A n n u a l R e p o r t 2 0 0 7 Charting a Course for High-Growth Opportunities A n n u a l R e p o r t 2007 for the Year Ended March 31, 2007 Trademark of American Soybean Association Printed on 100% Recycled Paper Printed in Japan on 100% recycled paper using soy ink Profile Nomura Group is a financial services group comprising Nomura Holdings and its subsidiaries located in Japan and overseas. Nomura Group aims to be a globally competitive Japanese and Pan-Asian financial services group and attain return on equity (ROE) of 10% to 15% over the medium to long term. To this end, we are leveraging the strengths of each division and achieving synergies across each busi- ness to establish an unparalleled customer base and stronger earnings platform. Charting a Course High-Growth Oppor For over 80 years, Nomura Group has been challenging conventional wisdom with innovative thinking. Today, we are going beyond the framework of the securities business, expanding into higher-growth areas. As our operating environment undergoes significant change, we remain focused on taking up new challenges to capitalize on business opportunities and drive Nomura to a new level of growth. Wind and Waves by Shukei Sesson (An important cultural asset owned by the Nomura Art Museum) This well-known work of art depicts a small sailboat heading confidently toward the great ocean beyond despite a gale-force wind and raging waves. Tokushichi Nomura II, the founder of Nomura Group, had a special fondness for this work. It symbolizes one of our founding principles: “We must have the courage to boldly follow the path of our convictions.” for tunities CONTENTS Consolidated Financial Highlights (U.S. GAAP) To Our Shareholders and Customers Japan’s Big Bang 10 Years On Topics Business Outline 2 4 10 14 16 Domestic Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Global Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Global Investment Banking . . . . . . . . . . . . . . . . . . . . . . . . 26 Global Merchant Banking . . . . . . . . . . . . . . . . . . . . . . . 30 Asset Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Global Research Corporate Governance and Internal Control System Corporate Social Responsibility Consolidated Six-Year Summary (U.S. GAAP) Major Subsidiaries and Affiliates/ Nomura Securities Domestic Network Corporate and Other Data 38 40 48 50 52 54 Information contained in this annual report can also be accessed on the Nomura Holdings website. When providing full details in this mark. Also, report was not possible, we have included a information related to Nomura’s CSR Report is shown by the mark. WEB CSR For information on investor relations: www.nomuraholdings.com/investor/ 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 subject 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 dif- fer materially from those projected. Annual Report 2007 1 Consolidated Financial Highlights (U.S. GAAP) Note: These consolidated financial highlights are prepared solely for convenience. Readers are recommended to refer to the Form 20-F. Operating Results: Total revenue Net revenue FY 3/2003 3/2004 3/2005 3/2006 3/2007 3/2007 Millions of yen Millions of U.S. dollars*1 ¥00,807,651 ¥01,045,936 ¥01,126,237 ¥01,792,840 ¥02,049,101 $017,430 566,274 803,103 799,190 1,145,650 1,091,101 Income before income taxes*2 47,409 282,676 204,835 545,013 321,758 Net income 119,913 172,329 94,732 304,328 175,828 9,281 2,737 1,496 Balance Sheet Data (Period End): Total assets ¥21,169,446 ¥29,752,966 ¥34,488,853 ¥35,026,035 ¥35,873,374 $305,149 Shareholders’ equity 1,642,328 1,785,688 1,868,429 2,063,327 2,185,919 18,594 Return on equity (ROE)*3 7.4% 10.1% 5.2% 15.5% 8.3% Net revenue Income before income taxes*2 Net income & return on equity (ROE)*3 (Billions of yen) (Billions of yen) (Billions of yen) Net income (lhs) ROE (rhs) 1,200 1,000 800 600 400 200 0 600 500 400 300 200 100 0 350 300 250 200 150 100 50 0 (%) 35 30 25 20 15 10 5 0 FY 3/03 3/04 3/05 3/06 3/07 FY 3/03 3/04 3/05 3/06 3/07 FY 3/03 3/04 3/05 3/06 3/07 2 Nomura Holdings, Inc. Per Share Data: Net income—basic*4 Shareholders’ equity*5 Cash dividends*5 FY 3/2003 3/2004 3/2005 3/2006 3/2007 3/2007 Yen U.S. dollars*1 ¥061.26 ¥088.82 ¥048.80 ¥0,159.02 ¥0,092.25 $00.78 846.40 919.67 962.48 1,083.19 1,146.23 15.00 15.00 20.00 48.00 44.00 9.75 0.38 *1 Calculated using the yen-dollar exchange rate of U.S.$1.00=¥117.56, 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 30, 2007. *2 Total for continuing and discontinued operations for the fiscal year ended March 31, 2006. *3 Calculated by dividing net income of the current fiscal year by average shareholders’ equity of the current and previous fiscal year-ends. *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 fiscal year-end. C o n s o l i d a t e d F i n a n c i a l i H g h l i g h t s ( U . S . G A A P ) For Reference: Cash Dividends: FY 3/2003 3/2004 3/2005 3/2006 3/2007 3/2007 Millions of yen Millions of U.S. dollars*1 Total annual dividends ¥29,116 ¥29,137 ¥38,845 ¥0,91,487 ¥0,83,939 $0.714 Consolidated payout ratio 24.3% 16.9% 41.0% 30.2% 47.7% Yen U.S. dollars*1 Stock Information: Stock price (On Tokyo Stock Exchange as of the end of March) ¥01,235 ¥01,895 ¥01,500 ¥0,02,625 ¥0,02,455 $20.88 Shareholders’ equity Total annual dividends and consolidated payout ratio Stock price Total annual dividends (lhs) Consolidated payout ratio (rhs) (Billions of yen) 2,500 (Billions of yen) 100 2,000 1,500 1,000 500 0 80 60 40 20 0 3/03 3/04 3/05 3/06 3/07 FY 3/03 3/04 3/05 3/06 3/07 (%) 100 80 60 40 20 0 (Yen) 3,000 2,500 2,000 1,500 1,000 500 0 FY 3/03 3/04 3/05 3/06 3/07 Annual Report 2007 3 To Our Shareholders and Customers A Leading Contender Makes a New Start Drawing effectively on our expertise and capital, we are continu- ally going beyond the conventional framework of the securities business to expand our operations. In doing so, we aim to deliver solid growth in both income and dividends. 4 Nomura Holdings, Inc. The Year in Review For fiscal 2006, ended March 31, 2007, net revenue was ¥1,091.1 billion, 4.8% lower than for the previous year. Due to higher expenditures on investments for future growth and other factors, income before income taxes declined 41.0% year on year, to ¥321.8 billion. As a result, net income decreased 42.2% year on year, to ¥175.8 billion, and ROE stood at 8.3%. During the year, we made significant progress in strengthening our client base in Japan, expanding revenue opportunities, and implementing initiatives to establish new businesses. As the shift from savings to investment in domestic personal financial assets continued to gain traction, in Domestic Retail we focused on expanding our points of interface with customers and improving our consultation capabilities. As of the fiscal year-end, Domestic Client Assets had expanded to ¥85.2 trillion, more than double the level of four years earlier. In Asset Management, we took full advantage of the strong growth in the investment trust market by expanding our lineup of products to meet increasingly diverse customer needs and aggres- sively expanded our sales channels. As a result, Asset Management reported increases in net revenues and income for the third consecutive fiscal year, and assets under management rose to a record ¥27 trillion. In the wholesale business, the level of total equity financing in Japan swelled to the equivalent of US$57.0 billion as Japanese corporations shifted to more aggressive business strategies, including M&A and capital investment. Riding this wave, Global Investment Banking won mandates as lead manager for a large number of issues and captured the top spot in the global equity & equity- related (Japan) league table* for the sixth consecutive fiscal year. On the other hand, the fact that we did not reach our target ROE range of 10% to 15% has made clear the issues we must address going forward. Therefore, during the current fiscal year, we are focusing on reforming our wholesale business operations, including international operations. *Source: Thomson Financial Making Effective Use of Capital in Wholesale Business Today, the number of opportunities for Nomura to use its capital to deliver optimal solutions to meet corporate financial needs is growing. Some typical examples are multiple private offerings (MPOs) that respond flexibly to fund- raising needs and hybrid private offerings (HPOs) as well as management T o O u r S h a r e h o l d e r s a n d C u s t o m e r s Sum of Domestic Client Assets and Assets under Management of Asset Management Domestic Client Assets Assets under management (Trillions of yen) 120 100 80 60 40 20 0 3/2003 3/2004 3/2005 3/2006 3/2007 Income before Income Taxes of Domestic Retail and Asset Management Domestic Retail Asset Management (Billions of yen) 250 200 150 100 50 0 FY 3/2003 3/2004 3/2005 3/2006 3/2007 Annual Report 2007 5 Nomura-Style Growth in Wholesale Business Use capital Deliver solutions to clients buyouts (MBOs) and management-employee buyouts (MEBOs) that facilitate business realignments and corporate revitalizations. Amid this environment, Nomura is expanding its business domains and opportunities for generating revenue by using its own capital to offer solutions for client problems. Achieve growth in wholesale business as globally competitive Japanese and Pan-Asian Nomura Int er n ational strategy Focus management resources in Asia Becoming Pan-Asian Nomura Group Another issue we are addressing is the revamping of our international opera- tions. In Asia, where we have spent many years developing our client base, we are working to establish ourselves as a globally competitive Japanese and Pan- Asian financial services group by prioritizing the allocation of personnel, capital, and other resources to Asia. We have arranged equity financing for leading Asian companies, including Infosys Technologies of India. At the same time, we have built a solid track record in offering investment opportunities for the retail market in Japan, includ- ing marketing of the Asia Attractive Dividend Stock Fund and investment trusts that take advantage of our China Qualified Foreign Institutional Investor (QFII) Initiatives in Asia investment quota. Domestic Retail Offering investment opportunities in fast-growing Asian countries to Japanese investors by drawing on the capabilities of Nomura Group Global Markets Strengthening Nomura’s business base to expand operations in Asia through the establishment of Asia Asset Finance (See page 25) Global Investment Banking Establishing position as Asia’s leading global invest- ment bank (See pages 28 and 29) Global Merchant Banking Offering risk capital to the rapidly expanding coun- tries of Asia through the establishment of Asia Merchant Banking (See page 33) Asset Management Strengthening distribution through alliances in Asia and enhancing asset management capabilities (See page 36) In addition to these activities that tap the strength of our customer base in Japan, we are delivering solutions that meet the increasingly diverse needs of our clients across Asia. Last year, we invested in Taiwan’s Taishin Financial Holding and are now working together on collaborative efforts. We are also col- laborating with the State Capital Investment Corporation (SCIC) of Vietnam. This year, in May 2007, we established Asia Merchant Banking. Going forward, we will act swiftly to further sharpen our competitive edge in delivering solutions to our clients across Asia. Professionalism in All Forms of Investment The markets for investment-related businesses are growing, and competition in the financial services industry is likely to become more intense. As a financial services group that delivers superior services and solutions for all forms of investment, we are constantly seeking ways to evolve, and we have implement- ed a broad range of strategies. For example, in 2000, we began full-scale pri- vate equity investments in Japan to respond to the needs of corporations. In 2004, we entered the equity derivatives business to meet the increasingly diverse needs of investors in Japan and overseas. In the securities intermediary 6 Nomura Holdings, Inc. business and sales of investment trusts, we have forged alliances with domestic banks, Japan Post, and financial institutions in other parts of Asia, all of which are starting to show steady results. For more than 80 years, Nomura Group has grown by delivering high-value- added investment services. We remain focused on developing new investment- related businesses that match the needs of our customers. To this end, we will continue to seek out strategic investments and take on new challenges to lift Nomura Group to higher levels of growth. Implementing Diverse Strategies in Japan Nomura Securities now offers separately managed accounts (SMAs) throughout Japan and is continuing to expand its new products and services, including the introduction of fund wrap services. In addition, Nomura Securities is working to strengthen its capabilities for responding to customer needs through a wide range of initiatives aimed at enhancing the scale and improving the quality of its human resources, such as financial advisors. To cope with the ongoing expan- sion of its client base, Nomura Securities is opening new branches with features closely matched to the characteristics of the areas they serve. Nomura Trust & Banking marked its 14th year of operations during the fiscal year under review and had approximately ¥25 trillion in trust assets as of March 31, 2007. Nomura Trust & Banking is drawing on the special features of Nomura Group, including its strengths in securities, to differentiate and enhance the competitiveness of its services. In another collaborative effort during the year, Nomura Securities began to act as an agent for Nomura Trust & Banking and took initiatives to enhance convenience for customers. In May 2006, Joinvest Securities began operations, specializing in providing financial services online. Joinvest is expected to win access to a new base of T o O u r S h a r e h o l d e r s a n d C u s t o m e r s Joinvest Securities: Number of Accounts and Assets in Custody Assets in custody (lhs) Number of accounts (rhs) (Millions of yen) 300,000 250,000 150,000 125,000 100,000 75,000 50,000 25,000 0 customers and to complement the online services of Nomura Home Trade, 200,000 offered by Nomura Securities, and Nomura Home Banking, a service of Nomura Trust & Banking. In addition, Joinvest will aim to develop new business domains through its online services by identifying and responding to customer needs. With Japan entering an era of significantly greater M&A activity, Nomura 150,000 100,000 50,000 Group strengthened Nomura Capital Investment (NCI) early during the fiscal 0 year under review to improve NCI’s competitiveness in the loan business and enable it to respond quickly to clients’ M&A financing needs. We also offered solutions that drew on these capabilities to support the strategies of individual 5/06 7/06 9/06 11/06 1/07 3/07 5/07 Annual Report 2007 7 clients. Some examples include the MEBOs arranged for Tsubaki Nakashima and Sunstar to assist them in realigning their business activities as well as assis- tance for a tender offer by Oji Paper aimed at industry realignment. Using External Resources for Further Growth Nomura is promoting two transitions in its capital strategy. First, we are expand- ing business with clients by shifting toward making aggressive use of our own capital while drawing on our global risk management expertise. Second, as evi- denced by the acquisition of Instinet during the fiscal year under review, we are accelerating growth through the formation of alliances with and acquisitions of other companies, rather than relying solely on our own resources. As the trend toward placing stronger emphasis on the best execution of securities trades increases around the world, Instinet is well positioned to take advantage of a wealth of business opportunities. The acquisition of Instinet will allow us to boost competitiveness even further by adding sophisticated execution technolo- gy to the long-standing research capabilities for which we have been known. In line with the global trend, investors in Japan and the rest of Asia are taking a closer look at markets for alternative investments, especially hedge funds. During the fiscal year under review, we invested in and began initiatives to cre- ate a business alliance with Fortress Investment Group, a U.S. asset manage- ment company that specializes in alternative investments, including private equity funds and hedge funds. We also announced a tie-up with Hedge Fund Research Group. Through these various activities, we are aiming to raise the presence of Nomura Group in the markets for alternative investments. Targeting Growth in Income and Dividends We want our shareholders to benefit from growth in both income and dividends. For the fiscal year ending March 31, 2008, we have set a target dividend of ¥34 per share, an increase of ¥2 per share compared to the ¥32 target dividend for the year under review. Our goal is to reward our shareholders with a dividend payout ratio of over 30%, combining the target dividend amount and the Dividend Policy for the Fiscal Year Ending March 31, 2008 Target dividend (minimum level) Dividend on equity (DOE) of 3.0% Performance-linked portion based on full-year dividend payout ratio of over 30% Dividend per share (¥) Dividend payout ratio of over 30% DOE of 3.0% Low ROE High performance-linked portion. Moreover, we aim to increase our target dividend in Dividends for the current fiscal year First quarter: ¥8.5 Second quarter: ¥8.5 ¥8.5 Third quarter: Fourth quarter: ¥8.5 + (cid:1) ((cid:1) = performance-linked portion) the medium to long term. By breaking new ground and not being limited to the old ways of doing busi- ness, I feel confident that Nomura Group will continue to grow and increase its corporate value. Ten years have passed since Japan’s financial “Big Bang” reforms, and over that period we have seen major changes not only in the 8 Nomura Holdings, Inc. Deputy President & Co-COO Kazutoshi Inano Co-Chief Operating Officer (Co-COO) Group Compliance Officer (Serving concurrently as Director) (Representative Executive Officer) Deputy President & COO Hiroshi Toda Chief Operating Officer (COO) International Operations Officer (Serving concurrently as Director) (Representative Executive Officer) President & CEO Nobuyuki Koga Chief Executive Officer (CEO) (Serving concurrently as Director) (Representative Executive Officer) earnings structures of financial institutions but also in Japanese society and its values. These and other changes, including the declining birthrate in Japan and the emergence of other economies in Asia, will continue. During the fiscal year under review, Nomura issued a Mission Statement* that clarified in detail what Nomura’s mission is in today’s operating environment. In the midst of today’s changes, new kinds of financial institutions are needed. Without being bound by yesterday’s conventional wisdom and by having a strong will to change and reform, we are committed to creating greater value for July 2007 our shareholders and society. As we move ahead, we look forward to your increased understanding, sup- port, and cooperation. *Please see page 45 for more information on the Mission Statement. Nobuyuki Koga President & Chief Executive Officer Annual Report 2007 9 Transition to a holding company structure Japan’s Big Bang 10 Years On As a financial services group that delivers superior services and solutions for all forms of investment, we are further expanding our operations into new business areas. In the 10 years since Japan’s “Big Bang” reforms aimed at revitalizing the country’s financial mar- kets, deregulation in the financial sector has gained traction and corporate behavior has been trans- formed through M&A and other activities. We have kept pace with these reforms by going beyond the traditional framework of the securities business to continually deliver innovative products and services. Began sale of variable annuities 10 Nomura Holdings, Inc. Total Net Assets of Publicly Offered Stock Investment Trusts (Billions of yen) 60,000 50,000 40,000 30,000 20,000 10,000 0 J a p a n ’ s B i g B a n g 1 0 Y e a r s O n (cid:1)October 2001 (cid:1)Oct.-Dec. 2004 Source: The Investment Trusts Association, Japan Transition to holding company structure and establishment of Nomura Holdings (cid:1)December 2001 Nomura Holdings lists on the New York Stock Exchange Approximately 200,000 new accounts opened as individuals place stocks held at home in custody accounts; net asset inflow of ¥3.6 trillion (cid:1)February 2005 Nomura and Rothschild form M&A alliance (cid:1)October 2005 (cid:1)November 1998 Introduction of financial advisor (FA) marketing specialists who work closely with the local community (cid:1)June 2003 Nomura Holdings adopts Committee System Introduction of Nomura SMA (cid:1)December 2006 Announced acquisi- tion of minority stake in Fortress Investment Group (cid:1)February 2007 Acquired Instinet FY 3/98 3/99 3/00 3/01 3/02 3/03 3/04 3/05 3/06 3/07 (cid:1) Nomura- related (cid:1) Society in general (cid:1)December 1998 (cid:1)December 2004 Commencement of sales of investment trusts through financial institutions Introduction of variable insurance annuities through securities firms Removal of ban on providing securi- ties intermediary services at banks (cid:1)October 1999 (cid:1)October 2001 (cid:1)April 2005 Equity trading commis- sions fully liberalized Commencement of defined contribution pension plans (Japan’s 401k pension plans) Removal of full government guarantees for deposits (cid:1)November 2000 Removal of ban on Japanese real estate investment trusts (J-REITs) (cid:1)October 2005 Japan Post commences sales of investment trusts (Number of deals) 4,000 M&A Advisory Any Japanese Involvement Financial Advisors 3,000 2,000 1,000 0 (Millions of U.S. dollars) 300,000 250,000 200,000 150,000 100,000 50,000 0 Rank value (rhs) Number of deals (lhs) Source: Thomson Financial Annual Report 2007 11 Diversification of Revenue Sources, Further Growth The expansion of our operations has created a revenue structure that is more balanced across our five business divisions. Each division is establishing a solid revenue base and business segment total income before income taxes has jumped fourfold over the past four years. Looking ahead, we are aim- ing to increase income before income taxes to ¥500 billion and higher. Business Segment Income before Income Taxes (Billions of yen) 500 Business segment total income before income taxes 377.3 Significant growth in income before income taxes over past four years Domestic Retail Global Markets Global Investment Banking Global Merchant Banking Asset Management Other 89.2 400 300 200 100 0 -100 FY 3/2003 3/2004 3/2005 3/2006 3/2007 12 Nomura Holdings, Inc. Domestic Retail Domestic Client Assets (cid:2) Domestic Client Assets, now standing at ¥85.2 trillion, have more than doubled in four years (Trillions of yen) 90 80 70 60 50 40 30 20 10 0 85.2 40.6 Mar. 31, 2003 Mar. 31, 2007 J a p a n ’ s B i g B a n g 1 0 Y e a r s O n Global Markets Trading-Related Revenue (cid:2) Equity derivatives, etc., diversify sources of revenue Global Investment Banking M&A Transactions (cid:2) More volume, higher quality (Billions of yen) (Millions of U.S. dollars) (Number of deals) 350 325 300 275 250 225 0 315.8 296.8 FY 3/2003 3/2007 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 ■ Rank value (lhs) Number of deals (rhs) 36,975.7 156 109 14,344.9 FY 3/2003 3/2007 Source: Thomson Financial 200 150 100 50 0 Global Merchant Banking Asset Management Business Exposure (Excluding Terra Firma) (cid:2) Firm cycle of investments and exits Assets under Management (cid:2) Substantial expansion in assets under management (Billions of yen) (Trillions of yen) 250 200 150 100 50 0 231.2 35.9 Mar. 31, 2003 Mar. 31, 2007 30 25 20 15 10 5 0 27.0 15.9 Mar. 31, 2003 Mar. 31, 2007 Annual Report 2007 13 Global Execution Capabilities, Significant Synergies Key trends in global equities markets include the rising prominence of elec- tronic communications network (ECN)-like alternative trading systems, grow- ing emphasis on best execution due to the unbundling of research and execution, and the movement among money managers to search beyond domestic markets to find investment alternatives. Instinet helps its clients achieve best execution based on its high-quality suite of electronic trading tools that offer electronic access to over 50 equities markets around the world. Instinet has tremendous opportunities for growth through the introduc- tion of fast, efficient, and inexpensive electronic trading venues that appeal to global investors, who are increasingly concerned with unbundled execution costs. Instinet today is delivering some of the world’s most advanced trading systems in Europe, the United States, and Japan. Looking ahead, Instinet plans to bring its technology platform and experience to emerging markets, including Eastern Europe, Southeast Asia, and Latin America. Chris Rogers Chief Technology Officer, Instinet TOPICS On Cours New Branch Offices Based on Innovative Concepts Nomura Securities opened its Hamadayama branch in Tokyo on May 7, 2007, as part of its expansion program to open new branches based on innovative concepts, such as collaborating with leading brand-name stores and a coffee-shop chain. The Hamadayama branch is located in a medical center on the ground floor of an upscale housing complex. The interior of the branch was designed to blend in with the luxurious surroundings of the other facilities in the center. Since this area is a long walk from the nearest train station, access to financial institutions is slightly inconvenient for local residents. For this reason, we believe we can greatly increase convenience for local residents. For customers visiting the medical center, we will emphasize services that can be provided at the branch, and we also plan to go out and visit local residents. Hamadayama Branch Manager, Nomura Securities Shigehiro Nakagawa 14 Nomura Holdings, Inc. Offering Nomura Group Products and Services to a Broad Base of Investors More than a year has passed since Joinvest Securities began operations in May 2006. During that time, we have paid particular attention to expanding our lineup of products that draw on the comprehensive capabilities of Nomura Group and ensuring the reliability of our computer systems, which underpin the trust that our customers place in us. Also, in a rare move for an online financial services company, we have set up an editorial office to develop original content for our website. Our aim here is to create a site that is easy to use and that all our customers, regardless of age or invest- ment experience, can enjoy. We are also committed to providing the low- est level of commissions in the industry while uploading high-level content, maintaining reliable systems, and delivering high-quality services that meet customer needs by drawing fully on the array of products and services that only Nomura Group can provide. Maiko Takezawa Joinvest Securities T o p i c s e for New Opportunities Aiming for the Top Share in All Investment Trust Sales Channels The scope of Japan’s investment trust market is rapidly expanding. One of the reasons for this is that, in addition to securities firms, other kinds of financial institutions are now also offering investment trusts. In fact, assets under management in investment trusts sold through banks are surging, and asset management firms are placing emphasis on developing new sales channels. Nomura’s strengths are not only its asset management capabilities and diverse range of investment products but also its capabili- ties for planning and conducting sales promotion events and its special- ized unit—the largest in the industry—for supporting the sales training activities of bank personnel. Nomura has already won the top shares of investment trust sales through securities firms and Japan Post. Going for- ward, we will aim to win the leading market share in sales through bank channels. Yoshitaka Isomura Nomura Asset Management Annual Report 2007 15 Business Outline Charting a Course for High-Growth Opportunities 16 Nomura Holdings, Inc. Domestic Retail Offers consulting services and financial products to meet investment needs Global Markets Handles sales and trading of bonds, equities, foreign exchange, and derivatives for institutional investors in Japan and international markets Global Investment Banking Underwrites bond and equi- ty issues, provides M&A and financial advisory services Global Merchant Banking Uses Nomura’s own capital to make private equity investments and invest- ments in venture companies Asset Management Delivers a diverse lineup of investment trusts and asset management services as well as administrative ser- vices for defined contribu- tion pension plans (Billions of yen) 500 400 300 200 100 0 FY (Billions of yen) 400 300 200 100 0 FY (Billions of yen) 100 80 60 40 20 0 FY (Billions of yen) 75 50 25 0 -25 FY (Billions of yen) 100 80 60 40 20 0 FY Net revenue Income before income taxes 3/2003 3/2004 3/2005 3/2006 3/2007 3/2003 3/2004 3/2005 3/2006 3/2007 B u s i n e s s O u t l i n e 3/2003 3/2004 3/2005 3/2006 3/2007 3/2003 3/2004 3/2005 3/2006 3/2007 3/2003 3/2004 3/2005 3/2006 3/2007 Annual Report 2007 17 D o m e s t i c R e t a i l Targeting ¥100 trillion in Domestic Client Assets by 2010. Net asset inflow of ¥6 trillion during the year ended March 31, 2007, takes total to ¥85.2 trillion. Business Results Aggressive Investment in People, Branch Offices, and administration fees and other increased due to strong sales of IT Infrastructure investment trusts offering frequent distributions and newly In fiscal 2006, ended March 31, 2007, Domestic Retail reported launched investment trusts. As a result, revenue remained at a net revenue of ¥440.1 billion, 1.4% lower than for the previous high level in line with the previous year. Non-interest expenses fiscal year. Income before income taxes was ¥160.9 billion, rose, meanwhile, due to investment in personnel, new branch 18.4% below the prior year. offices, call centers, and IT infrastructure ahead of an expected Although stock brokerage commissions declined due to increase in customer numbers and further growth in the overall a drop in equity agency transaction value, commissions for investor base in Japan. the distribution of investment trusts and investment trust Domestic Retail Business Results Net revenue Non-interest expenses Income before income taxes 3/2003 3/2004 3/2005 3/2006 3/2007 ¥249,251 ¥305,757 ¥304,367 ¥446,535 ¥440,118 213,562 226,213 223,200 249,330 279,253 ¥035,689 ¥079,544 ¥081,167 ¥197,205 ¥160,865 Millions of yen 18 Nomura Holdings, Inc. Business Environment Kenichi Watanabe Chief Executive Officer, Domestic Retail Ongoing Shift from Savings to Investment this group through fiscal 2011 will amount to ¥85 trillion*. Baby As a result of continued low interest rates in Japan and uncer- boomers are rapidly changing their views about investing, and tainties regarding the pension system, individuals are shifting these retirees may become much more active investors in order their financial assets from savings to investment. The percent- to live more affluent post-retirement lifestyles. Interest is rising age of personal financial assets held in the form of cash and not only in safe and secure investment products but also higher- deposits declined from 57.2% as of March 31, 2003, to 50.1% return products that are suited to individual risk tolerance and as of March 31, 2007. On the other hand, the percentage held investment trusts that offer frequent distributions and provide a as risk assets (equities, bonds, and investment trusts) increased stable cash flow. Along with these trends, we are being called from 9.1% as of March 31, 2003, to 19.1% as of March 31, on increasingly to sponsor life financial planning seminars and 2007. give advice on asset management to assist customers in man- Growth in the balance of funds invested in investment trusts aging their retirement allowances and other assets. has been especially strong, and there has been a significant *Nomura Securities Financial & Economic Research Center estimate trend among individuals to invest in a greater diversity of invest- ment trusts. In addition to growth in global bond funds, which Transition to Electronic Share Certificates have shown rapid expansion, investors have diversified into In 2009, share certificates in Japan will go digital. According to global equity funds, global real estate investment trusts (REITs), a survey released in October 2006 by the Japan Securities and balanced-type investment trusts. As a result, we foresee the Dealers Association, there are an estimated 18.8 billion paper need to continue to expand our lineup of investment products to share certificates held by their owners at home. Prior to the meet customer needs. Baby Boomers Retiring introduction of electronic share certificates, individual investors are beginning to open accounts with securities firms and have these stock certificates held in custody by the Japan Securities Beginning in fiscal 2007, Japan’s baby-boomer generation will Depository Center. This trend is expected to grow even reach retirement age en masse. Estimates show that the accu- stronger going forward. mulated total of retirement and severance benefits to be paid to B u s i n e s s O u t l i n e / D o m e s t i c R e t a i l Personal Financial Assets Equities Bonds 5.3% 1.7% Investment trusts 2.1% Total 9.1% Equities Bonds 12.2% 2.5% Investment trusts 4.5% Total 19.1% Cash and deposits 57.2% As of March 31, 2003 ¥1,356 trillion Insurance and annuities 27.8% As of March 31, 2007 ¥1,536 trillion Cash and deposits 50.1% Insurance and annuities 26.2% Source: Nomura Institute of Capital Markets Research based on Bank of Japan data Annual Report 2007 19 Opened Kamakura branch on April 27, 2007 Seeking Further Growth—Expansion in Domestic Client Assets and Accounts We have always regarded the level of assets in custody as an Expansion through Securities Intermediary Business important yardstick of the trust that our clients place in us. In As of June 30, 2007, we had formed alliances with 55 financial order to win the trust of even more customers, we have set our- institutions. By strengthening our ties with regional financial selves the medium-term targets of increasing Domestic Client institutions, which have branches carefully tailored to local Assets to ¥100 trillion and customer accounts to 5 million by needs and strong regional customer bases, and through tie-ups the end of March 2010. We are making steady progress toward with companies in other industries, we have positioned our- these goals. As of March 31, 2007, Domestic Client Assets selves to offer our products and services to a larger group of amounted to ¥85.2 trillion, ¥4.7 trillion higher than a year earlier. customers. There were 3.95 million customer accounts at the end of March 2007, 170,000 more than at the end of the previous fiscal year. Filling Out Our Lineup of Services and Products Going forward, we will respond to the needs of an even larger In addition to expanding our interfaces with customers, we have number of customers by expanding our interfaces with cus- stepped up our drive to offer a broad lineup of services and tomers and filling out our lineup of services and products. products. Expanding Interfaces with Customers Increasing Staff and Adopting an Open-Architecture Strategy To offer our customers more in-depth consulting, we are We are working to expand our network of branch offices and increasing the number of personnel and enhancing our training other points of contact with customers to respond to the grow- programs. For example, as of May 31, 2007, we had 2,400 ing base of investors and their increasingly sophisticated needs. financial advisors (FAs), who provide consulting services careful- Growing Branch Network ly tailored to the needs of local communities. This represents an Since April 2006, we have opened 23 new branch offices, increase of 450 FAs compared with a year earlier. We have set bringing the total number in Japan to 157 as of the end of June a goal of having 3,000 FAs on staff by the end of March 2010. 2007. With the new branches, we are introducing innovative Similarly, in our call centers, we had a total of 700 personnel as concepts such as opening joint branches with leading brand- of June 2007, and we are aiming to increase this to 1,000. In name stores and a coffee-shop chain as well as setting up a addition, we are reallocating personnel resources to enable branch inside a medical center. some branches to focus entirely on consultation and to have back-office operations conducted by a regional head branch to 20 Nomura Holdings, Inc. Domestic Retail Nomura Money Fair increase operating efficiency. Among other initiatives, we are Working through Employee Stock Ownership Plans working to introduce new interfaces to deal with a broader Nomura has a market share of close to 60% in the administra- range of customers. For example, in our Hotto Direct service, tion and management of Japanese employee stock ownership which makes use of call centers and the Internet, we have plans for companies listed on the Tokyo Stock Exchange. We revised our fee schedules and created a new Beginner’s Dial offer a broad spectrum of services to meet the asset manage- service for entry-level investors. ment needs of company employees, while employed and after In terms of our product lineup, we have adopted an open- retirement. While we have mainly been involved in handling architecture strategy that allows us to offer the products that clerical and administrative matters, we are planning to provide are best suited to individual customer needs. asset management advice, including assistance in management Expansion of Discretionary Investment Services of retirement allowances. Separately managed account (SMA) services that were intro- Commencement of Bank Agency Services duced in October 2005 are now available at Nomura Securities In September 2006, Nomura Securities started providing bank branches nationwide in Japan, and we have also introduced agency services as an agent for Nomura Trust & Banking. The fund wrap services. These services provide the reassurance to first service offered is a savings account named Nomura customers that their assets are being professionally managed Yokinbako, which is now available via the Internet through according to their financial life plans. We are working to ensure Nomura Home Trade and enables customers to open bank that these accounts and services enable us to build stronger accounts online. Plans call for further increasing the conven- ties of trust with our customers over the long term. ience of these services. B u s i n e s s O u t l i n e / D o m e s t i c R e t a i l Nomura Securities Domestic Branches and Newly Hired Financial Advisors (FAs) Domestic Client Assets and Number of Accounts with Balance Number of domestic branches (lhs, end of period) Number of FA new hires (rhs) Domestic Client Assets (lhs) Number of accounts with balance (rhs) 150 140 130 120 110 100 FY 500 400 300 200 100 0 (Trillions of yen) 100 Targets: • Domestic Client Assets: ¥100 trillion • Number of accounts: 5 million (Thousands of accounts) 5,000 80 60 40 20 0 4,500 4,000 3,500 3,000 2,500 3/2003 3/2004 3/2005 3/2006 3/2007 3/2003 3/2004 3/2005 3/2006 3/2007 3/2010 Annual Report 2007 21 G l o b a l M a r k e t s Strengthened global execution capabilities for equity brokerage transac- tions through the acquisition of Instinet Expanded loan business by strengthening Nomura Capital Investment (NCI) Business Results Confronting Issues Related to Expansion of Revenue year, Fixed Income saw a decline in revenue as a result of weak Base and Increasing Profitability trading due to changes in the interest and currency market In fiscal 2006, ended March 31, 2007, Global Markets reported environment. In Equity, although MPO* transactions and equity net revenue of ¥290.0 billion, 21.8% lower than for the prior fis- derivative trading turned up during the fourth quarter, trading cal year. Income before income taxes declined 62.7%, to ¥58.8 revenue declined as equity market volatility remained low until billion. the third quarter. In spite of a rebound in order flow for interest-rate and currency-linked structured bonds during the second half of the *Multiple private offerings (MPOs) are issues of convertible-bond-type instruments to securities firms via private placement. Global Markets Business Results Net revenue Non-interest expenses Income before income taxes 3/2003 3/2004 3/2005 3/2006 3/2007 ¥235,991 ¥284,147 ¥243,087 ¥371,108 ¥290,028 142,434 163,304 182,901 213,387 231,222 ¥ 93,557 ¥120,843 ¥ 60,186 ¥157,721 ¥058,806 Millions of yen Notes: 1. In April 2004, Fixed Income, Equity, and certain functions of Investment Banking were consolidated to create Global Markets. 2. Figures for fiscal years prior to the year ended March 31, 2005, are totals of the previous Fixed Income and Equity and thus differ in composition from figures shown for the years ended March 31, 2005–2007. 22 Nomura Holdings, Inc. Business Environment Yasuo Agemura Chief Executive Officer, Global Markets Changing Client Base Responding to Change In addition to conventional institutional investors, several types We continue to draw on our strengths in serving our traditional of new clients such as hedge funds, private banks, and private client base with conventional business activities. However, as equity funds have raised their profiles and are becoming key our clients and their business activities change, one of the market participants. The balance of assets under the manage- issues we face is the increase in business with new types of ment of hedge funds on a global basis as of December 31, clients. For this reason, we believe it is important to strengthen 2006, is estimated to be US$1.4 trillion and is continuing to our execution and trading capabilities. expand. In addition, growth in the global economy is leading to In Equity, we have a very strong structure in place for an expansion of personal financial assets and in turn creating a research sales in Japanese equities. To boost our global execu- prosperous environment for private banks. tion capabilities, we acquired Instinet, a leading U.S. agency broker, in February 2007. Changes in Business Activities To increase our trading capabilities, we are making a major In Equity, we are seeing increased emphasis placed on execu- move into the equity derivatives business to add to trading in tion. In Europe, unbundling is growing and clients are increas- interest-rate and currency derivatives, which are already an ingly demanding the best execution. In the United States, there important source of revenue. Our initiatives in the credit and is a movement to seek the best pricing from among various commodities businesses are still in the relatively early stages, markets, including regional stock exchanges and proprietary and strengthening these areas is an issue we intend to address trading systems. Investors are also searching for ways to exe- during the current fiscal year. B u s i n e s s O u t l i n e / l G o b a l M a r k e t s cute orders that ensure minimal impact on equity prices, taking into account the liquidity of various markets. In the credit risk business, there is a strong movement, espe- cially in Europe and the United States, toward using securitiza- tion and derivatives to transfer risks off the balance sheets of financial institutions. Assets under the Management of Hedge Funds (Billions of U.S. dollars) 1,500 1,200 900 600 300 0 CY 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Source: Hedge Fund Research, Inc., © HFR, Inc. 2006, www.hfr.com Annual Report 2007 23 Japanese equities seminar Shinka Forum held in London Seeking Further Growth—Diversifying Products and Increasing Profitability This year, we will expand our operations with new clients such At the same time, regulatory changes in Europe and the as hedge funds, private banks, and private equity funds while United States are expected to expand business opportunities continuing to strengthen the position of our existing businesses. for Instinet. In the United States, proprietary trading systems We will also focus on expanding our solutions business, includ- may become as important as NASDAQ in terms of order execu- ing MPOs and hybrid private offerings (HPOs*), by making flexi- tion. As such, Instinet is well positioned to attract clients looking ble use of our balance sheet. to access the best liquidity pools through its algorithmic trading While maintaining our focus on Japan and the rest of Asia, systems. In Europe, the requirement for market concentration we will work to respond to the wide-ranging needs of clients will be relaxed, and we believe Instinet’s Chi-X will make a major and broaden our client base to diversify our revenue structure contribution to winning orders from clients looking for the best to boost revenue and ensure a stable earnings platform. execution. These developments are also expected to have an *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. impact on Japan, and we believe there is huge potential for Instinet’s JapanCrossing to provide liquidity. Acquisition of Instinet We acquired Instinet as part of our drive to strengthen our glob- al execution capabilities. We believe that significant synergies can be gained by working with Instinet’s clients in the United States to enhance our capabilities for responding to global orders and expand our transactions with hedge funds. In addi- tion, Instinet will work with our strong client base in Japan and the rest of Asia to access growth markets in the region. Accordingly, we believe the acquisition will result in an ideal, complementary relationship for both companies. Strengthening Asset Finance Business We plan to build our asset finance business into another major source of revenue by drawing on the sourcing capabilities of Nomura Group, our leading track record in M&A, and the risk- taking and pricing expertise we have developed in Europe and the United States. Instinet Growth Scenario SMART ROUTER Collaboration United States Europe Japan/Asia Access to best liquidity pools Shift away from exchanges Growth markets 24 Nomura Holdings, Inc. Global Markets B u s i n e s s O u t l i n e / l G o b a l M a r k e t s Enhancing the Operations of Nomura Capital Investment (NCI) Strengthening Derivatives Business Growth in leveraged finance is anticipated in Japan due to the In addition to foreign currency bonds for retail investors, we increasing scale of M&A deals targeting industrial realignment have expanded sales of interest-rate and currency-linked struc- and an increase in management buyouts (MBOs) aimed at revi- tured bonds since around 2000. In 2004, we formed an equity talizing enterprises through reorganizations and restructuring. derivatives team in Europe to collaborate with Tokyo to origi- To meet the funding needs associated with these deals as nate principal-guaranteed, privately placed investment trusts expeditiously as possible, we have bolstered the operations of and a range of other products. Going forward, we plan to NCI to enable it to offer senior and mezzanine loans. expand our marketing channels to include not only Japan and As a result, during the fiscal year under review, NCI began its Europe but also the rest of Asia and the Middle East. activities by making loan arrangements for an MBO by Yagi We also plan to make a full-scale entry into commodity-linked Corporation. This was followed by management-employee buy- structured bonds and credit-related products to offer top-quality outs (MEBOs) for Tsubaki Nakashima and Sunstar. solutions in response to the diverse needs of clients. By having a Establishment of a Private Fund for Urban Redevelopment wide range of products in our portfolio, we believe we can dis- In 2004, we established a fund with the Development Bank of perse trading risk and expand profit-making opportunities. Japan (DBJ) as a partnership to develop mezzanine financing in the real estate industry. During the fiscal year under review, we Initiatives in Asia established the Urban Redevelopment Private Fund with the In June 2007, we established Asia Asset Finance. Along with DBJ to apply the know-how accumulated thus far to real estate the trends toward the securitization of real estate to create equity. As a result, we have put in place an integrated system investment instruments and the disappearance of national for offering senior loans, mezzanine financing, and equity financ- boundaries in investing activities, domestic and international ing that can respond to the funding needs of a wide range of investments are flowing into real estate risk assets in Asia, real estate projects. including Japan. We are positioning ourselves to respond to client needs for real estate development, financing, and asset management. Nomura Investment Forum 2006 Held in Tokyo Our annual Nomura Investment Forum was held in Tokyo in December 2006 and was attended by over 6,000 people. One of the special features of this forum is that it provides an opportunity for frank dialogue between institutional investors from around the globe and the CEOs of leading corporations based in Japan and other countries in Asia. During the forum, participants engaged in active discus- sion and institutional investors enjoyed an excellent opportunity to garner new ideas for their investment strategies. Annual Report 2007 25 G l o b a l I n v e s t m e n t B a n k i n g Ranked No. 1 in the global equity and equity-related (Japan) league table* for the sixth consecutive fiscal year Ranked at the top of the league table for M&A advisory deals involving Japanese companies in terms of number of deals and third in terms of rank value* *Source: Thomson Financial. M&A deals and rank value are on an announced basis. (From April 1, 2006, to March 31, 2007.) Business Results Won Numerous Large, Symbolic Deals investments in human resources in international operations and In fiscal 2006, ended March 31, 2007, Global Investment Banking recorded net revenue of ¥99.2 billion, approximately the same as for the previous fiscal year. Income before income taxes declined 13.8%, to ¥44.4 billion. Supported by a large increase in equity underwriting, a strong performance in M&A- related business, and an expansion in business activities in Europe, which we have targeted as a strategic area for strengthening, net revenue remained at the high level of the pre- vious year. However, increases in expenses associated with other factors led to a decline in income. We acted as lead manager for major underwriting deals in Japan for Mitsubishi UFJ Financial Group, Toyota Motor, and others. In the solutions business, we undertook a major multiple private offering (MPO) for Sojitz. In M&A-related activities, we acted as financial advisor on a management-employee buyout (MEBO) for Skylark and the management integration of Daimaru and Matsuzakaya Holdings. Internationally, we successfully concluded a number of deals, including acting as joint book- runner for the IPO of Russian company Sistema Hals. Global Investment Banking Business Results Net revenue Non-interest expenses Income before income taxes 3/2003 3/2004 3/2005 3/2006 3/2007 ¥69,125 ¥70,869 ¥75,445 ¥99,666 ¥99,187 56,374 ¥12,751 53,703 ¥17,166 46,231 ¥29,214 48,127 ¥51,539 54,783 ¥44,404 Millions of yen Note: In April 2004, Fixed Income, Equity, and certain functions of Investment Banking were consolidated to create Global Markets. 26 Nomura Holdings, Inc. Takashi Yanagiya Chief Executive Officer, Global Investment Banking Business Environment Corporations Face Changing Environment domestic industries and that these trends will spur companies During the fiscal year under review, Japanese corporations to form cross-border alliances. stepped up their capital investment, and many companies In recent years, the influence of private equity funds in capital made substantial equity offerings to finance their investments. markets has increased. On a global basis, these funds are esti- Moreover, along with the growing intensity of global competi- mated to have made about US$900 billion in total investments tion, M&A activities, such as management integrations aimed at in calendar 2006. However, their investments in Japan remain industrial realignment and strategic acquisitions to complement around US$10 billion, suggesting that there is considerable and strengthen existing operations, have become increasingly room for further development of private equity funds in Japan. prominent. Corporate profits are expected to continue to expand during the current fiscal year. Corporate actions are M&A Set to Take Off in Japan also likely to remain strong as systemic reforms such as the The total value of M&A transactions throughout the world in cal- removal of the ban on triangular mergers raise awareness of the endar 2006 climbed to US$3,750 billion, of which only US$150 importance of boosting corporate value. Acceleration of Industry Realignments billion was from deals involving Japanese companies. This rep- resents a mere 4% of Japan’s nominal GDP, or about the same level as in the United States in 1993. M&A transactions in the Companies based in emerging countries such as the BRICs are United States thereafter took off at an annual rate of 14%. beginning to make their presence felt, further intensifying global Considering this growth record in the United States, expecta- competition. From a longer-term perspective, Japan’s popula- tions are for a major increase in M&A in Japan. We therefore tion has started to decline and growth in GDP is likely to slow. believe that many corporate actions will take place in the years Further shakeouts among corporations are inevitable, making ahead, including financing for restructuring of share ownership it essential for Japanese companies to expand globally. following M&A deals and arrangements for IPOs for newly Accordingly, we believe that survival will require realignments of formed companies. B u s i n e s s O u t l i n e / l G o b a l I n v e s t m e n t B a n k i n g Size of M&A Market* and Ratio to Nominal GDP (United States and Japan) M&A involving U.S. companies (lhs) M&A involving Japanese companies (lhs) Ratio to GDP (U.S.; rhs) Ratio to GDP (Japan; rhs) (Billions of U.S. dollars) 2,500 2,000 1,500 1,000 500 0 4% Annual growth of 14% （%） 25 20 15 10 5 4 0 4% CY 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 *Data on size of M&A market estimated by Thomson Financial. Annual Report 2007 27 Signing ceremony for a memorandum of understanding on collaboration with State Capital Investment Corporation of Vietnam Seeking Further Growth—Becoming Asia’s Leading Investment Bank Our medium-term objective is to establish a position as Asia’s ranked No. 1 in the global equity and equity-related (Japan) leading global investment bank. league table for fiscal 2006. For the current fiscal year, our goal is to remain in the No. 1 position. Improving Responsiveness to Customers Second, the IPO Division formed in April 2007 will take the lead To win mandates for major deals, our proposals must speak in developing our IPO business and strengthen ties with leading directly to the goals of managers who want to implement indus- medium-sized companies and high-net-worth individuals. try realignments and increase international competitiveness. Our Our third objective is to expand our debt underwriting opera- proposals must be detailed and customized for each company. tions. Working with Global Markets, we plan to expand our During the fiscal year under review, we advised Daimaru and share of underwriting for highly rated Fiscal Investment and Matsuzakaya Holdings on a management integration, a major Loan Program (FILP) agency bonds and bonds for electric deal in the reorganization of Japan’s retail sector. During the power companies. We will also work aggressively to win lead- current fiscal year, we will continue to make proposals that pin- manager positions for bond issues by companies with ratings point growth strategies for individual companies. To enhance between A and BBB. our capabilities, we will make effective use of the resources of Fourth, we aim to win mandates for major M&A deals, includ- the Investment Banking Strategic Research Department and the ing cross-border transactions, to build on our top-class ranking in Investment Banking Financial Research Department. We will the fiscal 2006 M&A advisory league table. To this end, we have also fully introduce a sector-specific organizational structure increased personnel and strengthened our structure in Europe. In covering both domestic and global operations to ensure seam- April 2007, we introduced a sector system in Asia and we plan to less internal teamwork, while gaining a comprehensive under- promote closer teamwork on a global basis. In addition, through standing of industry trends and sharing information internally our alliance with Rothschild, we successfully concluded a joint with increased effectiveness. deal for assisting a Japanese company in acquiring a German Strengthening Existing Businesses prospective clients. Moreover, in the field of acquisition finance, We have four objectives for strengthening existing businesses. which is a major factor related to winning large M&A deals, we First, during the fiscal year under review, the value of our equity are working closely with Global Markets and improving our capa- finance transactions exceeded a total of ¥2 trillion and we bilities to respond to our clients’ financing needs. company, and we will continue to present joint proposals to League Tables Global Equity and Equity-Related (Japan) Rank Bookrunner 1 2 3 4 5 Nomura Nikko Citigroup Daiwa Securities SMBC Goldman Sachs Mizuho Financial Group Source: Thomson Financial April 1, 2006, to March 31, 2007 Proceeds (US$ mn) 19,149.7 10,250.2 7,409.3 5,057.5 3,791.6 Market Number of Deals Share 33.4% 17.9% 12.9% 8.8% 6.6% 101 55 83 13 48 M&A Advisory Any Japanese Involvement Financial Advisors Announced deals, value base Rank Advisor April 1, 2006, to March 31, 2007 Rank Value (US$ mn) Market Number of Deals Share 1 2 3 4 5 Citigroup Goldman Sachs Nomura 48,161.5 47,240.2 36,975.7 Mizuho Financial Group 35,783.8 Merrill Lynch 32,071.8 27.7% 27.2% 21.3% 20.6% 18.5% 43 22 156 111 19 28 Nomura Holdings, Inc. Global Investment Banking B u s i n e s s O u t l i n e / l G o b a l I n v e s t m e n t B a n k i n g Developing New Products and Entering New Businesses position as a provider of value added to clients in Europe and Private equity funds are expected to show rapid growth in the United States as we focus on “delivering Asia” by providing Japan over the coming years and we are bolstering our services services based on our strengths in Asia, including Japan. In through our newly established Financial Sponsors Department Asia, major accomplishments included acting as lead manager and other initiatives. During the fiscal year under review, we for global offerings for Infosys Technologies of India and made steady progress in this area, acting as purchasing agent Powerchip Semiconductor of Taiwan. for a tender offer by a Japan-U.S. private equity fund for During the current fiscal year, in addition to focusing on win- Toshiba Ceramics. This fiscal year, we will further globalize our ning lead-manager mandates for global offerings and sole list- systems and work on increasing our business activities for pri- ings on the Tokyo Stock Exchange by companies based mainly vate equity funds. in China, India, Singapore, South Korea, and Taiwan, we will The key to our competitiveness is in our ability to use our also concentrate on developing M&A advisory deals. own capital for complex deals. When we assisted in the delist- In Europe, we will expand M&A deals in core sectors and ing of Tsubaki Nakashima, we offered solutions drawing on work toward winning a greater diversity of deals by collaborat- Nomura Group capabilities, with Global Merchant Banking mak- ing closer with Rothschild. We will also step up our initiatives to ing an equity investment in the company and loan financing win mandates for IPOs, drawing on the capabilities of Nomura made available via Nomura Capital Investment (NCI). During the Code Securities. During the fiscal year under review, we also current fiscal year, we aim to strengthen our responsiveness by served as joint bookrunner for the IPO of Russian real estate collaborating closely with Global Markets and Global Merchant developer Sistema Hals and opened an office in Moscow. Banking and offering a comprehensive menu of services, Going forward, our plans call for focusing on expanding busi- including M&A advisory, leveraged finance, and bridge finance. ness activities in Eastern Europe, including Russia. Growth in International Operations In the Americas, we aim to expand revenues, principally in the financial middle market. We also plan to extend the scope Our strategic focus is to expand business activities that can be of coverage and take initiatives to diversify our product lineup. fully completed within specific regions and to establish our Solutions that Draw on Group Capabilities GIB Advisory services Collaboration with Nomura Principal Finance (Global Merchant Banking) Skylark MEBO (June 2006) Tsubaki Nakashima MEBO (January 2007) Principal investment Corporate clients Acquisition finance GMB GM Combinations of services Collaboration with Nomura Capital Investment (Global Markets) Oji Paper Tender offer for Hokuetsu Paper Mills (August 2006) Tsubaki Nakashima MEBO (January 2007) Sunstar MEBO (February 2007) Note: GIB = Global Investment Banking, GMB = Global Merchant Banking, GM = Global Markets. Annual Report 2007 29 G l o b a l M e r c h a n t B a n k i n g Stable cycle of new investments and exits Steady progress toward goal of ¥230 billion in investments* *Excluding Terra Firma Business Results New Investments and Exits reported realized and unrealized gains accompanying the sale In fiscal 2006, ended March 31, 2007, Global Merchant Banking reported net revenue of ¥65.0 billion, 4.8% lower than for the previous fiscal year. Income before income taxes was ¥52.8 billion, 4.7% below the prior fiscal year. of a portion of shares held by Nomura Principal Finance (NPF) in Tungaloy. Realized and unrealized gains were also booked on the sale of a portion of a stake in an investee company of Terra Firma*. During the year, we invested in Skylark and Tsubaki *Terra Firma is an independent private equity firm based in Europe. Nakashima while also actively exiting from other investments. As a result, income before income taxes remained at a high level, in line with the prior year. Global Merchant Banking Global Merchant Banking Business Results Net revenue ¥0(6,647) ¥10,720 ¥(7,338) ¥68,244 ¥64,969 Non-interest expenses Income (loss) before income taxes 8,628 ¥(15,275) 10,220 ¥00,500 10,370 ¥(3,032) 12,809 ¥55,435 12,153 ¥52,816 3/2003 3/2004 3/2005 3/2006 3/2007 Millions of yen 30 Nomura Holdings, Inc. Akira Maruyama Chief Executive Officer, Global Merchant Banking Business Environment Rising Level of Corporate Actions through the fiscal year under review amounted to about ¥2 tril- Japan is currently seeing a steady rise in corporate actions. lion. This has paved the way for an environment in which unlist- Corporations are reorganizing their group operations and focus- ed companies will be able to raise substantial equity from ing on their core competencies. Business expansion is increas- external sources. With these developments, more companies ing, spurred on by the recent recovery in the domestic economy. are opting to delist their shares as one solution for reorganizing Moreover, there has been an uptick in M&A aimed at industrial and restructuring to revitalize their operations as well as dealing reorganization. These trends are now prompting firms to seek with other management issues they face. out innovative financial solutions. In addition, corporate man- agers are increasingly aware of the need to use capital more effi- Increasing Need to Add Value ciently and are paying closer attention to performance indicators As the recovery in the Japanese economy has led to improved such as return on assets (ROA) and return on equity (ROE). corporate performance and the financial system has returned to Strategic Delisting Now an Option a sound footing, the corporate revitalization business has largely fulfilled its mission for the time being. As a result, the merchant Japan’s private equity market is expanding as a growing num- banking business in Japan is now changing, and it is becoming ber of European and North American private equity funds enter increasingly important to offer a comprehensive set of capabili- the market. The United States leads the expansion in the private ties that can add value to investee companies. B u s i n e s s O u t l i n e / l G o b a l M e r c h a n t B a n k i n g equity market and total funds under management are estimated to be US$94.2 billion. In Japan, the total value of commitments since the first domestic buyout fund was formed in 1997 Commitments to Buyout Funds Raised in the U.S. (Billions of U.S. dollars) 100 80 60 40 20 0 CY 2002 2003 2004 2005 2006 Source: Nomura Institute of Capital Markets Research from Private Equity Analyst magazine Annual Report 2007 31 Seeking Further Growth—Driver of Sustainable Growth Our Global Merchant Banking operations center on NPF and As the Japanese economy has now entered a recovery use our own capital to deliver optimal solutions that meet our phase, the corporate revitalization business has subsided from clients’ needs and help boost their corporate value. One of the its peak. We believe it is vital to offer superior proposals that main objectives of Global Merchant Banking is to help diversify take full advantage of our advanced expertise and Nomura Nomura Group’s revenue sources and ensure sustainable Group’s comprehensive capabilities at each stage of the invest- growth by leveraging its merchant banking expertise, the strong ment process, from identifying companies for investment to client base of Nomura Group, our global research capabilities, increasing the corporate value of investee companies and exit- and financial strength. ing from investments. To structure the optimal investment portfolio, we make use of Structuring the Optimal Investment Portfolio Nomura Group’s extensive internal and external networks, Global Merchant Banking set a goal two years ago of expanding working closely with other divisions such as Domestic Retail its investments, principally through NPF, to between ¥250 billion and Global Investment Banking. We take a flexible approach to and ¥300 billion (excluding Terra Firma in Europe) over a period diversify our portfolio into a wide range of industries, investment of three to four years. As a result of Nomura’s hands-on man- vehicles, and geographical areas. agement of this investment portfolio, business exposure as of March 31, 2007, had risen steadily to approximately ¥230 billion. Raising the Corporate Value of Investee Companies Business Exposure (Excluding Terra Firma) Skylark In June 2006, the shares of Skylark, a major restaurant chain in Japan, were acquired through a tender offer that was one of Japan’s largest management-employee buyouts (MEBOs) to Japan Europe (Excluding Terra Firma) date. The deal, conducted amid the increasingly competitive (Billions of yen) 250 200 150 100 50 0 3/2003 3/2004 3/2005 3/2006 3/2007 Notes: 1. Amount of exposure in Japan is total of Nomura Principal Finance (NPF), Nomura Financial Partners (NFP), Nomura Research & Advisory (NR&A), and others. 2. Amount of exposure in Europe (excluding Terra Firma) is total of Private Equity Group (PEG) and Nomura Phase4 Ventures (NPV). 32 Nomura Holdings, Inc. environment of Japan’s food services industry, was aimed at allowing Skylark to change its business model by shifting to a management strategy that is more focused on the medium to long term and not influenced by short-term fluctuations in performance. Tsubaki Nakashima In January 2007, we worked on an MEBO for Tsubaki Nakashima, a company with sophisticated technology for manu- facturing steel balls and the leading share worldwide in this prod- uct area. We took the company private with the aim of implementing substantial management reforms. Due to the ongoing globalization of the economy, automakers—the end users of the company’s products—have been promoting strate- gies to integrate the production of automobile parts in emerging Asian countries for products to be sold in the United States and Global Merchant Banking Europe. As such, Tsubaki Nakashima management and employ- through its London office. During the fiscal year ended March 31, ees came together to conduct the MEBO so as to ensure a sta- 2007, we broadened our focus to include venture businesses in ble base of shareholders to support the company over the the clean technology (“cleantech”) field. Cleantech includes a medium to long term as it aggressively seeks growth by building broad spectrum of technologies and related products, services, up its production and sales operations in overseas markets. and processes for reducing the consumption of natural resources, the release of greenhouse gases, and waste disposal as well as Venture Capital Investments in Japan and Europe promoting the use of recyclable and renewable resources. We In addition to venture capital investments in Japan, Global believe that we can substantially raise the presence of Nomura Merchant Banking has made investments in European and U.S. Group by drawing on the expertise we have accumulated in mer- ventures, mainly in the areas of bio-pharma and healthcare chant banking as well as the Group’s extensive global research. B u s i n e s s O u t l i n e / l G o b a l M e r c h a n t B a n k i n g Asia Merchant Banking Established Asia Merchant Banking was established in May 2007 to develop Nomura Group’s merchant banking business across Asia. Along with economic expansion in Asia, we expect to see strong demand from Asian companies in a wide range of industries to raise funds for business expansion. The companies we invest in and the type of investment we opt for will vary depending on the level of development of the countries where the companies are based and the characteristics of each individual enterprise. However, we will be well positioned to draw on the extensive experience we have gained from investing in Japan and Europe as well as the strength of the Nomura brand in Asia to identify promising growth companies and proactively offer them risk capital to develop their businesses. Strengths and Results ▼ Global Merchant Banking’s main strength lies in our ability to source deals through Nomura Group’s nationwide network. Eastern Capital increase UHT MBO YMC Review of shareholder profile Tsubaki Nakashima MEBO Huis Ten Bosch Business revitalization Skylark MEBO Millennium Retailing Capital increase Tungaloy MBO Sliontec MBO Kawamura Electric Review of shareholder profile Annual Report 2007 33 A s s e t M a n a g e m e n t Total assets under management rose to a record ¥27 trillion Awarded “Fund of the Year 2006”* *Morningstar Awards, Global Equity Fund category Business Results Third Consecutive Year of Increased Revenue and Income offering frequent distributions remained robust, and sales of In fiscal 2006, ended March 31, 2007, Asset Management posted net revenue of ¥90.1 billion, 36.8% higher than the pre- vious fiscal year. Income before income taxes expanded a sharp 76.8%, to ¥36.5 billion. This was the third consecutive year for Asset Management to report gains in both net revenue and income before income taxes. Japan’s investment trust market continues to expand along with growing asset management needs, and assets under man- agement in publicly offered investment trusts have reached a record level. Spurred on by this favorable environment, sales of our My Story Profit Distribution-Type Fund and other funds newly launched funds were also strong. The growth in the investment trust business was due in part to extending our line- up of investment products that meet the varied asset manage- ment needs of our customers and diversifying our sales channels as we step up efforts aimed at the Nomura Securities, Japan Post, bank, and trust bank channels. Moreover, Asset Management’s investment advisory business remained strong, driven by demand from international investors. As a result of these developments, assets under management reached ¥27.0 trillion as of March 31, 2007, an increase of ¥3.9 trillion com- pared with the prior year. Asset Management Business Results Net revenue Non-interest expenses Income before income taxes 3/2003 3/2004 3/2005 3/2006 3/2007 ¥40,363 ¥40,276 ¥48,993 ¥65,843 ¥90,106 36,322 ¥04,041 39,783 ¥00,493 39,005 ¥09,988 45,220 ¥20,623 53,649 ¥36,457 Millions of yen 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. 34 Nomura Holdings, Inc. Takumi Shibata Chief Executive Officer, Asset Management Business Environment Investment Trust Market Growth largest network in the country. Even though Japan Post only As Japanese individual investors continue to shift away from started selling investment trusts in 2005, it accounted for over savings and into investment products, the domestic investment ¥700 billion in sales of investment trusts as of March 31, 2007. trust market is expanding rapidly due to increased demand and At present, Japan Post sells investment trusts through about the ongoing diversification of sales channels. As of March 31, 1,150 of its branches, but with its privatization in October 2007, 2007, total net assets in publicly offered investment trusts in this number is scheduled to rise to approximately 1,550 Japan had climbed to a record ¥72.6 trillion. branches. This growth in the investment trust market is expected to Sales of publicly offered stock investment trusts by securities continue as the asset management needs of retiring baby firms also continue to rise. Sales of these investment trusts boomers increase and young and middle-aged people focus amounted to ¥28.5 trillion as of March 31, 2007, representing more on building their wealth. Diversification of Sales Channels an increase of ¥5.9 trillion in one year. In addition, sales of investment trusts via banks, etc., amounted to ¥29.8 trillion as of March 31, 2007. This represented an ¥8.0-trillion increase in Since the market for the sale of investment trusts was opened one year. This growth suggests that the investor bases for all to financial institutions other than securities firms in 1998, the types of sales channels are expanding. range of investment trust sales channels has continued to expand. One newcomer is Japan Post, which boasts the Diversification of Product Offerings B u s i n e s s O u t l i n e / A s s e t M a n a g e m e n t Total Net Assets in Publicly Offered Investment Trusts by Sales Channel Securities firms Direct sales Japan Post Banks, etc. (Trillions of yen) 80 60 40 20 0 3/2003 3/2004 3/2005 3/2006 3/2007 Source: The Investment Trusts Association, Japan While individual investors continue to focus on funds offering frequent distributions, the underlying assets that generate these distributions are becoming more diverse. There is a trend away from funds investing in foreign currency bonds to investments in real estate and high-dividend stocks as well as to new types of investment opportunities, such as fund of funds that include alternative assets and strategies. Recently, fund products that invest in equities in emerging markets, particularly in Asia, are becoming more popular among investors. Pension Business Growth The number of companies introducing defined contribution pen- sion plans is increasing every year. This market is expected to experience growth as a result of reforms in the pension system and the effect of the elimination of the tax qualified pension plan system in 2012. Annual Report 2007 35 Seeking Further Growth—Becoming a Japan-Based Global Asset Manager In addition to Nomura Asset Management, Japan’s largest firm Strengthening Alliance with Research Affiliates in terms of assets under management, Nomura Group includes Nomura Asset Management has secured exclusive rights to the a number of other investment management businesses, such marketing of products based on the Fundamental Index™ devel- as Nomura Corporate Research and Asset Management, which oped by U.S. firm Research Affiliates. In December 2006, Nomura invests primarily in U.S. high-yield bonds, and Nomura Funds became a minor shareholder of Research Affiliates in order to Research and Technologies, which evaluates investment prod- develop a deeper strategic alliance. Based on the Fundamental ucts and manages fund-of-funds products. Index™ concept, we plan to develop investment products that We are currently consolidating our position as the leading player can contribute to stable performance in the medium to long term in Japan by further enhancing our asset management capabilities, and offer a wide range of these products to investors. increasing our product development expertise, and improving our Tie-up with Hedge Fund Research Group client services. We are also stepping up investment in our growing In May 2007, we entered into an agreement with Hedge Fund international operations as part of our drive to become a Japan- Research Group, a manager of fund of hedge funds and suppli- based global player in the asset management business. Strengthening Asset Management Capabilities, Diversifying Product Offerings er of a database on hedge funds, under which we have exclu- sive rights to distribute certain fund of hedge funds managed by Hedge Fund Research Group in Japan. We are also considering the establishment of a joint venture in Japan with Hedge Fund We continually work to deliver innovative investment products Research Group. By making use of Hedge Fund Research and techniques that respond to client needs by strengthening Group’s platform, Nomura Group will offer transparent and our asset management capabilities through building on our highly liquid hedge-fund-related investment products. research structure and investing in IT and other infrastructure while collaborating closely with other companies that offer Expansion of Sales Channels strengths that complement our own. Strategic Investment in Fortress Expanding the breadth of our sales channels is important to ensure we are able to tap into the growing investor base in During the fiscal year under review, we began initiatives to expand Japan and further increase assets under management. In addi- our operations with Fortress Investment Group, an alternative tion to sales through securities firms, including Nomura investment firm based in the United States. By working together Securities, we remain focused on expanding sales through with Fortress, which has a solid track record in alternative invest- channels such as Japan Post and banks. ments in Europe and the United States, we are aiming to raise the Japan Post presence of Nomura Group in the alternative investment markets The Nomura Global Six Assets Diversified Fund has become a in Japan and the rest of Asia. Great Potential in Asia core product of the Japan Post sales channel. As of March 31, We believe the potential for the investment trust and investment advisory businesses in Asia is substantial. In 2006, Nomura Asset Management established a subsidiary in Malaysia. In South Korea, we set up an investment trust for individual investors in partner- ship with Samsung Investment Trust Management, and the volume of advisory assets has exceeded ¥100 billion. In Japan, we established the Nomura China A Share Investment Trust in January 2007, making use of our Qualified Foreign Institutional Investors (QFII) quota, and were successful in raising funds up to the ¥29-billion limit. 36 Nomura Holdings, Inc. Asset Management 2007, this fund accounted for about 60% of investment trusts Moreover, in September 2006, we began selling our My Story sold through Japan Post. In addition, the Nomura Asset Design Profit Distribution-Type Fund through regional financial institu- Fund was newly selected for sale by Japan Post from June tions, and assets under management in our Global High Income 2007. This innovative product responds to the changing needs Stock Fund and Global Three Assets Balance Fund, which are of customers throughout their lives by transitioning over time sold through banks, are showing steady expansion. from active to stable asset allocation. We aim to strengthen our Pension Business product offerings and services for the nationwide network of As of May 2007, we had won contracts for managing and Japan Post to contribute to further expansion in the investor administering the defined contribution pension plans of about base for the investment trust market. Banks 190 companies with approximately 270,000 employees. Looking ahead, to increase the number of pension plans under We are stepping up our marketing capabilities to bolster sales our administration and pension assets under management, we through Japan’s megabanks and regional financial institutions. are emphasizing the development of new products and increas- Sales of our Global REIT Open Fund through Sumitomo Mitsui ing customer contact. Banking Corporation and sales of the Nomura Japan-US REIT We intend to increase our presence in the pension fund man- Fund through Mitsubishi UFJ Trust and Banking continue to be agement business, looking to the deregulation of the manage- robust. In addition, Bank of Tokyo-Mitsubishi UFJ has selected ment of public pensions by taking initiatives to offer a diverse the Nomura Global All Stars Fund for sale through its branches. range of asset management products. B u s i n e s s O u t l i n e / A s s e t M a n a g e m e n t Sales of Investment Products through Banks, Etc., and Japan Post Banks, etc. (Excluding Nomura Trust & Banking) Japan Post (Billions of yen) 2,000 1,500 1,000 500 0 Total Assets under Management (Trillions of yen) 30 25 20 15 10 5 0 3/2005 3/2006 3/2007 3/2003 3/2004 3/2005 3/2006 3/2007 Notes: 1. Total assets under management of Nomura Asset Management, Nomura Corporate Research and Asset Management, Nomura Funds Research and Technologies, MAINTRUST KAG, and Nomura Funds Research and Technologies America. Adjusted for asset overlap among group companies. Data until March 31, 2006, includes Nomura BlackRock Asset Management. Notes: 2. Nomura Funds Research and Technologies America data as of the end of February 2007. Annual Report 2007 37 G l o b a l R e s e a r c h Publishes about 12,000 reports annually Holds top spot in Japanese research ranking Global Research publishes about 12,000 reports a year and holds seminars as well as forums in many locations in Japan and overseas. These events provide an opportunity for the top managements of leading companies to meet and hold discussions with institutional investors. Through its various activities, Global Research acts as an information intermediary, providing a bridge between securities mar- kets and investors. 38 Nomura Holdings, Inc. Analyst Ranking (2006) by the Nikkei Financial Daily All-Japan Research Team (2006) by Institutional Investor Analyst/Economist Ranking (2006) by the Weekly Economist Rank Securities firm Points Rank Securities firm Position (Total points) Rank Securities firm Points 1 2 3 4 5 6 7 8 9 Nomura Securities Daiwa Institute of Research Mitsubishi UFJ Securities UBS Nikko Citigroup Credit Suisse Mizuho Securities Deutsche Securities Goldman Sachs 10 Merrill Lynch Japan Securities 17,537 16,163 13,501 13,093 10,844 9,133 7,637 7,273 6,826 6,184 1 2 3 4 5 6 7 8 9 9 Nomura Securities Daiwa Institute of Research UBS Goldman Sachs Nikko Citigroup Merrill Lynch Japan Securities Credit Suisse Deutsche Securities Mitsubishi UFJ Securities Morgan Stanley 20 17 16 15 13 12 11 10 9 9 1 2 3 4 5 6 7 8 9 Nomura Securities Daiwa Institute of Research Mitsubishi UFJ Securities UBS Nikko Citigroup Goldman Sachs Deutsche Securities Credit Suisse Mizuho Securities 10 JPMorgan Securities Japan 15,529 14,778 11,294 8,948 8,910 6,486 6,059 5,733 5,125 4,187 History of Nomura Research Global Research Structure Emphasis on research is part of Nomura’s DNA. Our founder, Global Research consists of approximately 550 people, 350 in Tokushichi Nomura II, realized the importance of scientific Japan and 200 in international offices. Domestic employees research early on. He formed a research department in Nomura belong to the three organizational units just outlined and Shoten, the predecessor company to Nomura Securities, in Nomura Research & Advisory (NR&A), which conducts research 1906 and started publishing the Osaka Nomura Business on unlisted companies. International employees work in Asia, News, which became the Weekend Report and the Nomura Europe, and the United States. Weekly Report distributed today. In the area of fundamental research, the Financial & When Nomura Securities was founded in 1925, it had a Economic Research Center collaborates with our offices in Asia, research department from the outset. In 1926, the research Europe, and the United States to implement a broad-ranging department began the publication of Capital Market Research, program of research activities in Japan and overseas on eco- which later became Capital Market Visions, to communicate the nomic conditions, stock markets, Japanese equities, foreign results of its research in Japan and overseas. currency market conditions, and other related topics. In addi- One of the milestones in research during the postwar period tion, in line with Nomura Group’s strategic emphasis on Asia, was the split-off of Nomura’s research department in 1965 into we are expanding our Asian equity research team. Moreover, a separate entity, Nomura Research Institute (NRI), thus follow- Global Research is implementing measures to strengthen its ing the example of U.S. companies in setting up think tanks. London research team responsible for emerging markets. Subsequently, Nomura Securities and NRI underwent a review In quantitative research, Global Research conducts the in line with global standards and the Financial Research Center research and development activities needed to support Nomura was established at Nomura Securities in 1997. Group’s cutting-edge financial businesses, drawing on the core The center marked its 10th anniversary this year. Following a skills of financial engineering and IT. These R&D activities cover reorganization, the current structure comprises three research a wide range of applications, including asset management, divisions: the Financial & Economic Research Center, which trading, product development, risk management, and financial conducts fundamental research; the Quantitative Research management, and are conducted in Tokyo, New York, London, Department; and the Global Research Planning & Support and Hong Kong. Department, which provides overall management and support. In addition, Nomura Group formed the Nomura Institute of l G o b a l R e s e a r c h Number of Reports European Research: 604 Asia Research: 3,258 27% Economic Research Strategy Sector/company Quantitative 4% 5% U.S. Research: 460 Capital Markets Research (NICMR) in 2004. The institute is a think tank in charge of researching capital markets and financial and other capital market systems as well as preparing policy proposals. 64% Financial & Economic Research Center*: 7,671 Total for fiscal year ended March 31, 2007: 11,993 *Includes Quantitative Research Department Annual Report 2007 39 Corporate Governance and Internal Control System B a s i c S t a n c e Nomura Holdings aims for transparency in all its operations and expanded its information disclosure to increase the transparency strives to ensure the quick, responsive management of Nomura of its management systems and activities. In June 2003, Group as a whole. While working to enhance the corporate Nomura Holdings adopted the Committee System corporate value of the Group in the medium to long term, Nomura governance model and separated the management oversight Holdings is fully aware that strengthening corporate governance functions from the day-to-day execution of business activities. is of the highest priority and accordingly implements initiatives It also focused governance on the Nomination, Audit, and to strengthen and improve its governance systems. Compensation committees, thereby substantially strengthening Among these initiatives, Nomura Holdings is actively imple- management oversight functions and increasing transparency. menting reforms to ensure management transparency. When Along with this, the Group’s executive officers were delegated the Group made the transition to a holding company structure in substantially greater authority for conducting operations and October 2001, Nomura Holdings appointed outside members to they subsequently have executed business activities quickly and its Board of Directors with the objective of strengthening man- responsively from a consolidated perspective. agement oversight functions. Nomura Holdings also formed an Moreover, in 2004, we drew up the Code of Ethics of Internal Controls Committee in which an outside director also Nomura Group, which specifies items related to corporate gov- participates, created a Compensation Committee with a majority ernance and corporate social responsibility that all Nomura of outside directors, and formed an Advisory Board composed Group executives and employees should be in compliance with of prominent persons. When Nomura Holdings listed its shares in order to fulfill their responsibilities to Nomura Holdings share- on the New York Stock Exchange in December 2001, it further holders and all other stakeholders. (cid:3) B o a r d o f D i r e c t o r s From left: Koji Tajika, Fumihide Nomura, Haruo Tsuji, Masaharu Shibata, Hideaki Kubori, Yukio Suzuki, Kazutoshi Inano, Junichi Ujiie, Nobuyuki Koga, Hiroshi Toda, and Masanori Itatani 40 Nomura Holdings, Inc. (cid:3) B o a r d o f D i r e c t o r s ( A s o f J u l y 1 , 2 0 0 7 ) Title Name Chairman of Junichi Ujiie the Board Director Nobuyuki Koga Director Hiroshi Toda Director Kazutoshi Inano Director Director Director Director Director Director Director Masanori Itatani Yukio Suzuki Masaharu Shibata Hideaki Kubori Haruo Tsuji Fumihide Nomura Koji Tajika Concurrent Position Audit Mission Director Nomination Committee Audit Committee Compensation Committee President & Chief Executive Officer (Representative Executive Officer) Deputy President & Chief Operating Officer (Representative Executive Officer) Deputy President & Co-Chief Operating Officer (Representative Executive Officer) 〇 〇 ◎ 〇 〇 ◎ 〇 〇 ◎ 〇 〇 Note: A double circle indicates the committee chair. (cid:3) B u s i n e s s E x p e r i e n c e ( A s o f J u l y 1 , 2 0 0 7 ) Name Year Assumed Business Experience Significant Concurrent Positions Junichi Ujiie Nobuyuki Koga Hiroshi Toda Kazutoshi Inano Masanori Itatani Yukio Suzuki Masaharu Shibata Hideaki Kubori Haruo Tsuji Fumihide Nomura Koji Tajika 2003 2006 2003 2003 2003 2003 2004 2006 2007 2003 2005 2005 1994 2001 2002 1971 1998 2001 2001 1986 1998 2001 2003 2003 1965 1993 1997 1999 2001 2003 Chairman of the Board of Directors and Senior Managing Director Chairman of the Board of Directors (Current) Director and President & Chief Executive Officer (Current) Director and Deputy President & Chief Operating Officer (Current) Director and Deputy President & Co-Chief Operating Officer (Current) Senior Managing Director in Charge of Global Corporate Communications, General Affairs Department and Secretariat Senior Managing Director in Charge of Internal Audit Executive Managing Director in Charge of Internal Audit Director (Current) Executive Managing Director of Nomura Asset Management Advisor Director (Current) President & CEO of NGK Insulators, Ltd. Director (Current) Chairman & CEO of NGK Insulators, Ltd. (Current) Registered as Attorney at Law Chairman of Hibiya Park Law Offices President of Daini Tokyo Bar Associations, Vice President of Japan Federation of Bar Associations Director (Current) President of Sharp Corporation Corporate Advisor of Sharp Corporation (Current) Statutory Auditor Director (Current) Director (Current) Registered as Certified Public Accountant CEO of Tohmatsu & Co. Chairman & CEO of Tohmatsu & Co. Chairman of Deloitte Touche Tohmatsu Advisor of Tohmatsu & Co. Director (Current) C o r p o r a t e G o v e r n a n c e a n d I n t e r n a l C o n t r o l S y s t e m • Chairman & CEO of NGK Insulators, Ltd. • Chairman & CEO of NGK Technica, Ltd. • Statutory Auditor of Chubu-Nippon Broadcasting Co., Ltd. • Chairman of Hibiya Park Law Offices • Statutory Auditor of SOURCENEXT CORPORATION • Corporate Advisor of Sharp Corporation • President of Nomura Shokusan Co., Ltd. • Director of Murata Manufacturing Co., Ltd. • Statutory Auditor of Sumitomo Corporation • Director of The Tokyo Star Bank Limited Annual Report 2007 41 C o r p o r a t e G o v e r n a n c e Management Structure oversight functions and increased management transparency. In June 2003, Nomura Holdings adopted the Committee In addition, by delegating substantially greater authority for con- System, and by forming the Nomination, Audit, and ducting business operations to the executive officers, the Compensation committees, with a majority of outside directors, Company is positioned to manage its activities quickly and the Company has significantly strengthened its management responsively from a consolidated perspective. Management Structure Shareholders’ Meeting Board of Directors (9 meetings held) Nomination Committee (3 meetings held) Audit Committee (26 meetings held) Compensation Committee (3 meetings held) Note: Number of meetings held in fiscal 2006 President & CEO Board of Executive Officers Group Executive Management Committee Advisory Board Group Management Council Commitment Committee Internal Controls Committee (cid:1)Consultative body for the Group (cid:1)Executive Management Committee (cid:1)Top managers of representative (cid:1)global Japanese companies offer (cid:1)management advice Management Systems • Operations of the Board of Directors • Three Committees The Board of Directors makes decisions on items specified by The Nomination Committee, Audit Committee, and the Corporation Law of Japan. The members of the Board of Compensation Committee have been given the authority to Directors receive operating reports from the executive officers make decisions on issues including candidates for the Board and, at least once every three months, receive reports on of Directors, audits concerning the business execution of items discussed in the Group Executive Management directors and executive officers, and compensation for direc- Committee and other management meetings. Moreover, the tors and executive officers, respectively. As such, manage- directors receive financial reports on a monthly basis. During ment oversight is conducted by the Board of Directors. the fiscal year ended March 31, 2007, the Board of Directors met nine times. 42 Nomura Holdings, Inc. (cid:4) Nomination Committee (1) Base Salary The Nomination Committee is composed of a majority of out- The base salary of each director and executive officer is the side directors and is responsible for decisions regarding pro- sum of amounts based on each individual’s career, post, and posals made to the Ordinary General Meeting of Shareholders responsibilities and the degree of attainment of the target ROE concerning the appointment and dismissal of directors. No on a consolidated basis. The ROE-linked portion is determined directors who are representative executive officers, including as shown in the accompanying table. the CEO, or executive officers are members of the Nomination Committee. During the fiscal year ended March 31, 2007, the Nomination Committee met three times. (cid:4) Audit Committee The Audit Committee is composed of a majority of outside directors and is responsible for auditing the business execution of the directors and executive officers and preparing audit reports. It also makes decisions regarding proposals to be sub- mitted to the Ordinary General Meeting of Shareholders con- cerning the appointment and dismissal of independent auditors. No directors who are representative executive officers, including the CEO, or executive officers are members of the Audit Committee. During the fiscal year ended March 31, 2007, the Audit Committee met 26 times. (cid:4) Compensation Committee ROE-Linked Portion of Base Salary f o n o i t c a r F i d e v e c e r d r a d n a t s 4/3 3/3 2/3 1/3 0 Standard 1/3 2/3 3/3 4/3 χ<0% χ<5% 0%< = 5%< = χ< =10% 10%<χ< =15% 15%<χ Consolidated ROE The Compensation Committee is composed of a majority of outside directors and makes decisions regarding compensation (2) Cash Bonus for directors and executive officers, both in terms of broad poli- The cash bonus is based on quantitative factors such as con- cy and compensation for specific individuals. No directors who solidated net income, ROE, and the earnings of business divi- are representative executive officers, including the CEO, or sions. This bonus is also based on qualitative items, such as the executive officers are members of the Compensation degree of attainment of management targets and personal tar- Committee. During the fiscal year ended March 31, 2007, the gets, assessments of individual contributions, and other factors. Compensation Committee met three times. The aggregate cash bonuses of directors and executive officers may not exceed 1% of consolidated net income. Compensation for Directors and Executive Officers Nomura Holdings has two basic compensation policies for (3) Stock Bonus directors and executive officers: (1) to set compensation levels The stock bonus is determined separately for each individual by flexibly in line with the attainment of management objectives to taking into consideration all applicable factors. These include raise management motivation and empower individuals to real- parameters such as consolidated net income and ROE as well ize their full potential and (2) to introduce equity-based compen- as the level of this compensation relative to the base salary, sation to enhance long-term incentives. The compensation of cash bonus, and other stock bonuses and the benefits relative directors and executive officers is composed of a base salary, to the cost of providing such compensation. cash bonus, and stock bonus. C o r p o r a t e G o v e r n a n c e a n d I n t e r n a l C o n t r o l S y s t e m Annual Report 2007 43 E x e c u t i v e O f f i c e r s W o r k t o S t r e n g t h e n a n d E x p a n d I n t e r n a l C o n t r o l S y s t e m Since Nomura Holdings adopted the Committee System, the Nomura Group is working to ensure proper corporate behav- Board of Directors has delegated substantial authority for the ior throughout the Group by strengthening and expanding the conduct of business operations to the executive officers, and internal control system with the objectives of securing trans- under this system the executive officers are able to conduct parency and efficiency in management, maintaining compliance business activities flexibly. with laws and regulations, conducting proper risk management, ensuring reliability of business and financial reporting, and pro- moting timely and appropriate information disclosure. (cid:3) E x e c u t i v e O f f i c e r s ( A s o f J u l y 1 , 2 0 0 7 ) Title President Name Main Responsibilities Nobuyuki Koga Chief Executive Officer (Serving concurrently as Director, Representative Executive Officer) Deputy President Hiroshi Toda Chief Operating Officer, International Operations Officer (Serving concurrently as Director, Representative Executive Officer) Deputy President Kazutoshi Inano Co-Chief Operating Officer, Group Compliance Officer (Serving concurrently as Director, Representative Executive Officer) Executive Managing Akihiko Nakamura Chief Information Officer Director Executive Managing Toshio Hirota Head of Communications Director Executive Managing Hideyuki Takahashi Head of Internal Audit Director Senior Managing Akihito Watanabe Head of Group Human Resources Development Director Senior Managing Tetsu Ozaki Head of Group Corporate Strategy Director Senior Managing Masafumi Nakada Chief Financial Officer Director Senior Managing Noriaki Nagai Head of Corporate Office Director Senior Managing Shigesuke Head of Regional Management, Americas Director Kashiwagi Senior Managing Yugo Ishida Head of Regional Management, Europe Director Senior Managing Yoshinori Go Head of Asia Region Marketing Director 44 Nomura Holdings, Inc. Our Founder’s Principles Throughout our more than 80-year history, Our Founder’s Principles have been handed down and still live on today. From the principle of putting the customer first came our unwavering commitment to prospering together with our clients, something that we continue to build on today. 1. Nomura’s raison d’être 6. Entrepreneurial spirit 2. Principle of putting the customer first 7. Human resources 3. Global ambition 8. Emphasis on teamwork 4. Emphasis on rigorous research 9. Business development frame of mind and analysis 5. Staying one step ahead 10. Customer service mind-set Code of Ethics Based on Our Founder’s Principles, the Code of Ethics of Nomura Group, which is applicable to all management and employees, was issued in March 2004. This code specifies the points relating to corporate governance and corporate social responsibility that all management and employees of Nomura Group are expected to follow. Training and other activities are conducted to make all per- sonnel of Nomura Group fully aware of these points. 1. Social responsibilities 8. Protection and proper use 14. Media policy 2. Advancement of customers’ of corporate assets interests 9. Retention of documents 3. Compliance with laws 10. Environmental issues 15. Personal investments 16. Reporting of illegal or unethical conduct 4. Corporate opportunity 11. Corporate citizenship 17. Protection against retaliation activities 18. Code of ethics for financial 12. Respect for human rights professionals 13. International harmonization 19. Amendments and waivers 5. Conflicts of interest 6. Confidentiality 7. Fair dealing Mission Statement With Our Founder’s Principles and the Code of Ethics of Nomura Group as the foundation for man- agement, Nomura Group issued its Mission Statement in March 2007 to clarify the specific points it is focusing on in the current operating environment. This statement is not just a slogan; it expresses the goals, vision, strategy, and other aspects of Nomura Group that are shared by all management and employees. 1. We are committed to enriching society by delivering superior investment services. 2. We are not afraid to continually challenge conventional wisdom and actively encourage change in order to pursue growth. 3. We are committed to putting our clients at the heart of our business, developing and maintaining long-standing relationships based on trust. 4. We are one firm, committed to delivering the full range of our capabilities, knowledge, and resources to meet the needs of our clients. 5. We respect diversity and value differences of opinion. C o r p o r a t e G o v e r n a n c e a n d I n t e r n a l C o n t r o l S y s t e m Annual Report 2007 45 B u s i n e s s E x e c u t i o n S y s t e m To ensure that executive officers make business decisions (cid:1) Internal Controls Committee smoothly and appropriately, Nomura Holdings has formed a The Internal Controls Committee is responsible for establishing Group Executive Management Committee, a Commitment internal controls for Nomura Group operations as well as for Committee, an Internal Controls Committee, a Board of deliberating and making decisions regarding matters to ensure Executive Officers, and a Group Management Council. proper corporate behavior. At present, the committee is made (cid:1) Group Executive Management Committee officer from a Nomura Group subsidiary. President Nobuyuki up of three executive officers, two directors, and one executive The Group Executive Management Committee is responsible Koga chairs the committee. for deliberating and making decisions on key issues related to management, including the business plans of Nomura Group, (cid:1) Board of Executive Officers budgets, and allocation of management resources. This com- The Board of Executive Officers is responsible for sharing infor- mittee is made up of the three representative executive officers mation related to the business of Nomura Holdings, the Group’s and is chaired by President Nobuyuki Koga. holding company, and for conducting discussions on related (cid:1) Commitment Committee The Commitment Committee is responsible for deliberating and matters. The Board of Executive Officers is made up of all 13 executive officers and is chaired by President Nobuyuki Koga. making decisions regarding important items involving Nomura (cid:1) Group Management Council Group positions having low liquidity and positions that are The Group Management Council is composed of 19 members material with regard to risk management. At present, the drawn from the management of Nomura Holdings and companies Commitment Committee is made up of five executive officers under the holding company. Although not a venue for decision plus three business division CEOs and is chaired by making, the council’s responsibilities include sharing information Representative Executive Officer Hiroshi Toda. and promoting the conduct of business through the exchange of opinions and free discussion regarding business strategy. Council meetings are chaired by President Nobuyuki Koga. I n t e r n a l C o n t r o l s WEB Nomura Holdings adopts a range of measures to ensure that Crisis Management decision making related to the conduct of operations by the Nomura Group has drawn up a set of crisis management rules executive officers proceeds smoothly and appropriately. and regulations that covers contingencies where natural disas- Fair Disclosure ters, fires, and other detrimental events may result in loss of human resources or assets, hindering the Group’s operations. To ensure investors have fair access to information regarding These rules and regulations provide guidelines for minimizing Nomura Group, we have established Nomura Group’s damage from such contingencies and returning to normal oper- Statement of Global Corporate Policy Regarding Public ation at an early date. For Nomura Group as a whole, the Disclosure of Information. Based on this policy statement, the Nomura Group Crisis Management Committee is responsible Disclosure Committee deliberates and makes decisions regard- for crisis management initiatives and responses. ing appropriate ways of disclosing material information related to Nomura Group, preparation of legally mandated disclosure documents, and important items related to disclosure of corpo- rate information. 46 Nomura Holdings, Inc. Information Security (cid:1) Compliance Hotline Information related to customers and other matters is critical to For cases when it appears that members of Nomura Group Nomura Group’s business activities and a rigorous system of management or staff may have engaged in behavior that is in controls has been put into place to protect this information. The violation of legal regulations, the Group provides a Compliance basic policies of Nomura Group regarding information security Hotline, which allows persons with information to go around the have been set forth in the Nomura Group Information Security regular communication channels of individual Group companies Policy. Each company in Nomura Group has developed infor- and directly inform the director in charge of Nomura Holdings or mation security rules and regulations based on the Group’s an outside director. basic policies, and the companies conduct training to raise awareness of the necessity for information security among (cid:1) Global Response to Legal Risk employees. Compliance Nomura Group takes the necessary measures to deal with legal risk in its international compliance activities and cross-border transactions. In addition, to develop cross-border products and Nomura Group works to prevent behavior that may give rise to services that satisfy the regulations of various countries, the suspicion of violations of legal regulations. Should such issues Group is working to enhance its specialized capabilities regard- arise, all related information is promptly transmitted to manage- ing such regulations. ment without exception, and systems have been put into place to deal with these appropriately. In addition, in accord with the Risk Management Regulations of Nomura Group Management Structure, all Group The businesses of Nomura Group are exposed to various types companies comply with laws and regulations that have been of risks. To ensure financial soundness and increase corporate enacted for the industries where they engage in business activi- value, managing these risks is one of the most important ties and supervise compliance based on their internal regulations. responsibilities of management. Accordingly, the risk manage- ment framework and governance systems of Nomura Group (cid:1) Appointment of a Group Compliance Officer have been structured to provide for comprehensive control, To create a substantially stronger system for internal supervision monitoring, and reporting on the risks the Group confronts. activities at all Nomura Group companies in Japan and interna- tionally, a Group Compliance Officer was appointed on April 1, (cid:1) Overall Risk Management by Global Risk Management 2007, with overall responsibility for Group compliance. In addition to the risk management activities conducted by the (cid:1) Compliance Officers Commitment Committee and the business units, Nomura Group has formed the Global Risk Management unit. This unit assists The companies of Nomura Group appoint Compliance Officers the Group Executive Management Committee and the executive who are responsible for ensuring that the conduct and super- officer in charge of risk management in their activities to conduct vision of operations is in accord with legal regulations and is overall management of various forms of risk. Overall risk man- socially appropriate from the perspective of corporate ethical agement includes structuring risk management frameworks, standards. These officers attend an annual training seminar to implementing measures to promote awareness and observance reinforce their awareness of the operating responsibilities of of risk management practices and procedures throughout the Compliance Officers, the unified regulations of the Group, and Group, monitoring the appropriateness of risk management, and compliance policy. measuring as well as analyzing risk for the Group as a whole. As part of this process, internal audits are also conducted on a peri- odic basis. C o r p o r a t e G o v e r n a n c e a n d I n t e r n a l C o n t r o l S y s t e m Note: For details regarding internal controls in the conduct of business operations, please refer to Corporate Governance in the Investor Relations section of www.nomura.com. Annual Report 2007 47 Corporate Social Responsibility E n r i c h i n g S o c i e t y t h r o u g h I n v e s t m e n t S e r v i c e s CSR P. 6 “Nomura’s mission is to enrich the nation through the securities business. This is something we must absolutely see through.” True to the words of our founder, Tokushichi Nomura II, we remain committed to enriching society by delivering to clients superior services and solu- tions to meet all investment needs. This has been our unwavering spirit since our founding. It is our social mission and our raison d’être. Nomura Group’s Basic Principles are rooted in Our Founder’s Principles and our Code of Ethics. To serve as a more practical guide for our business operations, we recently established both a Mission Statement and Principles of Conduct, which along with Our Ideals, com- bine to serve as our Code of Conduct to make clear our social mission as a Group. By sharing and putting into practice our Basic Principles and Code of Conduct, we will continue to grow and play our part in enriching society. Basic Principles Our Founder’s Principles Our Ideals Mission Statement Principles of Conduct Code of Ethics Corporate mission stated clearly and in detail Code of Conduct To achieve missions Our Relationships with Society Nomura Group conducts a range of activities to fulfill its corpo- undertake activities that contribute to the community and raise rate social responsibility (CSR) and help enrich society. We Nomura’s presence among a broad spectrum of groups in soci- focus on three main areas: (1) community involvement, (2) edu- ety to gain trust and a better understanding of Nomura’s mis- cation, and (3) support for the arts, culture, and academia. sion. Two such activities in Japan are the acceptance of (1) Community Involvement CSR P.32-35 student interns at Nomura’s Toyama branch and participation in We believe that winning the trust of the community is essential community cleanup initiatives by the staff of Nomura’s Seijo for Nomura Group to continue its business activities. We all branch in Tokyo. 48 Nomura Holdings, Inc. (2) Education CSR P. 36-37 • Support for Academic Activities To contribute to making investment an integral part of everyday Nomura Group’s support for academic activities includes life in Japan and assure its position as part of the foundations of sponsorship of joint research, other assistance for research, society, Nomura Group endeavors to expand and enrich edu- and sponsorship of courses on securities. In Japan, we sup- cational opportunities available to all age-groups. Specific port such universities as the University of Tokyo, Kyoto examples include the following. • Finance Courses for University Students University, and Hitotsubashi University. Internationally, we work with the University of Oxford in the United Kingdom, During fiscal 2006, 548 personnel of Nomura Group acted as Columbia University in the United States, and Chulalongkorn visiting instructors for courses at 127 universities throughout University in Thailand. Japan, which were attended by a total of about 20,000 In addition to these activities, the Nomura Cultural Foundation students. • Special Support for the Nikkei Stock League provides support for the career development of young artists and offers scholarships to foreign students pursuing their stud- The Nikkei Stock League was held for the seventh time in fis- ies in Japan. cal 2006, and 2,065 teams with a total of 8,193 participants from schools throughout Japan took part in conducting Environmental Initiatives CSR P. 48-53 investment simulations. Nomura Group believes that the way in which companies inter- In addition to these activities, Nomura Group donates financial act with the environment is a key factor in the sustainable devel- and economic educational materials for primary- and middle- opment of society. We therefore engage in activities to heighten school students, offers educational programs on securities for awareness of the need for environmental conservation and pro- lifelong learning courses, and maintains a website dedicated to mote initiatives for a sustainable future. Some of these activities learning about economics. are as follows. (3) Support for the Arts, Culture, and Academia • Environmental Activities Working Group We believe that sound economic development is not enough in and design Groupwide measures and plans that can be itself to create true prosperity. We therefore provide support for implemented by Nomura Group companies working together. a variety of cultural and artistic pursuits grounded in the belief • Initiatives Aimed at Preventing Global Warming CSR P. 38-41 Nomura Group has established a working group to examine that people should be well-rounded and should have the rich- ness of spirit to view society constructively. Some of these activities are as follows. • Pacific Music Festival Nomura Group works to save energy by reducing CO 2 emis- sions through the purchase of Green Power Certificates and reducing electric power consumption by cutting down on unnecessary office lighting. In addition, the Group is working We have been a special corporate supporter of the Pacific to reduce fuel consumption by encouraging the use of public Music Festival (PMF), which aims to contribute to the develop- transportation. ment of musical culture around the world by fostering young musicians, since its inception in 1990. Public Evaluation Nomura Group’s CSR initiatives have been highly commended, and Nomura Holdings stock is part of the Dow Jones Sustainability Indexes, FTSE4Good Index, and MS-SRI (Morningstar Socially Responsible Investment Index, as of September 2006). It was selected for inclusion in the Global 100 in January 2007. C o r p o r a t e S o c i a l R e s p o n s i b i l i t y Dow Jones Sustainability Indexes The indexes are the world’s first sustain- ability equity indexes, for which compa- nies are jointly selected by Dow Jones & Company and Sustainable Asset Management (SAM), Switzerland. FTSE4Good Index A socially responsible investment index set up by FTSE owned by the Financial Times and the London Stock Exchange. MS-SRI The first domestic socially responsible investment stock index developed by Morningstar Japan K.K., indexing the stock prices of the 150 most socially responsible companies listed in Japan. Global 100 The world’s most sustainable corpora- tions selected by Innovest Strategic Value Advisors Inc., SRI’s research company in the U.S., and Corporate Knights Inc., the publisher of a Canadian CSR magazine. Annual Report 2007 49 Consolidated Six-Year Summary (U.S. GAAP) Note: These consolidated financial statements are prepared solely for convenience and do not include the notes herein. Readers are strongly recommended to refer to the notes contained in the Form 20-F. Operating Results: Revenue: Commissions Fees from investment banking Asset management and portfolio service fees Net gain on trading Gain (loss) on private equity investments Interest and dividends Gain (loss) on investments in equity securities Gain from changes in equity of an affiliated company PFG entities product sales PFG entities rental income Gain on sales of PFG entities Private equity entities product sales Other Total revenue Interest expense Net revenue Non-interest expenses: Compensation and benefits Commissions and floor brokerage Information processing and communications Occupancy and related depreciation Business development expenses PFG entities cost of goods sold PFG entities expenses associated with rental income Private equity entities cost of goods sold Other Total non-interest expenses Income from continuing operations before income taxes and cumulative effect of accounting change Income from discontinued operations before income taxes and cumulative effect of accounting change Income tax expense Income from continuing operations before cumulative effect of accounting change Gain on discontinued operations Cumulative effect of accounting change Net income Cash Flows: Net cash provided by (used in) operating activities from continuing operations Net cash provided by (used in) investing activities from continuing operations Net cash provided by (used in) financing activities from continuing operations Effect of exchange rate changes on cash and cash equivalents Discontinued operations, net Net increase (decrease) in cash and cash equivalents Balance Sheet Information (Period End): Cash and cash deposits Loans and receivables Collateralized agreements Trading assets and private equity investments Other assets Total assets Short-term borrowings Payables and deposits Collateralized financing Trading liabilities Other liabilities Long-term borrowings Total liabilities Total shareholders’ equity Total liabilities and shareholders’ equity Note: Certain reclassifications of previously reported amounts have been made to conform to the current-year presentation. 50 Nomura Holdings, Inc. 3/2002 ¥00,140,001 75,255 109,985 162,228 232,472 500,541 (55,860) 3,504 294,931 177,053 116,324 — 68,965 1,825,399 504,048 1,321,351 379,540 20,962 87,252 73,787 26,652 200,871 111,529 — 247,786 1,148,379 172,972 — 4,926 168,046 — — ¥00,168,046 ¥ (1,170,028) (42,882) 1,052,851 13,018 — ¥ (147,041) ¥00,775,734 1,046,014 6,680,001 7,841,533 1,414,991 ¥17,758,273 ¥00,629,279 1,251,592 9,087,597 2,693,746 518,156 1,972,974 16,153,344 1,604,929 ¥17,758,273 *Calculated using the yen-dollar exchange rate of U.S.$1.00=¥117.56, the noon buy- ing rate in New York City for cable transfers in foreign currencies as certified for cus- toms purposes by the Federal Reserve Bank of New York on March 30, 2007. 3/2003 3/2004 3/2005 3/2006 ¥00,141,640 81,847 79,290 172,308 (14,391) 368,656 (41,288) — — — — 6,229 13,360 807,651 241,377 566,274 244,167 20,844 77,389 57,152 24,361 — — 4,968 89,984 518,865 47,409 — 37,295 10,114 — 109,799 ¥00,210,216 86,994 66,193 229,042 13,138 343,260 55,888 — — — — 17,640 23,565 1,045,936 242,833 803,103 259,336 19,169 80,031 54,221 23,100 — — 11,852 72,718 520,427 282,676 — 110,347 172,329 — — ¥00,221,963 92,322 78,452 201,686 7,744 401,379 15,314 — — — — 75,061 32,316 1,126,237 327,047 799,190 274,988 23,910 81,408 53,534 28,214 — — 44,681 87,620 594,355 204,835 — 110,103 94,732 — — ¥00,356,325 108,819 102,667 304,223 12,328 693,813 67,702 — — — — 88,210 58,753 1,792,840 647,190 1,145,650 325,431 32,931 89,600 55,049 32,790 — — 48,802 115,447 700,050 445,600 99,413 240,685 256,628 47,700 — Millions of yen 3/2007 ¥00,337,458 99,276 145,977 290,008 47,590 981,344 (20,103) — — — — 100,126 67,425 2,049,101 958,000 1,091,101 345,936 50,812 109,987 61,279 38,106 — — 57,184 106,039 769,343 321,758 — 145,930 175,828 — — Millions of U.S. dollars* 3/2007 $002,870 844 1,242 2,467 405 8,348 (171) — — — — 852 573 17,430 8,149 9,281 2,943 432 936 521 324 — — 486 902 6,544 2,737 — 1,241 1,496 — — ¥00,119,913 ¥00,172,329 ¥0,0094,732 ¥00,304,328 ¥00,175,828 $001,496 ¥ 133,892 120,851 (111,189) (8,952) — ¥ (57,125) 20,971 201,267 (18,978) — ¥00,134,602 ¥00,146,135 ¥00,955,509 1,137,265 8,603,170 9,286,507 1,186,995 ¥21,169,446 ¥00,343,837 821,659 11,791,833 3,888,720 411,699 2,269,370 19,527,118 1,642,328 ¥21,169,446 ¥00,930,637 1,013,636 12,881,752 13,838,396 1,088,545 ¥29,752,966 ¥00,437,124 1,384,096 17,367,758 5,976,966 415,865 2,385,469 27,967,278 1,785,688 ¥29,752,966 ¥ (360,780) (103,443) 448,531 13,697 (50,262) ¥ (52,257) ¥01,047,234 1,221,083 14,389,045 15,600,521 2,230,970 ¥34,488,853 ¥00,520,605 963,965 21,666,185 5,332,173 1,309,944 2,827,552 32,620,424 1,868,429 ¥34,488,853 ¥ (565,214) (4,678) 829,219 16,419 131,100 ¥00,406,846 ¥01,555,636 1,363,681 17,027,807 13,697,441 1,381,470 ¥35,026,035 ¥00,691,759 1,239,731 20,263,012 6,527,627 641,980 3,598,599 32,962,708 2,063,327 ¥35,026,035 Millions of yen ¥ (1,627,156) (533,813) 1,568,703 10,333 — ¥00(581,933) Millions of yen ¥01,054,012 1,618,411 17,838,227 13,178,220 2,184,504 ¥35,873,374 ¥01,093,529 1,345,855 20,599,256 4,800,403 845,522 5,002,890 33,687,455 2,185,919 ¥35,873,374 C o n s o l i d a t e d S i x - Y e a r S u m m a r y ( U . S . G A A P ) Millions of U.S. dollars* $ (13,841) (4,541) 13,344 88 — $ (4,950) Millions of U.S. dollars* $008,966 13,766 151,737 112,098 18,582 $305,149 $009,302 11,448 175,223 40,834 7,192 42,556 286,555 18,594 $305,149 Annual Report 2007 51 Major Subsidiaries and Affiliates As of July 1, 2007 Japan NOMURA SECURITIES CO., LTD. NOMURA ASSET MANAGEMENT CO., LTD. THE NOMURA TRUST & BANKING CO., LTD. NOMURA CAPITAL INVESTMENT CO., LTD. NOMURA INVESTOR RELATIONS CO., LTD. NOMURA PRINCIPAL FINANCE CO., LTD. NOMURA FUNDS RESEARCH AND TECHNOLOGIES CO., LTD. Americas NOMURA PENSION SUPPORT & SERVICE CO., LTD. NOMURA HOLDING AMERICA INC. NOMURA BABCOCK & BROWN CO., LTD. NOMURA SECURITIES INTERNATIONAL, INC. • Chicago Office • Los Angeles Office • San Francisco Office NOMURA RESEARCH & ADVISORY CO., LTD. • São Paulo Representative Office NOMURA BUSINESS SERVICES CO., LTD. NOMURA FACILITIES, INC. NOMURA CORPORATE RESEARCH AND ASSET MANAGEMENT INC. NOMURA ASSET CAPITAL CORPORATION THE CAPITAL COMPANY OF AMERICA, LLC NOMURA INSTITUTE OF CAPITAL MARKETS RESEARCH NOMURA AMERICA MORTGAGE FINANCE LLC JOINVEST SECURITIES CO., LTD. NOMURA HEALTHCARE CO., LTD. Europe & Middle East NOMURA EUROPE HOLDINGS PLC NOMURA INTERNATIONAL PLC • Madrid Office • Vienna Representative Office NOMURA CODE SECURITIES LTD. NOMURA BANK INTERNATIONAL PLC BANQUE NOMURA FRANCE NOMURA NEDERLAND N.V. NOMURA BANK (LUXEMBOURG) S.A. NOMURA BANK (DEUTSCHLAND) GmbH MAINTRUST KAG mbH NOMURA BANK (SWITZERLAND) LTD. • Geneva Office NOMURA ITALIA S.I.M.p.A. NOMURA CORPORATE ADVISORY (CENTRAL EUROPE) Private Company LTD. NOMURA CORPORATE ADVISORY (CENTRAL & EASTERN EUROPE) Sp.z.o.o. NOMURA (CIS) LIMITED • Moscow Office NOMURA INVESTMENT BANKING (MIDDLE EAST) B.S.C. (c) NOMURA FUNDING FACILITY CORPORATION LIMITED NOMURA GLOBAL FUNDING PLC NOMURA EUROPE FINANCE N.V. NOMURA STRUCTURED HOLDINGS PLC NOMURA PRINCIPAL INVESTMENT PLC NOMURA DERIVATIVE PRODUCTS, INC. NOMURA GLOBAL FINANCIAL PRODUCTS, INC. NOMURA FUNDS RESEARCH AND TECHNOLOGIES AMERICA, INC. NOMURA INTERNATIONAL TRUST COMPANY NOMURA SECURITIES (BERMUDA) LTD. NOMURA CANADA INC. NOMURA REALTY ADVISORS, INC. Instinet INSTINET, INC. Asia & Oceania NOMURA ASIA HOLDING N.V. NOMURA INTERNATIONAL (HONG KONG) LIMITED • Seoul Branch Office • Taipei Branch Office • Hanoi Representative Office NOMURA FUTURES (HONG KONG) LIMITED NOMURA SECURITIES (HONG KONG) LIMITED NOMURA ASIA LIMITED NOMURA SINGAPORE LIMITED NOMURA SECURITIES (SINGAPORE) PTE. LTD. NOMURA FUTURES (SINGAPORE) PTE. LTD. NOMURA MALAYSIA SDN. BHD. NOMURA AUSTRALIA LIMITED NOMURA SECURITIES PHILIPPINES, INC. P.T. NOMURA INDONESIA NOMURA EUROPEAN INVESTMENT LIMITED CAPITAL NOMURA SECURITIES PUBLIC COMPANY LIMITED NOMURA GP LIMITED NOMURA CORPORATE ADVISORY (CHINA) CO., LTD. 52 Nomura Holdings, Inc. Nomura Securities Domestic Network As of July 1, 2007 (157 Offices) Kinki Kanto Akashi Branch Daito Branch Esaka Branch Gakuenmae Branch Higashiosaka Branch Himeji Branch Hirakata Branch Ibaraki Branch Kishiwada Branch Kobe Branch Kyoto Branch Nanba Branch Nara Branch Nishinomiya Branch Okamoto Branch Osaka Branch Otsu Branch Sakai Branch Senri Branch Takatsuki Branch Tennoji-eki Branch Toyonaka Branch Tsukaguchi Branch Uehonmachi Branch Umeda Branch Wakayama Branch Chugoku Fukuyama Branch Hiroshima Branch Kurashiki Branch Matsue Branch Okayama Branch Shimonoseki Branch Tokuyama Branch Yonago Branch Kyushu Fukuoka Branch Kagoshima Branch Kitakyushu Branch Kumamoto Branch Kurume Branch Miyazaki Branch Nagasaki Branch Oita Branch Saga Branch Sasebo Branch Aobadai Branch Atsugi Branch Chiba Branch Fujisawa Branch Funabashi Branch Hiratsuka Branch Ichikawa Branch Kamakura Branch Kashiwa Branch Kawagoe Branch Kawaguchi Branch Kawasaki Branch Kofu Branch Konandai Branch Koshigaya Branch Kumagaya Branch Matsudo Branch Mito Branch Odawara Branch Omiya Branch Omiya Nishiguchi Branch Ota Branch Sagamihara Branch Saitama Branch Shinyokohama Branch Shinyurigaoka Branch Takasaki Branch Tama Plaza Branch Tokorozawa Branch Totsuka Branch Tsuchiura Branch Tsurumi Branch Urawa Branch Utsunomiya Branch Yokohama Branch Yokohama Bashamichi Branch Yokohama-eki Nishiguchi Branch Yokosuka Branch Hokuriku Fukui Branch Kanazawa Branch Niigata Branch Toyama Branch Shikoku Kochi Branch Matsuyama Branch Takamatsu Branch Tokushima Branch Chubu Gifu Branch Hamamatsu Branch Kanayama Branch Kariya Branch Kasugai Branch Matsumoto Branch Nagano Branch Nagoya Branch Nagoya-ekimae Branch Numazu Branch Okazaki Branch Shizuoka Branch Toyohashi Branch Toyota Branch Tsu Branch Yokkaichi Branch Hokkaido Asahikawa Branch Hakodate Branch Kushiro Branch Sapporo Branch Tohoku Akita Branch Aomori Branch Fukushima Branch Hachinohe Branch Koriyama Branch Morioka Branch Sendai Branch Yamagata Branch Tokyo Metropolitan Area Chofu Branch Fuchu Branch Gotanda Branch Hachioji Branch Hamadayama Branch Head Office Iidabashi Branch Ikebukuro Branch Ikebukuro Metropolitan Plaza Branch Jiyugaoka Branch Kamata Branch Kanda Branch Kichijoji Branch Kinshicho Branch Koishikawa Branch Koiwa Branch Kojimachi Branch Kokubunji Branch Machida Branch Mita Branch Nakameguro Branch Nakano Branch Nerima Branch Ogikubo Branch Omori Branch Sakurashinmachi Branch Seijo Branch Senju Branch Shibuya Branch Shinbashi Branch Shinjuku Branch Shinjuku-eki Nishiguchi Branch Shinjuku Nomura Building Branch Tachikawa Branch Tamagawa Branch Tokyo Branch Toranomon Branch Ueno Branch M a j o r S u b s i d i a r i e s a n d A f f i l i a t e s / N o m u r a S e c u r i t i e s D o m e s t i c N e t w o r k Okinawa Naha Branch Annual Report 2007 53 Corporate and Other Data 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 Paid-in Capital ¥182,799,788,854 (As of March 31, 2007) Group Employees 16,144 (As of March 31, 2007) Fiscal Year-end March 31 Share Data Common Stock Issued 1,965,919,860 shares (As of March 31, 2007) Listings The common shares of Nomura Holdings 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, 2007) Number of Shareholders 238,788 (Unit shareholders: 209,942) (As of March 31, 2007) Major Shareholders (Top 10) (As of March 31, 2007) Number of Shares Held (Thousands) Share of Total Voting Rights (%) 102,679 5.40 95,071 76,404 58,715 5.00 4.02 3.09 2.91 2.30 1.61 1.00 Ranking 01 Japan Trustee Services Bank, Ltd. Shareholder Name (Trust Account) 02 Japan Master Trust Bank of Japan, Ltd. (Trust Account) 03 Depositary Nominees Inc. 04 State Street Bank and Trust Company 05 State Street Bank and Trust Company 505103 55,442 06 Japan Trustee Services Bank, Ltd. (Trust Account 4) 07 The Chase Manhattan Bank, N.A. London 08 Nippon Life Insurance Company 09 Mellon Bank, N.A. as Agent for Its Client 43,687 30,696 19,007 Mellon Omnibus US Pension 18,462 0.97 10 Trust & Custody Services Bank, Ltd. (Trust Account B) 17,384 0.91 Note: As of March 31, 2007, the Company had 57,730 thousand shares of treasury stock which have been excluded from the above list. Transfer Agent and Registrar Mitsubishi UFJ Trust & Banking Corporation Corporate Agency Department: 81 (3) 5683-5111, 0120-232-711 (Toll free in Japan) Depositary for American Depositary Receipts (ADRs) The Bank of New York Depositary Receipts Division: 1 (212) 815-8161, (888) 269-2377 (Toll free in U.S.) www.adrbny.com Ratio: 1 ADR = 1 ordinary share Component Ratio of Shareholders (cid:3) Financial Institutions (cid:3) Foreign Legal Entities (cid:3) Securities Firms (cid:3) Individuals and Others (cid:3) Other Legal Entities (%) 100 80 60 40 20 0 8.67 8.47 8.88 8.09 21.55 21.58 0.70 1.10 24.61 0.83 22.73 0.93 7.28 22.00 1.23 28.97 40.44 37.90 43.66 44.06 40.10 28.40 27.77 24.60 25.43 3/03 3/04 3/05 3/06 3/07 Credit Ratings S&P Moody’s R&I JCR *As of March 31, 2007 Nomura Holdings Nomura Securities Long-term Short-term Long-term Short-term AA- A 3 AA- AA A-2 — a-1+ — AA A 2 AA- AA A-1 P-1 a-1+ — 54 Nomura Holdings, Inc. For More Information Investor Relations Department Nomura Holdings, Inc. Otemachi Nomura Building 2-1-1, Otemachi, Chiyoda-ku, Tokyo 100-8170, Japan Tel.: 81 (3) 5255-1000 www.nomuraholdings.com/investor/ Nomura Holdings Website Top Page www.nomura.com News Click here to see the latest news releases, including the quarterly earnings reports of Nomura Holdings. Investor Relations www.nomuraholdings.com/investor/ News Release Subscription Services Our e-mail alert service informs subscribers when a news release is issued or new content is uploaded to our website. Financial Information Presentations C o r p o r a t e a n d O t h e r D a t a Annual Report 2007 55 A n n u a l R e p o r t 2 0 0 7 Charting a Course for High-Growth Opportunities A n n u a l R e p o r t 2007 for the Year Ended March 31, 2007 Trademark of American Soybean Association Printed on 100% Recycled Paper Printed in Japan on 100% recycled paper using soy ink
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