Nomura Shareholder Yield 70
EQUITY QUANTITATIVE RESEARCH

70 stocks with proactive shareholder returns

Global Markets Research
22 March 2019

Research analysts
Targeting returns resulting from improved capital efficiency owing toshareholder returns
Improvement in capital efficiency at Japanese corporations has become a major
investment theme. Pressure on Japanese companies to improve capital efficiency andincrease shareholder returns appears to have heightened to an unprecedented degree,
particularly since the release of Japan's stewardship code in 2014 and theimplementation of its corporate governance code in 2015.
The Nomura Shareholder Yield 70 is based on the concept of targeting returns thatarise as a result of improvements in capital efficiency. It does this by investing inJapanese corporations that are proactively providing shareholder returns via dividends
and share buybacks. We use "net shareholder yield" as a quantitative measure of theaggressiveness of shareholder returns. We base this on the net shareholder payout,which is the total value of dividends and share buybacks minus the total value of capitalincreases, over the past three years. The Nomura Shareholder Yield 70 is a market
cap-weighted index comprising the top 70 stocks in terms of net shareholder yield
selected from all listed Japanese companies (excluding financial stocks), with individual
stock weightings capped at 2%.

Japan quantitative research
Sayuri Otsuka - NSC
sayuri.otsuka@nomura.com+81 3 6703 1397
Yasuhiro Shimizu - NSC
yasuhiro.shimizu@nomura.com+81 3 6703 1748

It is not necessarily the case that higher shareholder returns are always desirable. If,
however, a company is unable to make effective use of the capital it has collected fromshareholders, returning excess capital to shareholders can increase capital efficiency
and lead to higher corporate value and improved share price returns. The Nomura
Shareholder Yield 70, which comprises stocks that proactively return profits toshareholders, has outperformed the TOPIX by 3.8% on an average annual basis overthe past 11 years or so.

Fig. 1: Index performance: Nomura Shareholder Yield 70
300
Nomura Shareholder Yield 70

250

TOPIX

200

150

100

50

(End-2008/1=100)02008/1

2011/1

2014/1

2017/1

Note: Period of analysis is February 2008 through February 2019. Based on monthly returns including dividends. We did
not take trading costs into account. Analysis is based on past performance and does not guarantee future performance.
Source: Nomura

Japanese version published on
March 19, 2019
Production Complete: 2019-03-22 15:42 UTC

See Appendix A-1 for analyst certification, important disclosures and the status of non-US analysts.

Nomura | Nomura Shareholder Yield 70

22 March 2019

Shareholder returns increasingly
attracting attention in recent years
Improvement in capital efficiency at Japanese corporations has become a major
investment theme. As part of the government's growth strategies, Japan's stewardshipcode was released in 2014, laying out principles "for institutional investors in order tofulfill their stewardship responsibilities, such as promoting the mid- to long-term growth ofcompanies through dialogue.” The following year (2015) brought the implementation ofJapan's corporate governance code, which established principles for achieving effective
corporate governance. We think this has heightened the pressure on Japanesecompanies to improve capital efficiency and increase shareholder returns to an
unprecedented degree (Figure 2).
At the same time, while ROE has been improving at Japanese companies, it remains
lower than at companies in the US and elsewhere. On the other hand, according to the
Financial Statements Statistics of Corporations by Industry, cash and deposits at
Japanese companies (all sizes, all industries, excluding financials and insurance) had
reached ¥222trn in FY17. This situation has been drawing criticism from investors. For
example, at the 11th meeting of the Council of Experts Concerning the Follow-up ofJapan’s Stewardship Code and Japan’s Corporate Governance Code in October 2017,
participants noted that retained earnings had been building up at Japanese corporationsin the form of cash and deposits, and that many investors think corporate cash on handis above optimal levels. The FY17 survey entitled Approaches toward Enhancing Equity
Values conducted by the Life Insurance Association of Japan also suggested thatinvestors are hoping for a further increase in shareholder returns, with more than 80% of
respondents selecting "around half" or "very few" when asked what proportion ofcompanies were offering satisfactory dividends and other shareholder returns.
The various measures promoting improvement in capital efficiency and shareholder
returns aim to raise corporate value through constructive dialogue between investors andmanagement, in turn facilitating sustained growth in the Japanese economy. We do not
see these efforts as temporary, and we expect attention to continue to focus onshareholder returns and their impact on capital efficiency over the long term.

Fig. 2: Major events strengthening corporate governance(yyyy/m) Event
2013/6 Japan Revitalization Strategy published2014/1 Launch of JPX-Nikkei Index 400
2014/2 FSA publishes Japan's stewardship code
Government Pension Investment Fund (GPIF) announces investment in JPX-Nikkei
2014/4
Index 400
2014/5 GPIF announces acceptance of stewardship code
2014/8 METI publishes Ito Report
2015/5 Revisions to Companies Act implemented
2015/6 TSE starts applying corporate governance code
2015/9 GPIF signs United Nations Principles for Responsible Investment (PRI)
2017/5 FSA revises stewardship code
2017/7 GPIF announces investment in ESG
11th meeting of Council of Experts Concerning the Follow-up of Japan’s Stewardship2017/10
Code and Japan’s Corporate Governance Code2017/10 METI publishes Ito Report 2.0
2018/6 TSE revises corporate governance code
Source: Nomura

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22 March 2019

In recent years, Japanese companies have been increasing their total shareholder
payouts, which comprise both stock dividends and share buybacks (Figure 3). As Figure
3 shows, while the change in dividends has been relatively gradual, share buybacks
have changed more sharply. This may be because of management attempts to keep
dividend payments roughly stable while taking a more flexible approach to sharebuybacks. Turning to the correlation between shareholder returns and net profits, as
shown in Figure 4, we see that the total shareholder payout (dividends plus sharebuybacks) tracks net profits more closely than do dividends alone. We conclude that it isimportant to look at a company’s share buybacks, in addition to its dividends, to get amore accurate picture of management's stance toward returning profits to shareholders.

Fig. 3: Shareholder payout for Japanese stocks
25(¥trn)

Total share buybacks

20

Total dividends
15

10

5

0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
(year-end)
Note: Period of analysis is end-2005 through end-2018. Shows total dividends and total share buybacks for all listedcompanies over the calendar year. Total dividends for 2018 include estimates.
Source: Nomura

Fig. 4: Correlation between shareholder returns and net profits
25

Shareholder returns (¥trn)

Total dividends + total share buybacks
Total dividends

20

15

10

5

0
0

10

20

30

40

50

Net profits (¥trn)
Note: Period of analysis is end-2005 through end-2018. Plots correlation between total net profits at all listed companies forthe most recent period as of the year-end and total dividends and share buybacks for the calendar year. As total net profits
were negative in 2009, data for this year has been excluded. Total dividends for 2018 include estimates.
Source: Nomura

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22 March 2019

The Nomura Shareholder Yield 70 is based on the concept of targeting returns that arise
as a result of improvements in capital efficiency. It does this by investing in Japanese
corporations that are proactively providing shareholder returns via dividends and sharebuybacks in response to the growing pressure to improve capital efficiency and increase
shareholder returns. As a quantitative measure of the aggressiveness of shareholder
returns, we use “net shareholder payout”, which is the total value of dividends and sharebuybacks minus the total value of capital increases, over the past three years. We
subtract the value of capital increases, as from the standpoint of corporate finance these
are the reverse of share buybacks, and could thus be regarded as negative shareholder
returns. We therefore think the net shareholder payout is a more accurate gauge of acorporation's stance toward shareholder returns. In order to facilitate comparisons
between corporations of differing sizes when selecting stocks, we calculate the "netshareholder yield" by dividing net shareholder payout by market cap.

Fig. 5: Calculation of net shareholder yieldNet
shareholder
payoutDividends

Net shareholder yield ＝

Share
buybacks

Capitalincreases

Total dividends＋ total buybacks − total capital increases
Market cap

Note: For total dividends, share buybacks, and capital increases we use the average for the past three years, while formarket cap we use the most recent figure.
Source: Nomura

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22 March 2019

The impact of shareholder returns onshare price performance
It is not necessarily the case that higher shareholder returns are always desirable. If a
company has high profit margins and considerable potential for growth, investing its
limited capital is likely to do more to boost corporate value than returning this limited
capital to shareholders. However, if the company is not able to use the capital raised
from its shareholders effectively, returning this capital to its shareholders via dividends orshare buybacks is likely to do more to boost its capital efficiency and increase both its
corporate value and its share price. Indeed, our analysis shows that companies thathave taken a more aggressive stance on shareholder returns and downsizing assets
have tended to see a stronger subsequent share price performance (Figure 6). We think
this indicates that, on average, companies are unable to use their capital efficiently andhave surplus assets.
There are many different views on why holding surplus cash and deposits or assets has
a negative impact on corporate value. One of the main arguments put forward is thatwhen a company has more cash and deposits than it needs, this gives its management
team too much discretion, and it is therefore more likely to carry out unsuitable
investments or increase expenditure. Another argument is that, because companies tend
to prefer to raise funds internally, from their retained earnings, rather than externally, forexample via borrowings or capital increases, they tend to build up more retained
earnings than they need, which reduces their capital efficiency and corporate value. Bothof these arguments show that when a company has, for whatever reason, a strong
desire to hold cash, this can lead to irrational behavior, and in our view this explains why
holding surplus cash and deposits or assets has a negative impact on corporate value
and share prices. On average, this negative impact is likely to be reduced for companies
with a proactive stance on shareholder returns, and we would therefore expect this kindof proactive stance to boost capital efficiency and corporate value.

Fig. 6: Share price performance, by shareholder returns（Annualized, %）Average excess return, by net shareholder yield
6
4（Annualized, %）2
Average excess return, by total asset growth

1

2
0

0
-2

-1

-4
-6
#1
（Low）

#2

#3

#4

Net shareholder yield#5（High）-2#1(Decrease intotal assets)#2#3
Total asset growth#4#5(Increase intotal assets)

Note: Period of analysis is February 2008 through February 2019. (Left-hand chart) We divided the universe of Russell/Nomura Total Market Index (the benchmark index)
constituent stocks into five groups at the beginning of each month, based on net shareholder yield, with an equal number of stocks in each group. We then calculated theannualized average excess return on each group of stocks (equally weighted, including dividends) versus the benchmark index. (Right-hand chart) We replaced net shareholder
yield, in the left-hand chart, with total asset growth (change in total assets in previous fiscal year and fiscal year before that).
Source: Nomura

In addition, companies that were proactive on shareholder returns in the past tend tohave larger shareholder returns in the future too (Figure 7). More specifically, companies
that carried out share buybacks in the past tend to continue to carry out share buybacks
in the future, and companies that had a higher net shareholder yield in the past tend tohave a higher net shareholder yield in the future. Notably, companies often see their

5Nomura | Nomura Shareholder Yield 70

22 March 2019

share price rise after they have announced a share buyback. By selecting stocks thathave been proactive on shareholder returns in the past, we think investors could expect
strong share price performance in the future too as a result of the share price impact of
future share buybacks.

Fig. 7: Continuity of shareholder returns% of companies that implemented
share buyback in following year

50
40
30
20
10
0
No share buybackin past year

Share buybackin past year(%)
Net shareholder yield in following year

% of companies that implemented
share buyback in following year(%)
60

Net shareholder yield in following year
by net shareholder yield in past year

4

3

2

1

0
# 1 (Low)

#2

#3

#4

# 5 (High)Net shareholder yield in past year

Note: Shows data from the beginning of February 2008 through the beginning of February 2018. (Left-hand chart) We divided the universe of Russell/Nomura Large Cap Index
constituent stocks into two groups at the beginning of each month—companies that had carried out a share buyback over the year to the end of the preceding month and thosethat had not. We then calculated the average percentage (over the period of analysis) of companies in each group that carried out a share buyback over the following year
(based on number of companies). (Right-hand chart) We divided the universe of Russell/Nomura Large Cap Index constituent stocks into five groups at the beginning of eachmonth based on net shareholder yield over the year up to the end of the preceding month, with an equal number of stocks in each group. We then calculated the simple average(over the period of analysis) of the net shareholder yield over the following year (net shareholder payout over the following year divided by market cap at the end of the previous
month) for each group.
Source: Nomura

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22 March 2019

Index performance and characteristics
In this chapter, we look at the performance and main characteristics of the index. It
comprises 70 Japanese large-cap, highly liquid non-financial stocks with a high net
shareholder yield, weighted by market cap (to a maximum of 2%) 1. The index isreconstituted once a year, and companies are rated every year in terms of the extent towhich they are proactive on shareholder returns, based on new data. The index is also
market cap-weighted at the time of its periodic reconstitutions, with individual stock
weightings capped at 2%. This helps to reduce excessive weighting towards specificlarge-cap stocks while reducing the weighting of small-cap stocks, thus bringing down
impact costs and facilitating diversified investment.
On average, the index has outperformed the TOPIX by 3.8% a year over the past 11
years or so (Figure 8). The actual shareholder yield (dividend yield and share buyback
yield) on the index at the time of the periodic reconstitution has been higher than theequivalent yield for TOPIX over the past three years, and the actual yield over the year
following the periodic reconstitution has tended to be higher than for the TOPIX too(Figure 9).

Fig. 8: Index performance: Nomura Shareholder Yield 70(End-2008/1 = 0%)(End-2008/1 = 100)
300

Cumulative excess return (rhs)50

Nomura Shareholder Yield 70
250

40

TOPIX

200

30

150

20

100

10

50

0

0
2008/1-10
2010/1

2012/1

2014/1

Absolute return
Nomura Shareholder
Yield 70
Average return (annualized, %)9.21
Risk (annualized, %)17.10
Return / risk
0.54

2016/1

TOPIX
5.46
18.79
0.29

2018/1
Excess return versus TOPIX
Nomura Shareholder
Yield 70
3.75
5.76
0.65

Note: Period of analysis is February 2008 through February 2019. Based on monthly returns including dividends. We did
not take trading costs into account. Analysis is based on past performance and does not guarantee future performance.
Source: Nomura

1

Please see our index rulebook for details of the index.

7

Nomura | Nomura Shareholder Yield 70

22 March 2019

Fig. 9: Average net shareholder yield at time of periodic reconstitution(%)

Average net shareholder yield over three years
before periodic reconstitution(%)

5

Average net shareholder yield over year after
periodic reconstitution

5
Capital increase yield (sign inversion)
Share buyback yield
Dividend yield

4
3

3

2

2

1

1

0

0

-1

Capital increase yield (sign inversion)
Share buyback yield
Dividend yield

4-1
Nomura Shareholder Yield 70

TOPIX

Nomura Shareholder Yield 70

TOPIX

Note: Period of analysis is periodic reconstitutions from early February 2008 through early February 2018. Left-hand exhibit shows the average over the period of analysis,
weighted by index weightings, for each type of yield (total dividends, total share buybacks, or total capital increases, over the three years before the periodic reconstitution,
divided by market cap at end of previous month, and annualized) for index constituents as of the time of the periodic reconstitution. Right-hand exhibit shows the average overthe period of analysis, weighted by index weightings, for each type of yield (total dividends, total share buybacks, or total capital increases, for the year after the periodic
reconstitution, divided by market cap at end of previous month) for index constituents as of the time of the periodic reconstitution.
Source: Nomura

Finally, we look at how the index has performed in individual fiscal years and at its recent
sector weightings. Since 2008, the index has always delivered positive excess returns inyears in which the TOPIX has fallen, and has often delivered positive excess returns inyears in which the TOPIX has risen too (Figure 10). Companies that provide proactive
shareholder returns tend to be high dividend yield stocks and stocks likely to generatehigher capital efficiency too, and the defensive characteristics of high dividend yieldstocks have provided support whenever economic conditions have been bad, while
expectations of higher ROE have also helped to ensure stable excess returns whenevereconomic conditions have been good.

Fig. 10: Annual return on Nomura Shareholder Yield 70
60(%)

Nomura Shareholder Yield 70
TOPIX

40

20

0

-20

-40
2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018
(FY)

Note: Period of analysis is end-March 2008 through end-February 2019. Index returns include dividends. We did not taketrading costs into account. Analysis is based on past performance and does not guarantee future performance.
Source: Nomura

As of end-February 2019, sector weightings for the Nomura Shareholder Yield 70 varied
more smoothly than those for the TOPIX Ex-Financials (Figure 11). In our opinion, thispartly reflects the wide range of sectors containing companies that are proactive aboutshareholder returns, and the fact that the 2% weighting cap for individual stocks in the

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22 March 2019

Nomura Shareholder Yield 70 means that the substantial weightings of large-cap stocks
in the TOPIX are distributed between a wide range of individual stocks in the Nomura
Shareholder Yield 70 .The particularly high weightings of the IT & services, others andautomobiles & transportation equipment sectors in the Nomura Shareholder Yield 70
reflect proactive shareholder returns at major telecom carriers and automakers that havebeen focusing on shareholder returns as part of their capital policies amid solid earnings.

Fig. 11: Sector weightings of Nomura Shareholder Yield 70
20
15

(%)
Nomura Shareholder Yield 70
TOPIX Ex-Financials

1050Note: As of end-February 2019. Weightings of index constituents based on TOPIX-17 Series sectors.
Source: Nomura

9Nomura | Nomura Shareholder Yield 70

22 March 2019

Appendix A-1
Analyst Certification
We, Sayuri Otsuka and Yasuhiro Shimizu, hereby certify (1) that the views expressed in this Research report accurately reflect
our personal views about any or all of the subject securities or issuers referred to in this Research report, (2) no part of ourcompensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in thisResearch report and (3) no part of our compensation is tied to any specific investment banking transactions performed by
Nomura Securities International, Inc., Nomura International plc or any other Nomura Group company.

Important Disclosures
The lists of issuers that are affiliates or subsidiaries of Nomura Holdings Inc., the parent company of Nomura Securities Co., Ltd., issuers thathave officers who concurrently serve as officers of Nomura Securities Co., Ltd., issuers in which the Nomura Group holds 1% or more of any
class of common equity securities and issuers for which Nomura Securities Co., Ltd. has lead managed a public offering of equity or equity
linked securities in the past 12 months are available at https://www.nomuraholdings.com/report/. Please contact the Research Production
Operation Dept. of Nomura Securities Co., Ltd. for additional information.

Online availability of research and conflict-of-interest disclosures
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from Nomura Securities International, Inc., or Instinet, LLC on 1-877-865-5752. If you have any difficulties with the website, pleaseemail grpsupport@nomura.com for help.
The analysts responsible for preparing this report have received compensation based upon various factors including the firm's total revenues, aportion of which is generated by Investment Banking activities. Unless otherwise noted, the non-US analysts listed at the front of this report are
not registered/qualified as research analysts under FINRA rules, may not be associated persons of NSI or ILLC, and may not be subject to
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Distribution of ratings (Nomura Group)
The distribution of all ratings published by Nomura Group Global Equity Research is as follows:
51% have been assigned a Buy rating which, for purposes of mandatory disclosures, are classified as a Buy rating; 43% of companies with thisrating are investment banking clients of the Nomura Group*. 0% of companies (which are admitted to trading on a regulated market in the EEA)
with this rating were supplied material services** by the Nomura Group.
43% have been assigned a Neutral rating which, for purposes of mandatory disclosures, is classified as a Hold rating; 54% of companies withthis rating are investment banking clients of the Nomura Group*. 0% of companies (which are admitted to trading on a regulated market in the
EEA) with this rating were supplied material services by the Nomura Group
6% have been assigned a Reduce rating which, for purposes of mandatory disclosures, are classified as a Sell rating; 15% of companies withthis rating are investment banking clients of the Nomura Group*. 0% of companies (which are admitted to trading on a regulated market in the
EEA) with this rating were supplied material services by the Nomura Group.
As at 31 December 2018.
*The Nomura Group as defined in the Disclaimer section at the end of this report.
** As defined by the EU Market Abuse Regulation
Distribution of ratings (Instinet, LLC)
The distribution of all ratings published by Instinet, LLC Equity Research is as follows:
55% have been assigned a Buy rating which, for purposes of mandatory disclosures, are classified as a Buy rating; Instinet LLC has provided
investment banking services to 0% of companies with this rating within the previous 12 months.
41% have been assigned a Neutral rating which, for purposes of mandatory disclosures, is classified as a Hold rating; Instinet LLC has provided
investment banking services to 0% of companies with this rating within the previous 12 months.
4% have been assigned a Reduce rating which, for purposes of mandatory disclosures, are classified as a Sell rating; Instinet LLC has provided
investment banking services to 0% of companies with this rating within the previous 12 months.

Definition of Nomura Group's equity research rating system and sectors
The rating system is a relative system, indicating expected performance against a specific benchmark identified for each individual stock,subject to limited management discretion. An analyst’s target price is an assessment of the current intrinsic fair value of the stock based on an
appropriate valuation methodology determined by the analyst. Valuation methodologies include, but are not limited to, discounted cash flow
analysis, expected return on equity and multiple analysis. Analysts may also indicate expected absolute upside/downside relative to the statedtarget price, defined as (target price - current price)/current price.

STOCKSA rating of 'Buy', indicates that the analyst expects the stock to outperform the Benchmark over the next 12 months. A rating of 'Neutral',indicates that the analyst expects the stock to perform in line with the Benchmark over the next 12 months. A rating of 'Reduce', indicates thatthe analyst expects the stock to underperform the Benchmark over the next 12 months. A rating of 'Suspended', indicates that the rating, target

10Nomura | Nomura Shareholder Yield 70

22 March 2019price and estimates have been suspended temporarily to comply with applicable regulations and/or firm policies. Securities and/or companies
that are labelled as 'Not rated' or shown as 'No rating' are not in regular research coverage. Investors should not expect continuing or
additional information from Nomura relating to such securities and/or companies. Benchmarks are as follows: United States/Europe/Asia exJapan: please see valuation methodologies for explanations of relevant benchmarks for stocks, which can be accessed
at: http://go.nomuranow.com/research/globalresearchportal/pages/disclosures/disclosures.aspx; Global Emerging Markets (ex-Asia): MSCIEmerging Markets ex-Asia, unless otherwise stated in the valuation methodology; Japan: Russell/Nomura Large Cap.

SECTORSA 'Bullish' stance, indicates that the analyst expects the sector to outperform the Benchmark during the next 12 months. A 'Neutral' stance,
indicates that the analyst expects the sector to perform in line with the Benchmark during the next 12 months. A 'Bearish' stance, indicates thatthe analyst expects the sector to underperform the Benchmark during the next 12 months. Sectors that are labelled as 'Not rated' or shown as'N/A' are not assigned ratings. Benchmarks are as follows: United States: S&P 500; Europe: Dow Jones STOXX 600; Global Emerging
Markets (ex-Asia): MSCI Emerging Markets ex-Asia. Japan/Asia ex-Japan: Sector ratings are not assigned.

Target Price
A Target Price, if discussed, indicates the analyst’s forecast for the share price with a 12-month time horizon, reflecting in part the analyst's
estimates for the company's earnings. The achievement of any target price may be impeded by general market and macroeconomic trends, andby other risks related to the company or the market, and may not occur if the company's earnings differ from estimates.

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transactions involving Japanese equities are subject to a sales commission (all figures on a tax-inclusive basis) of up to 1.404% of thetransaction amount or a commission of ¥2,808 for transactions of ¥200,000 or less, while transactions involving investment trusts are subject tovarious fees, such as commissions at the time of purchase and asset management fees (trust fees), specific to each investment trust). In
addition, all products carry the risk of losses owing to price fluctuations or other factors. Fees and risks vary by product. Please thoroughly read
the written materials provided, such as documents delivered before making a contract, listed securities documents, or prospectuses.
-----Transactions involving Japanese equities (including Japanese REITs, Japanese ETFs, and Japanese ETNs) are subject to a sales commissionof up to 1.404% of the transaction amount (or a commission of ¥2,808 for transactions of ¥200,000 or less). When Japanese equities arepurchased via OTC transactions (including offerings), only the purchase price shall be paid, with no sales commission charged. However,Nomura Securities may charge a separate fee for OTC transactions, as agreed with the customer. Japanese equities carry the risk of losses
owing to price fluctuations. Japanese REITs carry the risk of losses owing to fluctuations in price and/or earnings of underlying real estate.
Japanese ETFs carry the risk of losses owing to fluctuations in the underlying indexes or other benchmarks.
Transactions involving foreign equities are subject to a domestic sales commission of up to 1.026% of the transaction amount (which equals the
local transaction amount plus local fees and taxes in the case of a purchase or the local transaction amount minus local fees and taxes in thecase of a sale) (for transaction amounts of ¥750,000 and below, maximum domestic sales commission is ¥7,668). Local fees and taxes inforeign financial instruments markets vary by country/territory. When foreign equities are purchased via OTC transactions (including offerings),
only the purchase price shall be paid, with no sales commission charged. However, Nomura Securities may charge a separate fee for OTC
transactions, as agreed with the customer. Foreign equities carry the risk of losses owing to factors such as price fluctuations and foreignexchange rate fluctuations.
Margin transactions are subject to a sales commission of up to 1.404% of the transaction amount (or a commission of ¥2,808 for transactions of¥200,000 or less), as well as management fees and rights handling fees. In addition, long margin transactions are subject to interest on thepurchase amount, while short margin transactions are subject to fees for the lending of the shares borrowed. A margin equal to at least 30% of
the transaction amount (at least 33% for online transactions) and at least ¥300,000 is required. With margin transactions, an amount up toroughly 3.3x the margin (roughly 3x for online transactions) may be traded. Margin transactions therefore carry the risk of losses in excess of themargin owing to share price fluctuations. For details, please thoroughly read the written materials provided, such as listed securities documents
or documents delivered before making a contract.
Transactions involving convertible bonds are subject to a sales commission of up to 1.08% of the transaction amount (or a commission of¥4,320 if this would be less than ¥4,320). When convertible bonds are purchased via OTC transactions (including offerings), only the purchaseprice shall be paid, with no sales commission charged. However, Nomura Securities may charge a separate fee for OTC transactions, as
agreed with the customer. Convertible bonds carry the risk of losses owing to factors such as interest rate fluctuations and price fluctuations in
the underlying stock. In addition, convertible bonds denominated in foreign currencies also carry the risk of losses owing to factors such as
foreign exchange rate fluctuations.
When bonds are purchased via public offerings, secondary distributions, or other OTC transactions with Nomura Securities, only the purchaseprice shall be paid, with no sales commission charged. Bonds carry the risk of losses, as prices fluctuate in line with changes in market interest
rates. Bond prices may also fall below the invested principal as a result of such factors as changes in the management and financial
circumstances of the issuer, or changes in third-party valuations of the bond in question. In addition, foreign currency-denominated bonds also
carry the risk of losses owing to factors such as foreign exchange rate fluctuations.
When Japanese government bonds (JGBs) for individual investors are purchased via public offerings, only the purchase price shall be paid, withno sales commission charged. As a rule, JGBs for individual investors may not be sold in the first 12 months after issuance. When JGBs forindividual investors are sold before maturity, an amount calculated via the following formula will be subtracted from the par value of the bondplus accrued interest: (1) for 10-year variable rate bonds, an amount equal to the two preceding coupon payments (before tax) x 0.79685 will be
used, (2) for 5-year and 3-year fixed rate bonds, an amount equal to the two preceding coupon payments (before tax) x 0.79685 will be used.
When inflation-indexed JGBs are purchased via public offerings, secondary distributions (uridashi deals), or other OTC transactions with
Nomura Securities, only the purchase price shall be paid, with no sales commission charged. Inflation-indexed JGBs carry the risk of losses, as
prices fluctuate in line with changes in market interest rates and fluctuations in the nationwide consumer price index.The notional principal of
inflation-indexed JGBs changes in line with the rate of change in nationwide CPI inflation from the time of its issuance. The amount of the
coupon payment is calculated by multiplying the coupon rate by the notional principal at the time of payment. The maturity value is the amountof the notional principal when the issue becomes due. For JI17 and subsequent issues, the maturity value shall not undercut the face amount.
Purchases of investment trusts (and sales of some investment trusts) are subject to a purchase or sales fee of up to 5.4% of the transaction
amount. Also, a direct cost that may be incurred when selling investment trusts is a fee of up to 2.0% of the unit price at the time of redemption.
Indirect costs that may be incurred during the course of holding investment trusts include, for domestic investment trusts, an asset managementfee (trust fee) of up to 5.4% (annualized basis) of the net assets in trust, as well as fees based on investment performance. Other indirect costs
may also be incurred. For foreign investment trusts, indirect fees may be incurred during the course of holding such as investment company
compensation.
Investment trusts invest mainly in securities such as Japanese and foreign equities and bonds, whose prices fluctuate. Investment trust unit
prices fluctuate owing to price fluctuations in the underlying assets and to foreign exchange rate fluctuations. As such, investment trusts carry
the risk of losses. Fees and risks vary by investment trust. Maximum applicable fees are subject to change; please thoroughly read the writtenmaterials provided, such as prospectuses or documents delivered before making a contract.
In interest rate swap transactions and USD/JPY basis swap transactions (“interest rate swap transactions, etc.”), only the agreed transaction
payments shall be made on the settlement dates. Some interest rate swap transactions, etc. may require pledging of margin collateral. In someof these cases, transaction payments may exceed the amount of collateral. There shall be no advance notification of required collateral value or
collateral ratios as they vary depending on the transaction. Interest rate swap transactions, etc. carry the risk of losses owing to fluctuations inmarket prices in the interest rate, currency and other markets, as well as reference indices. Losses incurred as such may exceed the value ofmargin collateral, in which case margin calls may be triggered. In the event that both parties agree to enter a replacement (or termination)transaction, the interest rates received (paid) under the new arrangement may differ from those in the original arrangement, even if terms other13Nomura | Nomura Shareholder Yield 70

22 March 2019

than the interest rates are identical to those in the original transaction. Risks vary by transaction. Please thoroughly read the written materials
provided, such as documents delivered before making a contract and disclosure statements.
In OTC transactions of credit default swaps (CDS), no sales commission will be charged. When entering into CDS transactions, the protection
buyer will be required to pledge or entrust an agreed amount of margin collateral. In some of these cases, the transaction payments may exceed
the amount of margin collateral. There shall be no advance notification of required collateral value or collateral ratios as they vary depending on
the financial position of the protection buyer. CDS transactions carry the risk of losses owing to changes in the credit position of some or all of
the referenced entities, and/or fluctuations of the interest rate market. The amount the protection buyer receives in the event that the CDS is
triggered by a credit event may undercut the total amount of premiums that he/she has paid in the course of the transaction. Similarly, theamount the protection seller pays in the event of a credit event may exceed the total amount of premiums that he/she has received in thetransaction. All other conditions being equal, the amount of premiums that the protection buyer pays and that received by the protection seller
shall differ. In principle, CDS transactions will be limited to financial instruments business operators and qualified institutional investors.
No account fee will be charged for marketable securities or monies deposited. Transfers of equities to another securities company via the Japan
Securities Depository Center are subject to a transfer fee of up to ¥10,800 per issue transferred depending on volume.

Nomura Securities Co., Ltd.
Financial instruments firm registered with the Kanto Local Finance Bureau (registration No. 142)
Member associations: Japan Securities Dealers Association; Japan Investment Advisers Association; The Financial Futures Association ofJapan; and Type II Financial Instruments Firms Association.
The Nomura Group manages conflicts with respect to the production of research through its compliance policies and procedures (including, but
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Additional information regarding the methodologies or models used in the production of any investment recommendations contained
within this document is available upon request by contacting the Research Analysts listed on the front page. Disclosures information
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