Management Message

Kenichi Watanabe Nomura Holdings, Inc. President & CEO

We are shifting strategic direction to become a more client-driven, business-focused firm. By creating change in the capital markets, we aim to further the development of the overall market and in turn create opportunities for growth at Nomura.

Management Vision

Our management vision centers on three areas: (1) aim to become a financial services group with world-class competitiveness, (2) create change to contribute to the development of capital markets and generate growth opportunities, and (3) act as a bridge between Asia including Japan and Europe and the United States.
To realize our vision, we aim to create change, be world-class, and act with speed.

Top-down decision making by the CEO, COO, and five business division CEOs

We have set up a Group Management Committee, which includes the Chief Executive Officer (CEO), the Chief Operating Officer (COO), the CEOs of the five business divisions, and the Head of Regional Management, Europe, who is based in London. We have adopted this structure to facilitate prompt top-down decision making to deal with rapid changes in the operating environment. The CEOs of the business divisions are now expected to fulfill their duties as the leaders of their divisions while also thinking about the management of Nomura Group as a whole.

Top management directly engaged in risk management

We have also formed a Risk Management Committee and Risk Management Sub Committee, making it possible for top management to become directly engaged in risk management. We will now work to change our risk management structure from one that focuses mainly on trying to measure risk to one that is geared to anticipate risks. Our previous risk management focused mainly on ascertaining the current state of illiquid positions. Now, as previously liquid positions are becoming illiquid, the Risk Management Sub Committee will closely monitor all positions.

Reaffirmation of matrix management

We have adopted a matrix management approach, under which our businesses are run jointly by regional managers in Europe, the United States, and Asia and the CEOs of the five business divisions. This approach relies on open communication among the regional heads and divisional CEOs, complementary relationships, and mutual checking functions.

Our Domestic Client Assets* account for about 30% of the equities, investment trusts, bonds, and other investment-related asset portion of Japan's ¥1,500 trillion in personal financial assets. In addition, we have close relations with corporates and institutions, acting as underwriter for over 60% of listed companies in Japan. Global Markets has long-standing relationships with institutional investors developed through our equities and fixed income businesses. These relations with a broad base of clients are invaluable to our operations. Our ability to provide these clients with world-class products and services will underpin our future growth. To that end, we must take a cross-divisional approach to identify the changing needs of our clients and focus more on delivering services that tap the strengths of the entire Group. * Domestic Client Assets: Total of client assets in custody in Domestic Retail (including regional financial institutions) and Financial Management Division.

Source: Nomura, based on Bank of Japan data. Figures are preliminary.

Our management target of ROE of between 10% and 15% over the medium to long term remains unchanged.
Although the turmoil in the global financial markets continues, we are looking to build a revenue base capable of generating ¥200-¥250 billion in pretax income. We are also aiming to have a revenue structure in place that will allow us to book ¥500 billion in pretax income in three years.
Major changes in the environment and competitive conditions in financial markets are expected to continue. We intend to anticipate these changes and respond accordingly to achieve further growth.
Acting with speed does not mean that we will make rash decisions. We will take a logical and flexible approach to decision making. Even regarding past decisions, we will make necessary changes in line with the prevailing operating environment and competitive conditions to be better positioned to build a revenue base geared towards future growth.
The job of the new management team is to ensure stable revenue and respond to market changes by leveraging Nomura's strengths to generate additional profits.

Expanding international business with global platform based in London and Tokyo

Our international strategy is another key to growth. Together with Japan, our operations in London are a cornerstone of our global strategy based on extensive expertise and experience gained through developing products and services. In the United States, we have nearly finished our downsizing. However, as the United States is a leading financial center, it will remain an essential part of our operations and we will monitor the environment and add on functions as necessary.
Our acquisition of Instinet and capital participation in Fortress Investment Group are examples of our strategy to not limit ourselves to organic growth if there are functions that we need and the industry-leading expertise is available.

Making strategic moves in Asia and emerging markets

We will invest aggressively in markets with prospects for future growth.
Emerging markets such as Central and Eastern Europe, the Commonwealth of Independent States (CIS), the Middle East, China, and India are not only recipients of foreign direct investment but also investors in their own right. Therefore, demand for financial services going both ways is increasing significantly. In addition to our client base in Japan, we are looking to increase services for Asia and other emerging markets by fully leveraging our capabilities to supply products from Japan and London.

Into fiscal 2008, concerns about the emergence of global inflation and an economic downturn have risen, and the uncertainties in the environment surrounding financial and capital markets continue to be challenging. Nevertheless, we have a strong financial position, and we believe major business opportunities are unfolding around us. It is time for us to augment our position, look to the future, and steer the firm toward future growth. We look forward to your continued support.