Q&A at Small-Group Meetings Regarding Medium-Term Management Plan
May 27 and 31, 2016
*NESIC: NEC Networks & System Integration Corporation≪Service Business≫
Q：With respect to EmpoweredOffice (EO) business, what kind of cost reductions resulted
from the adoption of EO by NESIC itself.
A：At the time of head office relocation in 2010, we adopted EO company-wide. Adoption ofEO had the effect of reducing floor area by 40%, due to a reduction in document storage
space and other measures, reducing power consumption by 50%, and reducing paper
usage by 60%, and our customers also took an interest in such results.
Q：With respect to EO business, are there any other companies offering similar solutions?
A：For example, a number of systems integrators have also begun mentioning workstylereform, etc. recently, but we are very different in the sense that we have been proposingand implementing EO ahead of our competitors since 2007 and that we are able toprovide total solutions which also include space design and office facilities. Officefurniture makers also compete with us sometimes but since they do not have theinformation and communication technology (ICT) themselves, they sometimes
collaborate with us as partner companies.
Q：I understand that EO is a business in which NESIC can utilize its strengths, but is it also
highly profitable?
A：Projects where customers leave everything to us through our consulting services are
more profitable than ordinary projects because there is no price competition.
Q： I believe the plan was to expand EO to corporations outside the Tokyo metropolitan area.
How is this going?
A：Rollout to major metropolitan areas such as Kansai and Chubu is making progress, but
we have not had much success in other regions. Projects tend to take shape more easily
if customers are companies of a certain size.
Q： You say that there are needs for diversification of work styles for women and senior
employees. Have any specific requests, etc. already been made by customers?
A：As Japan aims to become a society in which women can play an active role, telework is
an area of interest for both government and private enterprises. In fact, the results of thequestionnaire survey of customers who came to our private fair also indicate stronginterest in telework, and increasingly we propose solutions that combine ICT andpersonnel system reform to our customers.

Q：What reaction have you had since the launch of the MVNO service in October last year?
A：This has already led to as many as 60 proof-of-concept demonstrations and some large
orders are close to being finalized. This is not the kind of business in which widespread
take-up happens all at once, but we have the impression that needs are becoming
evident and we intend to expand the business whilst conducting the demonstrations.
Q：The strength of NESIC’s MVNO service appears to lie in the availability of various accesscharges according to user needs. Is it not possible that some of your competitors will start
to offer similar charges?
A：Speed is important and we were quicker off the mark than our competitors. There aresome companies that are offering line services for IoT, but our big strength is that we areable to provide not just the line but a total service including everything from theinstallation of equipment to SI, maintenance and operation.
In this sector, it is important to team up with many partners, and our ability to cover every
aspect right down to evaluation of the line connection with partners is a feature only wecan offer.

≪Infrastructure Business≫
Q：You mention broadcasting and CATV, disaster prevention, and railways and roads as
areas of focus under the current Medium-Term Plan. Give details of the intended timeline
for the expansion of each of these businesses.
A：Regarding broadcasting, the type of demand we expect under the current Medium-Term
Plan is replacement demand for studio equipment supplied when digital terrestrial
broadcasting was launched. Last year and the year before last, the replacement of studioequipment of Tokyo’s key stations began and the replacement of local broadcast stations
will take place over the next two to three years. This is demand that will continue over theperiod of the Medium-Term Plan.
In the CATV area, we expect demand in response to 4K, which is the next generation ofTV resolution, and we plan to convert CATV networks to fiber optics to enable thetransmission of large-volume 4K data. Last year, 4K broadcasting on BS channels beganand services will gradually become more widespread in the future and we believe,
therefore, that demand will grow in the run up to the Tokyo 2020 Games. Since half of all
CATV operators are customers with which we have dealings, we intend to use thiscustomer base to win orders.

Regarding radio communications for disaster prevention, Japan has around 1,800municipalities, but 20% of these have no radio communications for disaster prevention
and around 60% of those that do have use analog communication systems and we plan
to target these. Unlike the digitalization of fire-fighting radio, there is no set deadline for
digitalization, but disaster prevention measures are an important theme and are allocateda budget of between 20 billion yen and 30 billion yen in some form or other every year,
making this a stable business. In addition to such disaster prevention at a municipal level,
there is also disaster prevention at a prefectural level, and the time for system
replacement has come. Since this is an area in which we can also make use of the NEC
Group’s large market share, we intend to make use of this to expand the business.
As for the expressway network, there is a stable budget of around 30 billion yen formonitoring, etc. but, with the construction of new expressways such as the Shin-Tōmei
Expressway and the Shin-Meishin Expressway, the market is expanding. Our main target
in the railway sector is train radio. Inter-connected through services are increasing butwhereas two radio sets are required in the case of analog radio, one radio set is enoughin the case of digital radio, and replacement demand will start to emerge.

≪Global Business≫
Q： You mention railway and airport projects as targets for outbound business. How do you
aim to win orders?
A： We already have a proven track record in various countries, and we aim to make use ofJapan’s ODA, etc. to win orders. We will be responsible for networks as part of aJapanese union.
Q：What are your reasons for focusing on Thailand and Myanmar in your outboundbusiness? And roughly what are their shares of total outbound business?
A：We have been doing business in Thailand for 25 years, and have a business base, withgood relations with customers. Furthermore, Thailand is seeing a shift in demand awayfrom 3G networks towards LTE networks and associated optical fiber networks. Myanmar,too, is a rapidly growing country, but it still lacks social infrastructure and various business
opportunities can be expected. Together, Thailand and Myanmar account of around 1/3 ofour outbound business and they are expected to maintain a similar share in the mediumterm.
Q： Conditions in the telecom carrier business remain difficult. Do you ever allocate telecom
carrier business staff to global business?
A：We have already shifted some staff to global business. However, to increase profitability,it is important to pursue localization and to use mainly local human resources to conductbusiness. In fact, this is also the kind of system that is in place in Thailand. At the newcompany established in Myanmar, we have two Japanese staff and the rest are locally
employed staff. Some of our joint venture partners operate schools, facilitating theutilization of local talent.
Q：Do you intend to utilize human resources from Myanmar in Japan as well?
A：We intend to make use of talented human resources from Myanmar in other countries
besides Myanmar, and expect to be able to utilize them in our domestic business as wellin the medium term.
Q： You say with respect to inbound business that there are also business opportunities at
the airports where foreign tourists arrive in Japan. Are you involved in air traffic controlsystems?
A：We provide flight information and security systems, not air traffic control systems. Thereis also a system called VDGS(Visual Docking Guidance System) which guides aircraft tothe gate after they land and we have a 100% share of this market in Japan.
Q：Regarding ATM for foreign tourists, what kind of system do you supply?
A：The system that we supply is not the ATM itself but the multilingual helpdesk service
provided when foreigners use the ATM. A multilingual service is used for the safety andsecurity of foreigners, even in the case of 119 emergency calls.
Q： Is the multilingual service based in Japan? With online English conversation classes, etc.
services are provided cheaply by putting calls through to India and the Philippines. Do
you intend to establish a base overseas?
A：NESIC’s multilingual service also supports areas that are a matter of life and death suchas 119 emergency calls. Consequently, members we assign to this service have acquired
the Japanese-Language Proficiency Test Level 1 so that they are able to speak correct
Japanese without misunderstanding and have also mastered other relevant skills such as
first aid and technical training.
≪Growth investments≫
Q：You say that investment will be 20 billion yen over 3 years. What kind of areas will you
invest in specifically? Give examples.
A：For example, we will make investment to further strengthen EO. We intend to constantly
adopt new technologies and new equipment to keep our customers interested and also
intend to invest in areas such as the development of the telework environment. TheMVNO service has only just been launched but further investment is necessary and wealso want to invest in innovation of the backbone system to improve efficiency, among
other areas.
Q：What kind of investment will you make in relation to telework?
A：We need to invest in proof-of-concept demonstrations, etc., and with respect to telework,
we began conducting an internal demonstration two years ago. One of the issues
Japanese companies face when introducing telework is how to maintain team work.
Since members are not performing their duties in the same space, this tends to create asense of isolation and measures to prevent this are required. Monitoring working hours isalso important and we are drawing on the results of the demonstration to develop an
attendance management system for telework. It is also important to ensure security, andwe will propose solutions to these kind of problems via proof-of-concept demonstrations.
Q：Under the previous Medium-Term Plan, there were three M&A transactions which
contributed to sales growth. The current Medium-Term Plan does not appear to factor inM&A. Do you aim to achieve the targets organically?
A：Also with the previous Medium-Term Plan, initially M&A were not a part of the plan but itturned out that there were deals which were in line with the growth strategies and we
implemented three M&A transactions. Since M&A transactions also involve a counterparty,
they are in some respects difficult to incorporate into the Medium-Term Plan. If any goodM&A deals that are in line with strategies come along, we intend to pursue them.
≪Improvement of profitability≫
Q： Basement business will decrease and your plan is to expand the businesses that areareas of focus. How will this change in business mix affect planned improvement in theprofit margin?
A：Generally speaking, growth in service-type businesses leads to improvement in the profit
margin. However, in the infrastructure sector, price competition is intensifying. Accordingly,efforts to improve cost in each project are important and this will underpin improvement inprofitability.
Q：I believe the sales-cost ratio is already fairly high. How much more do you intend to keep
aiming for improvement?
A： We are committed to continual improvement. Over the period of the Medium-Term Plan,
we are aiming for improvement of 0.5% in the operating margin. We also intend toimprove SG&A efficiency but since investment in growth is also necessary, we consider
improvement in the cost ratio to be more important.
Q：Due to sudden deterioration in the environment of business with telecom carriers, in thefiscal year ended March 31, 2016, profitability in the carrier networks segment
deteriorated significantly. You say that, over the period of the medium-term management
plan, we still cannot expect anything of business with telecom carriers. If net sales wereto deteriorate further, surely action in terms of cost could still be taken?
A：We are streamlining business with telecom carriers and the results of these efforts
became apparent in the fourth quarter of the fiscal year ended March 31, 2016. I believe
we have at last put in place a structure that allows us to respond to capital investment
trends among telecom carriers and in the future we will control costs depending oninvestment trends.

≪Other≫
Q：You say that the new Medium-Term Plan assumes that business with telecom carriers will
not recover. Are you assuming that 5G technology will not be launched yet?
A：Even if 5G technology is launched, since in the case of base stations, the average spend
per installation is still low, we do not have high expectations. However, with respect toservices that use 5G networks such as IoT, we expect that business opportunities willexpand.

Q：NESIC’s dividend yield is attractive. Explain your dividend policy for the future.
A：Our basic policy is to maintain stable dividends and we also take DOE into consideration.
We intend to increase profitability in order to be able to stably increase returns tomedium- and long-term shareholders.
Q：I believe that there are areas in which you operate in collaboration with NEC and areas inwhich you operate independently. During the period of the new Medium-Term Plan, will
there be any change in the sense of distance between NESIC and NEC?
A：We do not anticipate any major change. The Medium-Term Plan was formulated basedon our own strategies but in areas where we can make use of NEC’s strengths such asthe broadcasting sector, we will collaborate with NEC.
This document summarizes questions and answers at meetings with sell-side analysts
held on May 27 and May 31. The questions have been changed in terms of the order andoverlaps to make them easier to understand.