1,497 7 (421) (360) 6,794 140 1,116 3,463 4,981 Cash and cash equivalents at end of the year.............................................................................. ¥0,585,115 ¥ 991,961 $ 8,444 Note: Cash flows from discontinued operations have been removed from cash flows from continuing operations for the years ended March 31, 2005 and 2006. Certain classifications of previous- ly reported amounts have been made to conform to the current year presentation. 70 Nomura Holdings, Inc. C o r p o r a t e D a t a (cid:1) 72 Subsidiaries and Affiliates 75 Domestic Network 77 Corporate and Other Data Nomura Holdings, Inc. 71 Subsidiaries and Affiliates As of July 31, 2006 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 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) 3340-0307 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 72 Nomura Holdings, Inc. NOMURA PENSION SUPPORT & SERVICE CO., LTD. 2-2-2, Otemachi, Chiyoda-ku Tokyo 100-0004, Japan Tel: 81 (3) 3275-0401 Fax: 81 (3) 3275-4330 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 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. 1-9-1, Nihonbashi, Chuo-ku Tokyo 103-8011, Japan Tel: 81 (3) 3278-9711 Fax: 81 (3) 3241-8187 NOMURA FACILITIES, INC. 1-7-2, Nihonbashi-honcho, Chuo-ku Tokyo 103-0023, Japan Tel: 81 (3) 3231-6261 Fax: 81 (3) 3231-6409 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 JOINVEST SECURITIES CO., LTD. 2-15-1, Konan, Minato-ku Tokyo 108-6023, Japan Tel: 81 (3) 5460-2006 Fax: 81 (3) 5460-2020 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 INTERNATIONAL, 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: 77 West Wacker Drive Chicago, IL 60601-1717, U.S.A. Tel: 1 (312) 408-9500 Fax: 1 (312) 408-9555 Los Angeles Office: 6100 Center Drive, Suite 1050 Los Angeles, CA 90045, U.S.A. Tel: 1 (310) 348-3100 Fax: 1 (310) 348-3144 San Francisco Office: 425 California Street, Suite 2600 San Francisco, CA 94104, 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 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 REALTY ADVISORS, INC. 2 World Financial Center, Building B New York, New York 10281-1198, U.S.A. Tel: 1 (212) 667-9197 Fax: 1 (212) 667-1643 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 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 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 ASSET MANAGEMENT U.S.A. INC. 2 World Financial Center, Building B New York, New York 10281-1712, U.S.A. Tel: 1 (212) 667-1414 Fax: 1 (212) 667-1460 Europe & Middle East 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: Paseo de La Castellana, 41-2F 28046 Madrid, Spain Tel: 34 (91) 532-0920 Fax: 34 (91) 521-6010 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 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 BANK (LUXEMBOURG) S.A. Bâtiment A 33, rue de Gasperich L-5826 Hesperange, 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 (44) 2957111 Fax: 41 (44) 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 SIM. p.A. Via Palestro 2, 20121 Milano, Italy Tel: 39 (02) 76461 Fax: 39 (02) 76317106 NOMURA CORPORATE ADVISORY (CENTRAL EUROPE) Private Company 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 CORPORATE ADVISORY (CENTRAL & EASTERN EUROPE) Sp.z.o.o. ul. Ogrodowa 59a 00-876 Warszawa Poland Tel: 48 (22) 436-0005 Fax: 48 (22) 436-0819 NOMURA INVESTMENT BANKING (MIDDLE EAST) B.S.C. (c) 7th Floor, BMB Centre Diplomatic Area, P.O. Box 26893 Manama, Bahrain Tel: 973 (17) 530531 Fax: 973 (17) 530365 NOMURA ASSET MANAGEMENT U.K. LIMITED 6th Floor, Nomura House, 1 St. Martin’s-le-Grand, London EC1A 4NP, U.K. Tel: 44 (207) 521-3333 Fax: 44 (207) 796-1246 Asia & Oceania 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 Seoul Branch Office: 17th Floor, Seoul Finance Center 84 Taepyeongno 1-ga, Jung-gu Seoul 100-768, Korea Tel: 82 (2) 3783-2000 Fax: 82 (2) 3783-2500 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 NOMURA FUTURES (HONG KONG) LIMITED 30/F, Two International Finance Centre 8 Finance Street, Central, Hong Kong Tel: 852 (2536) 1111 Fax: 852 (2536) 1888 Nomura Holdings, Inc. 73 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) 3231-1901 Fax: 81 (3) 3231-6421 NOMURA RESEARCH INSTITUTE, LTD. 1-6-5, Marunouchi, Chiyoda-ku Tokyo 100-0005, Japan Tel: 81 (3) 5533-2111 Fax: 81 (3) 5533-3383 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, China Tel: 86 (10) 6590-9090 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, China Tel: 86 (10) 6590-8991 Fax: 86 (10) 6590-8999 NOMURA SECURITIES (HONG KONG) LIMITED 30/F, Two International Finance Centre 8 Finance Street, Central, Hong Kong Tel: 852 (2536) 1111 Fax: 852 (2536) 1888 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 SINGAPORE LIMITED NOMURA AUSTRALIA LIMITED 6 Battery Road, #34-01 Singapore 049909, Singapore Tel: 65 (6420) 1811 Fax: 65 (6420) 1888 Level 33, 126 Philip Street Sydney, N.S.W. 2000, Australia Tel: 61 (2) 9321-3500 Fax: 61 (2) 9321-3599 NOMURA SECURITIES (SINGAPORE) PTE. LTD. NOMURA ASSET MANAGEMENT SINGAPORE LIMITED 6 Battery Road, #34-01 Singapore 049909, Singapore Tel: 65 (6420) 1811 Fax: 65 (6420) 1888 6 Battery Road, #34-02 Singapore 049909, Singapore Tel: 65 (6420) 1788 Fax: 65 (6420) 1799 NOMURA FUTURES (SINGAPORE) PTE. LTD. NOMURA ASSET MANAGEMENT HONG KONG LIMITED 6 Battery Road, #34-01 Singapore 049909, Singapore Tel: 65 (6420) 1811 Fax: 65 (6420) 1888 NOMURA TRUST COMPANY (SINGAPORE) LTD. 6 Battery Road, #34-01 Singapore 049909, Singapore Tel: 65 (6420) 1811 Fax: 65 (6420) 1888 30/F, Two International Finance Centre 8 Finance Street, Central, Hong Kong Tel: 852 (2524) 8061 Fax: 852 (2536) 1067 NOMURA ASSET MANAGEMENT AUSTRALIA PTY LIMITED Level 33, 126 Philip Street Sydney, N.S.W. 2000, Australia Tel: 61 (2) 9321-3901 Fax: 61 (2) 9321-3949 NOMURA TRUST COMPANY (BVI) LIMITED REPRESENTATIVE OFFICES OF NOMURA SECURITIES CO., LTD. Beijing Representative Office: 1212, Beijing Fortune Building 5 Dongsanhuan-Beilu Chaoyang District, Beijing, China Tel: 86 (10) 6590-8181 Fax: 86 (10) 6590-8182 Shanghai Representative Office: 725, 7/F., Shanghai Central Plaza 381 Huai Hai Zhong Road Shanghai 200020, China Tel: 86 (21) 6391-5353 Fax: 86 (21) 6391-6225 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 Palm Grove House, P.O. Box 438 Road Town, Tortola British Virgin Islands Tel: 1-284 (494) 2766 Fax: 1-284 (494) 2676 NOMURA MALAYSIA SDN. BHD. Suite No.16, 3, Level 16 Letter Box No. 46, Menara IMC 8 Jalan Sultan Ismail 50250 Kuala Lumpur, Malaysia Tel: 60 (3) 2076-6811 Fax: 60 (3) 2076-6877 NOMURA SECURITIES PHILIPPINES, INC. 18F, Tower The Enterprise Center 6766 Ayala Avenue Corner Paseo de Roxas, Makati City 1200 The Philippines Tel: 63 (2) 886-5240 Fax: 63 (2) 886-5250 74 Nomura Holdings, Inc. Domestic Network (Alphabetical Order for Each Region) As of July 31, 2006 ■ 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 Hachinohe 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 Ichikawa Branch Office Kashiwa Branch Office Kawagoe Branch Office Kawaguchi Branch Office Kawasaki Branch Office Kofu Branch Office Koshigaya Branch Office Kumagaya Branch Office Matsudo Branch Office Mito Branch Office Odawara Branch Office Omiya Branch Office Ota Branch Office Sagamihara 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 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 (178) 72-1001 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 (47) 321-3811 81 (4) 7163-2011 81 (49) 225-5151 81 (48) 256-3811 81 (44) 233-6751 81 (55) 237-1781 81 (48) 960-2811 81 (48) 529-5111 81 (47) 362-1221 81 (29) 224-5231 81 (465) 24-8511 81 (48) 641-8111 81 (276) 30-1533 81 (42) 704-2331 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 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 28 Jusannichi-machi, Hachinohe-shi, Aomori 031-0041 2-5-12, Ekimae, Koriyama-shi, Fukushima 963-8002 2-2-18, Odori, Morioka-shi, Iwate 020-0022 3-2-1, 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 1-6-19, Ichikawa, Ichikawa-shi, Chiba 272-0034 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 1-2-21, Koshigaya, Koshigaya-shi, Saitama 343-0024 3-202 Tsukuba, Kumagaya-shi, Saitama 360-0037 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 3-1, Hamacho, Ota-shi, Gunma 373-0853 4-3-14, Sagamihara, Sagamihara-shi, Kanagawa 229-0031 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, Urawa-ku, 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 ■ Tokyo metropolitan area 81 (42) 498-6011 Chofu Branch Office 81 (42) 369-8111 Fuchu Branch Office 81 (3) 3491-9101 Gotanda Branch Office 81 (42) 646-3811 Hachioji Branch Office Ikebukuro Branch Office 81 (3) 3983-1111 Ikebukuro Metropolitan Plaza Branch Office 81 (3) 3988-1181 81 (3) 3718-3371 Jiyugaoka Branch Office 81 (3) 3738-5101 Kamata Branch Office 81 (422) 22-8181 Kichijoji Branch Office 81 (3) 3657-1141 Koiwa Branch Office 81 (3) 3222-6211 Kojimachi Branch Office 81 (42) 328-6011 Kokubunji Branch Office 81 (42) 725-2111 Machida Branch Office 81 (3) 3769-6651 Mita Branch Office 81 (3) 3228-7755 Nakano Branch Office 81 (3) 3994-7711 Nerima Branch Office 81 (3) 3392-6011 Ogikubo Branch Office 81 (3) 3774-1181 Omori Branch Office 81 (3) 5426-8531 Sakurashinmachi Branch Office (Scheduled to open on August 7) 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 5-3, Kojimachi, Chiyoda-ku, Tokyo 102-0083 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 1-12-10, Sakurashinmachi, Setagaya-ku, Tokyo 154-0015 Seijo Branch Office Senju Branch Office Shibuya Branch Office Shinbashi Branch Office Shinjuku Branch Office 81 (3) 3482-2011 81 (3) 3882-8411 81 (3) 3400-7111 81 (3) 3572-0111 81 (3) 3205-1001 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 Nomura Holdings, Inc. 75 Office Name Telephone Address Shinjuku-eki Nishiguchi Branch Office Shinjuku Nomura Building Branch Office Tachikawa Branch Office Tamagawa Branch Office Tokyo Branch Office Toranomon Branch Office Ueno Branch Office ■ Chubu/ Hokuriku ■ Kinki ■ Chugoku/ Shikoku ■ Kyushu/ Okinawa Fukui Branch Office Gifu Branch Office Hamamatsu Branch Office Kanayama Branch Office Kanazawa Branch Office Kariya 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 Sasebo Branch Office 76 Nomura Holdings, Inc. 81 (3) 3342-1281 81 (3) 3348-8211 81 (42) 524-1111 81 (3) 3708-1811 81 (3) 3211-2411 81 (3) 3583-2301 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 (566) 63-4411 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 (59) 353-2141 81 (78) 918-1155 81 (6) 6783-5241 81 (79) 222-6101 81 (72) 846-2511 81 (72) 438-8188 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 81 (956) 37-0531 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 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, Aichi 460-0022 3-25, Takaoka-machi, Kanazawa-shi, Ishikawa 920-0864 3-20, Sakuramachi, Kariya-shi, Aichi 448-0028 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 410-0801 2-11, Koseidori-nishi, Okazaki-shi, Aichi 444-0059 1-6, Otemachi, Aoi-ku, Shizuoka-shi, Shizuoka 420-0853 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 7-20, Shimase-cho, Sasebo-shi, Nagasaki 857-0806 Profile Corporate and Other Data Structured under Nomura Holdings, Inc., Nomura Group is committed to a management vision of firmly establishing itself as a globally competitive Japanese financial services group. We have also set a management target of achieving an average consolidated return on equity (ROE) of 10%-15% over the medium to long term. In pursuing this vision, we will achieve a dominant position in terms of our customer base and establish a solid revenue base—one resilient to the changing market environment. As Japan’s economy recovers and deregulation moves forward, we are seeing a significant increase in business opportunities. To capitalize on these opportunities and provide superior services for all investment needs, we are posi- tioning ourselves for higher levels of growth by enlarging the scope of our operations, without being confined to the tra- ditional bounds of the securities business. To underline our determination to expand the scope of our business, we have removed the word “Securities” from the name of the Group in Japanese. It is now simply “Nomura Group” as in English. The theme of this year’s annual report is “Nomura Knows How.” This theme emphasizes our ability to provide solu- tions to the issues our customers face. By delivering these solutions along with financial services that exceed the stan- dards our customers have come to expect, we aim to build even stronger relationships, thereby expanding our earnings base and continuing to increase shareholder and corporate value. Corporate Data Date of Incorporation December 25, 1925 Head Office 1-9-1, Nihonbashi, Chuo-ku, Tokyo 103-8645, Japan Tel: 81 (3) 5255-1000 Fax: 81 (3) 5255-1064 Share Data Number of Common Stock Issued 1,965,919,860 shares (As of March 31, 2006) Listings The common shares of Nomura Holdings, Inc., are listed on the Tokyo, Osaka, Nagoya, and Singapore stock exchanges. The shares are also listed on the New York Stock Exchange in the form of American Depositary Receipts. (As of June 30, 2006) Transfer Agent and Registrar Mitsubishi UFJ Trust & Banking Corporation Corporate Agency Department 81 (3) 5683-5111 0120-232-711 (Toll free in Japan) Major Shareholders (Top 10) Share of Number of Total Voting Shares Held (Thousands) Rights (%) Ranking Shareholder Name 01 Japan Trustee Services Bank, Ltd. (trust account) 02 Japan Master Trust Bank of Japan, Ltd. (trust account) 86,808 107,478 03 Depositary Nominees Inc. 04 State Street Bank and Trust Company 05 State Street Bank and Trust Company—505103 06 07 The Chase Manhattan Bank, N.A. London Japan Trustee Services Bank, Ltd. (trust account 4) 83,975 82,467 54,795 44,345 26,282 08 Mitsubishi UFJ Trust & Banking Corporation (trust account) 19,309 09 Nippon Life Insurance Company 19,007 10 The Sumitomo Trust & Banking Co., Ltd. (trust account B) 18,684 5.66 4.57 4.42 4.34 2.88 2.33 1.38 1.02 1.00 0.98 Capital ¥182,799,788,854 (As of March 31, 2006) Group Employees 14,668 (As of March 31, 2006) Fiscal Year-End March 31 Depositary for American Depositary Receipts (ADRs) The Bank of New York ADR Division 1 (212) 815-8161 U.S. Toll Free: (888) 269-2377 (888-BNY-ADRS) www.adrbny.com Ratio: 1 ADR = 1 ordinary share Number of Shareholders 226,488 (Unit shareholders: 197,450) (As of March 31, 2006) Component Ratio of Shareholders (%) 100 80 60 40 20 0 9.53 8.67 8.47 8.88 8.09 19.41 0.63 21.55 21.58 0.70 1.10 24.61 0.83 22.73 0.93 28.27 28.97 40.44 37.90 43.66 42.15 40.10 28.40 27.77 24.60 3/02 3/03 3/04 3/05 3/06 ■ Financial Institutions ■ Foreign Legal Entities ■ Securities Firms ■ Individuals and Others ■ Other Legal Entities Contents 01 Consolidated Financial Highlights (U.S. GAAP) 02 Nomura Knows How 04 To Our Shareholders and Customers 12 Business Portfolio 14 Business Outline 14 Domestic Retail 20 Global Markets 26 Global Investment Banking 32 Global Merchant Banking 38 Asset Management 44 Global Research 46 Topic: Joinvest Securities 48 Corporate Governance 52 Compliance 54 Risk Management 55 Directors and Executive Officers 56 Corporate Citizenship 58 A Better Workplace 60 Product Policies 61 Financial Section 71 Corporate and Other Data Credit Ratings S&P Moody’s R&I JCR *As of June 30, 2006 Nomura Holdings, Inc. Nomura Securities Co., Ltd. Long-term Short-term Long-term Short-term A- A3 A+ AA A-2 ― a-1 ― A A2 A+ AA A-1 P-1 a-1 ― For More Information Investor Relations Nomura Group Headquarters Nomura Securities Co., Ltd. Otemachi Nomura Building 2-1-1, Otemachi, Chiyoda-ku Tokyo 100-8170, Japan Tel: 81 (3) 3211-1811 www.nomuraholdings.com/investor/ E-mail Alerts Our e-mail alert service informs subscribers when a news release is issued or new content is uploaded to our website. Forward-Looking Statements This annual report contains forward-looking statements about the future plans, strategies, beliefs, and performance of Nomura Group. These forward-looking statements are not historical facts. They are expectations, estimates, forecasts, and projections based on information currently available to the Company and are sub- ject to a number of risks, uncertainties, and assumptions, which, without limitation, include market trends, economic trends, competition in the Japanese financial industry, laws and regulations, and the tax system. As such, actual results may differ materially from those projected. Nomura Holdings Website www.nomura.com The Nomura Holdings website has been redesigned to become the first JIS-compliant website in Japan’s securities industry. The site can now be used more easily by people of all ages and individuals with disabilities. In addition, further improvements have been made with regard to ease of use and accessibility. Nomura Holdings, Inc. 77 A n n u a l R e p o r t 2 0 0 6 N o m u r a Knows How Annual Report 2006 for the Year Ended March 31, 2006 Printed on 100% Recycled Paper Printed in Japan on 100% recycled paper using soy ink N o m u r a H o d n g s , i l I n c . 

Continue reading text version or see original annual report in PDF format above