NOMURA-BPI/Extended
CROSS-ASSET

Index rulebook

Global Markets Research
27 September 2019
Visit Nomura Connects for our global
thought leadership.

Key features of the NOMURA-BPI/Extended•• The Nomura Bond Performance Index Extended (NOMURA-BPI/Extended) was
developed to reflect the performance of the entire secondary market for publicly offered,yen-denominated, fixed-income bonds rated as equivalent to Triple B or higher issued inJapan.
• The portfolio of bonds that makes up the index (hereafter, the index portfolio) is
determined based on given inclusion criteria.

Research analysts
Japan Bond Indices
Index Operations Dept. - NSC
idx_mgr@jp.nomura.com+81 3 6703 3986

• Securities in the NOMURA-BPI/Extended are classified into eight sectors: JGBs,
municipals, government-guaranteed, bank debentures, corporate bonds, Samurai bonds(yen-denominated foreign bonds), MBS and ABS.
• The performance of NOMURA-BPI/Extended is calculated based on the marked-to-market
valuation of the bonds that make up the index portfolio.
• The NOMURA-BPI/Extended has sub-index portfolios by sectors and by term to maturity.
Their performance indices and portfolio indicators are also released.
• Bonds included in the NOMURA-BPI/Extended are reviewed monthly.

Major rule changes, additions, etc.
[September 27, 2019]• Relaxation of the exclusion criteria with regard to TOKYO PRO-BOND Market listed bonds• Established First entry ruleSee Appendix A-1 for analyst certification, important disclosures and the status of non-US analysts.

Nomura | NOMURA-BPI/Extended

27 September 2019

Contents
1. Introduction ......................................................................................................................................... 3
2. Sub-indices ......................................................................................................................................... 4
2.1 NOMURA-BPI/Extended Sectors ................................................................................................................... 4
2.2 Term to maturity .............................................................................................................................................. 5
2.3 Corporate bonds industry classifications ........................................................................................................ 6
2.4 Ratings (corporate bonds and Samurai bonds) .............................................................................................. 6

3. Scheduled portfolio reconstitution ....................................................................................................... 9
3.1 Scheduled reconstitution date ........................................................................................................................ 9
3.2 Portfolio determination date ............................................................................................................................ 9
3.3 Scheduled reconstitution base date ............................................................................................................... 9
3.4 Portfolio reconstitution announcement ........................................................................................................... 9

4. Portfolio inclusion/exclusion criteria .................................................................................................. 10
4.1 Portfolio inclusion criteria for next month...................................................................................................... 10
4.2 Portfolio exclusion criteria for next month ..................................................................................................... 12

5. Unscheduled portfolio reconstitution ................................................................................................. 14
5.1 Exclusion of defaulted debt and fully called bonds ....................................................................................... 14
5.2 Other criteria for unscheduled reconstitution ................................................................................................ 14
5.3 Announcement of unscheduled portfolio reconstitution ................................................................................ 14

6. Calculating index value ..................................................................................................................... 15
6.1 Method for calculating index ......................................................................................................................... 15
6.2 Return ........................................................................................................................................................... 16
6.3 Reference for obtaining market data ............................................................................................................ 17
6.4 Key indices and data released...................................................................................................................... 18

7. Definition of NOMURA-BPI/Extended indicators .............................................................................. 19
7.1 Definition of issue-specific return-risk indicators .......................................................................................... 19
7.2 Definition of portfolio indicators..................................................................................................................... 21

Appendix: Past rules on NOMURA-BPI/Extended index composition .................................................. 22
Sector Changes in the NOMURA-BPI/Extended Total ....................................................................................... 22
Past Changes in NOMURA-BPI/Extended Inclusion Criteria ............................................................................. 23
Changes in Pricing .............................................................................................................................................. 23

Data delivery services ........................................................................................................................... 24
NOMURA-BPI/Extended data providers ............................................................................................................. 24
Detailed data including next month’s index portfolios......................................................................................... 24
Contact for further inquiries ................................................................................................................................ 25

Policies with regard to NSC’s indices ................................................................................................... 26
Appendix A-1 ............................................................................................................................................ 27

2

Nomura | NOMURA-BPI/Extended

27 September 2019

1. Introduction
The Nomura Bond Performance Index Extended (NOMURA-BPI/Extended) is a bondperformance index that reflects the performance of the entire secondary market for
publicly offered, yen-denominated, fixed-income bonds issued in Japan. The Index
Operations Dept. (IOD) in Nomura Securities Co., Ltd. (NSC) is the Administrator of the
NOMURA-BPI/Extended, and Nomura Research Institute, Ltd. (NRI) serves as the
Calculation Agent.
The IOD has primary responsibility for the daily calculation of the bond performanceindices, as well as their production and operation. Specifically, the IOD, in its role as
operations manager:• Maintains records of the index weightings of all constituents;• Reviews the index portfolios according to the inclusion/exclusion criteria, and replaces
securities in these portfolios as necessary, reflecting these changes in the performanceand other indicators; it reviews the index portfolio inclusion criteria.
• Announces changes in securities included in the index portfolios, which are determined
as a result of daily operations management and scheduled reviews; and• Distributes the index portfolio performances, either through NRI’s data delivery service
or on its own.

The NOMURA-BPI/Extended is meant to be used as:• A tool for determining investment policies (asset allocation strategies);• A tool for determining investment manager structure;• An investment management benchmark;• A tool for portfolio management;• An investment performance indicator; and• A risk management tool.

3

Nomura | NOMURA-BPI/Extended

27 September 2019

2. Sub-indices
The NOMURA-BPI/Extended has sub-index portfolios by sectors, by term to maturity, byindustry and by ratings. The IOD computes and releases sub-index performance indicesand portfolio indicators for each of these portfolios.

Fig.1: The structure of NOMURA-BPI/Extended

Source: NSC

Listed below are the NOMURA-BPI/Extended sub-indices, which are subject tochange:NOMURA-BPI/Extended (Sectors) <Industry> <Rating> <Term to maturity>(There is a space between each classification. If each <classification> describes “all”,
the name is optional.)

2.1 NOMURA-BPI/Extended Sectors
Securities in the NOMURA-BPI/Extended are classified into eight sectors (Figure 1).
• JGBsThe portfolio includes bonds issued by the Japanese government. It is further
classified into sub-sectors by the term to maturity at the time of the issuance (2yr,
5yr, 10yr and 20yr).
• Municipals
The portfolio includes bonds issued by municipal governments and the Japan
Finance Organization for Municipalities (including the former Japan FinanceCorporation for Municipal Enterprises and the Japan Finance Organization for
Municipal Enterprises), but excludes issues whose principal and interest are
guaranteed by the Japanese government1. Bonds included in this sector areclassified into those issued by municipal governments and other issuers. Municipal
government bonds are further classified into those issued by the Tokyo Metropolitan

1

These bonds are classified as government-guaranteed bonds.

4Nomura | NOMURA-BPI/Extended

27 September 2019

government, five major (government-designated) cities and other municipal
governments.
• Government guaranteed bonds
The portfolio includes bonds issued by public institutions and special corporations
whose principal and interest are guaranteed by the Japanese government2.
Government-guaranteed bonds are classified into municipal public corporation
bonds and other government-guaranteed bonds.
• Bank debentures
The portfolio includes bonds issued by a specific group of financial institutions(generally referred to as publicly-offered bank debentures). The issuance of thesebonds is governed by special laws (Long-Term Credit Bank Law and others). Bank
debentures are further classified into specific bank debentures3 and other bankdebentures.
• Corporate bonds
The portfolio includes bonds issued by domestic corporations and those issued bypublic institutions and special corporations whose principal and interest are notguaranteed by the Japanese government. Corporates’ sub-indices are classified bytheir industrial sector and ratings.
• Samurai bonds (yen-denominated foreign bonds )The portfolio includes JPY-denominated bonds issued in Japan by non-Japaneseissuers. Samurai bonds’ sub-indices are classified by their ratings.
• MBS (Mortgage-Backed Securities)
The portfolio includes securities backed by real estate loans (mortgages).
• ABS (Asset-Backed Securities)
The portfolio includes securities backed by various types of assets. ABS areclassified into life insurance fund (capital securities) bonds/subordinated-loanbacked bonds, REIT-corporation bonds and securities backed by fiscal-loan funds.
Apart from the sector indices noted above, NOMURA-BPI/Extended has sub-indicessuch as NOMURA-BPI/Extended excluding JGBs, NOMURA-BPI/Extended
excluding specific bank debentures, NOMURA-BPI/Extended excluding ABS,
NOMURA-BPI/Extended excluding MBS, and NOMURA-BPI/Extended excluding
MBS/ABS.

2.2 Term to maturity
The NOMURA-BPI/Extended is classified into seven sectors based on the numberof years remaining until maturity as of the last day of the month (Figure 2). It also
has sub-indices for term to maturity with one-year intervals, between year one andyear 40. There are two types of terms to maturity, one based on scheduled
redemption and the other based on early redemption. The first is the term until the
final redemption date, and the latter is the term to maturity calculated using theweighted average of the future principal cash flow. The NOMURA-BPI/Extended
uses the one based on scheduled redemption for classifying bonds by term tomaturity.

2

Public institution bonds and specific corporation bonds whose principal and interest are not guaranteed by theJapanese government are classified as corporate bonds.
3

Specific bank debentures are those rated BBB or lower by all of the four rating agencies as of the portfolio
determination date. For bank debentures that are not rated, ratings assigned to the financial institution’s senior
bonds or its issuer rating are referenced.

5

Nomura | NOMURA-BPI/Extended

27 September 2019

Fig 2: Portfolio classification by term to maturity
Classification
Short-term (1-3yrs)
Medium-term (3-7yrs)
Long-term (7yrs -)Long-term (7-11yrs)
Super long-term (11yrs -)Term to maturity (scheduled redemption)
1yr or more and less than 3yrs
3yrs or more and less than 7yrs
7yrs or more
7yrs or more and less than 11yrs
11yrs or more
Super long-term (1111yrs or more and15yrs)
less than 15yrs
Super long-term
15yrs or more
(15yrs -)Source: NSC

2.3 Corporate bonds industry classifications
Corporate bonds are classified by industry, based on 34 classifications (i.e., the TSE33
industry classifications and FILP Agency bond and others sector4) (Figure 3).

Fig 3: NOMURA-BPI/Extended corporates industry classifications
Fishery, Agriculture & Forestry
Construction
Textiles & Apparels
Chemicals
Oil & Coal Products
Glass & Ceramics Products
Nonferrous Metals
MachineryTransportation Equipment
Other Products
Land Transportation
Air Transportation
Information & Communication
Retail Trade
Securities
Other Financing Business
Services

MiningFoods
Pulp & Paper
Pharmaceutical
Rubber Products
Iron & Steel
Metal ProductsElectric Appliances
Precision Instruments
Electric Power & Gas
Marine Transportation
Warehousing & Harbor
Transportation Services
Wholesale Trade
Banks
Insurance
Real Estate
FILP Agency bonds5 and others

Source: NSC

2.4 Ratings (corporate bonds and Samurai bonds)
2.4.1 Classification by ratings
Corporate bonds and Samurai bonds included in the NOMURA-BPI/Extended areclassified into sub-indices by their ratings. The classification refers to the individual
issue rating, not to issuer rating (Figure 4). For bonds that are not rated by a ratings
agency, the classification may refer to deemed ratings. Long-term senior debt ratingsand issuer ratings are not considered in the classification.


Deemed ratings in NOMURA-BPI/Extended

For bonds that are not rated by a ratings agency (hereafter, “unrated bonds”), theclassification may refer to a rating considered equivalent to one assigned to otherdebt from the same issuer (hereafter referred to as “deemed rating”), provided theoriginal and deemed ratings meet all of the following conditions:

4

FLIP stands for “Fiscal Investment and Loan Program”

5

Bonds issued by a corporation that is subject to governing law for incorporation and not listed in the stock market.

6Nomura | NOMURA-BPI/Extended

27 September 2019

• Both are assigned to the same issuer• Both are assigned under the same terms (i.e., subject to the same6
specific financial clauses and credit enhancements)• Both are rated by the same ratings agency, and,• An issue assigned the original rating is dated one year or longer until
scheduled redemption.

Deemed ratings are referred to as “X-equivalent.”

Fig 4: Rating classifications

SectorCriteria
ratingsfor・Highest rating
・Lowest rating
Corporate
bonds

・R&I rating
・JCR rating
・Moody’s rating
・S&P rating・Highest rating
・Lowest rating
Samuraibonds

・R&I rating
・JCR rating
・Moody’s rating
・S&P rating

Corporatebonds &
Samuraibonds

・Highest rating

assigning

Classification

AAA--AA-equivalent
AAA--A
AAA--BBB
AAA--BB
AAA
AA
A
BBB
BB
Under BNo ratingAAA--AA
AAA--A
AAA--BBB
AAA--BB
AAA
AA
A
BBB
BB
Under BNo ratingAAA--AA
AAA—A
AAA-BBB
AAA
AA
A
BBB

Source: NSC

2.4.2 Criteria for assigning ratings7 Classification by highest rating
The classification refers to the highest of the ratings assigned by R&I, JCR, Moody’s andS&P.
6

In-substance defeasance issues are grouped separately from unsecured senior debt from the same issuer.

7

If the classification of criteria for assigning ratings is “the highest rating”, only “AAA-AA”, ”AAA-A”, ”AAA-BBB”,“AAA”, “AA”, “A”, and “BBB” fall under its category..

7

Nomura | NOMURA-BPI/Extended

27 September 2019

Classification by lowest rating

The classification refers to the lowest of the ratings assigned by R&I, JCR, Moody’s andS&P.


Classification by ratings agency

The classification refers to ratings among those assigned by the same ratings agency.

8

Nomura | NOMURA-BPI/Extended

27 September 2019

3. Scheduled portfolio reconstitution
The IOD reviews and reconstitutes the NOMURA-BPI/Extended portfolios every month.
Next month’s portfolios are determined on the portfolio determination day of each month.

3.1 Scheduled reconstitution date
NOMURA-BPI/Extended portfolios are reconstituted on the first business day of themonth (scheduled reconstitution date), with the inclusion/exclusion implemented after thebond market closes on the business day before the scheduled reconstitution date.

3.2 Portfolio determination date
In principle, next month’s portfolio determination date is one of the following dates,
whichever is the earlier:

The business day after the 25th day of the month

The three business days before the last business day of the month

However, the portfolio determination date may be changed if a JGB auction that may
have a non-negligible impact is held between the day after the determination date andthe last day of the month. Any such changes will be announced in advance.

3.3 Scheduled reconstitution base date
Next month’s portfolio base is determined on the day before the portfolio determination
date. The new portfolio structure is determined on the portfolio determination date basedon disclosed information available as of the scheduled reconstitution base date.

3.4 Portfolio reconstitution announcement
Information about scheduled portfolio reconstitution is announced through NRI’s datadelivery service and other media, except in cases where definite information on new
portfolios is unavailable due to unexpected circumstances.

9

Nomura | NOMURA-BPI/Extended

27 September 2019

4. Portfolio inclusion/exclusion criteria
4.1 Portfolio inclusion criteria for next month8
The NOMURA-BPI/Extended incorporates all securities that meet the inclusion criteria
listed in Figure 5 as of the scheduled reconstitution base date into the index portfolios forthe following month.
Fig. 5: NOMURA-BPI/Extended inclusion criteria

Issuance process
Currency
denomination
CouponOutstanding facevalue
Term to maturity(scheduled
redemption)
RatingIssue datePublicly offered bonds issued in Japan
JPY
Fixed
JPY1 billion or more
1 year or more
JGBs, municipals,… No rating criteria
government-guaranteedbonds, bank debentures
Corporate bonds,… Equivalent to Triple B
Samurai bonds, MBS,or higher
ABS
JGBs
Issues until the portfolio
determination date9
Bank
Issues until the last day of thedebenturesmonth two months before theportfolio determination date
OthersIssues until the last day of themonth prior to the portfolio
determination date

Source: NSC

8

The NOMURA-BPI/Extended is an index measuring the performance of the entire secondary bond market, andthe inclusion criteria have been revised based on changes in the market environment. Please see Appendix 2 formore details on changes in the inclusion criteria.
9This rule will be implemented from the April 2018 portfolio reconstitution date. Until then, JGB issues until the last
day of the month of the portfolio determination date will be eligible for the following month’s index portfolio
inclusion.

10

Nomura | NOMURA-BPI/Extended

27 September 2019

4.1.1 Issuance process
The NOMURA-BPI/Extended is designed to reflect the performance of all publicly offeredbonds issued in Japan. Note that it excludes the following types of bonds from the poolof eligible securities:• JGBs not publicly offered in the market (i.e., JGBs tailored for retail investors and sold
New OTC sales system, those issued for BOJ Rollover)• JGBs for Subscription/Contribution• Corporate bonds offered specifically to retail investors• Municipal bonds issued specifically to local residents (mini municipal bonds)• Convertible bonds, warrant bonds• Collateralized bond obligations (CBO), Collateralized loan obligations (CLO)• MBS that are neither JHF MBS nor GHLC MBS, both of which are issued by the Japan
Housing Finance Agency (JHF; formerly the Government Housing Loan Corporation, or
GHLC)• ABS that do not fall into any of these categories; life insurance fund bonds, life
insurance subordinate loan ABS, investment corporation bonds and FILP ABS• Bonds listed in TOKYO PRO-BOND Market and subject to disclosure rules of the
Financial Instruments and Exchange Act, namely the securities that are not subject tothe disclosure exemption stated in Article 3 of the Financial Instruments and ExchangeAct.
4.1.2 Currency denomination
The NOMURA-BPI/Extended includes JPY-denominated bonds in terms of redemption,
principal and interest payments.
4.1.3 Coupon
The NOMURA-BPI/Extended only covers fixed-coupon bonds (i.e., coupon payments
remain unchanged from the issuance until maturity). Note that it does not include thefollowing types of bonds:• Step-up bonds• Fix-to-Float bonds (issued as fixed-coupon bonds, with coupon payments changed tovariable from the first call date)• Discount bonds• Deferred interest bonds• Deferrable bonds• Perpetual bonds
4.1.4 Outstanding face value
The NOMURA-BPI/Extended only includes bonds with an outstanding face value
amount10 of JPY1bn or more as of the last business day of the month following thescheduled reconstitution base date.
4.1.5 Term to maturity (scheduled redemption)
The NOMURA-BPI/Extended only includes bonds that are dated 365 days or more after
the last day of the month following the scheduled reconstitution base date to the full
redemption date. 29 February is also counted in.
4.1.6 Rating
For corporate bonds, Samurai bonds, MBS and ABS, a rating equivalent to Triple B or
higher in terms of their highest ratings as of the scheduled reconstitution base date isrequired for inclusion in the NOMURA-BPI/Extended index portfolio. Please see “2.4Ratings (corporate bonds and Samurai bonds)” for more details on rating requirements.
4.1.7 Issue date
Inclusion criteria in terms of issue date are as follows:• JGBs: Issues until the portfolio determination date1110Additional issuance after the portfolio determination date is disregarded.

11

This rule will be implemented from the May 2018 portfolio determination day (24 April, 2018). Until then, JGB
issues until the last day of the month of the portfolio determination date will be eligible for the following month’s
index portfolio inclusion.

11

Nomura | NOMURA-BPI/Extended

27 September 2019

• Bank debentures: Issues until the last day of the month two months before theportfolio’s determination date
• Other bonds: Issues until the last day of the month before the portfolio’s determinationdate
4.1.8 Other policies related to eligibility for inclusion
 Subordinate bonds
The difference between senior and subordinated bonds is not taken into account inselecting bonds.
Basel III-compliant bonds

The presence or absence of bail-in clauses and/or write-off clauses for non-viability is notconsidered in the selection of bonds.
Callable/puttable bonds

The presence or absence of callable clauses, prepayment clauses or puttable clauses is
not considered in the selection of bonds.
4.1.9 First Entry RuleAs a general rule, for bonds whose eligibility cannot be determined by the inclusion
criteria set forth in this rule book, an investigation is conducted within a certain
monitoring period from the issue date of the relevant bond, and whether or not they are
to be included is determined. Announcements are made before and after the monitoring
period. However, if public information, such as laws or regulation changes, clarifies therationality for inclusion of the relevant bond, an announcement will be made without
setting a monitoring period.
4.1.10 Other potential for inclusion
If an event that is material in terms of portfolio inclusion occurs after the portfolio
determination date, the issue in question may be included in the next month’s portfolio.
Any such change would be announced in advance.

4.2 Portfolio exclusion criteria for next month
Any issues that fall short of the inclusion criteria (Figure 5) as of the scheduledreconstitution base date will be excluded from the index portfolio in the following month.
Listed below are specific criteria for exclusion from the index portfolio.
4.2.1 Outstanding face value
Debt issues, whose outstanding face value amount12 will decrease to levels below
JPY1bn on the last business day of the month following the scheduled reconstitution
base date, will be excluded from the index portfolio.
For the JHF (GHLC) MBS sector, the remaining face value amount (i) at the lastbusiness day of the next month is calculated based on a performance factor13 and arescheduled factor14, which are announced by the JHF:

Remaining face value amount 𝑖 (last business day of next month) =Original face value amount 𝑖 × performance factor𝑖 (next month)
For issues for which the next month’s performance factor information is not available by
the scheduled reconstitution base date, the remaining face value amount at the lastbusiness day of the next month is calculated using a projected scheduled factor for the
next month defined as below:

12

Additional issuance after the portfolio determination date is disregarded.

13

For MBS, the performance factor indicates the ratio of remaining principal to the original face amount (theprojected repayment amount of the current month is considered). Data on the performance factor for the next
month are announced on the 25th of every month (or the prior business day if the 25th is a weekend or holiday),provided by each MBS issue on the JHF website.
14

The rescheduled factor indicates the ratio of remaining principal to the original face amount, which is updated
every six months by reflecting repayment progress since issuance. The rescheduled factor for each MBS issue isannounced on the JHF website on the 25th of every month (or the prior business day if the 25th is a weekend or
holiday).

12

Nomura | NOMURA-BPI/Extended

27 September 2019

Remaining face value amount 𝑖 (last business day of next month)= Original face value amount 𝑖× projected scheduled factor𝑖 (next month)
Projected scheduled factor𝑖 (next month)= Performance factor (this month)𝑖
Rescheduled factor𝑖 (next month)×
Rescheduled factor𝑖 (this month)
In addition, the projected scheduled factor (i) of the next month is set to 0% when thenext month corresponds to the clean-up call month (April or October) of the MBS issue(i), and its performance factor (i) of this month (March or September) becomes 10% orless at the scheduled reconstitution base date.
4.2.2 Term to maturity (scheduled redemption)
The NOMURA-BPI excludes bonds of less than 365 days until the full redemption dateas of the last day of the month following the scheduled reconstitution base date. 29
February is also counted in.
4.2.3 Credit rating
For corporate bonds, Samurai bonds, MBS and ABS, bonds that have lost all their Triple
B grades (i.e., downgraded to Double B or lower) in terms of their highest ratings as ofthe scheduled reconstitution base date would be excluded from the NOMURABPI/Extended index portfolio. Please see “2.4 Ratings (corporate bonds and Samurai
bonds)” for more details on rating requirements.
4.2.4 Other potential for exclusion
If a full early redemption and/or a default – and/or a similar material credit event – occurs
after the portfolio determination date, the issue in question may be excluded from thenext month index portfolio. Any such change would be announced in advance.

13

Nomura | NOMURA-BPI/Extended

27 September 2019

5. Unscheduled portfolio reconstitution
In principle, index portfolios for the next month, as determined on the portfolio
determination date, will remain unchanged. However, these planned portfolios may besubject to an unscheduled reconstitution, which will be implemented between theportfolio determination date and the last business day of the month, if the IOD becomesaware that a security in the portfolios for the next month meets any of the following
criteria:

5.1 Exclusion of defaulted debt and fully called bonds
Default
In the event of a default, the debt issue concerned would be removed from the
NOMURA-BPI/Extended index portfolio the first business day after its last trading day.

Full early redemption
Callable bonds are excluded from the index portfolio on the day they are called fully.

5.2 Other criteria for unscheduled reconstitution
A material event other than these explained in 5.1 may lead to an unscheduled portfolio
reconstitution. Any such change would be announced in advance.

5.3 Announcement of unscheduled portfolio reconstitution
Information about unscheduled portfolio reconstitution is announced through NRI’s datadelivery service and other media, except in cases where definite information on such achange is unavailable until that actually takes place due to unexpected circumstances.

14

Nomura | NOMURA-BPI/Extended

27 September 2019

6. Calculating index value
6.1 Method for calculating index
6.1.1 Total investment return index (Total index)
This is an index of investment returns including capital and income gains. Assuming theindex portfolio was purchased on the last business day of the previous month at a value
including accrued interest, coupon payments and redemptions are added the market
value amount (including accrued interest), which is announced as the index value for theday. All coupon payments and redemptions are assumed to be received in cash without
interest on the day they are made, and are reinvested in the following portfolio
reconstitution. Coupon payments made on weekends and holidays are assumed to bemade on the following business days.

BPItoday  BPIe.l .m. 

MVLttoday   CF( e.l .m.,today )MVLt( e.l .m.)

Where

𝑀𝑉𝐿𝑡(𝑖) = 𝑃(𝑖) × 𝐴𝑚𝑜𝑢𝑛𝑡(𝑖) ×1
100

𝐵𝑃𝐼(𝑡𝑜𝑑𝑎𝑦)： Total index value, today

𝐵𝑃𝐼(𝑒.𝑙.𝑚)： Total index value, the last business day of the𝑀𝑉𝐿𝑡(𝑡𝑜𝑑𝑎𝑦)： Market value amount (including accrued interest) ofprevious month𝑃(𝑖)index portfolio, today： Market value amount (including accrued interest) ofindex portfolio, the last business day of the previousmonth： Total income gains and redemptions paid from thelast business day of the previous month throughtoday： “Dirty price” at point i

𝐴𝑚𝑜𝑢𝑛𝑡(𝑖)： Outstanding face value amount at point i

𝑀𝑉𝐿𝑡(𝑒.𝑙.𝑚)𝐶𝐹(𝑒.𝑙.𝑚,𝑡𝑜𝑑𝑎𝑦)

15

Nomura | NOMURA-BPI/Extended

27 September 2019

6.1.2 Capital investment return index (Capital index)
This is an index of investment returns in terms of capital gains. Assuming the index
portfolio was purchased on the last business day of the previous month at the “dirty
price”, redemptions are added at the market value amount (excluding accrued interest).
All redemptions are assumed to be received in cash without interest on the day they are
made, and reinvested in the following portfolio reconstitution.

 MVLc(today )  MVLc( e.l .m.)  RD( e.l .m.,today ) 
BPIc(today )  BPIc( e.l .m.)  1 
MVLt
( e.l .m.)Provided that:

𝑀𝑉𝐿𝑐(𝑖) = 𝑆𝑃(𝑖) × 𝐴𝑚𝑜𝑢𝑛𝑡(𝑖) ×1
100

𝐵𝑃𝐼𝑐(𝑡𝑜𝑑𝑎𝑦)： Capital index value, today

𝐵𝑃𝐼𝑐(𝑒.𝑙.𝑚)： Capital index value, the last business day of theprevious month： Market value amount (excluding accrued interest)of index portfolio, today： Market value amount (excluding accrued interest)of index portfolio, the last business day of theprevious month： Market value amount (including accrued interest)of index portfolio, the last business day of theprevious month： Mid-term redemptions arising from the lastbusiness day of the previous month through today

𝑀𝑉𝐿𝑐(𝑡𝑜𝑑𝑎𝑦)
𝑀𝑉𝐿𝑐(𝑒.𝑙.𝑚)

𝑀𝑉𝐿𝑡(𝑒.𝑙.𝑚)

𝑅𝐷(𝑒.𝑙.𝑚,𝑡𝑜𝑑𝑎𝑦)
𝑆𝑃(𝑖)： Clean price at point i

𝐴𝑚𝑜𝑢𝑛𝑡(𝑖)： Outstanding face value amount at point i

6.2 Return15
6.2.1 Total return (annualized)

 BPI(n)  365
Rt(m, n)  
 1 
 BPI(m)  t D
Point m is assumed to precede point n in a given timeline.

Rt(m, n)： Total return from point m through point n

BPI(i )

： Index value at point i

t D ( 0)： Days between point m and point n (excluding thesettlement date)15

Only monthly data were created for investment return before 30 September 1993.

16

Nomura | NOMURA-BPI/Extended

27 September 2019

6.2.2 Capital return (annualized)

 BPIc(n)  365
Rc(m, n)  
 1 
 BPIc(m)  t D
Point m is assumed to precede point n in a given timeline.

Rc(m, n)： Capital return from point m through point n

𝐵𝑃𝐼𝑐(𝑖)： Principal investment return index at point i

t D ( 0)： Days between point m and point n (excluding thesettlement date)

6.2.3 Income return (annualized)

Ri (m, n)  Rt (m, n)  Rc(m, n)

Point m is assumed to precede point n in a given timeline.

Ri(m, n)：Income return from point m through point n

Rt(m, n)：Total return from point m through point n

Rc(m, n)：Capital return from point m through point n

6.3 Reference for obtaining market data
The NOMURA-BPI/Extended references bond market pricing data for the marked-tomarket valuation of the index portfolios (listed in descending order of priority):

JS PriceNomura price

These data are provided on a settlement-day basis, and should be converted to tradedday basis data for use as reference in calculating portfolio and performance indicators.
JS Price is evaluated and calculated by Nomura Securities Co., Ltd. and later examinedby Nikkei Inc., Nikkei Financial Technology Research Institute, Inc., and Nomura
Research Institute, Ltd.. JS Prices are reliable for a variety of purposes, including markto-market accounting. JS Prices are calculated by the reasonable and consistentmethodology with passing through the process which examines validations to detect
relative/absolute outlier by the methodology designed by Nikkei Inc., Financial
Technology Research Institute Inc., Nomura Research Institute, Ltd., and Nomura
Securities Co., Ltd..
In addition, JS Price lists more than 12,000 bonds in total (mainly publicly offered andprivate placement domestic bonds) and covers almost 100% of index portfolios.
Furthermore, JS Price offers daily prices with good continuity.
NSC dealers in the front office trading desk at Global Markets Division value Nomura
prices for its own daily valuation process, and the NSC is one of the key financial
instrument firms in the yen bond market, and is actively engaged in transactions withother financial instruments firms and its clients. For this reason, NSC is in a good
position to obtain traded prices and/or quotations in the secondary market.

17Nomura | NOMURA-BPI/Extended

27 September 2019

6.4 Key indices and data released
Key indices provided in the NOMURA-BPI/Extended and their base dates are as follows(base dates vary depending on the index):

Index

Base date(= Base index value)

Publication start
date

NOMURA-BPI/Extended

28 Dec 1983 (=100)16

Oct 2000(The same as the NOMURABPI’s until 29 Dec 1995.)

NOMURA-BPI/Extended MBS

31 Mar 2003 (=100)

Apr 2003

NOMURA-BPI/Extended excluding ABS

28 Dec 1983 (=100) 17

Apr 2008(The same as the NOMURABPI’s until 29 Dec 1995.)

16

Prior to 31 August 1993, indices were provided on a monthly basis.

17

Prior to 31 August 1993, indices were provided on a monthly basis.

18

Nomura | NOMURA-BPI/Extended

27 September 2019

7. Definition of NOMURA-BPI/Extended
indicators
7.1 Definition of issue-specific return-risk indicators
In NOMURA-BPI/Extended, the issue-specific return-risk indicators are defined asfollows (see Japan Bond Indices Handbook, 14 June 2016, for the definition of future
cash flow and return-risk indicators in the MBS sector):

Current yield CY (%)

𝐶𝑝𝑛 × 𝐹𝑉
𝑆𝑃

𝐶𝑌 =



SP

：

Clean price (JPY)

Cpn：

Coupon rate (%)

FV：Face value (JPY100)

Simple yield SY (%)

𝑆𝑌 =𝐹𝑉 − 𝑆𝑃
𝑌𝑟
× 100
𝑆𝑃

𝐶𝑝𝑛 +

SP

：

Clean price (JPY)

Cpn：

Coupon rate (%)

FV
Yr

：

Face value (JPY100)：

Term to maturity (scheduled redemption)

Compound yield r (%)
Multiple values r fit formula below

𝑃 = ∑ 𝐶𝐹𝑖 × (1 +𝑖𝑟
1 −2𝑡𝑖
× )
100 2

P

：

Dirty priceCFi：i th future cash flow (JPY)ti：
Number of years until CFi occurs
Future cash flow CFi includes principal and interest payments (unlessotherwise specified)T-spread Tspd (%)

Tspd  r  r
Let P be a dirty price of the bond, which is assumed a JGB that has the same
cash flow as the one for which Tspd is calculated:P   CFi  DF t i iCalculater (compound yield) for P as:𝑃̅ = ∑ 𝐶𝐹𝑖 × (1 +𝑖𝑟̅
1 −2𝑡𝑖
× )
100 2

19

Nomura | NOMURA-BPI/Extended：

i th future cash flow (JPY)

𝐷𝐹(𝑡𝑖 )：

Discount coefficient at point t i 18

ti：

Number of years until CFi occurs

CFi

Term to maturity (considering early redemption) WAL(Weighted Average Life; years)WAL t  CFP(t ) CFP(t )
i i

i

i

i



ti

：

CFP (t i )：𝐶𝐹𝑖 × (1 +𝑖：i th future cash flow (JPY)

ti
P

：

Number of years until CFi occurs：

Dirty price

Modified duration mD

𝐷
1 𝑑𝑃
(= −
)
𝑟
1
𝑃
𝑑𝑟
1+
×
100 2

P

：

Dirty price

Convexity Cv

𝐶𝑉 = ∑

𝐶𝐹𝑖 × (1 +

𝑖

18

𝑟
1 −2𝑡𝑖
× )
× 𝑡𝑖
100 2
𝑃

CFi

𝑚𝐷 =



Number of years until CFi occurstPrincipal cash flow at point i

Duration D (years)𝐷=∑

27 September 2019𝑟
1 −2𝑡𝑖 −2
1
2× )× 𝑡𝑖 × (𝑡𝑖 + )100 2
2 (= − 1 𝑑 𝑃)𝑃
𝑃 𝑑𝑟 2CFi：

i th future cash flow (JPY)

ti
P

：

Number of years until CFi occurs：

Dirty price

The JGB discount factor is computed using the NOMURA Par Yield Model.

20

Nomura | NOMURA-BPI/Extended

27 September 2019

Effective duration EffD, effective convexity EffCV

EffD 
EffCV 1
 t i  CFi  DF (t i )  exp(t i )P i
1
t i2  CFi  DF (t i )  exp(t i )
P iWhere  (yield curve spread) satisfies the following formulaP  CF  DF (t )  exp( t )
i

i

i

i

：

i th future cash flow (JPY)

𝐷𝐹(𝑡𝑖 )：

Discount coefficient at point t i 19

ti
P

：

Number of years until CFi occurs：

Dirty priceCFi

7.2 Definition of portfolio indicators
Portfolio indicators are calculated using the issue-specific indicators of all issues in theindex portfolio. The weighted average is used in the calculation, as shown in Figure 6.

Fig. 6: Portfolio Indicator Calculation Methods
Indicator

Calculation Method

Coupon rate
Term to maturity(scheduled redemption)
Term to maturity(considering early redemption)

Outstanding face value amount weighted
average

Dirty price
Clean price
Current yield
Simple interest yield

Market value amount (excluding accrued
interest) weighted average

Compound interest yield
Duration
Modified duration
Convexity

Market value amount (including accrued
interest) weighted average

Effective duration
Effective convexity
Source: NSC

19

The JGB discount factor is computed using the NOMURA Par Yield Model.

21

Nomura | NOMURA-BPI/Extended

27 September 2019

Appendix: Past rules on NOMURABPI/Extended index composition
Sector Changes in the NOMURA-BPI/Extended Total
Fig. 7: Sector Changes in the NOMURA-BPI/Extended

May 2003

January 2004

February 2004
January 2005
April 2009

Some petroleum bonds were taken over by the government following a repeal of the Japan
National Oil Corporation Law. Government-guaranteed petroleum bonds were thus reclassified
as JGBs, instead of government-guaranteed bonds.
With the repeal of the Electric Power Development Promotion Law, electric power development
corporation bonds were reclassified as electric/gas utility bonds, instead of FILP agency bonds
and others.
As with the change in May 2003, government-guaranteed petroleum bonds taken over by thegovernment were reclassified as JGBs, instead of government-guaranteed bonds.
Portfolio index released in accordance with rating classifications by ratings agency.
Securities issued by the Japan Finance Corporation for Municipal Enterprises and the Japan
Finance Organization for Municipal Enterprises were classified as follows:
Municipal corporation bonds backed by government: government-guaranteed bonds (same as
before)Municipal corporation bonds backed by government: government-guaranteed bonds (same as
before)Bonds issued by the Japan Finance Organization for Municipal Enterprises: corporate bonds(through March 2009), municipal bonds (from April 2009)

Source: NSC

22

Nomura | NOMURA-BPI/Extended

27 September 2019

Past Changes in NOMURA-BPI/Extended Inclusion Criteria
Fig. 8: Past Changes in NOMURA-BPI/Extended Inclusion Criteria

June 2002

April 2003
June 2005

April 2008
April 2014
October 2019

Date for determining inclusion in portfolio changed from the last business day of the month tothe 25th of the month, and inclusion standards then changed as follows:・Inclusion determined based on rating as of the 25th of that month.
・Inclusion determined based on remaining value as of end of the following month using data
through the 25th of that month.
Government Housing Loan Corporation MBS are added.
Date for the following month’s portfolio determination date:
Changed to earlier of: 1) first business day after the 25th; or 2) three business days before
the last business day of the month. Note that the inclusion selection is made one business
day prior to the portfolio determination day.
Note: The portfolio determination day may be changed if the JGB auction for a given month
falls later than the day after the portfolio determination date.
Some ABS included (FILP ABS, REIT bonds, life insurance capital fund notes andsubordinated loan bonds).
“Retail investor bonds (corporate bonds tailored for retail investors and local government
bonds for retail subscription)” will be excluded from the index portfolio.
Changed exclusion criteria for TOKYO PRO-BOND Market listed bonds.

Source: NSC

Changes in Pricing
Fig. 9: Changes in Pricing
Listed bonds
JGBs

Non-JGBs

Unlistedbonds

Oct.10, 2000Feb.1, 2002

Nomura priceFeb.2, 2002-

Japan Standard Bond Price (JS Price), and if notavailable, Nomura priceSource: NSC

23

Nomura | NOMURA-BPI/Extended

27 September 2019

Data delivery services
Data on performance indices, such as the total investment return index, andportfolio indicators are available from the following sources:

NOMURA-BPI/Extended data providers


Nomura Securities’ Securities Market Benchmarks’ website
http://qr.nomuraholdings.com/en/bpi/index.html



Quick

NRIJ001

NOMURA Indices guidance

NRIJ112-NRIJ119

NOMURA-BPI/Extended

Reuters

NMSBPI

Bloomberg

NBPI<GO>NOMURA-BPI/Extended guidance

NOMURA-BPI/Extended guidance

Jiji Press

BPIXG/12400

NOMURA-BPI/Extended total investment return index

Detailed data including next month’s index portfolios
Detailed data on portfolio indices and issue-specific indicators are available on
IDS, NRI’s data delivery services.
Contact: Nomura Research Institute Investment Data Service Department+ 81-45-613-7200
ids-sales@nri.co.jp

24Nomura | NOMURA-BPI/Extended

27 September 2019

Contact for further inquiries
For inquiries on the use of NOMURA-BPI/Extended as investment benchmark,please see the contact details below:
Nomura Securities Co., Ltd
Global Research Division, Financial Engineering & Technology ResearchCenterIndex Operations Dept.
Tel：03-6703-3986
e-mail ：bpi@jp.nomura.com

The intellectual property rights and any other rights, in NOMURA-BPI/Extended belong
to Nomura Securities Co., Ltd. (“Nomura”). Nomura does not guarantee accuracy,completeness, reliability, usefulness, marketability, merchantability or fitness of the Index,
and does not account for business activities or services that any index user and/or its
affiliates undertakes with the use of the Index.

A license agreement with Nomura Securities is required to use the index and accessdetailed data. In the case of an unavoidable event such as computer breakdown or
natural disaster, calculation of the index may be delayed or suspended. While every
effort is made to ensure that the information used in this report and all publishedinformation is based on reliable data, it should be noted that data may be changed oramended when necessary.
25Nomura | NOMURA-BPI/Extended

27 September 2019

Policies with regard to NSC’s indices
The below index-related policies are published on our website.
See the following link for details:
http://qr.nomura.co.jp/en/guides/index.html• Index Calculation Policy• Complaints Handling Policy• Glossary (Fixed Income)• Index Governance Framework• Conflicts of Interest Policy

26

Nomura | NOMURA-BPI/Extended

27 September 2019

Appendix A-1
Analyst Certification
I, Index Operations Dept., hereby certify (1) that the views expressed in this Research report accurately reflect my personalviews about any or all of the subject securities or issuers referred to in this Research report, (2) no part of my compensation was,is or will be directly or indirectly related to the specific recommendations or views expressed in this Research report and (3) nopart of my 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
Online availability of research and conflict-of-interest disclosures
Nomura Group research is available on www.nomuranow.com/research, Bloomberg, Capital IQ, Factset, Reuters and ThomsonOne.
Important disclosures may be read at http://go.nomuranow.com/research/globalresearchportal/pages/disclosures/disclosures.aspx or requested
from Nomura Securities International, Inc., or Instinet, LLC on 1-877-865-5752. If you have any difficulties with the website, please email
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
FINRA Rule 2241 restrictions on communications with covered companies, public appearances, and trading securities held by a researchanalyst account.
Nomura Global Financial Products Inc. (“NGFP”) Nomura Derivative Products Inc. (“NDPI”) and Nomura International plc. (“NIplc”) areregistered with the Commodities Futures Trading Commission and the National Futures Association (NFA) as swap dealers. NGFP, NDPI, andNIplc are generally engaged in the trading of swaps and other derivative products, any of which may be the subject of this report.
ADDITIONAL DISCLOSURES REQUIRED IN THE U.S.
Principal Trading: Nomura Securities International, Inc and its affiliates will usually trade as principal in the fixed income securities (or in related
derivatives) that are the subject of this research report. Analyst Interactions with other Nomura Securities International, Inc. Personnel: The fixedincome research analysts of Nomura Securities International, Inc and its affiliates regularly interact with sales and trading desk personnel inconnection with obtaining liquidity and pricing information for their respective coverage universe.
Valuation methodology - Fixed Income
Nomura’s Fixed Income Strategists express views on the price of securities and financial markets by providing trade recommendations. Thesecan be relative value recommendations, directional trade recommendations, asset allocation recommendations, or a mixture of all three.
The analysis which is embedded in a trade recommendation would include, but not be limited to:• Fundamental analysis regarding whether a security’s price deviates from its underlying macro- or micro-economic fundamentals.
• Quantitative analysis of price variations.
• Technical factors such as regulatory changes, changes to risk appetite in the market, unexpected rating actions, primary market activity andsupply/ demand considerations.
The timeframe for a trade recommendation is variable. Tactical ideas have a short timeframe, typically less than three months. Strategic tradeideas have a longer timeframe of typically more than three months.
For the purposes of the EU Market Abuse Regulation, the distribution of ratings published by Nomura Global Fixed Income Research is asfollows:
55% have been assigned a Buy (or equivalent) rating; 25% of issuers with this rating were supplied material services* by the Nomura Group**.
0% have been assigned a Neutral (or equivalent) rating.
45% have been assigned a Sell (or equivalent) rating; 33% of issuers with this rating were supplied material services by the Nomura Group.
As at 3 July 2019.
*As defined by the EU Market Abuse Regulation**The Nomura Group as defined in the Disclaimer section at the end of this report

Disclaimers
This publication contains material that has been prepared by the Nomura Group entity identified on page 1 and, if applicable, with thecontributions of one or more Nomura Group entities whose employees and their respective affiliations are specified on page 1 or identified
elsewhere in the publication. The term "Nomura Group" used herein refers to Nomura Holdings, Inc. and its affiliates and subsidiaries including:
Nomura Securities Co., Ltd. ('NSC') Tokyo, Japan; Nomura Financial Products Europe GmbH (‘NFPE’), Germany; Nomura International plc('NIplc'), UK; Nomura Securities International, Inc. ('NSI'), New York, US; Instinet, LLC ('ILLC'); Nomura International (Hong Kong) Ltd. (‘NIHK’),
Hong Kong; Nomura Financial Investment (Korea) Co., Ltd. (‘NFIK’), Korea (Information on Nomura analysts registered with the Korea Financial
Investment Association ('KOFIA') can be found on the KOFIA Intranet at http://dis.kofia.or.kr); Nomura Singapore Ltd. (‘NSL’), Singapore(Registration number 197201440E, regulated by the Monetary Authority of Singapore); Nomura Australia Ltd. (‘NAL’), Australia (ABN 48 003
032 513), regulated by the Australian Securities and Investment Commission ('ASIC') and holder of an Australian financial services licencenumber 246412; PT Nomura Sekuritas Indonesia (‘PTNSI’); Nomura Securities Malaysia Sdn. Bhd. (‘NSM’), Malaysia; NIHK, Taipei Branch(‘NITB’), Taiwan; Nomura Financial Advisory and Securities (India) Private Limited (‘NFASL’), Mumbai, India (Registered Address: Ceejay
House, Level 11, Plot F, Shivsagar Estate, Dr. Annie Besant Road, Worli, Mumbai- 400 018, India; Tel: +91 22 4037 4037, Fax: +91 22 4037
4111; CIN No: U74140MH2007PTC169116, SEBI Registration No. for Stock Broking activities : INZ000255633; SEBI Registration No. for
Merchant Banking : INM000011419; SEBI Registration No. for Research: INH000001014. ‘CNS Thailand’ next to an analyst’s name on the front
page of a research report indicates that the analyst is employed by Capital Nomura Securities Public Company Limited (‘CNS’) to provide
research assistance services to NSL under an agreement between CNS and NSL. ‘NSFSPL’ next to an employee’s name on the front page of a
research report indicates that the individual is employed by Nomura Structured Finance Services Private Limited to provide assistance to certain
Nomura entities under inter-company agreements. The "BDO-NS" (which stands for "BDO Nomura Securities, Inc.") placed next to an analyst’s
name on the front page of a research report indicates that the analyst is employed by BDO Unibank Inc. ("BDO Unibank") who has been27

Nomura | NOMURA-BPI/Extended

27 September 2019seconded to BDO-NS, to provide research assistance services to NSL under an agreement between BDO Unibank, NSL and BDO-NS. BDONS is a Philippines securities dealer, which is a joint venture between BDO Unibank and the Nomura Group.
THIS MATERIAL IS: (I) FOR YOUR PRIVATE INFORMATION, AND WE ARE NOT SOLICITING ANY ACTION BASED UPON IT; (II) NOT TO
BE CONSTRUED AS AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY IN ANY JURISDICTION WHERE
SUCH OFFER OR SOLICITATION WOULD BE ILLEGAL; AND (III) OTHER THAN DISCLOSURES RELATING TO THE NOMURA GROUP,BASED UPON INFORMATION FROM SOURCES THAT WE CONSIDER RELIABLE, BUT HAS NOT BEEN INDEPENDENTLY VERIFIED BY
NOMURA GROUP.
Other than disclosures relating to the Nomura Group, the Nomura Group does not warrant or represent that the document is accurate, complete,reliable, fit for any particular purpose or merchantable and does not accept liability for any act (or decision not to act) resulting from use of thisdocument and related data. To the maximum extent permissible all warranties and other assurances by the Nomura Group are hereby excluded
and the Nomura Group shall have no liability for the use, misuse, or distribution of this information.
Opinions or estimates expressed are current opinions as of the original publication date appearing on this material and the information, including
the opinions and estimates contained herein, are subject to change without notice. The Nomura Group is under no duty to update thisdocument. Any comments or statements made herein are those of the author(s) and may differ from views held by other parties within Nomura
Group. Clients should consider whether any advice or recommendation in this report is suitable for their particular circumstances and, if
appropriate, seek professional advice, including tax advice. The Nomura Group does not provide tax advice.
The Nomura Group, and/or its officers, directors and employees, may, to the extent permitted by applicable law and/or regulation, deal as
principal, agent, or otherwise, or have long or short positions in, or buy or sell, the securities, commodities or instruments, or options or otherderivative instruments based thereon, of issuers or securities mentioned herein. The Nomura Group companies may also act as market makeror liquidity provider (within the meaning of applicable regulations in the UK) in the financial instruments of the issuer. Where the activity ofmarket maker is carried out in accordance with the definition given to it by specific laws and regulations of the US or other jurisdictions, this will
be separately disclosed within the specific issuer disclosures.
This document may contain information obtained from third parties, including ratings from credit ratings agencies such as Standard & Poor’s.
Reproduction and distribution of third-party content in any form is prohibited except with the prior written permission of the related third-party.
Third-party content providers do not guarantee the accuracy, completeness, timeliness or availability of any information, including ratings, andare not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, or for the results obtained from the use of suchcontent. Third-party content providers give no express or implied warranties, including, but not limited to, any warranties of merchantability or
fitness for a particular purpose or use. Third-party content providers shall not be liable for any direct, indirect, incidental, exemplary,compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including lost income or profits andopportunity costs) in connection with any use of their content, including ratings. Credit ratings are statements of opinions and are not statements
of fact or recommendations to purchase hold or sell securities. They do not address the suitability of securities or the suitability of securities forinvestment purposes, and should not be relied on as investment advice.
Any MSCI sourced information in this document is the exclusive property of MSCI Inc. (‘MSCI’). Without prior written permission of MSCI, thisinformation and any other MSCI intellectual property may not be reproduced, re-disseminated or used to create any financial products, including
any indices. This information is provided on an "as is" basis. The user assumes the entire risk of any use made of this information. MSCI, itsaffiliates and any third party involved in, or related to, computing or compiling the information hereby expressly disclaim all warranties oforiginality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of this information. Without limiting anyof the foregoing, in no event shall MSCI, any of its affiliates or any third party involved in, or related to, computing or compiling the information
have any liability for any damages of any kind. MSCI and the MSCI indexes are services marks of MSCI and its affiliates.
The intellectual property rights and any other rights, in Russell/Nomura Japan Equity Index belong to Nomura Securities Co., Ltd. ("Nomura")and Frank Russell Company ("Russell"). Nomura and Russell do not guarantee accuracy, completeness, reliability, usefulness, marketability,
merchantability or fitness of the Index, and do not account for business activities or services that any index user and/or its affiliates undertakeswith the use of the Index.
Investors should consider this document as only a single factor in making their investment decision and, as such, the report should not beviewed as identifying or suggesting all risks, direct or indirect, that may be associated with any investment decision. Nomura Group produces a
number of different types of research product including, among others, fundamental analysis and quantitative analysis; recommendations
contained in one type of research product may differ from recommendations contained in other types of research product, whether as a result ofdiffering time horizons, methodologies or otherwise. The Nomura Group publishes research product in a number of different ways including theposting of product on the Nomura Group portals and/or distribution directly to clients. Different groups of clients may receive different products
and services from the research department depending on their individual requirements.
Figures presented herein may refer to past performance or simulations based on past performance which are not reliable indicators of future
performance. Where the information contains an indication of future performance, such forecasts may not be a reliable indicator of future
performance. Moreover, simulations are based on models and simplifying assumptions which may oversimplify and not reflect the future
distribution of returns. Any figure, strategy or index created and published for illustrative purposes within this document is not intended for “use”
as a “benchmark” as defined by the European Benchmark Regulation.
Certain securities are subject to fluctuations in exchange rates that could have an adverse effect on the value or price of, or income derived
from, the investment.
With respect to Fixed Income Research: Recommendations fall into two categories: tactical, which typically last up to three months; or strategic,
which typically last from 6-12 months. However, trade recommendations may be reviewed at any time as circumstances change. ‘Stop loss’
levels for trades are also provided; which, if hit, closes the trade recommendation automatically. Prices and yields shown in recommendations
are taken at the time of submission for publication and are based on either indicative Bloomberg, Reuters or Nomura prices and yields at thattime. The prices and yields shown are not necessarily those at which the trade recommendation can be implemented.
The securities described herein may not have been registered under the US Securities Act of 1933 (the ‘1933 Act’), and, in such case, may not
be offered or sold in the US or to US persons unless they have been registered under the 1933 Act, or except in compliance with an exemption
from the registration requirements of the 1933 Act. Unless governing law permits otherwise, any transaction should be executed via a Nomura
entity in your home jurisdiction.
This document has been approved for distribution in the UK as investment research by NIplc. NIplc is authorised by the Prudential Regulation
Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. NIplc is a member of the London Stock
Exchange. This document does not constitute a personal recommendation within the meaning of applicable regulations in the UK, or take into
account the particular investment objectives, financial situations, or needs of individual investors. This document is intended only for investors
who are 'eligible counterparties' or 'professional clients' for the purposes of applicable regulations in the UK, and may not, therefore, be
redistributed to persons who are 'retail clients' for such purposes. This document has been approved for distribution in the European Economic
Area as investment research by Nomura Financial Products Europe GmbH (“NFPE”). NFPE is a company organized as a limited liability
company under German law registered in the Commercial Register of the Court of Frankfurt/Main under HRB 110223. NFPE is authorized andregulated by the German Federal Financial Supervisory Authority (BaFin).
This document has been approved by NIHK, which is regulated by the Hong Kong Securities and Futures Commission, for distribution in Hong
Kong by NIHK. This document has been approved for distribution in Australia by NAL, which is authorized and regulated in Australia by the
ASIC. This document has also been approved for distribution in Malaysia by NSM. In Singapore, this document has been distributed by NSL.
NSL accepts legal responsibility for the content of this document, where it concerns securities, futures and foreign exchange, issued by theirforeign affiliates in respect of recipients who are not accredited, expert or institutional investors as defined by the Securities and Futures Act(Chapter 289). Recipients of this document in Singapore should contact NSL in respect of matters arising from, or in connection with, this28

Nomura | NOMURA-BPI/Extended

27 September 2019

document. Unless prohibited by the provisions of Regulation S of the 1933 Act, this material is distributed in the US, by NSI, a US-registeredbroker-dealer, which accepts responsibility for its contents in accordance with the provisions of Rule 15a-6, under the US Securities Exchange
Act of 1934. The entity that prepared this document permits its separately operated affiliates within the Nomura Group to make copies of such
documents available to their clients.
This document has not been approved for distribution to persons other than ‘Authorised Persons’, ‘Exempt Persons’ or ‘Institutions’ (as definedby the Capital Markets Authority) in the Kingdom of Saudi Arabia (‘Saudi Arabia’) or a ’Market Counterparty’ or a 'Professional Client' (as definedby the Dubai Financial Services Authority) in the United Arab Emirates (‘UAE’) or a ‘Market Counterparty’ or a ‘Business Customer’ (as definedby the Qatar Financial Centre Regulatory Authority) in the State of Qatar (‘Qatar’) by Nomura Saudi Arabia, NIplc or any other member of the
Nomura Group, as the case may be. Neither this document nor any copy thereof may be taken or transmitted or distributed, directly or indirectly,
by any person other than those authorised to do so into Saudi Arabia or in the UAE or in Qatar or to any person other than ‘Authorised Persons’,‘Exempt Persons’ or ‘Institutions’ located in Saudi Arabia or a ’Market Counterparty’ or a 'Professional Client' in the UAE or a ‘Market
Counterparty’ or a ‘Business Customer’ in Qatar. Any failure to comply with these restrictions may constitute a violation of the laws of the UAE
or Saudi Arabia or Qatar.
For Canadian Investors: This research report was approved for distribution to Canadian investors by Instinet Canada Limited ("ICL"), member of
the Investment Industry Regulatory Organization of Canada ("IIROC") and member of the Canadian Investor Protection Fund. An affiliate of ICL
prepared the research report (an "Affiliate Research Report") in accordance with the regulatory requirements applicable to research in theaffiliate's local jurisdiction, which include conflict of interest disclosure. ICL reviewed this Affiliate Research Report for the purpose of ensuring
Canadian disclosures required by IIROC are included. ICL does not receive compensation in respect of the distribution of Affiliate Research
Reports. Pursuant to ICL's policies and procedures regarding the dissemination of research, ICL makes available Affiliate Research Reports to
ICL clients and prospective clients only, in electronic and/or in printed form. ICL endeavours to make available and/or distribute Affiliate
Research Reports to all intended recipients at the same time. This Affiliate Research Report is not a recommendation and does not take into
account the investment objectives, financial situation or particular needs of any particular account.
For report with reference of TAIWAN public companies or authored by Taiwan based research analyst:
THIS DOCUMENT IS SOLELY FOR REFERENCE ONLY. You should independently evaluate the investment risks and are solely responsible
for your investment decisions. NO PORTION OF THE REPORT MAY BE REPRODUCED OR QUOTED BY THE PRESS OR ANY OTHERPERSON WITHOUT WRITTEN AUTHORIZATION FROM NOMURA GROUP. Pursuant to Operational Regulations Governing Securities Firms
Recommending Trades in Securities to Customers and/or other applicable laws or regulations in Taiwan, you are prohibited to provide thereports to others (including but not limited to related parties, affiliated companies and any other third parties) or engage in any activities inconnection with the reports which may involve conflicts of interests. INFORMATION ON SECURITIES / INSTRUMENTS NOT EXECUTABLEBY NOMURA INTERNATIONAL (HONG KONG) LTD., TAIPEI BRANCH IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT BECONSTRUED AS A RECOMMENDATION OR A SOLICITATION TO TRADE IN SUCH SECURITIES / INSTRUMENTS.
NO PART OF THIS MATERIAL MAY BE (I) COPIED, PHOTOCOPIED, OR DUPLICATED IN ANY FORM, BY ANY MEANS; OR (II)REDISTRIBUTED WITHOUT THE PRIOR WRITTEN CONSENT OF A MEMBER OF THE NOMURA GROUP. If this document has been
distributed by electronic transmission, such as e-mail, then such transmission cannot be guaranteed to be secure or error-free as information
could be intercepted, corrupted, lost, destroyed, arrive late or incomplete, or contain viruses. The sender therefore does not accept liability forany errors or omissions in the contents of this document, which may arise as a result of electronic transmission. If verification is required, please
request a hard-copy version.
------

Disclaimers required in Japan
Credit ratings in the text that are marked with an asterisk (*) are issued by a rating agency not registered under Japan’s Financial Instruments
and Exchange Act (“Unregistered Ratings”). For details on Unregistered Ratings, please contact the Research Production Operation Dept. of
Nomura Securities Co., Ltd.
Investors in the financial products offered by Nomura Securities may incur fees and commissions specific to those products (for example,
transactions involving Japanese equities are subject to a sales commission of up to 1.404%*1 (1.3% tax excluded) of the transaction amount or
a commission of ¥2,808*2 (¥2,600 tax excluded) for transactions of ¥200,000 or less, while transactions involving investment trusts are subject
to various 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.
*1,*2 As of October 1, 2019, the consumption tax rate of 10% will be applied to *1 at 1.43% and *2 at ¥2,860.
-----Transactions involving Japanese equities (including Japanese REITs, Japanese ETFs, and Japanese ETNs, Japanese Infrastructure Funds)
are subject to a sales commission of up to 1.404%*1 (1.3% tax excluded) of the transaction amount (or a commission of ¥2,808*2 (¥2,600 tax
excluded) for transactions of ¥200,000 or less). When Japanese equities are purchased via OTC transactions (including offerings), only thepurchase 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 and ETNs carry the risk of losses owing to fluctuations in
the underlying indexes or other benchmarks. Japanese Infrastructure Funds carry out the risk of losses owing to fluctuations in price and/or
earnings of underlying infrastructures.
*1,*2 As of October 1, 2019, the consumption tax rate of 10% will be applied to *1 at 1.43% and *2 at ¥2,860.
Transactions involving foreign equities are subject to a domestic sales commission of up to 1.026%*1 (0.95% tax excluded) 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 the case of a sale) (for transaction amounts of ¥750,000 and below, maximum domestic sales commission is ¥7,668*2(¥7,100 tax excluded)). Local fees and taxes in foreign financial instruments markets vary by country/territory. When foreign 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. Foreign equities carry the risk of losses
owing to factors such as price fluctuations and foreign exchange rate fluctuations.
*1,*2 As of October 1, 2019, the consumption tax rate of 10% will be applied to * 1 at 1.045% and * 2 at ¥7,810.
Margin transactions are subject to a sales commission of up to 1.404%*1 (1.3% tax excluded) of the transaction amount (or a commission of¥2,808*2 (¥2,600 tax excluded) 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 the purchase amount, while short margin transactions are subject to fees for the lending of theshares 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 to roughly 3.3x the margin (roughly 3x for online transactions) may be traded. Margintransactions therefore carry the risk of losses in excess of the margin owing to share price fluctuations. For details, please thoroughly read thewritten materials provided, such as listed securities documents or documents delivered before making a contract.
*1,*2 As of October 1, 2019, the consumption tax rate of 10% will be applied to * 1 at 1.43% and * 2 at ¥2,860.
Transactions involving convertible bonds are subject to a sales commission of up to 1.08%*1 (1% tax excluded) of the transaction amount (or acommission of ¥4,320*2 (¥4,000 tax excluded) if this would be less than ¥4,320*2). When convertible bonds 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. 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.
*1,*2 As of October 1, 2019, the consumption tax rate of 10% will be applied to * 1 at 1.10% and * 2 at ¥4,400.
29

Nomura | NOMURA-BPI/Extended

27 September 2019

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%*1 (5.0% tax excluded)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 thetime of redemption. Indirect costs that may be incurred during the course of holding investment trusts include, for domestic investment trusts, anasset management fee (trust fee) of up to 5.4%*1 (5.0% tax excluded/annualized basis) of the net assets in trust, as well as fees based oninvestment performance. Other indirect costs may also be incurred. For foreign investment trusts, indirect fees may be incurred during thecourse 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.
*1 As of October 1, 2019, the consumption tax rate of 10% will be applied to 5.5%.
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 otherthan 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.
Transfers of equities to another securities company via the Japan Securities Depository Center are subject to a transfer fee of up to ¥10,800*1(¥10,000 tax excluded) per issue transferred depending on volume. No account fee will be charged for marketable securities or monies
deposited.
*1 As of October 1, 2019, the consumption tax rate of 10% will be applied to ¥11,000.

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
not limited to, Conflicts of Interest, Chinese Wall and Confidentiality policies) as well as through the maintenance of Chinese Walls andemployee training.
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
is available upon request and disclosure information is available at the Nomura Disclosure web page:
http://go.nomuranow.com/research/globalresearchportal/pages/disclosures/disclosures.aspx
Copyright © 2019 Nomura Securities Co., Ltd. All rights reserved.

30