Consolidated Financial Statements under US GAAP (PDF)€¦ · 1 Consolidated Financial Statements...

1

Consolidated Financial Statements

under US GAAP

Nomura Holdings, Inc.

December 2001

This is a summary of the presentation on Consolidated Financial Statements under US GAAP.

Date: December 14, 2001 (Friday)Place: Nihonbashi Headquaters of Nomura Securities Co., Ltd.Speaker: Akira Maruyama, General Manager of Finance Dept.

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1. Nothing in this document shall be considered as an offer to sell or solicitation of an offer to buy any security, commodity or other instrument, including securities issued by Nomura or any affiliate thereof. Offers to sell, sales, solicitations to buy, or purchases of anysecurities issued by Nomura or any affiliate thereof may only b e made or entered into pursuant to appropriate offering materials or a prospectus prepared and distributed according to the laws, regulations, rul es and market practices of the jurisdictions in which such offers or sales may be made.

2. No part of this document shall be reproduced, stored in a retrie val system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without theprior written permission of Nomura.

3. The information and opinions contained in this document have bee n obtained from sources believed to be reliable, but no represen tations or warranty, express or implied, are made that such info rmation is accurate or complete and no responsibility or liability can be a ccepted by Nomura for errors or omissions or for any losses arising from the use of this information.

4. This document contains statements that may constitute, and from time to time our management may make "forward -looking statements" within the meaning of the safe harbor provisions of The Private Securities Litigation Reform Act of 1995. Any such statements must be read in the context of the offering materials pursuant to which any securities may be offered or sold in the United States. These forward -looking statements are not historical facts but instead represent only our belief regarding future events, many of which, by their nature, are inherently uncertain and outside our control. Imp ortant factors that could cause actual results to differ from those in specific forward -looking statements include, without limitation, economic and market conditions, political events and investor sentiments, liquidity of secondary markets, level and volatility of interest rates, currency exchange rates, security valuations, competitive conditions and size, and the number and timing of transactions.

n NYSE Listing and US GAAP Financials

Ø NYSE Listing 4Ø Year ended March 31, 2000 5Ø Year ended March 31, 2001 6Ø Major Differences between US GAAP and

Japanese GAAP (P/L) 7Ø Major Differences between US GAAP and

Japanese GAAP (B/S) 9

n Investments in Equity Securities and Principal Finance Group

Ø Investments in Equity Securities 12Ø PFG Business Overview 13Ø PFG Major Investments 14Ø Potential Restructuring of PFG Business 15

n Segment Information

Ø Year ended March 31, 2000 17Ø Year ended March 31, 2001 18

n Appendix 19

Outline of the Presentation

1. Nothing in this document shall be considered as an offer to sell or solicitation of an offer to buy any security, commodity or other instrument, including securities issued by Nomura or any affiliate thereof. Offers to sell, sales, solicitations to buy, or purchases of any securities issued by Nomura or any affiliate thereof may only be made or entered into pursuant to appropriate offering materials or a prospectus prepared and distributed according to the laws, regulations, rules and market practices of the jurisdictions in which such offers or sales may be made.

2. No part of this document shall be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of Nomura.

3. The information and opinions contained in this document have been obtained from sources believed to be reliable, but no representations or warranty, express or implied, are made that such information is accurate or complete and no responsibility or liability can be accepted by Nomura for errors or omissions or for any losses arising from the use of this information.

4. This document contains statements that may constitute, and from time to time our management may make, "forward-looking statements" within the meaning of the safe harbor provisions of The Private Securities Litigation Reform Act of 1995. Any such statements must be read in the context of the offering materials pursuant to which any securities may be offered or sold in the United States. These forward-looking statements are not historical facts but instead represent only our belief regarding future events, many of which, by their nature, are inherently uncertain and outside our control. Important factors that could cause actual results to differ from those in specific forward-looking statements include, without limitation, economic and market conditions, political events and investor sentiments, liquidity of secondary markets, level and volatility of interest rates, currency exchange rates, security valuations, competitive conditions and size, and the number and timing of transactions.

3

NYSE Listing and US GAAP Financials

4

NYSE Listing

N M RN M RN M RN M RN M RN M RN M RN M R

n PurposesØ To clearly demonstrate in Japan and overseas that our goal is to become a globally

competitive Japanese financial services groupØ To enhance information disclosure conforming to the spirit of fair disclosureØ To expand our strategic optionsØ To strengthen corporate governance

n ScheduleØ December 13, 2001 Official Filing of Registration Statement with SECØ December 17, 2001 Listing on NYSE

n ADRØ Form American Depositary Share (ADS) represented

by American Depositary Receipt (ADR�Ø Code NMR

Ø ConversionRate 1:1 (1 ADS � 1 Share)

NYSE Listing and US GAAP Financial (1)NYSE listing.

The main purposes of the listing are:1. To clearly demonstrate in Japan and overseas that our goal is to become a globally competitive Japanese financial services group2. To enhance information disclosure conforming to the spirit of fair disclosure3. To expand our strategic options4. To strengthen corporate governance

As for the schedule,1. On December 13, 2001, we officially filed our statement of registration with SEC2. On December 17, 2001, our shares will be listed on the New York Stock Exchange in the form of American Depositary Shares represented by American Depositary Receipts (ADR)

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n Operating Results US GAAP Japanese GAAP

Ø Net Revenue* 1,062.7 billion yen 815.9 billion yen

Ø Income before Income Taxes 372.2 billion yen 265.2 billion yen

Ø Net Income 203.5 billion yen 146.3 billion yen

n Balance Sheet

Ø Total Assets 14,610.9 billion yen 18,821.9 billion yen

Ø Total Liabilities 13,199.9 billion yen 17,401.5 billion yen

Ø Shareholders’ Equity 1,411.0 billion yen 1,420.4 billion yen

Ø Leverage** 10.4 times 13.3 times

n ROE*** 15.3% 10.7��

Year ended March 31, 2000

* Net Revenue: Total revenue – Interest expense** Leverage: Total assets divided by shareholders’ equity

*** ROE: Net income divided by average shareholders’ equity

NYSE Listing and US GAAP Financial (2)US GAAP and Japanese GAAP for the year ended March 31, 2000

Under US GAAP:1. Net revenue is 1,062.7 billion yen2. Income before income taxes is 372.2 billion yen, and3. Net income is 203.5 billion yen

On the other hand, net income under Japanese GAAP was 146.3 billion yen, much lower than net income under US GAAP.

As for balance sheet data as of March 31, 2000:1. Total assets stood at 14,610.9 billion yen2. Total liabilities were 13,199.9 billion yen3. Shareholders’ equity was 1,411.0 billion yen

As a result, the financial leverage is 10.4 times and ROE is 15.3%.As for the balance sheet items, the figures under US GAAP are smaller.

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n Operating Results US GAAP Japanese GAAP

Ø Net Revenue* 915.7 billion yen 884.2 billion yen

Ø Income before Income Taxes 156.2 billion yen 320.5 billion yen

Ø Net Income 57.4 billion yen 181.7 billion yen

n Balance Sheet

Ø Total Assets 17,146.0 billion yen 20,529.1 billion yen

Ø Total Liabilities 15,709.6 billion yen 18,886.7 billion yen

Ø Shareholders’ Equity 1,436.4 billion yen 1,642.4 billion yen

Ø Leverage** 11.9 times 12.5 times

n ROE*** 4.0% 11.9��


* Net Revenue: Total revenue – Interest expense** Leverage: Total assets divided by shareholders’ equity

*** ROE: Net income divided by average shareholders’ equity

NYSE Listing and US GAAP Financial (3)US GAAP and Japanese GAAP for the year ended March 31, 2001

Under US GAAP,1. Net revenue was 915.7 billion yen2. Income before income taxes was 156.2 billion yen, and3. Net income was 57.4 billion yen, which is lower than under Japanese GAAP.

As for balance sheet data as of March 31, 2001:1. Total assets were 17,146.0 billion yen2. Total liabilities stood at 15,709.6 billion yen3. Shareholders’ equity was 1,436.4 billion yen

As a result, the financial leverage is 11.9 times and ROE is 4.0%.

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Major Differences between US GAAP and Japanese GAAP (P/L)n Valuation of Equity Investments

Ø Valuation of investments in equity securities and non-trading debt securities• Japanese GAAP: Unrealized gains/losses are recognized directly in shareholders’ equity ,

US GAAP: Unrealized gains/losses are recognized in current income

n Principal Finance Group (“PFG”)Ø Treatment

• Japanese GAAP: Venture capital accounting US GAAP: Consolidated (i.e. like a subsidiary)

Ø Recognition of P&L• Japanese GAAP:Gain on disposal & realization of surplus, non recourse cash after refinancing

US GAAP: Gain on disposal & annual net income/ loss of each entity (based also on US GAAP)

n OthersØ Business combination / Investments in affiliates

• Amortization period of negative goodwill (Nomura Asset Management)Amount of goodwill amortizationFiscal year ended March 31, 2001Japanese GAAP: 25.7 billion yenUS GAAP: 13.0 billion yen

• Difference in the realized gain/loss of investment securities • Affiliates �Japanese GAAP:Recognize equity earnings after the investees become affiliates

US GAAP: Retroactive application of equity method)

Ø Others

NYSE Listing and US GAAP Financial (4)

There are many differences between US and Japanese GAAP, among which the important ones are:1. Valuation methods for equity investments, and2. Accounting treatment of principal finance business, or PFG business

Valuation methods for equity investmentsUnder US GAAP, broker dealers recognize equity investments at fair value and unrealized profits/losses of investments in equity securities and non-trading debt securities currently in income. On the other hand, under Japanese GAAP, such unrealized profits/losses, net of taxes, are recorded directly in shareholders’ equity and are not recognized currently in income.Accounting treatment for our PFG activities.Our management views PFG activities as private equity investments. Under Japanese GAAP, which follows UK GAAP, PFG activities are treated as venture capital and profit/loss is recognized on a transaction basis, e.g., on disposal or the realization of surplus, non-recourse cash received back by Nomura, following third party refinancing of the PFG entity.On the other hand, under US GAAP we record PFG entities as consolidated subsidiaries because of our controlling financial interest. As a result, under US GAAP we recognize the revenue and expenses of PFG entities in our consolidated financial statements. We recognize gain/loss of investments when we dispose of the entity.As such, there is a timing difference between US and Japanese GAAP with respect to the recognition of profit/loss for our PFG activities.Shareholders’ equity is affected partly by the cumulative effect of the timing difference I just explained and also because under US GAAP, the property assets of PFG entities are recorded at a lower level than would be the case under Japanese and UK GAAP.

Other factors affecting the profit/loss include differences in:1. Amortization periods of negative goodwill relating to Nomura Asset Management.2. Realized gain/loss of certain investment securities, such as Kokusai Securities ’sshares, which we sold to Tokyo-Mitsubishi Bank.3. Accounting treatment of affiliated companies.Under Japanese GAAP, the amortization period of negative goodwill relating to the acquisition of Nomura Asset Management is 3 years while under US GAAP the period is 10 years. As for the accounting treatment of affiliated companies, under Japanese GAAP we apply equity earnings at acquisition, while under US GAAP we apply the equity method retroactively.

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JapaneseGAAP320.5

USGAAP156.2

(1)

(2)

-20.0 (3)

JapaneseGAAP

1,642.4

-121.8

(1)

-84.2

Income before Income Taxes Shareholders’ Equity

(Billions of yen)

(1) Valuation of investments inequity and other securities

(2) PFG(3) Others

- 91.7

-52.6

USGAAP

1,436.4

Major Differences between US GAAP and Japanese GAAP (P/L)(for the year ended March 31, 2001)

(2)

(1) PFG(2) Others


This slide explains the differences in income before income taxes and shareholders’equity between US and Japanese GAAP using the figures for the year ended March 31, 2001.The green bar on the left shows the Japanese GAAP figure, the blue bar on the right the US GAAP figure and the yellow bars the differences between the two.For the year ended March 31, 2001, the value of equity investments declined largely due to a decline in the Japanese stock market, resulting in large unrealized losses of 91.7 billion yen.Under US GAAP for broker dealers, we recognize such unrealized losses currently in income, while under Japanese GAAP, such unrealized losses are not currently recognized in income. As for shareholders’ equity, both US and Japanese GAAP recognize such unrealized losses, net of tax, in shareholders’ equity.The impact of the consolidation of PFG entities under US GAAP is twofold.One is that surplus, non-recourse cash, received by Nomura from PFG entities, which is recognized under Japanese GAAP, has to be eliminated on consolidation and no profit can be recognized. The other is that the net revenue of PFG entities is included under US GAAP.As a result, income before income taxes under US GAAP is 20 billion yen less than under Japanese GAAP.In addition, there are differences in the realized gain/loss of certain investment securities. This impact is included in “Others” in the graph. We sold shares in Kokusai Securities in November 2000. Because of the difference in carrying value of KokusaiSecurities’s shares between US and Japanese GAAP, there is a difference of 47.3 billion yen in realized gain/loss on sale of Kokusai Securities’s shares. Under Japanese GAAP, we recognized a realized gain of 35.9 billion yen, while under US GAAP we recognized a realized loss of 11.4 billion yen.

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n Principal Finance GroupØ Japanese GAAP: Treated as venture capital

US GAAP: Consolidation of all assets and liabilities of each entity which we have invested.

n OthersØ Securities Financing Transactions

• Securities borrowed, securities received as collateralJapanese GAAP: On-balance when receivedUS GAAP: Off-balance when received

• Gensaki transactionsJapanese GAAP: Recorded as financing transactionsUS GAAP: Recorded as sale transactions

Ø Others• Business combination / Equity methods• Appropriations of retained earnings�Japanese GAAP:the period when they are

approved at the shareholders’ meeting. US GAAP:The period to which they relate.�

Major Differences between US GAAP and Japanese GAAP (B/S)


The differences between US and Japanese GAAP regarding assets and liabilities are explained in this slide.There are many differences between US and Japanese GAAP, among which the important ones are:1. Accounting treatment of PFG business, which I have explained, and2. Accounting treatment of securities financing transactions

As for PFG business, under Japanese GAAP we only include management estimates of fair value for investments in PFG assets, while under US GAAP assets and liabilities of PFG entities are included in our consolidated balance sheet. Please note that the additional debt recorded is all non-recourse to Nomura.As for securities financing transactions, under Japanese GAAP, “Securities borrowed, Securities received as collateral” are on-balance items, while under US GAAP they are off-balance items. From September 2001, they become off-balance items also under Japanese GAAP.Under Japanese GAAP, Gensaki transactions are recognized as financing transactions, while under US GAAP they are recorded as sale transactions.There are other factors affecting the balance sheet, such as differences in business combination / equity methods, and recognition of appropriations of retained earnings.Under Japanese GAAP, appropriations of retained earnings are recognized during the period in which they are approved at the shareholders’ meeting. Under US GAAP, they are recognized in the period to which they relate.

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835.9

-4,219.0

(1)

869.2

-4,046.3

(2)(1)

(1) PFG’s tangible assets(2) Others

(2)

Major Differences between US GAAP and Japanese GAAP (B/S)(for the year ended March 31, 2001)

Total Assets Total Liabilities

(Billions of yen)

USGAAP

15,709.6

JapaneseGAAP

18,886.7US

GAAP17,146.0

JapaneseGAAP

20,529.1

(1) PFG’s non-recourse loans and bonds

(2) Others


The differences between US and Japanese GAAP regarding assets and liabilities are explained in this slide, using the figures as of March 31, 2001.The green bar on the left shows the Japanese GAAP figure, the blue bar on the right the US GAAP figure and the yellow and red bars the difference between the two.Under the US GAAP, assets and liabilities of PFG entities, such as tangible assets and borrowings (mainly subordinated loans), are recognized and amounted to 835.9 billion yen and 869.2 billion yen, respectively.As for securities financing transactions, under Japanese GAAP, we recognize 4,066.6 billion yen in securities on our balance sheet, which is not recognized under US GAAP.

For more detail, please see the appendix from page 19.

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Investments in Equity Securities and

PFG

12

Investments in Equity Securities

n Reduction of Investments in Equity Securities

Purchase Value and Market Value of Investments in Equity Securities

0

100

200

300

400

500

600

Mar-97 Mar-98 Mar-99 Mar-00 Mar-01 Sep-01

(Billions of yen)

Purchase Value(Nomura Asset Management)Purchase Value(Other than Nomura Asset Management)Market Value

* Purchase Value: Up to March 2000 - Lower cost or market method From March 2001 - Cost less impairment losse

Investments in Equity Securities and PFG (1)

This slide explains two important items affecting our financial statements under US GAAP, namely, investment in equity securities and our PFG business.We have been holding a large amount of investments in equity securities in unaffiliated companies in accordance with customary practice in Japan in order to promote existing and potential business relationships.However, we have been actively disposing of such investments while carefully reviewing our relationships with investors.As of March 1997, the investments amounted to about 260 billion yen on a purchase value base and about 500 billion yen on a market value base. We reduced these investments to 140 billion yen and about 220 billion yen respectively as of September 2001, a decrease of about half compared with March 1997.We continue to reduce these investments and reduce the impact of volatility in these investments on our US GAAP financial statements.

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PFG Business Overview

n Investment Profile

(Initial Investment)

PurchasedAssets

NomuraSub Debt

ExternalLoans

(Refinance)

•Purchase assets•Raise externally collateralized financing

whose underlying is purchased assets(Non -recourse to Nomura)

•Nomura uses sub debt to supply cashfor purchase proceeds.

•Nomura holds warrant at zero cost

•Companies that PFG Invests in are not legal subsidiaries of Nomura and are bankruptcy remote>> Nomura’ s financial exposure is limited to its investments only

(Potential Value Added)

�Value added through strong management team, clarificationof business plan model

�Added value represents potential warrant value

•Refinance through external loansand bonds based on valueadded assets

•Decrease/redeem Nomurasub debt

•Extract surplus non recoursecash, after refinancing. Partial recognition of profit.

ExternalLoans

PurchasedAssets

AddedValue

NomuraSub Debt

PotentialProfit

PurchasedAssets

ExternalLoans��bonds

AddedValue

PotentialProfit

(Exit)

Realized Profit

�Recognize final profit throughtrade sale

Cash


We have been conducting Principal Finance (PFG) business in Europe. The basic strategy in this business is that PFG purchases assets (or companies), which for differing reasons are under valued by the market and have significant profit potential, adds value to these assets and sells them to third parties to make a profit.I would like to explain PFG’s investment profile and recognition of its profit as shown on this slide. We consider this business as private equity. Therefore, the explanation of its profit recognition is based on Japanese GAAP, which follows UK GAAP.

First, the initial investment stage. PFG purchases assets (companies) through SPC. They are financed by externally collateralized financing (non-recourse loans to Nomura) and sub debt supplied by Nomura. Also, Nomura holds warrants at zero cost and has the right to profit from the equity portion. Using this structure, Nomura’s financial exposure is limited to its sub debt only.Second, the potential value added stage. PFG adds value to assets (companies) through a strong management team and clarification of its business plan and model. PFG lets its management team of experienced professionals operate companies. PFG itself is only involved in the strategic management issues.Third, the refinancing stage. When the assets’ value has been increased, PFG refinances through external loans and bonds based on value-added assets and redeems Nomura’s sub debt. We mostly use securitization in refinancing. Nomura recognizes profit through the extraction of excess cash following the refinancing and repayment of sub debt.Finally, the exit stage. Ultimately, we recognize final profit through sale of the company, usually by trade sale to third parties. Following disposal, the excess cash, or gain on disposal is returned to Nomura through final exercise of warrants. It usually takes from three to seven years to exit the deals after the initial investments.

In addition, because US GAAP requires that the companies in which PFG invests be regarded as Nomura’s subsidiaries, we have to regard all trades with these companies as inter-company trades until their exits and recognize whole profit relating to the deals at that time. As such, the differences between US and Japanese GAAP mainly concern the timing of profit/loss recognition for our PFG activities.

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PFG Major Investments

Investment Date Sep. 96

Housing stocks holdings

for MOD in UK

Tenanted Pub

holding company

Investment Date Sep. 97Rental company of mainly

consumer electronics

Investment Date July 98Tenanted Pub

holding company

Investment Date Jan. 99

Largest retailer in UK of

wine/beer/spirits

Investment Date Oct. 00

Housing stocks holdings

for German railway

Investment Date Dec. 00PFG Position (Net)

0

100

200

300

400

Mar-00 Mar-01

(Billions of yen)


This slide explains the contents and the amount of PFG related investments.PFG’s exposure was about 300 billion yen as of March 31, 2001. PFG increased its investments from March 31, 2000 to March 31, 2001, mainly due to the acquisitions of First Quench in October 2000 and Deutsche Annington in December 2000.This page shows the main investment deals and the time of investments in them.

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Potential Restructuring of PFG Business

n Nomura is committed to growing PFG business in a way that reduces overall concentration risk

n Provide new alternative investment funds to our client

n Encourage PFG

nPotential Restructuring of PFG Business

Possibilities include:

üPFG Fund

üIndependent Asset Management


This slide illustrates “Potential Restructuring of PFG Business”.Our management philosophy is that:

•we conduct PFG business as private equity investments in merchant banking activities, and that PFG business is profitable and has further potential. However, we would like to control the concentration of our resources and risk in this business, and

•provide new alternative funds to our clients.

Despite the US GAAP accounting model for these investments, we continue to regard PFG entities as private equity investments due to the nature of this business.

We are currently considering the potential restructuring of PFG business. The possibilities include moving the existing investments into a fund structure that would be independently managed and also by making new investments in an overall private equity fund. Through establishing PFG funds and financing through external loans and bonds, we will create a structure to expand PFG business and control its risk concentration.

16

Segment Information

17


* These operating segment results are based on US GAAP except excluding the impact of unrealized gains/losses on equity investments held for relationship purposes and the impact of consolidating PFG.

** Other includes asset management segment, corporate items, gain/loss on investment securities, equity earnings/loss of affiliates, amortization of goodwill, elimination, etc.

380.6401.5

28.2

186.2203.3

-83.4

-200

-100

0

100

200

300

400

500

Domestic Retail Global Wholesale Other**

(Billions of yen)

Net revenue

Income/loss before income taxes

Segment Information (1)

This graph shows business segment information for the year ended March 31, 2000.

First of all, the segment information was prepared based on internal management account figures, based on which, among others, management assesses business performance.Therefore, this information does not include the impact of unrealized gains/losses on investments in equity securities, which under US GAAP are included in income. The segment information treats investments in PFG entities as private equity positions as management only view these entities as investments for ultimate sale to realize capital gain. Under US GAAP, they are recorded as consolidated subsidiaries.

As for the segment information for the year ended March 31, 2000, our securities businesses consist of Domestic Retail activities and Global Wholesale activities. For the year ended March 31, 2000, both Domestic Retail and Global Wholesale recorded high levels of profit. Our asset management business was small for the period because the period does not include the results of Nomura Asset Management, in which we acquired a majority interest in March 2000. Therefore, the results are included in “Other” in this graph.“Other” includes asset management segment, corporate items, gain/loss on investment securities, equity earnings/loss of affiliates, amortization of goodwill, and elimination, etc.

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* These operating segment results are based on US GAAP except excluding the impact of unrealized gains/losses on equity investments held for relationship purposes and the impact of consolidating PFG.

** Other includes corporate items, gain/loss on investment securities, equity earnings/loss of affiliates, amortization of goodwill, elimination, etc.

266.4

462.8

60.0

16.550.8

252.7

20.5

-60.5-100

0

100

200

300

400

500

Domestic Retail Global Wholesale Asset Management Other**

��Billions of yen ��

Net revenue

Income/loss before income taxes

Segment Information (2)

This graph shows business segment information for the year ended March 31, 2001.In the graph, we show three business lines, Domestic Retail, Global Wholesale and Asset Management, since our asset management business grew as a result of the acquisition and consolidation of Nomura Asset Management.For the year ended March 31, 2001, Global Wholesale continued to produce high levels of profit, while Domestic Retail was stagnant under the depressed Japanese stock market.For details, please see 20-F.

In summary, for our listing on the New York Stock Exchange, we prepared consolidated financial statements in compliance with US GAAP. Although there exist differences between Japanese and US GAAP, the most important of these are the treatment of investments in equity securities for relationship purposes and the treatment of PFG business.As regards investments in equity securities, we have been reducing the amounts considerably and will continue to do so.As for PFG business investments, management views these entities purely as investments for ultimate sale and realization of capital gain, not as operating subsidiaries. While the difference in US GAAP and Japanese GAAP results in a timing issue only, this together with other reasons, which I explained, has led us to consider restructuring our PFG business.

19

Appendix��

Following pages are supplemental information.

20

Consolidated Financial Statements (1)n Consolidated Statements of Operations

Translation intothousands ofU.S. dollars

2000 2001 2001Revenue:

Commissions 329,332 189,841 1,512,195Fees from investment banking 93,644 87,160 694,281Asset management and portfolio service fees 63,799 144,882 1,154,070Net gain on trading 253,328 307,989 2,453,314Interest and dividends 419,742 518,941 4,133,670Profit (loss) on investments in equity securities 90,839 (98,968) (788,338)PFG entities product sales 56,476 117,523 936,140PFG entities rental income 144,005 103,339 823,156Other 48,616 98,591 785,335

Total revenue 1,499,781 1,469,298 11,703,823Interest expense 437,131 553,643 4,410,092

Net revenue 1,062,650 915,655 7,293,731

Non-interest expenses:Compensation and benefits 286,268 305,190 2,431,018Commissions and floor brokerage 21,342 26,393 210,236Information processing and communications 54,961 70,998 565,541Occupancy and related depreciation 71,191 65,319 520,304Business development expenses 20,418 29,940 238,490PFG entities cost of goods sold 37,408 84,004 669,141PFG entities expenses associated with rental income 51,706 43,760 348,574Other 147,136 133,879 1,066,425

690,430 759,483 6,049,729

Income before income taxes 372,220 156,172 1,244,002

Income tax expense:Current 12,866 53,693 427,697Differed 155,805 45,069 359,001

168,671 98,762 786,698Net income 203,549 57,410 457,304

Millions of yenYear ended March 31

21

Consolidated Financial Statements (2)n Consolidated Balance Sheets


2000 2001 2001ASSETS

Cash and cash deposits:Cash and cash equivalents 522,970 503,676 4,012,076 Time deposits 212,858 278,648 2,219,595Deposits with stock exchanges and other segregated cash 338,863 46,325 369,006

1,074,691 828,649 6,600,677

Loans and receivables:Loans receivable from customers 780,258 282,424 2,249,673Loans receivable from other than customers 466,992 409,638 3,263,008Receivables from customers 42,314 78,155 622,550Receivables from other than customers 191,335 302,437 2,409,089Receivables under resale agreements and securities

borrowed transactions 4,649,363 5,995,998 47,761,654Securities pledged as collateral 697,242 2,769,026 22,056,922Allowance for doubtful accounts (15,181) (26,529) (211,319)

6,812,323 9,811,149 78,151,577

Trading assets:Securities inventory 4,064,790 3,281,659 26,140,346Derivative contracts 300,592 343,536 2,736,466

4,365,382 3,625,195 28,876,812

Other:Office buildings, land, equipment and facilities

(net of accumulated depreciation and amortizationof Yen 145,713 million in 2000 and Yen 206,132 million($1,641,963 thousand) in 2001, respectively) 143,169 156,430 1,246,057

PFG entities land, buildings, equipment and furniture andfixtures (net of accumulated depreciation and amortization

of Yen 135,621 million in 2000 and Yen 75,447 million($600,980 thousand) in 2001, respectively) 433,054 835,854 6,658,069

Lease deposits 172,689 90,601 721,690Non-trading debt securities 377,080 590,694 4,705,226Investments in equity securities 305,724 272,761 2,172,702Investments in and advances to affiliated companies 383,500 403,818 3,216,648Deffered tax assets 102,018 87,006 693,054Other assets 441,238 443,867 3,535,662

2,358,472 2,881,031 22,949,10814,610,868 17,146,024 136,578,174

Millions of yenMarch 31

22

Consolidated Financial Statements (3)n Consolidated Balance Sheets


2000 2001 2001LIABILITIES AND SHAREHOLDERS' EQUITY

Payables, borrowings and deposits:Payables to customers 310,563¥ 449,219¥ 3,578,294$ Payables to other than customers 411,035 363,658 2,896,750Payables under repurchase agreements and securities

loaned transactions 5,151,644 7,448,220 59,329,457Short-term borrowings 1,146,030 1,151,823 9,174,948Time and other deposits received 382,842 471,405 3,755,018

7,402,114 9,884,325 78,734,467Trading liabilities:

Securities sold but not yet purchased 2,741,752 2,430,037 19,356,675Derivative contracts 326,959 427,279 3,403,529

3,068,711 2,857,316 22,760,204Other:

Accrued income taxes 13,371 43,753 348,518Accrued pension and severance costs 46,850 44,053 350,908Other accrued liabilities 496,220 521,751 4,156,054

556,441 609,557 4,855,480Long-term borrowings 1,625,369 1,489,184 11,862,227Non-recourse PFG entities loans and bonds 547,257 869,214 6,923,801

13,199,892 15,709,596 125,136,179

Shareholders' equity:Common stock, Yen 50 par value

Authorized---6,000,000,000 sharesIssued March 31, 2001---1,962,977,841 shares 182,797 1,456,086 March 31, 2000---1,962,977,247 shares 182,796

Additional paid-in capital 147,714 146,133 1,164,035Retained earnings 1,154,599 1,177,660 9,380,755Accumulated other comprehensive income:

Minimum pension liability adjustment (4,073) (19,083) (152,007)Cumulative translation adjustments (59,716) (51,021) (406,412)

(63,789) (70,104) (558,419)1,421,320 1,436,486 11,442,457

Less---Common stock held in treasury, at cost---March 31, 2001---26,334 shares (58) (462)March 31, 2000---3,099,017 shares (10,344)

1,410,976 1,436,428 11,441,99514,610,868¥ 17,146,024¥ 136,578,174$

Millions of yenMarch 31

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Reverse Reconciliation (Year ended March 31, 2001)(Millions of yen)

Shareholders'Net Income Equity

57,410 1,436,428

(a) Valuation of investments in equity securities and non-trading debtsecurities

91,650 (549)

(b) Retirement and severance benefit (1,712) 1,065(c) Recognition of provision for multi-employer pension plan - (35,681)(d) Consolidation of the PFG entities 20,027 121,796

(e)Business conbinations - evaluation of assets and liabilities ofacquired subsidiary and difference of amortization period *

57,860 63,259

(f) Investments in affiliates 21,778 8,401(g) Appropriations of retained earnings 640 34,949(h) Loss on sale of treasury stock (1,691) - (i) Hedge acounting (3,007) (6,623)(j) Leveraged leases 46 (8,889)(k) Valuation of marketable equity securities (18,479) - (l) Other (2,751) (3,771)

Total Japanese GAAP adjustments 164,361 173,957Tax effect of above Japanese GAAP adjustments (40,105) 32,023

181,666 1,642,408

* 47,283 millions yen relates to the sale of Kokusai Securities's shares.

Amounts reported in the consolidated financial statements underU.S. GAAP

Amounts determined in conformity with Japanese GAAP

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Outline of Reconciling Items (1)

Pension cost is provided in accordance with SFAS No.87 “Employers' Accounting for Pensions”.

Similar accounting treatment is required, however, certain treatment is different from US GAAP. Under US GAAP, additional minimum pension liabilities are provided when the accumulated benefit obligation exceeds the fair value of plan assets, while such treatment is not provided under Japanese GAAP. Under US GAAP, gain or loss resulting from experience different from that assumed or from a change in an actuarial assumption is amortized over the remaining service period of employees when such balance at beginning of year exceeds the “Corridor ”which is defined as a 10% of larger of projected benefit obligation or fair value of plan assets, while such gain or loss is amortized regardless of the Corridor under Japanese GAAP.

(b) Retirement and severance benefit

In accordance with accounting principles generally accepted in the United States of America for broker -dealers, investments in equity securities and non-trading debt securities are recorded at market or fair value with unrealized gains and losses included in income.

Investments in equity securities and non-trading debt securities are reported at fair value and the related net unrealized gains or losses, net of applicable income taxes, are reported in a separate component of shareholders' equity. If the decline in fair value of such investments below its respective cost is considered to be other than temporary, the decline is recorded as a loss on investments by a charge to current earnings.

(a) Valuation of investments in equity securities and non-trading debt securities

US GAAPJapanese GAAP

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Under U.S. GAAP, tax effects of accounting for equity investment are provided and accounting for equity investment is retroactively adopted effective from the initial equity investment. Due to certain adjustments described this section, the net assets value of affiliate companies is different between U.S. GAAP and Japanese GAAP when Nomura recognizes equity earnings.

Under Japanese GAAP, tax effects of accounting for equity investment are not provided and accounting for equity investment is prospectively adopted effective when Nomura acquires an influence on the investee. Due to certain adjustments described this section, the net assets value of affiliate companies is different between U.S. GAAP and Japanese GAAP when Nomura recognizes equity earnings.

(f) Investments in affiliates

Nomura had directly held only 5% of the outstanding share capital of NAM, In March 2000, Nomura acquired an additional 69% equity interest in NAM. The acquisition has been accounted for by the purchase method of accounting effective March 31, 2000 and assets acquired and liabilities assumed have been recorded at estimated fair values.Negative goodwill of NAM is amortized over ten years from the fiscal year beginning April 1, 2000.

Nomura had directly held only 5% of the out-standing share capital of NAM, In March 2000, Nomura acquired an additional 69% equity interest in NAM. The acquisition has been accounted for accounting effective March 31, 2000 and assets acquired and liabilities assumed have been recorded at estimated fair values based on Japanese GAAP.Negative goodwill of NAM is amortized over three years from the fiscal year beginning April 1, 2000.

(e) Business combinations

Under U.S. GAAP, certain operating companies in which PFG made investments are consolidated since Nomura has controlling financial interests in the underlying investments.

Under Japanese GAAP, Nomura has not consolidated PFG entities since those investments are treated as venture capital investments.

(d) Consolidation of the PFG entities

The accrual of a provision described on the left would not meet the requirements of SFAS No.5 "Accounting for Contingencies" with regard to JSDE Fund and is not recorded.

Nomura and most of its domestic consolidated sub-sidiaries participate in the Japan Securities Dealers Employees’ Pension Fund ( “JSDE Fund”), a multi-employer fund funded by companies in the securities broker -dealer industry in Japan. On March 31, 2000, Nomura recognized provision in order to secure certain specific expenses attributable to participants in the future.

(c) Recognition of provision for multi-employer pension plan



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Marketable equity securities are recorded at market or fair value. Fair value is generally based on quoted market price or dealer quotation or an estimation by management of the amounts expected to be realized upon settlement in current market conditions.

Up to the fiscal year ended March 31, 2000, marketable equity securities were recorded at quoted market price. For the fiscal year beginning April 1, 2000, marketable equity securities have been recorded in accordance with U.S. GAAP policy outlined the right. As a result, there is no difference to shareholders ’ equity in the accompanying reconciliation.

(k) Valuation of marketable equity securities

Derivative contracts that have been designated as hedges to specific assets or specific liabilities are accounted for on an accrual basis.

Derivative contracts that have been entered into for hedging purchase for specific assets or groups of similar assets or specific liabilities or group of similar liabilities are valued at fair value and unrealized gains or losses are deferred on the balance sheet.

(i) Hedge accounting

Leveraged leases are accounted in accordance with SFAS No.13 "Accounting for Leases", and fixed income and expenses are recognized for each year over the period of the leveraged leases.

Depreciation expenses arising from leases assets are recognized on a declining balance method and income and expenses are not averaged during the period of leveraged leases.

(j) Leveraged leases

Gain or loss on sale of treasury stock is charged to additional paid-in capital.

Gain or loss on sale of treasury stock is charged to income.

(h) Loss on sale of treasury stock

Appropriations of retained earnings are reflected and recorded in the consolidated financial statements for the period to which they relate. Also, bonuses to directors are charged to income.

Under Japanese GAAP,a company may select an accounting method for appropriations of retained earnings to reflect and record those in the consoli-dated financial statements for the period to which they relate or for the subsequent period when shareholders' aapproval has been obtained. Nomura applies the latter method and records appropriations of retained earnings in the consolidated financial statements in the accounting period when shareholders' approval has been obtained. And also, under Japanese GAAP, bonuses to directors are recorded as appropriations of retained earnings.

(g) Appropriations of retained earnings



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� Gensaki transactions �Gensaki transactions are recorded as sales in the consolidated financial statements; therefore, the related securities and obligations to repurchase are not reflected in the accompanying consolidated balance sheets. � Securities lending and borrowing transactions �Collateral securities of which the right of sell orrepledge are held by secured party are recognized on the balance sheet when the collateral is sold.

�Gensaki transactions�Gensaki transactions are accounted for financing transactions. �Securities lending and borrowing transactions��Securities received as collateral are recognized on the balance sheet by secured party when received. (Effective from September 30, 2001, such treatment is amended and the accounting treatment is same as U.S. GAAP.)

Gensaki transactions &securities lending and borrowing transactions


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