Nomura Annual Report 2007

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FY2007 Annual Report · Nomura

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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

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

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

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

3/2003

3/2004

3/2005

3/2006

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)

Net income (lhs)

ROE (rhs)

1,200

1,000

800

600

400

200

600

500

400

300

200

100

350

300

250

200

150

100

(%)

3/03

3/04

3/05

3/06

3/07

3/03

3/04

3/05

3/06

3/07

3/03

3/04

3/05

3/06

3/07

Nomura Holdings, Inc.

Per Share Data:

Net income—basic*4

Shareholders’ equity*5

Cash dividends*5

3/2003

3/2004

3/2005

3/2006

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

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.

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For Reference:

Cash Dividends:

3/2003

3/2004

3/2005

3/2006

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

3/03

3/04

3/05

3/06

3/07

3/03

3/04

3/05

3/06

3/07

(%)

100

(Yen)

3,000

2,500

2,000

1,500

1,000

500

3/03

3/04

3/05

3/06

3/07

Annual Report 2007

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.

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

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Sum of Domestic Client Assets and Assets under
Management of Asset Management

Domestic Client Assets

Assets under management

(Trillions of yen)

120

100

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

3/2003 3/2004 3/2005 3/2006 3/2007

Annual Report 2007

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

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

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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

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

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

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

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

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

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

J
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1
0

Y
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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

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

(Millions of
U.S. dollars)
300,000

250,000

200,000

150,000

100,000

50,000

Rank value (rhs)

Number of deals (lhs)

Source: Thomson Financial

Annual Report 2007

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

-100

3/2003

3/2004

3/2005

3/2006

3/2007

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)

85.2

40.6

Mar. 31, 2003

Mar. 31, 2007

J
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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

315.8

296.8

3/2003

3/2007

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

■ Rank value (lhs)
Number of deals (rhs)

36,975.7

156

109

14,344.9

3/2003

3/2007

Source: Thomson Financial

200

150

100

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

231.2

35.9

Mar. 31, 2003

Mar. 31, 2007

27.0

15.9

Mar. 31, 2003

Mar. 31, 2007

Annual Report 2007

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

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

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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

Business Outline

Charting a Course for
High-Growth
Opportunities

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

(Billions of yen)
400

300

200

100

(Billions of yen)
100

(Billions of yen)
75

-25

(Billions of yen)
100

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

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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

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

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

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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

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

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.

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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

500

400

300

200

100

(Trillions of yen)

100

Targets:
• Domestic Client Assets: ¥100 trillion
• Number of accounts: 5 million

(Thousands of accounts)
5,000

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

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.

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.

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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

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Source: Hedge Fund Research, Inc., © HFR, Inc. 2006, www.hfr.com

Annual Report 2007

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

Nomura Holdings, Inc.

Global Markets

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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

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.

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.

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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

Annual growth of 14%

（%）
25

5
4
0

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

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

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

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

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%

156

111

Nomura Holdings, Inc.

Global Investment Banking

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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

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

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

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.

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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

2002

2003

2004

2005

2006

Source: Nomura Institute of Capital Markets Research from Private Equity Analyst

magazine

Annual Report 2007

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

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).

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.

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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

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.

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