Consolidated Financial Statements for the First Half of Fiscal Year ending March 31, 201930/Oct/2018
These financial statements have been prepared in accordance with accounting principals generally accepted in Japan.

NEC Networks & System Integration Corporation

Stock exchange listing: Tokyo
Code number:
1973

http://www.nesic.co.jp/english/index.html

1. Consolidated Results for the First Half (April 1, 2018 to September 30, 2018)of Fiscal Year ending March 31, 2019

(Rounded down to the nearest million yen.)(1) Net Sales and Income

6 months ended
September 2018
6 months ended
September 2017

Net sales(¥ million)

Year-on-yearchange (%)

OperatingincomeYear-on-yearchange (%)

Ordinaryincome

Year-on-yearchange (%)

122,506

2.1

2,632

4.7

2,900

9.9

119,937

0.9

2,514

45.8

2,640

42.5

Net income
attributable
Net income
Year-on-year
to owners ofper sharechange (%)
the parent(¥)(¥ million)

Net income
per share(diluted) (¥)

6 months ended
1,911
18.4
38.51
—
September 2018
6 months ended
1,613
59.5
32.51
—
September 2017c.f. Comprehensive income: 1H/FY Mar 2019: ¥2,113 million ( 5.4 %); 1H/FY Mar 2018: ¥2,004 million (86.8%)(2) Financial Position
Owner'sNet assets
equity ratio
per share (¥)(%)
30/Sep/2018
200,417102,22549.8
2,009.13
31/Mar/2018
207,643
101,73247.9
2,004.04
c.f. Owner's equity: 30/Sep/2018: ¥99,725 million; 31/Mar/2018: ¥99,473 million
Total assets(¥ million)

Net assets(¥ million)

2. Dividends
1stquarter
FY ended Mar. 2018

—Dividends per share (¥)
3rd
InterimYear-endquarter
37.00—37.00※FY ending Mar.
※—38.00—38.002019
Note: Revisions to projected dividends for the quarter under review: noFull year
74.00
76.00

※※ Forecasts

3. Financial Forecasts for Fiscal Year ending March 31, 2019 (April 1, 2018 to March 31, 2019)(¥ million)(%)(Percentages represent change compared to the previous corresponding period.)
Net income attributable to Net income
Operating income
Ordinary income
owners of the parentper share(¥ million)(%)(¥ million)(%)(¥ million)(%)(¥)

280,000

4.5

11,500Net sales
FY ending Mar. 2019

4.0

11,500

5.0

7,500

1.9

151.10Note: Revisions to projected results for the quarter under review: noCautionary Statement
Forecasts of results mentioned in this document are future estimates and are thus inclusive of risks and uncertain factors since they are not based on
definite facts. Please be aware that a variety of factors could cause actual results to differ significantly from those projected. The major factors affecting
actual results include the economic climate and social trends surrounding the business of this Company’s group, consumer trends vis-a-vis systems
and services provided by this Company’s group, as well as pressure to lower prices and ability to cope with the market in response to intensifiedcompetition.
Factors affecting results are not limited to the ones mentioned above.

4. Business Results(1) Business Results for the 1H for the Fiscal Year Ending March 31, 2019
During the first half of the fiscal year ending March 31, 2019 (the period from April 1, 2018,
to September 30, 2018), the Japanese economy continued a moderate recovery, supported
by policy effects accompanied by improvements observed in employment and income
conditions, despite worrying trends in areas such as trade and associated fluctuations infinancial and capital markets and a string of natural disasters

Under those economic conditions, disparities were observed in different segments of theinformation and communication technology (ICT) market, the business domain where NEC
Networks & System Integration Corporation (hereinafter “the Company”) operates.
In the enterprises market, companies maintained a high level of investment in management
improvements, such as work-style innovation and strengthening their competitiveness, andrevived capital expenditure in response to rising inbound tourism. In addition, interest in
cutting-edge technologies, including DX (digital transformation) such as artificial intelligence(AI), the Internet of things (IoT), and data analysis, has been rising. In thetelecommunications carrier business, investment in network infrastructure centering on
mobile base stations showed a recovery. In the central and local government and public
interest-related markets, investment in improving urban infrastructure such as broadcasting
and CATV remained active. On the other hand, in some fields, effects have been observed
from natural disasters and investments in firefighting commander systems, which haveentered a transitional period. Overseas markets showed signs of recovery, including an
increase in demand for telecommunication facilities in ASEAN regions in response toimprovements in urban infrastructure, as well as the resumption of capital expenditure which
had been postponed in some regions due to the impact of factors such as crude oil prices.

In this market environment, the Company and its consolidated subsidiaries (hereinafter the “Group”)
continued to step up their initiatives in businesses related to work-style innovation, including“EmpoweredOffice (*),” in response to a growing trend to change work styles. At the same time, theGroup has proactively proceeded with growth investment such as R&D and verification of newsolutions, including a verification test for the DX technology field, as well as investment in venture
enterprises through the CVC fund established in January 2018. We also responded actively todemand for improvements in network infrastructure in step with to hotel construction, which has
been more active in recent years. In addition, the Group bolstered its systems to expand
businesses for telecommunications carriers whose capital spending is expected to recover, which
included the establishment of a new company jointly with KDDI Corporation and the rebuilding of abase station construction system.

As a result, the Group posted the following consolidated results for the first half for the fiscalyear under review:

Net sales¥122,506 million

2.1% increase year on year

Operating income¥2,632 million

4.7%

increase year on year

Ordinary income¥2,900 million

9.9%increase year on year

Net income attributable¥1,911 million

18.4%

increase year on year

to owners of the parent＜Reference＞
Orders received¥146,727 million

14.0% increase year on year

Net sales increased 2.1% year on year, to ¥ 122,506 million. The result reflected growthin sales achieved in the Enterprise Networks business and Carrier Networks business,centering on key areas under the Group’s medium-term business strategy (covering the period
from the fiscal year ended March 31, 2017, to the fiscal year ending March 31, 2019) such as
work-style innovation. Orders received grew 14.0% year on year, to ¥146,727 million, due tostrong results posted for general companies consisting primarily of financial companies, inwhich projects concentrated in the first half of the fiscal year under review and service
companies such as hotels, , as well as the recovery of capital spending on network
infrastructure among telecommunications carriers.
Looking at profits, operating income rose 4.7% year on year, to ¥2,632 million, ordinary
income grew 9.9% year on year, to ¥2,900 million, and net income attributable to owners of
the parent rose 18.4% year on year, to ¥1,911 million. These results reflected factors such as
the decline in the earnings of the Social Infrastructures business and its execution of proactive
investment in growth, which was offset by an improvement in the cost of sales ratio in theEnterprise Networks business that resulted primarily from positive changes in the sales mix,
such as the increased weighting of projects with high added value, and efficiency gains.

Operating results by business segment were as follows:（Million yen）

Net sales by business segment
Enterprise

CarrierSocialNetworks

Networks

Infrastructures

OtherTotal

1H Fiscal 2019.3

55,81631,55632,016

3,116

122,506

1H Fiscal 2018.3

51,97130,40335,244

2,318

119,937

Increase or (decrease)

3,845

1,153(3,228)

7982,568

7.4

3.8(9.2)

34.5

2.1

Ratio ofincrease/(decrease) (%)（Million yen）

Reference: Orders received by business segment
EnterpriseCarrierSocialNetworks

NetworksInfrastructures

OtherTotal

1H Fiscal 2019.3

58,51939,13945,2503,816

146,727

1H Fiscal 2018.3

52,92031,03741,923

2,771

128,653

Increase or (decrease)

5,599

8,102

3,327

1,044

18,074

10.6

26.1

7.9

37.7

14.0

Ratio ofincrease/(decrease) (%)

1. Enterprise Networks business
ICT investment in work-style reforms remained strong. EmpoweredOffice, a work-styleinnovation solution, achieved growth, too. As a result, net sales for the business increased
7.4% year on year, to ¥55,816 million.
2. Carrier Networks businessNet sales for the business rose 3.8% year on year, to ¥31,556 million, reflecting the growthin business for telecommunications carriers and non-carrier businesses such as network
development for service industries.

3. Social Infrastructures businessNet sales for the business decreased 9.2% year on year, to ¥32,016 million, as areactionary fall in civil engineering for development in large projects for constructing mega
solar power plants and decreased sales in businesses for overseas markets offset growth in
the broadcasting and CATV segment.
*EmpoweredOffice:EmpoweredOffice is our office innovation solution. It combines our strengths in ICT andfacility installation to enable more intellectual and creative styles of work through process
reforms. It also proposes new methods and places of work that enable customers to fulfill
their social responsibilities, such as the strengthening of security and environmental
responsiveness.

<Outline of Business Segments>
Business Segment

Descriptions of Main BusinessesService integration of ICT solutions, mainly for the enterprises market
Total office solutions based on ICT with securities or environmental

Enterprise Networks

solutionsand related operation/monitoring services, as well as outsourcing
services using our own contact centers and data centers
Service integration mainly for telecom carriers’ ICT platforms (frommobile communications base stations to core networks), including
systems integration, installation, and related services such as

Carrier Networks

operations and monitoring.
Systems integration of large-scale, wide-area, carrier-grade ICT
platforms and data centers and related operations, monitoring services
Development, manufacturing, sales and systems integration of network
equipment and other equipment.
Service integration of ICT infrastructure for governments and publicutilities (broadcasters, electric power companies, etc.), such as systems

Social Infrastructure

integration, installation, operation, and monitoring, and operations inmarkets other than the Tokyo, Nagoya, and Osaka areas. Overseas
subsidiaries

OthersSales of purchased equipment(2) Outlook for the Fiscal Year Ending March 31, 2019
The Japanese economy is expected to show a moderate recovery, reflecting factors such as theeffects of central government measures and improvements in employment and income conditions.
However, the domestic economy continues to face downward pressure owing to factors such asconcerns over a downturn in overseas economies under the effects of trade issues and otherconditions.
Regarding the Group’s consolidated business forecasts for the fiscal year ending March 31,
2019, although strong progress was made during the first half of the fiscal year, the initialprojections remain unchanged in view of uncertainties in the macroeconomic environment.

Net sales¥280 billion

4.5% increase year on yearOperating income¥11.5 billion

4.0% increase year on year

Ordinary income¥11.5 billion

5.0% increase year on year

Net income attributable¥7.5 billion

1.9% increase year on year

to owners of the parent

5. Consolidated Financial Statements(1) Consolidated Balance Sheets
As ofMarch 31, 2018
AssetsCurrent assets
Cash and cash equivalents
Notes and accounts receivable
Electronically recorded monetary claims
Purchased goods,materials and supplies
Work in process
Other
Allowance for doubtful accounts
Total current assets
Non-current assets
Property and equipment
Intangible assetsGoodwill
Other
Total intangible assets
Investments and other assets
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Notes and accounts payable
Electronically recorded obligations
Short-term bank loans
Current installments of long-term debt
Accrued inncome taxes
Accrued bunuses to directors and corporate auditors
Accrued warranty on products
Accrued losses on sales contracts
Other current liabilities
Total current liabilities
Long-term liabilities
Long-term debt
Liabilities for retirement benefits
Other liabilities
Total long-term liabilities
Total liabilities
Net assets
Shareholders' equity
Capital stock
Capital surplus
Retained earnings
Treasury stock, at cost
Total shareholders' equity
Accumulated other comprehensive income
Net unrealized holding gain on other securities
Foreign currency translation adjustments
Accumulated adjustments for retirement benefits
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets(Millions of yen)
As of
September 30, 201857,281103,911
494
2,379
5,858
5,414(121)
175,218

66,41682,440
481
3,872
8,757
5,494
(83)
167,378

10,093

10,342

1,394
3,990
5,384

1,270
4,308
5,578

12,714
4,270(37)
16,94732,425
207,643

12,598
4,585(66)
17,11733,038200,417

39,574
728
4,086
3,171
3,768
102
116
557
20,76872,87431,858
674
3,692
3,171
1,471
44
111
1,029
23,292
65,347842
30,428
1,765
33,037
105,911757
30,354
1,732
32,844
98,191

13,122
16,65574,357(276)
103,858

13,122
16,65974,432(277)
103,936

42(374)(4,053)(4,385)
2,258
101,732
207,643

27(493)(3,746)(4,211)2,500
102,225
200,417

(2) Consolidated Statements of Income and Comprehensive Income(Consolidated Statements of Income)(Millions of yen)
1H, FY March 2018
(6 months ended September 2017)(6 months ended September 2018)

Net sales

119,937

122,506

Cost of sales

100,921102,979

Gross profit

19,016

19,526

Selling, general and administrative expenses

16,501

16,894

Operating income

2,514

2,632

Interest income

1320

Dividends income of insurance

197

193

Other

101

175

Total non-operating income

312

389

Interest expenses

55

53

Loss on disposal of property and equipment

29

33

Business reconstruction expenses for subsiriaries

37－1H, FY March 2019

Non-operating income

Non-operating expenses

Other

64

33

Total non-operating expenses

187

120

Ordinary income

2,640

2,900

Income before income taxes

2,640

2,900

Income taxes

902

889

Net income
Net income attributable to non-controlling interests

1,737
123

2,011
99

Net income attributable to owners of the parent

1,613

1,911

(Millions of yen)

Net income(Millions of yen)

1H, FY March 2018
(6 months ended September 2017)(6 months ended September 2018)

1,737

2,011

1H, FY March 2019

Other comprehensive income
Net unrealized holding loss on other securities

12(14)

Foreign currency translation adjustments

(22)

(187)

277

307

Adjustments for retirement benefit
Share of other comprehensive income of associates
accounted for using equity method
Total other comprehensive income
Comprehensive incomeー(2)

267

102

2,004

2,113

1,867

2,084

136

28

Comprehensive income attributable to:Owners of the parent
Non-controlling interests

(3) Consolidated Statements of Cash Flows

Cash flows from operating activities
Net income before income taxes
Depreciation and amortization
Amortization of goodwill
Increase (decrease) in allowance for doubtful receivables(Increase) decrease in asset for retirement benefit
Increase (decrease) in liability for retirement benefits(Millions of yen)
1H, FY March 2018

1H, FY March 2019

(6 months ended September 2017)(6 months ended September 2018)

2,640
1,275
127
5
196
548

2,900
1,242
123
(5)
134
269

(29)
(4)

(57)
(4)

(117)
(20)
55
15,291(1,706)(4,115)(429)
2,122
15,83820(55)(2,492)
13,311472(34)
53
21,219(4,404)(7,720)(868)
4,179
17,49934(54)(3,254)
14,225(779)
4(860)
3(8)
(0)
1(1)
(1,641)(1,080)0(1,153)
－
(115)
－
0
(386)
(2,734)0(85)(2)(1,785)
(17)
－
(224)
(2,114)

(290)
(85)
(1)
(1,834)
(27)
245
(229)
(2,223)

1
9,556
59,64869,205(132)
9,134
57,281
66,416

Increase (decrease) in accrued bonuses to directors andcorporate auditorsIncrease (decrease) in accurued warranty on products
Increase (decrease) in accurued losses on sales
contracts
Interest and dividend income
Interest expense(Increase) decrease in notes and accounts receivable(Increase) decrease in inventories
Increase (decrease) in notes and accounts payable
Increase (decrease) in accrued consumption taxes
Other, net
SubtotalInterest and dividend income received
Interest paid
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities
Purchase of property and equipment
Proceeds from sale of property and equipment
Purchase of intangibles
Proceeds from sale of intangibles
Purchase of investment securities
Loans receivable madeCollection of loans receivable
Other, net
Net cash used in investing activities
Cash flows from financing activities
Net increase (decrease) in short-term bank loans
Repayments of long-term debt
Net (increase) decrease in treasury shares
Dividends paid to shareholders
Dividends paid to minority shareholders of subsidiaries
Proceeds from share issuance to non-controlling shareholders
Other, net
Net cash provided by used in financing activities
Effect of exchange rate changes on cash and cash
equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

(4) Segment Information
Business Segment Information
First half of fiscal March 2019 (6 months ended September 2018)
Enterprise
NetworksSales(1) Sales to third parties(2) Intersegment sales
Total
Operating income and loss

(Millions of yen)

Carrier
Networks

55,81655,816
5,102

31,55631,556
1,835

SocialInfrastructures
32,01632,016(123)

Others3,116
3,116131

Adjustments(4,315)First half of fiscal March 2018 (6 months ended September 2017)
EnterpriseNetworks
Sales(1) Sales to third parties(2) Intersegment sales
Total
Operating income

51,971
51,971
4,346

Total

122,506
122,506
2,632(Millions of yen)

Carrier Networks

SocialInfrastructures

30,40330,403
2,109

35,24435,244
118

Others

2,318
2,318
98

Adjustments(4,158)

Total

119,937
119,937
2,514