Integrated Report 2023 (Financial Section)
Publication: October 2023 (Published annually)
NEC Capital Solutions Limited
https://www.necap.co.jp/english/

CONTENTS
5-Year Summary

3

Operating and Financial Review

4

Consolidated Balance Sheets

8

Consolidated Statements of Income and Comprehensive Income

10

Consolidated Statements of Changes in Net Assets

12

Consolidated Statements of Cash Flows14

Notes to Consolidated Financial Statements

16

Independent Auditor’s Report56© NEC Capital Solutions Limited 2023

2

NEC Capital Solutions Limited Integrated Report 2023(Financial Section)

5-Year Summary
Consolidated Financial Data
Thousands of
U.S. Dollars

Millions of Yen
2023

2022

2021

2020

2019

2023

¥258,107¥249,908¥221,256¥220,717¥204,131$1,932,809

Profit before income taxes

12,444

11,423

6,089

9,093

8,986

93,184

Profit attributable to owners ofparent

6,419

6,940

4,119

5,118

6,391

48,065¥1,055,876¥1,030,617¥1,057,654¥997,511¥895,683$7,906,811

128,815

121,740

113,885

105,249

105,999964,619

For the year:
Revenues

At year-end:
Total assets
Total net assets

Yen

U.S. Dollars

Per share data:
Net assets¥5,085.69¥4,794.13¥4,438.33¥4,306.21¥4,131.64$38.08

Basic net income

298.143322.37191.29237.66296.81

2.23

Cash dividends

110.00

74.00

60.00

60.00

55.00

0.82

Dividend payout ratio (%)

36.9

23.0

31.4

25.2

18.5

-

Equity ratio (%)

10.4

10.0

9.0

9.3

9.9

-

Price earnings ratio (Times)

8.47

6.44

10.59

7.74

5.73

-

Return on equity (%)

6.0

7.0

4.4

5.6

7.4

-

Return on assets (%)

1.2

1.1

0.6

1.0

1.0

-

Number of employees

866

812

811

784

767

-

Key indicators:

1. The U.S. dollar amounts represent translation of Japanese yen, for convenience only, at the rate of ¥133.54=U.S.$1.00 in
effect on March 31, 2023.

3

NEC Capital Solutions Limited Integrated Report 2023(Financial Section)

Operating and Financial Review
1. Business Results
While the Japanese economy during the fiscal year ended March 31, 2023 was affected by COVID-19, it stepped
forward in resuming economic activities toward the post COVID-19 world. On the other hand, the situation
became more uncertain mainly due to the Russian invasion of Ukraine started in February 2022 seemingly being
prolonged and causing a steep rise in commodity prices, such as crude oil and grain prices, as well as the world’s
central banks being pressed to pursue a tight monetary policy, including raising interest rates to combat inflation.
In addition, in December 2022, there were moves in Japan that suggest modification of its easy monetary policy,
such as the Bank of Japan widening the permitted fluctuation band of long-term interest rates to 0.5% under its
yield curve control policy. Under these national and international environmental changes, closer attentions thanever to future prospects of economic activities are considered necessary.

The leasing industry, in which the NEC Capital Solutions Group (hereinafter, the “Group”) operates, the total
value of leasing contracts of the leasing industry for the fiscal year ended March 31, 2023 has been ¥4,310.6
billion, which represents an increase by 2.2% compared with the previous fiscal year (based on Lease Statistics
published on May 29, 2023, by the Japan Leasing Association).

Under these circumstances, the contract execution volume decreased by 1.4% and contract volume increased by
8.7%, respectively compared with the previous fiscal year in the Leasing Business of NEC Capital Solutions
Limited (hereafter, the “Company”).

The contract execution volume decreased from the previous fiscal year

primarily due to the impact of a large-scale project of the GIGA School Program recorded in the previous fiscal
year, excluding which the contract execution volume would have exceeded the level of the previous fiscal year.
The contract volume increased compared with the previous fiscal year due to an increase in demand of bothgovernment and private sector.
In the Finance Business, both the contract execution volume and contract volume exceeded the level of theprevious fiscal year due to an increase in factoring and loans. The increase was due to the capturing the shortterm financing needs in Japan and overseas.
In the Investment Business, while revenues increased mainly due to gain on sales of large-scale real estate forsale, gross profit and operating income decreased from the previous fiscal year mainly due to a decline of revenue
on a venture fund exit in the previous fiscal year.
In Other Business, revenue and operating income both increased compared with the previous fiscal year mainly
due to an increase in fee income from PFI and PPP, and revenue from solar power generation business.
As for the overall operating results, revenues and gross profit both increased compared with the previous fiscal
year because the Finance Business, Investment Business and Other Business expanded while the Leasing
Business, which recorded large-scale sales of leased assets in the previous fiscal year, remained almost
unchanged. Operating income and ordinary income increased from the previous fiscal year due to a decrease in
selling, general and administrative expenses as a result of the improvement of credit-related costs, whereas
profit attributable to owners of parent decreased from the previous fiscal year as a result of an increase in profit
attributable to non-controlling interests.
As a result of the Group’s initiative, total revenues increased by 3.3% to ¥258,107 million ($1,932,807 thousand)on a consolidated basis for the year under review. Operating income increased by 12.1% to ¥11,715 million($87,727 thousand), ordinary income increased by 8.9% to ¥12,440 million ($93,156 thousand) and profit
attributable to owners of parent decreased by 7.5% to ¥6,418 million ($48,061 thousand).

4

NEC Capital Solutions Limited Integrated Report 2023(Financial Section)

Operating results by segment are as follows:a. Leasing BusinessTotal revenue in this segment was ¥224,307 million ($1,679,699 thousand), almost the same level as theprevious fiscal year, and operating income decreased by ¥751 million ($5,624 thousand) to ¥6,368 million($47,686 thousand) mainly due in part to the posting of provision of allowance for doubtful accounts.
b. Finance BusinessTotal revenue in this segment increased by 25.9% from the previous fiscal year, to ¥6,569 million ($49,191
thousand) mainly due in part to an increase in interest income, and operating income increased by ¥2,809 million($21,035 thousand) from the previous fiscal year, to ¥2,154 million ($16,130 thousand).
c. Investment BusinessTotal revenue in this segment increased by 39.4% from the previous fiscal year, to ¥22,813 million ($170,833
thousand) mainly due in part to a large-scale sale of real estate for sale in the current fiscal year, whereas
operating income decreased by ¥983 million ($7,361 thousand) from the previous fiscal year, to ¥4,412 million($33,039 thousand) mainly due in part to a decrease in gain on sale of operational investment securities.
d. Other BusinessTotal revenue in this segment increased by 6.8% from the previous fiscal year, to ¥4,462 million ($33,413
thousand) mainly due in part to a rental revenue from healthcare-related properties, and revenue from sales ofsolar power electricity, and operating income increased by ¥218 million ($1,632 thousand) from the previous
fiscal year, to ¥493 million ($3,692 thousand).

2. Forecasts for Fiscal Year Ending March 31, 2024
The Japanese economy during the fiscal year ending March 31, 2024 is anticipated to continue moving towardnormalization of economic activities with the risk of spread of COVID-19 being lower, as seen in the decision todowngrade COVID-19 to “Class 5,” a category under the Act on the Prevention of Infectious Diseases and Medical
Care for Patients with Infectious Diseases. On the other hand, the Russian invasion of Ukraine started in
February 2022 which seems to be prolonged and economic sanctions imposed by western countries have had alarge impact on the world economy. Since the invasion, commodity prices such as crude oil and grain prices havebeen rising and limited the effect of tight monetary policies, including raising interest rates, adopted by theworld’s central banks. In addition, there have been moves in Japan that suggest a shift of its monetary policy,
such as the Bank of Japan widening the fluctuation band for yield curve control. Under these conditions, closer
attentions than ever to future prospects of economic activities are necessary.
Under these circumstances, as the impact of COVID-19 has become smaller and smaller, sustainability is once
again being discussed as a global topic. Although the necessity and importance of sustainability, including SDGs,
have been much discussed, they did not directly approach to business management. However, the escalation ofworldwide economic losses from recent abnormal weather reached a scale that cannot be ignored, which resulted
in the establishment of international frameworks that directly prompted entrepreneurs to promotesustainability management. One of the representative frameworks is the Task Force on Climate-related
Financial Disclosures (TCFD). Under the TCFD framework, listed companies on the Prime Market have beenrequired to disclose their initiatives in line with the framework from the fiscal year ended March 31, 2023, alongwith the restructuring of the market segments of the Tokyo Stock Exchange. In light of these recent

5NEC Capital Solutions Limited Integrated Report 2023(Financial Section)
environmental changes, the Company has established its new group vision toward 2030, “Be a solution company
leading the next-generation circular economy,” which also serves as a goal of SDGs to further promote CSV
management it has aimed to realize. At the same time, the Company has also formulated “the Medium-term
Plan 2025” as the first stage toward the achievement of “the next-generation circular economy”. Under “theMedium-term Plan 2025” that is a first step toward the achievement of the group vision, the Company will create
circular services in our own way toward the achievement of the next-generation circular economy, as well as
conducting CSV management and solving social issues with customers through its business for a three year termin which the Company will try to engage in innovation to fulfill its goal for 2030 and sustainable growth.
Based on the policies mentioned above, forecasts ordinary income of ¥12.5 billion and profit attributable toowners of parent of ¥7.5 billion on a consolidated basis in the fiscal year ending March 31, 2024, a 0.5% and16.8% increase compared with the current fiscal year, respectively, resulting from sustainable growth of the
Leasing Business and the Finance Business and an increase in revenue of the Investment Business. The forecast
for annual dividends will increase ¥20 per share compared to the current fiscal year to ¥130 per share (includinginterim dividend of ¥65 yen per share), taking into consideration for the profit forecast, based on the Company’s
dividend policy, which is maintaining stable dividends as the basic policy.
Meanwhile, unless otherwise specified, information concerning the future presented herein are forecasts basedon our decisions, targets , certain premises, or assumptions as of the last day (March 31, 2023) of the consolidated
fiscal year and may differ materially from the actual results for a number of reasons.

3. Assets, Liabilities, and Net Assets
Total assets at the end of this fiscal year under review increased by ¥25,258 million ($189,142 thousand) year
on year, to ¥1,055,875 million ($7,906,807 thousand). This increase mainly reflected an increase of ¥14,357
million ($107,511 thousand) in loans, an increase of ¥12,816 million ($95,971 thousand) in investment securities,
offsetting a decrease of ¥11,665 million ($87,352 thousand) in lease receivables and investment in leases.
Liabilities at the end of this fiscal year under review increased by ¥18,183 million ($136,161 thousand) year
on year, to ¥927,060 million ($6,942,190 thousand). This increase mainly reflected an increase of ¥27,000 million($202,187 thousand) in commercial papers, offsetting a decrease of ¥10,000 million ($74,884 thousand) in current
portion of long-term bond.
Net assets at the end of this fiscal year under review increased by ¥7,074 million ($52,973 thousand) year on
year, to ¥128,815 million ($964,617 thousand). This increase mainly reflected an increase of ¥4,717 million($35,323 thousand) in profit attributable to owners of parent and an increase of ¥1,347 million ($10,087
thousand) in retained foreign currency translation adjustments and an increase of ¥798 million ($5,976
thousand) in non-controlling interests.

4. Cash Flow Status
Cash and cash equivalents at the end of this fiscal year under review were ¥35,557 million ($266,265
thousand).
The following is a description of cash flows and significant factors:(Cash Flows from Operating Activities)
Net cash provided by operating activities was ¥29 million ($217 thousand), compared with net cash provided
in operating activities of ¥46,815 million for the previous fiscal year. This was primarily attributable to profit
before income taxes of ¥12,443 million ($93,178 thousand) and decrease in lease receivables and investment inleases of ¥12,839 million ($96,143 thousand) , offsetting increase in loans of ¥17,491 million ($130,979 thousand)and interest paid of ¥4,906 million ($36,738 thousand) and income taxes paid of ¥1,648 million ($12,341

6NEC Capital Solutions Limited Integrated Report 2023(Financial Section)
thousand).
(Cash Flows from Investing Activities)
Net cash provided in investing activities was ¥9,581 million ($71,746 thousand), compared with net cash used
in investing activities of ¥501 million for the previous fiscal year. This was primarily attributable to proceedsfrom and purchases of investment securities of ¥17,675 million ($132,357 thousand) and purchases of assets
held for own use of ¥4,067 million ($30,455 thousand) , offsetting redemption of investment securities of ¥11,942
million ($89,426 thousand).
(Cash Flows from Financing Activities)
Net cash provided in financing activities was ¥7,875 million ($58,971 thousand), compared with net cash usedby financing activities of ¥46,932 million for the previous fiscal year. This was primarily attributable to increasein long-term debt of ¥177,554 million ($1,329,594 thousand) and increase in short-term borrowings, of ¥27,000
million ($202,187 thousand) and increase in long-term bond of ¥20,000 million ($149,768 thousand), offsetting
repayment of long-term debt of ¥180,511 million ($1,351,737 thousand) and repayment of long-term bond of¥30,000 million ($224,652 thousand) and cash dividends paid to minority shareholders of ¥5,008 million($37,502 thousand).

7

NEC Capital Solutions Limited Integrated Report 2023(Financial Section)

Consolidated Balance Sheets
NEC Capital Solutions Limited
March 31, 2023 and 2022

Millions of Yen
2023
2022

AssetsThousands of
U.S. Dollars(Note 1)
2023

Current assets:¥35,558－¥37,467$266,271

287－

Lease receivables and investment in leases (Notes 12, 13, 14)
Accounts receivable:

517,945529,610

3,878,577

Installment sales (Note 14)
Loans (Notes 9, 14)

38,828
231,61235,342
217,255

290,763
1,734,401

Leases (Note 14)
Purchased receivables (Note 14)

22,035
12,42020,6808,010

165,003
93,004

Allowance for doubtful accounts
Operational investment securities (Notes 7, 13, 14)(9,840)22,875(10,159)
21,183(73,684)
171,298

Real estate for sale (Note 13)
Other (Note 14)

23,82813,031

25,222
14,088

178,431
97,584

Total current assets

908,292

898,985

6,801,648

Property and equipment, net:
Leased assets (Note 6)

55,81955,253

Other operating assets (Note 6)

7,199

5,503

417,996
53,912

Cash and cash equivalents (Notes 13, 14)Time deposits

363

461

2,720

63,381

61,217474,628

Computer programs leased to customers
Goodwill

1,437
1,560

1,302
1,626

10,763

Software and other

6,177

2,940

11,682
46,254

Total intangible assets

9,174

5,868

68,699Investments and other assets:
Investment securities (Notes 7, 13, 14)

61,73748,921

Net defined benefit asset (Note 11)
Deferred tax assets (Notes 10)

340
9,045

365
11,480462,314
2,545

Other (Note 14)
Allowance for doubtful accounts

5,919(2,012)

5,591(1,810)(15,064)

Total investments and other assets

75,02964,547561,836¥1,055,876¥1,030,617$7,906,811

Assets held for own use (Notes 6, 13)
Property and equipment, net
Intangible assets:

Total assets
The accompanying notes are an integral part of these statements.

8

67,73544,306

NEC Capital Solutions Limited Integrated Report 2023(Financial Section)
Thousands of
U.S. Dollars(Note 1)Millions of Yen
Liabilities and net assets

2023

2022

2023

Current liabilities:
Short-term borrowings (Notes 8, 9, 14)¥270,091¥240,581$2,022,545

Current portion of long-term debt (Notes 8, 13, 14)

170,773

204,046

1,278,813

Notes and accounts payable – trade (Notes 14)

15,796

12,977

118,285

239

267

1,789

Accrued income taxes (Note 14)
Deposits received (Note 14)

2,043

2,203

15,302

Allowance for bonuses

847

6,346

Allowance for bonuses for directors

33

948
－

248

Other (Note 14)

36,57236,902

273,869

Total current liabilities

496,394

497,924

3,717,197

Long-term liabilities:
Long-term debt (Notes 8, 13, 14)418,485

397,801

3,133,783

Net defined benefit liability (Note 11)

2,035

2,077

15,237

Other

10,146

11,07575,975

Total long-term liabilities

430,666

410,953

3,224,995

Total liabilities

927,060

908,877

6,942,192

Common stock
Authorized:86,000,000 shares
Issued:21,533,400 shares
Capital surplus (Note 18)

3,777

3,777

28,283

4,646

4,646

34,792Retained earnings (Note 18)

97,132

92,414

727,360

(9)

(9)

(70)

105,546

100,828

790,365

1,628

1,383

12,188

91

102

683

2,263

915

16,944

Net assets:
Shareholders’ equity

Treasury stock, at cost
4,324 shares in 2023 and 4,156 shares in 2022
Total shareholders’ equity
Accumulated other comprehensive income
Net unrealized gains on marketable securities
Deferred losses on hedging derivatives
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Total accumulated other comprehensive income

(37)

(14)

(275)

3,945

2,386

29,540Non-controlling interests

19,325

18,526

144,714

Total net assets

128,816

121,740

964,619¥1,055,876¥1,030,617$7,906,811

Total liabilities and net assets

The accompanying notes are an integral part of these statements.

9NEC Capital Solutions Limited Integrated Report 2023(Financial Section)

Consolidated Statements of Income and Comprehensive Income
NEC Capital Solutions Limited
Years ended March 31, 2023 and 2022
Consolidated Statements of Income

Millions of Yen
2023
2022
Revenues:
LeasesInstallment sales
Loans
Other
Total revenues
Costs:
LeasesInterest expense
Other
Total costs
Gross profit

Thousands of
U.S. Dollars(Note 1)
2023

¥210,968
691
6,569
39,879258,107¥208,074
609
5,220
36,005249,908$1,579,814
5,176
49,194
298,625
1,932,809

195,183
5,053
25,951
226,187
31,920

192,060
3,931
22,215
218,206
31,702

1,461,603
37,840
194,329
1,693,772
239,037

Selling, general, and administrative expenses
Operating income

20,205
11,715

21,255
10,447

151,30387,734

Other income (expenses):
Interest and dividend income
Interest expense
Equity in earnings (losses) of affiliates
Gain on investment in partnerships
Gain on sales of investment securities
Foreign exchange gain
Income from compensation for damage
Loss on disposal of property and equipment
Rent expenses
Loss on investment in partnerships
Gain on sales of shares of subsidiaries
Loss on revision of retirement benefit plan
Loss on sale of shares of subsidiaries
Loss on valuation of investment securities
Other, net
Profit before income taxes

121
(26)
(34)
1,027
17
(459)
94
(5)
(85)
(4)
25
(22)
(0)
(17)
97
12,444

106
(22)
(8)
524
0
270
103
(3)
－
(29)
－
－
－
(13)
48
11,423

904
(193)
(258)
7,688
124
(3,440)
701
(36)
(637)
(27)
189
(165)
(1)
(130)
731
93,184

1,255
1,830
3,085

3,988
(1,680)
2,308

9,394
13,70523,0999,359
2,940¥6,4199,115
2,175¥6,94070,08522,020$48,065

Income taxes (Note 10):
Current
DeferredProfitProfit attributable to non-controlling interests
Profit attributable to owners of parent

The accompanying notes are an integral part of these statements.

10NEC Capital Solutions Limited Integrated Report 2023(Financial Section)
Consolidated Statements of Comprehensive Income

2023

2022

Thousands of
U.S. Dollars(Note 1)2023

¥9,359¥9,115$70,085

Net unrealized gains on marketable securities

104

493

778

Deferred (losses) gains on hedging derivatives

(23)

353

(170)

1,325

950

9,922

(23)

(147)

(170)

173

409

1,291

¥1,556¥2,058$11,651¥10,915¥11,173$81,736

Owners of parent

7,977

8,990

59,732

Non-controlling interests

2,938

2,183

22,004

Millions of Yen

ProfitOther comprehensive income (loss):

Foreign currency translation adjustments
Remeasurements of defined benefit plans
Share of other comprehensive income of associates accounted
for using equity method
Total other comprehensive income (loss)
Comprehensive income
Comprehensive income attributable to:

U.S. Dollars(Note 1)

Yen
2023

2022

2023

Basic net income¥298.14¥322.37$2.23

Cash dividends applicable to the year

110.00

74.00

0.82

Amounts per share:

The accompanying notes are an integral part of these statements.

11NEC Capital Solutions Limited Integrated Report 2023(Financial Section)

Consolidated Statements of Changes in Net Assets
NEC Capital Solutions Limited
Years ended March 31, 2023 and 2022
Millions of Yen
Accumulated othercomprehensive income

Shareholders' Equity
Number ofsharesCommon Capital Retained Treasury
issuedstock surplus earnings stock(Thousandsof shares)
Balance at March
31, 2021

21,533¥3,777¥4,646¥86,811¥(1)

Net
DeferredForeign Remeasureunrealized
gain
currency ments ofNongain (losses)
Total net(losses) translation defined controllingon
assetsbenefitinterests
on hedging adjustment
marketableplans
derivativesssecurities¥518¥(263)¥(51)¥133 ¥18,315 ¥113,885

Profit attributable toowners of parent

6,940

6,940

Cash dividends(1,335)(1,335)Purchase oftreasury stock
Disposal oftreasurysharesTransferrestricted
stock-based
compensation
Transfer fromretainedearnings
tocapital surplus

(60)

(60)

1

42

43

(3)

10

7

2

(2)

0

Other, net
Balance at March
31, 2022

21,533

3,777

4,646

92,414

(9)

865

365

966

(147)

211

2,260

1,383

102

915

(14)

18,526

121,740

Profit attributable toowners of parent

6,419

6,419

Cash dividends(1,701)(1,701)

Purchase oftreasury stock
Disposal oftreasuryshares

(9)

(9)

9

9

Other, net
Balance at March
31, 2023

21,533¥3,777¥4,646¥97,132

¥(9)

12

245

(11)

1,347

¥1,628¥91¥2,262

(23)

799

2,357

¥(37) ¥19,325 ¥128,815

NEC Capital Solutions Limited Integrated Report 2023(Financial Section)

Shareholders' Equity

Balance at March
31, 2022

Thousands of U.S. Dollars (Note 1)
Accumulated othercomprehensive income

Commonstock

CapitalsurplusRetainedearnings

Treasurystock$28,283$34,789$692,033$ (68)

Net
unrealized Deferred
Foreign
Remeasuregain (losses) gain (losses) currency
ments ofdefinedonon hedging translation
marketable derivatives adjustments benefit planssecurities$10,358$ 763$ 6,854$(104)

Noncontrollinginterests

Total net
assets$138,732$911,640

Profit attributable toowners of parent

48,06548,065

Cash dividends(12,738)(12,738)

Purchase oftreasury stock
Disposal oftreasuryshares

3

(68)

(68)

66

69

Other, net
Balance at March
31, 2023$28,283$34,792$727,360$ (70)

1,830

(80)

10,090

(171)

5,982

17,651$12,188$683$16,944$ (275)$144,714$964,619

The accompanying notes are an integral part of these statements.

13NEC Capital Solutions Limited Integrated Report 2023(Financial Section)

Consolidated Statements of Cash Flows
NEC Capital Solutions Limited
Years ended March 31, 2023 and 2023
Thousands of
U.S. Dollars(Note 1)Millions of Yen

Cash flows from operating activities:
Profit before income taxes
Depreciation and amortization
Amortization of goodwill
Increase (Decrease) in allowance for doubtful accounts
Increase (Decrease) in allowance for bonuses
Increase (Decrease) in allowance for directors’ bonuses
Increase (Decrease) in net defined benefit liability
Interest and dividend income
Interest expense
Foreign exchange loss
Equity in (earnings) losses of affiliated companies
Gain on sales of investment securities
Loss on valuation of investment securities
Gain on redemption of investment securities
Increase (Decrease) in installment sales receivables
Increase (Decrease) in lease receivables and investment inleasesIncrease (Decrease) in loans receivable
Increase (Decrease) in purchased receivables
Increase (Decrease) in operational investment securities
Increase (Decrease) in real estate for sale
Purchases of leased assets
Proceeds from sales of leased assets
Other, net
SubtotalInterest and dividend income received
Interest paid
Income taxes paid
Net cash used in operating activities
Cash flows from investing activities:
Purchases of assets held for own use
Purchases of investment securities
Proceeds from sales of investment securities
Proceeds from redemption of investment securities
Increase in time deposits
Payments for sales of investments in subsidiaries resulting inchange in scope of consolidation
Other, net
Net cash used in investing activities
Cash flows from financing activities:
Increase (Decrease) in short-term borrowings, net
Increase (Decrease) in long-term debt/bondRepayment of long-term debt/bondCash dividends paid
Cash dividends paid to non-controlling interests
Proceeds from stock issuance to non-controlling interests
Other, net
Net cash provided by financing activities
Foreign currency translation adjustments on cash and cash
equivalents

14

2023

2022

2023

¥12,444
18,732
201
(10)
(101)
33
(69)
(121)
5,103
5,924
34
(42)
17
(607)
(3,487)¥11,423
14,231
238
1,013
331
―
(26)
(106)
3,949
4,785
8
(101)
43
―
(4,213)
1,852$93,184
140,270
1,502
(74)
(756)
248
(515)
(904)
38,21144,362
258
(312)
130
(4,546)(26,111)(17,491)(4,409)(1,848)1,096(19,045)
7,258(10,056)
6,395
190(4,906)(1,649)30

17,408(397)
2,639(2,306)(11,791)
8,849
10,56858,397852(3,937)(8,497)
46,815(130,980)(33,019)(13,838)
8,209(142,619)
54,353(75,313)47,884
1,422(36,739)(12,346)
221(4,067)(17,676)
11
11,943(287)(1,138)(12,450)
2,220
10,87527―(30,456)(132,362)
84
89,432(2,149)506(9,581)

(35)
(501)

3,787
(71,747)

27,824
197,555(212,896)(1,772)(5,009)
2,182
(9)
7,875

(53,442)
135,848(125,842)(1,175)(4,279)1,966(9)(46,933)

208,360
1,479,366(1,594,248)(13,271)(37,507)
16,342(68)
58,974

(96)

(438)

(716)

12,839(11)

96,144(83)

NEC Capital Solutions Limited Integrated Report 2023(Financial Section)
Net decrease in cash and cash equivalents(1,772)(1,057)(13,268)

Cash and cash equivalents at beginning of year
Decrease in cash and cash equivalents resulting from exclusionof subsidiaries from consolidation
Cash and cash equivalents at end of year

37,46738,828

280,568

(137)

(304)

(1,029)¥35,558¥37,467$266,271

The accompanying notes are an integral part of these statements.

15

NEC Capital Solutions Limited Integrated Report 2023(Financial Section)

Notes to Consolidated Financial Statements
NEC Capital Solutions Limited
Year ended March 31, 2023

1. Basis of Presentation
The Company maintains its books of account in accordance with the provisions set forth in the Corporation Law
of Japan (the “Law”), and the Financial Instruments and Exchange Act of Japan and in conformity withaccounting principles generally accepted in Japan (“Japanese GAAP”), which are different in certain respects as
to the application and disclosure requirements of International Financial Reporting Standards. The
accompanying consolidated financial statements have been compiled from the consolidated financial statementsthat were filed with the Director of the Kanto Local Finance Bureau as required by the Financial Instruments
and Exchange Act of Japan. In preparing the accompanying consolidated financial statements, certain
reclassifications and rearrangements have been made to the consolidated financial statements issued
domestically in order to present them in a format that is more familiar to readers outside Japan. In addition,certain reclassifications of previously reported amounts have been made to conform to the current year
presentation.
The translation of Japanese yen amounts into U.S. dollar amounts is included solely for convenience, as amatter of arithmetic computation only, at ¥133.54 = U.S.$1.00, the approximate rate of exchange in effect on
March 31, 2023. This translation should not be construed as a representation that Japanese yen amounts havebeen, could have been, or could in the future be, converted into U.S. dollar amounts at this or any other rate.
2. Summary of Significant Accounting Policiesa) Consolidation
The consolidated financial statements include the accounts of the Company and its 59 consolidated subsidiaries
for the fiscal year ended March 31, 2023, such as Reboot Technology Services and Capitech Limited, RISA
Partners, Inc. (65 consolidated subsidiaries for the fiscal year ended March 31, 2022).
3 companies are newly included in consolidated subsidiaries since their establishment or acquisition in thefiscal year ended March 31, 2023.
Capital Solutions Consulting Ltd.and NEC Capital Solutions（Thailand) Ltd., a consolidated subsidiary of theGroup in the previous fiscal year, has been excluded from the scope of consolidation starting from the current
fiscal year from the perspective of materiality.
5 companies are excluded from the scope of consolidation because they are small in scale, and their total assets,
net revenues, net income (the Company’s interest share) and retained earnings (the Company’s interest share),etc. are not material to the Company’s consolidated financial statements.
Non-consolidated subsidiaries, to which the Company has majority voting shares are excluded fromconsolidation because it is considered obvious that our certain consolidated subsidiaries hold the shares as an
operating transaction in order to invest, develop, and earn capital gains to and from these companies, and do notcontrol decision-making organization of these companies and it meets the requirements of ASBJ Guidance No.
22.
3 companies have been accounted for by the equity method due to acquisition in the fiscal year ended March
31, 2023.
Affiliated companies, to which the Company has voting shares of more than 20% to 50% are excluded fromaffiliated companies because it is considered obvious that our certain consolidated subsidiaries hold the sharesas an operating transaction in order to invest, develop and earn capital gains to and from these companies anddo not have significant influence on these companies and it meets the requirements of ASBJ Guidance No. 22.
The Company does not apply the equity method to certain non-consolidated subsidiaries and affiliates because
net income (the Company’s interest share) and retained earnings (the Company’s interest share) of thesecompanies are not material to the Company’s consolidated financial statements even though the equity method
is not applied, and these companies are not material as a whole.
The financial statements of affiliated companies used by the Company in applying the equity method, whose
fiscal year-ends are different from the Group’s fiscal year-end, are those as of their respective fiscal year-ends.
The fiscal year-ends of 45 consolidated subsidiaries are different from the Group’s fiscal year-end, and are
December 31. 1 companies were consolidated by using their financial statements as of the Group’s fiscal yearend, which are prepared solely for consolidation purposes. With regard to other consolidated subsidiaries,
financial statements as of their respective fiscal year end are used for consolidation and necessary adjustments
are made to the consolidated financial statements to reflect any significant transactions between their fiscal

16

NEC Capital Solutions Limited Integrated Report 2023(Financial Section)
year-ends and March 31.
All significant intercompany balances and transactions have been eliminated in consolidation.
b) Revenue recognition
Leases:
Revenues from finance lease contracts with customers and corresponding costs are recognized at the time thepayments under the leases are due as stipulated in the lease contracts without regard to the actual collection ofsuch payments.
Installment sales:
Installment sales and the related costs are recognized when the installment payments become due according to
the installment sales contracts. Revenues from installment sales are reported net of installment sales and therelated costs.
c) Allocation of interest expense
Interest expense on borrowings is allocated to operating expenses and other expenses based on the balances of
the respective assets relating to operating and other activities. Interest expense classified as an operating
expense is recorded net of the corresponding interest income from deposits.
d) Allowance for doubtful accounts
Allowance for doubtful accounts is recorded to provide for probable losses on bad debts based on historicalexperience for those receivables other than specific doubtful accounts, and based on an estimate of theuncollectible amounts after a review of the collectibility for the specific doubtful receivables.
e) Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, callable cash deposits at banks and short-term investmentswith original maturities of three months or less which are readily convertible into cash with only an insignificant
risk of any change in their value.
f) Investment securities
Available-for-sale securities
Marketable available-for-sale securities are reported at fair value, with any unrealized gain or loss, net of theapplicable taxes, reported as a separate component of net assets. The cost of securities sold is determined by
the moving-average method. Non-marketable available-for-sale securities are stated at cost determined by themoving-average method.
g) Investments in anonymous partnerships
Investments in anonymous partnerships are included in investment securities based on the portion of interest
shares of anonymous partnerships’ net assets. The gains and losses arising from anonymous partnerships areincluded in total revenues for anonymous partnerships held for business purposes, and in other income (expense)
held for non-business purposes, with the corresponding adjustments made to investment securities in the sameamount. Capital refunds from anonymous partnerships by their general partners were deducted from investment
securities.
h) Real estate for sale
Real estate for sale is stated at cost determined by the identified method (carrying value is reduced if there isa decline in profitability of real estate).
i) Property and equipment
Property and equipment are stated at cost less accumulated depreciation.
Depreciation of assets held for own use;
The Company and its domestic consolidated subsidiaries adopted primarily the declining-balance method(however, the depreciation method for buildings (except for facilities attached to buildings) that were acquiredon or after April 1, 1998, and facilities attached to buildings and structures that were acquired on or after April
1, 2016 are depreciated by the straight-line method) to assets held for own use, and overseas consolidated
subsidiaries primarily adopted the straight-line method.
In addition, depreciation of machinery and equipment related to solar power generation facility is computed by
the straight-line method.
The useful lives of buildings are from 3 to 18 years, furniture and fixtures are from 3 to 20 years.

17NEC Capital Solutions Limited Integrated Report 2023(Financial Section)
Depreciation of property and equipment leased to customers;
Property and equipment leased to customers are depreciated over the term of the lease using the straight-line
method to the residual value which is the amount to be realized at the time when the lease contract is terminated.
j) Computer software
Costs related to software purchased for internal use are amortized by the straight-line method over an
estimated useful life of 3 to 5 years.
k) Accounting for derivatives
Derivatives are carried at fair value with any changes in unrealized gain or loss credited or charged to earnings,
except for those that meet the criteria for deferral hedge accounting under which unrealized gain or loss isdeferred as a separate component of net assets.
The Company utilizes derivative financial instruments principally in order to mitigate the risk of fluctuation
in interest rates on borrowings. The Company has established entity level controls that include policies andprocedures for risk assessment in accordance with the Company’s rules for interest-rate swap transactions.
Under these rules, the Company conducts transactions within a certain range and places limits on the applicable
assets and liabilities based on the actual demand. In addition, the Company also assesses the effectiveness ofthe hedging and verifies the approval, reporting and monitoring of all transactions involving derivatives. The
Company does not hold or issue derivative financial instruments for trading purposes.
The effectiveness of the hedge transactions is assessed by calculating the cumulative changes in cash flows of
the hedging instruments and the cumulative changes in cash flows of the hedged items and then verifying that
their ratio is within a fixed range.
Of the above hedging relationships, the Company has applied the exception set out in the “Practical Solution
on the Treatment of Hedge Accounting for Financial Instruments that Reference LIBOR “(PITF No.40, March
17, 2022) to all of those hedging relationships that are within the scope of the Practical Solution.
In cases where interest rate swap contracts are used as a hedge and meet certain hedging criteria, the interest
rate swaps are not recorded at fair value, instead, the net amount to be paid or received under the interest rate
swap contract is added to or deducted from the interest on the assets or liabilities for which the swap contract
was executed.
l) Retirement benefit plans
Employees’ retirement benefits:
The Company has a defined-benefit corporate pension plan, which is essentially a defined-benefit plan withguaranteed benefits and a defined-contribution pension plan, as well as a severance indemnity plan covering
virtually all employees other than directors and corporate auditors. Under the terms of these plans, eligible
employees upon retirement are entitled to lump-sum severance payments or annuity pension payments basedon their level of compensation upon termination and their years of service with the Company. To provide a portionof the lump-sum benefits or annuity payments, the Company participates in the NEC corporate pension fundestablished for NEC Group companies in accordance with the Welfare Pension Insurance Law.
Accrued retirement benefits have been provided for employees’ retirement benefits, based on an estimate of the
projected benefit obligation and the pension plan assets at the end of the year.
m) Allowance for bonuses
Allowance for bonuses provided for the future bonus payments to employees, is maintained at the amountaccrued at the end of the fiscal year, based on the estimated future payments.
n) Allowance for bonuses for directors
Allowance for bonuses for directors provided for the future bonus payments to directors, is maintained at theamount accrued at the end of the fiscal year, based on the estimated future payments.
o) Goodwill
Goodwill is amortized on a straight-line basis over a period within 20 years. However, if the amount isimmaterial, it is recognized as expense in the fiscal year when incurred.
p) Income taxes
Income taxes are calculated based on taxable income and charged to income on an accrual basis. Deferredincome tax assets and liabilities are recognized for the temporary differences between the financial reporting
and the tax bases of the assets and liabilities that will result in taxable or deductible amounts in the future.

18

NEC Capital Solutions Limited Integrated Report 2023(Financial Section)
Calculations of deferred tax assets and liabilities are based on the enacted tax laws at the end of the year.
q) Per share data
Basic net income per share is calculated by dividing the net income available to shareholders of common stockby the weighted-average number of shares of common stock outstanding during the year.
Diluted net income per share has not been disclosed because no potentially dilutive shares were outstanding.

3. Significant Accounting Estimates
Allowance for doubtful accounts(1) Amount recorded in the consolidated financial statements as of March 31, 2023
¥11,851 million ($88,745 thousand)Previous consolidated fiscal year ¥11,968 million(2) Information on the nature of the significant accounting estimates for identified items
The Company’s operating receivables mainly consist of installment sales receivables, lease receivables andinvestments in leases, accounts receivable - leases, and accounts receivable - loans, and are exposed to credit
risks caused by customers’ non-fulfillment of a contracts. The Company determines borrower categories basedon the degree of customers’ credit risks and categorizes the receivables into general receivables, doubtfulreceivables, and receivables from companies in bankruptcy and reorganization in order to prepare for bad debt
losses of operating receivables. Allowance for doubtful accounts is recorded for uncollectable amounts that are
determined based on historical write-off ratio of bad debt losses for general receivables and based on theindividual assessment of collectability considering each customer’s financial position and operating results inaddition to an estimate of collectable amounts through credit protection measures for doubtful receivables andreceivables from companies in bankruptcy and reorganization.
The Company determines the borrower categories based on the predetermined criteria taking into
consideration quantitative factor including customers’ repayment status including delinquency in payment andother financial indicators, as well as qualitative factor including future outlook of business performance.
Although the Company recorded allowance for doubtful accounts based on the information available as ofMarch 31, 2023, there is a possibility that additional allowance for doubtful accounts would be necessary during
the next fiscal year in case of unforeseen events such as customers' delinquency in payment or bankruptcy due
to deterioration of their operating results and financial position, affected by changes in economic and otherconditions considering that the Company's operating receivable collection period tends to be of medium-term andlong-term.

4. Change in Accounting Policies

The Company has applied the “Implementation Guidance on Accounting Standard for Fair Value
Measurement” (ASBJ Guidance No. 31 of June 17, 2021; the “Guidance”) starting from the beginning of the
fiscal year ended March 31, 2023 and decided to apply the new accounting policy prescribed in the Guidance
prospectively in accordance with the transitional measures set forth in Paragraph 27-2 of the Guidance.
This change has an immaterial impact on the consolidated financial statements.
The notes on investment trusts for the matters regarding the breakdown by level of fair value of financial
instruments and other matters specified in the note “Financial Instruments” do not present information
for the fiscal year ended March 31, 2022 in accordance with Paragraph 27-3 of the Guidance.

5. Unapplied accounting standards• “Accounting Standard for Current Income Taxes” (ASBJ Statement No. 27, October 28, 2022)• “Accounting Standard for Presentation of Comprehensive Income” (ASBJ Statement No. 25, October 28,
2022)

19

NEC Capital Solutions Limited Integrated Report 2023(Financial Section)• “Guidance on Accounting Standard for Tax Effect Accounting” (ASBJ Guidance No. 28, October 28, 2022)(1) Overview
The above standards and guidance define the accounting classification of income taxes, etc. when othercomprehensive income is taxable, and the handling of tax effect regarding the sales of the stock of subsidiaries,
etc. when the group taxation regime is adopted.
(2) Effective date
The Company will apply above standards and guidance from the beginning of the fiscal year ending March 31,
2025.
(3) Effects of application of these standards and guidance
The effects of the application of these standards and guidance are being evaluated when preparing theconsolidated financial statements for the current fiscal year.
6. Accumulated depreciation of property and equipment
Accumulated depreciation of property and equipment at March 31, 2023 and 2022 were as follows:
Thousands of
U.S. Dollars

Millions of Yen
2023
Leased assets

2022

2023

¥51,757¥47,120$387,578

Other operating assets

2,342

1,882

17,540Assets held for own use

1,070

957

8,013

7. Investment Securities
Investment securities at March 31, 2023 and 2022 consisted of the following:Thousands of
U.S. Dollars

Millions of Yen
2023

2022

2023

Current:
Marketable available-for-sale securities

¥565

¥913

$4,241Non-marketable available-for-sale securities

22,31020,270167,057¥22,875¥21,183$171,298

Marketable available-for-sale securities¥7,677¥2,797$57,485

Non-marketable available-for-sale securities

38,48934,755288,231

Non-consolidated subsidiaries and affiliated companies

15,571

11,368

116,598¥61,737¥48,920$462,314

Total
Non-current:

Total

20

NEC Capital Solutions Limited Integrated Report 2023(Financial Section)

The aggregate acquisition cost and fair value of available-for-sale securities with readily determinable
market value at March 31, 2023 and 2022 were as follows:
March 31, 2023
Acquisition cost

Unrealized gain Unrealized loss
Millions of Yen

Fair value

Available-for-sale securities:
Current
Equity securities

¥278

¥272

¥15

¥535

Debt securities

30

―

―

30

Equity securities

705

638

97

1,246

Debt securities

650

44

4

690

5,301

440

―

5,741

¥6,964¥1,394¥116¥8,242

Non-current

Other (trust beneficiary rights, etc.)
Total

March 31, 2022
Acquisition cost

Unrealized gain Unrealized loss
Millions of Yen

Fair value

Available-for-sale securities:
Current
Equity securities

¥357

¥541

¥15

¥883

Debt securities

30

―

―

30

Equity securities

705

354

71

988

Debt securities

1,126

43

―

1,169

426

214

―

640

¥2,644¥1,152¥86¥3,710Non-current

Other (trust beneficiary rights, etc.)
Total

March 31, 2023
Acquisition cost

Unrealized gain Unrealized loss
Thousands of U.S. Dollars

Fair value

Available-for-sale securities:
Current
Equity securities$2,084$2,041$111$4,014

227

―

―

227

Equity securities

5,281

4,776

724

9,333

Debt securities

4,866

330

30

5,166

Debt securities
Non-current

21NEC Capital Solutions Limited Integrated Report 2023(Financial Section)
Other (trust beneficiary rights, etc.)

39,693

3,293―

42,986

Total$52,151$10,440$865$61,72622

NEC Capital Solutions Limited Integrated Report 2023(Financial Section)
Non-marketable available-for-sale securities whose fair value were not readily determinable at March 31, 2023 and 2022
were as follows:
Carrying value
Thousands of
U.S. Dollars

Millions of Yen
2023

2022

2023

Non-marketable available-for-sale securities:
Equity securities¥25,337¥21,486$189,726―――

Other (investment in partnerships, etc.)

35,46233,539265,563

Total¥60,799¥55,025$455,289

Debt securities

Available-for-sale securities sold during the fiscal year ended March 31, 2023 and 2022 were as follows:
Thousands of
U.S. Dollars

Millions of Yen
2023

2022

2023

Equity securities:
Sales prices¥205¥7,709$1,538

Total gains on sales

126

5,189

946

Total losses on sales

―

―

―

Sales prices―¥1,023―

Total gains on sales

―

23

―

Total losses on sales

―

―

―

Debt securities:

8. Short-Term Borrowings and Long-Term Debt
Short-term borrowings at March 31, 2023 and 2022 were as follows:

Millions of Yen
2023

2022

Thousands of
U.S. Dollars

Weighted-averageinterest rate

2023

2023

Short-term loans from banks¥27,091¥24,581$202,865

4.68%

Commercial paper

243,000

216,000

1,819,679

0.03%¥270,091¥240,581$2,022,544

－

Total

Long-term debt at March 31, 2023 and 2022 consisted of the following:
Millions of Yen

Thousands of
U.S. Dollars

Weighted-averageinterest rate
2023

2023

2022

2023

¥485,122¥485,328$3,632,787

0.59%

3,986

6,370

29,8470.49%

Unsecured bonds

100,150

110,150

749,963

0.35%

Total

589,258

601,848

4,412,597－

Less current portion

170,773

204,046

1,278,813－

Long-term loans, principally from banks
Payables under securitized lease receivables

23NEC Capital Solutions Limited Integrated Report 2023(Financial Section)¥418,485$3,133,784¥397,802－

The aggregate annual maturities of long-term debt subsequent to March 31, 2023 are summarized as follows:
Fiscal Year ending March 31,

Millions of Yen

Thousands of
U.S. Dollars

2024¥170,773$1,278,813

2025

124,577

932,8862026

206,338

1,545,138

2027

38,768290,308

2028

10,09575,6002029 and thereafter

38,707

289,852¥589,258$4,412,597

At March 31, 2023, the Company had overdraft facilities or line-of-credit agreements with 46 financial institutions that were
set up in order to procure working capital efficiently. The unused committed lines of credit under such agreements at March
31, 2023, totaled ¥316,411 million ($2,369,410 thousand).

At March 31, 2022, the Company had overdraft facilities or line-of-credit agreements with 42 financial institutions that were
set up in order to procure working capital efficiently. The unused committed lines of credit under such agreements at March
31, 2022, totaled ¥300,323 million.

9. Commitment

Loan commitment as lender
As of March 31, 2023 and 2022, the Company had the following balances:
Thousands of
U.S. Dollars

Millions of Yen
2023
Loan commitment agreements
The loans provided under these credit facilities
Aggregated balance of loan commitments available forcustomers of the Company

2022¥20,719¥32,190$155,152

7,587

16,23456,817¥13,132¥15,956$98,335

Depending on the credit standing of borrower, any unused amount will not necessarily be utilized in full.

24

2023

NEC Capital Solutions Limited Integrated Report 2023(Financial Section)
10. Income Taxes
The Company and its domestic consolidated subsidiaries are subject to Japanese national and local income taxes that, inthe aggregate, resulted in a statutory tax rate of approximately 30.62% for the fiscal year ended March 31, 2023 and 2022.
The tax effects of significant temporary differences that resulted in deferred tax assets and liabilities at March 31, 2023
and 2022 were as follows:
Thousands of
U.S. Dollars

Millions of Yen
2023

2022

2023

Deferred tax assets:
Tax adjustments for lease transactions¥3,673¥5,083$27,505

Allowance for doubtful accounts

2,519

3,008

18,866

Loss on valuation of investment securities

1,962

2,320

14,695

Net operating loss carryforwards (*2)

569

1,427

4,257

Net defined benefit liability

519

524

3,886

Accrued bonuses

291

326

2,180

Other

1,643

1,285

12,305

Subtotal

11,176

13,973

83,694

Valuation allowance for tax loss carryforward (*2)

(564)

(183)

(4,225)

Valuation allowance for total amount of deductible temporary
differences and other(791)(1,699)(5,930)

Valuation allowance (*1)

(1,355)(1,882)(10,155)

Total deferred tax assets¥9,821¥12,091$73,539

Net unrealized gain on marketable securities

(656)

(465)

(4,912)

Other

(272)

(634)

(2,034)(928)(1,099)(6,946)¥8,893¥10,992$66,593

Deferred tax liabilities:

Total deferred tax liabilities
Net deferred tax assets(*1) The amount of valuation allowance decreased by ¥526 million ($3,941 thousand). The main component of this decreaseis due to the decrease of valuation allowance for tax loss carryforward of the consolidated subsidiary, RISA Partners, Inc.
(*2) The amounts of tax loss carryforward and related deferred tax assets by carryforward period at March 31, 2023 are as
follows:
Millions of Yen
Due within
1 yearDue after
1 yearthrough
2 years

Due after
2 years
through
3 years

Due after
3 years
through
4 years

Due after
4 years
through
5 years

Due after
5 years

Net operating loss carryforwards (a)

¥4

¥－

¥－

¥－

¥－

¥564

¥568

Valuation allowance

－

－

－

－

－

(564)

(564)

Deferred tax assets

4

－

－

－

－

－

(b)4

25

Total

NEC Capital Solutions Limited Integrated Report 2023(Financial Section)
Thousands of U.S. Dollars
Due within
1 yearDue after
1 yearthrough
2 years

Due after
2 years
through
3 years

Due after
3 years
through
4 years

Due after
4 years
through
5 years

Due after
5 years

Net operating loss carryforwards (a)

$32

$－

$－

$－

$－

$4,225$4,257

Valuation allowance

－

－

－

－

－

(4,225)(4,225)

Deferred tax assets

32

－

－

－

－

－

(b) 32

Total(a) Tax loss carryforward is the amount after multiplying the statutory tax rate.
(b) Deferred tax assets of ¥4 million ($32 thousand) are recognized for tax loss carryforward of ¥568 million ($4,257 thousand),
which is the amount after multiplying the statutory tax rate. Deferred tax assets of ¥4 million ($32 thousand) are mainly
recognized for certain part of tax loss carryforward of RISA Partners, Inc. As for the above tax loss carryforward, it considered
to be recoverable since future taxable income will be available.

The reconciliation between the statutory income tax rate and the effective income tax rate for the fiscal years ended March
31, 2023 and 2022 were as follows:
2023
2022
Statutory tax rate

30.62%

30.62%

0.40%

0.55%

(7.29%)(6.27%)(4.86%)(31.11%)－%19.00%

2.45%

3.38%

3.50%

0.77%

0.41%

0.42%

Equity in earnings of affiliates

0.07%(0.04%)

Other(0.51%)

2.88%

Effective tax rate

24.79%

20.20%(Reconciliation)
Amortization of goodwill
Adjustment related to distribution of net income ofanonymous partnerships attributable to noncontrolling interests
Valuation allowance
Expiration of net operating loss carryforwards
Different tax rates applied by consolidated
subsidiaries
Aggregation of income earned by foreignsubsidiaries
Inhabitant tax on per capita basis etc.

11. Accrued Retirement Benefits
The Company has a defined-benefit corporate pension plan, a defined-benefit plan with guaranteed benefits and a definedcontribution pension plan, as well as a severance indemnity plan covering virtually all employees other than directors andcorporate auditors. The defined-benefit corporate pension plan is a cash balance pension plan sponsored by NEC Group andestablished in December 2003.
Under the terms of these plans, eligible employees are entitled to lump-sum payments or annuity payments based on theirlevel of compensation upon termination and their years of service with the Company.
The Company transferred its pension plan from a defined benefit plan to a defined contribution plan on April 1, 2023. Lossof ¥21 million arising from this transfer is recorded under Other income (expenses) for the fiscal year ended March 31, 2023
as “loss on revision of retirement benefit plan”, based on “Accounting for Transfer between Retirement Benefit Plans” (ASBJ
Guidance No. 1, January 31, 2002, revised on December 16, 2016) and “Practical Solution on Accounting for Transfer between
Retirement Benefits Plans” (ASBJ PITF No. 2, March 29, 2002, revised on February 7, 2007).
Certain consolidated subsidiaries have joined in multi-employer defined-benefit corporate pension plan from the current
fiscal year, however, for certain plans in which the amount of plan assets corresponding to the Company’s contribution cannot
be reasonably calculated, the amount is accounted for the same manner as defined-contribution plan.

26

NEC Capital Solutions Limited Integrated Report 2023(Financial Section)
Defined benefit plans at March 31, 2023 and 2022 were as follows:(1) Reconciliation of changes in defined benefit obligations
Thousands of
U.S. Dollars

Millions of Yen
2023
Defined benefit obligations at beginning of year

2022

2023

¥4,628¥4,658$34,655

Service cost

229

238

1,717

Interest cost

51

51

381

Actuarial gains and losses

4

(8)

32

(476)

(311)

(3,567)

Reduction due to transition to a defined contribution plan

(1,240)－(9,285)

Defined benefit obligations at end of year

¥3,196¥4,628$23,933

Benefits paid

(2) Reconciliation of changes in plan assets
Thousands of
U.S. Dollars

Millions of Yen
2023

2022

2023

Plan assets at beginning of year

¥2,917¥2,940$21,841

Expected return on plan assets

73

74

546

Actuarial gains and losses

(48)

(28)

(362)

Employer contributions

91

98

683

(270)

(167)

(2,019)Reduction due to transition to a defined contribution plan

(1,262)－(9,448)Plan assets at end of year

¥1,501¥2,917$11,241

Benefits paid

(3) Reconciliation between defined benefit obligations (plan assets) and amounts of net defined benefit liability (asset)
recognized in the consolidated balance sheet
Thousands ofMillions of Yen
U.S. Dollars
2023

2022

2023

Defined benefit obligations (funded)¥1,209¥2,595$9,054

Plan assets(1,501)(2,917)(11,241)

Subtotal

(292)

(322)

(2,187)

Defined benefit obligations (unfunded)

1,987

2,033

14,880¥1,695¥1,711$12,693

Net defined benefit liability

2,035

2,077

15,238Net defined benefit asset

(340)

(366)

(2,545)¥1,695¥1,711$12,693

Net liability (asset) recognized in the consolidated balance sheet

Net liability (asset) recognized in the consolidated balance sheet27NEC Capital Solutions Limited Integrated Report 2023(Financial Section)(4) Retirement benefit expenses
Thousands of
U.S. Dollars

Millions of Yen
2023

2022

2023

Service cost

¥229

¥238

$1,717

Interest cost

51

51

381

Expected return on plan assets

(73)

(73)

(546)

Amortization of actuarial gains and losses

20

(193)

149

¥227

¥23

$1,701－$165

Retirement benefit expenses

Gains and losses associated with the transition to a defined¥22
contribution plan (Note)(Note)Other income (expenses) was recorded as a "loss on revision of retirement benefit plan."(5) Adjustment amount of defined benefit plans

Thousands of
U.S. Dollars

Millions of Yen
2023

2022

2023

Actuarial gains and losses¥(33)¥(213)$(245)

Total

¥(33)

¥(213)$(245)(6) Remeasurement of defined benefit plans
Thousands of
U.S. Dollars

Millions of Yen
2023

2022

2023

Unrecognized actuarial gains and losses

¥53

¥20

$394

Total

¥53

¥20

$394

(7) Percentage by major category of plan assets
2023

2022

Debt securities

58.7%

61.9%

Equity securities

23.3%

25.4%

General account

16.1%

8.4%

Other

1.9%

4.3%

Total

100.0%

100.0%In determining long-term expected rate of return on plan assets, the Company considers the current and projected asset
allocations, as well as current and future long-term rate of returns for various categories of the plan assets.
(8) Basis for calculation of actuarial assumption (weighted-average)
2023
Discount rateLong-term expected rate of return on plan assets(Note) Defined benefit plans include multi-employer pension plans.

2022

1.1%

1.1%

2.5%

2.5%

The amount to be paid by the Company to the defined contribution plans was ¥69 million ($519 thousand) for the fiscal year
ended March 31, 2023 and ¥65 million for the fiscal year ended March 31, 2022.

28

NEC Capital Solutions Limited Integrated Report 2023(Financial Section)
The amount to be paid to the multi-employer pension plans, which are accounted for the same manner as the definedcontribution pension plan, were ¥259 million ($1,939 thousand) and ¥302 million for the years ended March 31, 2023 and2022, respectively.
(1) Fund status of the multi-employer pension plans
Thousands of
U.S. Dollars

Millions of Yen
2023

2022

2023

Plan assets¥77,272¥62,838$578,643

Actuarial obligations for pension plan finance calculation

75,263

61,220563,599

Net amount¥2,009¥1,618$15,044(2) Ratio of the Group’s contribution to the total contributions of the multi-employer pension plans
For the fiscal year ended March 31, 2023
1.35% (From January 1, 2022 to December 31, 2022)
For the fiscal year ended March 31, 2022
1.81% (From January 1, 2021 to December 31, 2021)(3) Supplementary explanation
The main factors of Net amount listed above (1) were general reserve (¥1,617 million ($12,109 thousand) and ¥1,189 million
for the fiscal years ended March 31, 2023 and 2022, respectively) and Retained Earnings (¥390 million ($2,920 thousand)and ¥428 million for the fiscal years ended March 31, 2023 and 2022, respectively). In addition, ratio listed above (2) does
not match the actual ratio afforded by the Group.

29NEC Capital Solutions Limited Integrated Report 2023(Financial Section)

12. Lease Transactions
Information relating to finance leases of the Company as lessor for the fiscal year ended March 31, 2023 and 2022 issummarized as follows:(1) Components of investment in leases
Thousands of
U.S. Dollars

Millions of Yen
2023

2022

2023

Lease payments receivables¥441,840¥454,420$3,308,675

Estimation of residual value

16,638

16,277

124,589

Unearned interest income(20,469)(21,414)(153,279)

Investment in leases¥438,009¥449,283$3,279,985(2) Collecting schedule of lease payments receivables after the fiscal year-ends
Thousands of
U.S. Dollars

Millions of Yen
2023

2023

2022

Lease receivables
Due within 1 year

¥27,418¥26,640$205,320

Due after 1 year through 2 years

21,355

20,647

159,916

Due after 2 years through 3 years

15,372

15,518115,114

Due after 3 years through 4 years

9,364

10,01570,122

Due after 4 years through 5 years

4,196

4,303

31,421

Due after 5 years

5,060

6,042

37,892¥154,178¥150,790$1,154,542

Due after 1 year through 2 years

112,956

117,820

845,862

Due after 2 years through 3 years

80,08984,900599,735

Due after 3 years through 4 years

49,02853,283367,143

Due after 4 years through 5 years

24,526

23,698

183,662

Due after 5 years

21,06323,928

157,731

Investment in leases
Due within 1 year

(3) Future lease receivables under non-cancelable operating leases
Thousands of
U.S. Dollars

Millions of Yen
2023

2022

2023

Due within 1 year

¥3,531¥3,184$26,438

Due after 1 year

16,871

17,741

126,338¥20,402¥20,925$152,776

Total

30

NEC Capital Solutions Limited Integrated Report 2023(Financial Section)
Future lease payments under non-cancelable operating leases are summarized as follows:
Thousands of
U.S. Dollars

Millions of Yen
2023

2023

2022

Due within 1 year

¥1,656¥1,569$12,398

Due after 1 year

11,44012,24085,668¥13,096¥13,809$98,066

Total

13. Pledged Assets
Assets pledged as collateral as of March 31, 2023 and 2022 were as follows:
Thousands of
U.S. Dollars

Millions of Yen
2023
Lease receivables and investment in leases

2022¥1,2792023¥1,313$9,581

Operational investment securities

4,081

―

30,558

Real estate for sale

1,849

10,542

13,844

Leased assets

1,504

1,492

11,265

922

985

6,905

¥9,635¥14,332$72,153

Other operating assets
Total

Liabilities secured by the assets pledged as collateral as of March 31, 2023 and 2022 were as follows:
Thousands of
U.S. Dollars

Millions of Yen
2023
Bonds payable

2022
100

Total

749

100

378

358

2,828

3,407

9,683

25,514¥3,885¥10,141¥29,091

Long-term debt due within a year
Long-term debt

2023

Besides the above, the following assets which have been eliminated in consolidation are pledged as collateralThousands ofMillions of Yen
U.S. Dollars
2023

2023

2022

Investments in capital of subsidiaries and affiliates

¥128

¥128

$957

Total

¥128

¥128

$957

Assets pledged for loans of companies which were borrowed from the third parties, etc. as of March 31, 2023 and 2022 wereas follows:
Thousands ofMillions of Yen
U.S. Dollars
2023
Accounts receivable - Loans
Operational investment securities
Investment securities
Other (Investments and other assets)
Total

31

2022

2023

¥1,206¥1,294$9,033

―

3,160

―

1,133

1,022

8,483

31

31

232

¥2,370¥5,507$17,748

NEC Capital Solutions Limited Integrated Report 2023(Financial Section)
14. Financial Instruments
Year ended March 31, 2023
1. Financial instruments(1) Policies for financial instruments
The Group provides financial services, such as leases, installment sales, and corporate loans, to a wide range of customers,
including public offices, local governments, large companies, and small and medium enterprises. The Group also offers
services, such as factoring, settlement and collection agency services, and securitization, meeting the financial needs of adiverse array of customers. In addition to these, the Group deal with overseas loans and investments denominated in foreign
currencies, certain consolidated subsidiaries also make investments in corporate equities, loans receivable and real estate
directly and indirectly through funds.
With a basic policy of maintaining the consistency of funding with its operating assets, the Group manages its funding basedon the changes in operating and other assets. Specifically, taking into account the market conditions and the balance of shortterm and long-term products or direct and indirect products, the Group raises funds using a range of methods, includingbank borrowings as the main funding source, issuance of corporate bonds and commercial paper, and securitized receivables.
The Group’s operating assets are comprised principally of those with fixed interest rates such as investment in leases.
However, the Group primarily utilizes variable-rate debt obligations to raise funds. The variable-rate debt obligations expose
the Group to fluctuations in cash flows as well as profit margin due to change in interest rates. Therefore, the Group strives
to properly manage risks associated with fluctuations in interest rates and liquidity risks by carrying out appropriate
operating assets and liabilities management (ALM).
With respect to the risks from the fluctuations of interest rates, the Group uses interest rate swaps to hedge the risks offluctuations in both the present and future profit margin of the Group. The Group does not hold or issue derivative
instruments for trading or speculative purposes.

(2) Details and the risks of financial instruments
Operating receivables mainly consist of installment sales receivable, lease receivables and investment in leases, accounts
receivable, loans receivable and purchased receivables, and are exposed to the customers’ credit risk.
Repayments of these operating receivables are made over a long term from the commencement to the termination oftransactions. Consequently, obligations may not be fulfilled in accordance with contracts due to delinquency or bankruptcy,
etc., as a result of changes in the economic environment and other factors.
Operational investment securities, securities and investment securities mainly comprise stocks, bonds, trust beneficiaryrights, and investments in partnerships, excluding short-term financial assets. These securities are exposed to credit risks
associated with the issuers of the securities, risks associated with fluctuations of interest rates, risks of foreign exchange,
and risks associated with fluctuations in market prices.
The Group enters into derivative transactions including interest rate swap transactions for hedging the risks of interest
rate and currency swap transactions for hedging the risks of foreign exchange. The Group’s derivative instruments are
exposed to market risks.
Moreover, because the Group borrows funds mainly based on variable rates, the Group is exposed to the risks of interest
rate fluctuations. The Group manages these risks by entering into interest rate swap transactions.
The Group primarily uses pay-fixed, receive-variable interest rate swaps to effectively change variable-rate debt obligations
to fixed-rate debt obligations to the extent that there are fixed rate operating assets. Therefore, market risks of the hedging
derivative instruments are offset by those of the fixed rate operating assets.
To manage the fluctuations in cash flows caused by interest rate changes, the Group enters into interest rate swaps as ahedging instrument. The Group accounts for the interest rate swaps by using hedge accounting. If the criteria for hedge
accounting are not met, the Group’s profit or loss may be affected. The hedge accounting method, hedging instruments andhedged items, hedging policy, and assessment method of the effectiveness of hedging are discussed in Note 2. k).
The Group is exposed to liquidity risks arising from its borrowings, corporate bonds and commercial paper. That is, if theGroup cannot raise funds through the markets for these instruments under certain circumstances, the Group may not beable to make payments on the relevant due dates.

(3) Risk management(i) Credit risk management
The Group mitigates credit risks for business transactions through monitoring each customer periodically, managing due
dates and outstanding balances, and monitoring the difficulty of collection caused by the deterioration of customers’ financial
positions in accordance with the internal rules.
a) Leases, installment sales and corporate loans
The Credit Department and the Credit Management Department as well as the relevant sales departments are responsible
for the management of credit risks of leases, installment sales and corporate loans.
Moreover, at the Management Meeting and meetings of the Board of Directors held on a regular basis, the credit status isreported and examined. In connection with each credit transaction, the Company performs a customer credit evaluation

32

NEC Capital Solutions Limited Integrated Report 2023(Financial Section)
based on the relevant customer’s business performance, financial position, projected cash flow, and others. After theevaluation, the Company sets credit limits, internal credit ratings, collateral or guarantees, and terms and conditions of thetransaction.
After the transaction has been made, the Company regularly monitors business performance, collateral and progress of
repayment by each customer, and revises credit limits when necessary.
In the event of a default due to delinquency, bankruptcy, or others, the Company seeks to protect its claims in accordancewith its operating manuals.
With respect to the credit risks of large borrowers, the Management Meeting examines credit limits of those borrowers.
Moreover, at meeting of the Board of Directors held on a regular basis, the outstanding balances of claims, internal credit
ratings, terms and conditions of the transactions are reported.
b) Securities and purchased receivables
With respect to securities that are held for operational purposes, market prices are periodically assessed for marketablesecurities and financial conditions of issuers are regularly monitored for the other securities.
With respect to purchased receivables, loans, operational investment securities, and investment securities held by certain
consolidated subsidiaries, credit risks of customers or issuers are monitored in accordance with the internal rules andoperating manuals. The results of the monitoring are periodically reported to their presidents.
c) Derivative transactions
In dealing with counterparty risks in derivative transactions, the Company’s Finance Department monitors the credit risksof financial institutions to avoid losses that arise if the relevant financial institution fails to meet its obligations.
(ii) Market risk managementa) Risks of interest rate fluctuations
As part of ALM, the Group manages the risks of interest rate fluctuations, mainly by using interest rate derivatives. The
Group has internal policies of risk management that stipulate risk hedging policies, hedging plan and reporting process. The
Board of Directors must approve the hedging plan before the transaction is made.
The Finance Department comprehensively monitors the interest rates and terms of financial assets and liabilities on acontinuous basis, and manages risks by utilizing value at risk (VaR). At least once a month, the department reports thestatus of transactions and current operational strategies to the President of the Company.
With respect to the operation and management of derivative transactions conducted by certain consolidated subsidiaries,
the transaction policies and authorization rules are established and derivative transactions are approved through a decisionmaking process based on a request for approval.
b) Risks of foreign exchange
Both domestic and overseas subsidiaries manage the risks of foreign exchange on operating assets denominated in foreign
currencies for each individual transaction. In addition to matching balance of foreign currency denominated assets andliabilities, they have entered into currency swap transactions in order to hedge the risks of foreign exchange. The status on
the risks of foreign exchange has been reported regularly to the ALM committee.
c) Risks of price fluctuations
The Group invests in securities for the purpose of customer intimacy in addition to operational investments. The Finance
Department regularly monitors market information to manage risks of these securities. This information is reported to theManagement Meeting on a regular basis.
d) Derivative transactions
The Company enters into derivative transactions in accordance with its internal policies. The policies include the objectives
for derivative instruments, risk management policies and procedures (including authorization, responsibilities and reporting).
In addition, the Company maintains segregation of duties between those with the authority to enter into derivativetransactions (front office) and those responsible for bookkeeping (back office) by assigning different employees in the Finance
Department.
e) Quantitative information about market risks
The financial instruments affected by the risks of interest rate fluctuations are installment sales receivable, leasereceivables and investment in leases, loans receivable, investment securities, long-term debt, bonds and interest rate swaps
of derivative transactions.
The risks of interest rate fluctuations of long-term fixed rate assets and liabilities are measured by VaR. The Company
calculates VaR using a historical simulation method (holding period of one year, confidence level of 99%, and observation
period of ten years) and periodically performs backtesting to confirm and verify its effectiveness.
In addition, calculation method of VaR has changed from variance-covariance method to historical simulation method inorder to reflect past long-term market fluctuation to risk volume, and observation period which is a part of main preconditions
has changed from one to ten years in this fiscal year.
As of March 31, 2023, the total market risk quantity (estimated amount of losses) of long-term fixed rate assets and liabilitieswas ¥14 million ($105 thousand).

33

NEC Capital Solutions Limited Integrated Report 2023(Financial Section)(iii) Liquidity risk management
The Group mitigates the liquidity risks for funding (risks that the Group will be unable to repay on a repayment date) byusing procedures such as follows:・Appropriately maintain the relationship between cash flows from operating assets and those for operating liabilities on
ALM
・Prepare and update the cash flow plan on a timely basis
・Seek diversification of funding sources
・Maintain an appropriate level of liquidity on hand(4) Supplementary explanation about fair value of financial instruments
Fair values of financial instruments are based on market prices and, in cases where market prices are not available,reasonably calculated prices. Such prices have been calculated based on certain assumptions, and may differ if calculated
based on different assumptions.
With respect to the notional amount of derivative transactions in Note 15 “Derivatives,” they do not present the Company’s
exposure to market risks of such derivative transactions.

34

NEC Capital Solutions Limited Integrated Report 2023(Financial Section)
2. Fair value of financial instruments
Millions of Yen
Amountrecorded in the
consolidatedbalance sheet(1) Lease receivables andinvestment in leases
Allowance for doubtful
accounts (*3)(*4)(2) Installment sales receivable
Allowance for doubtful
accounts (*3)(3) Loans receivable
Allowance for doubtful
accounts (*3)(4) Operational investment
securities and Investment
securities(*6) ,(*7)
Total assets
(1)
Bonds
(2)
Long-term debt
Total liabilities
Derivatives (*5)

Thousands of U.S. Dollars
Amount recorded

Fair Value

Difference in the consolidated¥517,945$3,878,577(1,670)(12,506)

516,275
38,828512,417(3,858)(319)
38,509231,612Fair Value

Difference

balance sheet

3,866,071
290,763

3,837,179(28,892)

285,679(2,695)(2,389)38,150(359)(6,464)

288,374
1,734,401(48,405)

225,148

224,442(706)

1,685,996

1,680,712(5,284)

8,243

8,243

―

61,72461,724―¥788,175¥100,150
485,122¥585,272¥(2,594)¥783,252¥99,135
484,916¥584,051¥(2,594)¥(4,923)¥(1,015)(206)¥(1,221)¥―$5,902,165$749,963
3,632,787$4,382,750$(19,428)$5,865,294$742,363
3,631,242$4,373,605$(19,428)$(36,871)$(7,600)(1,545)$(9,145)$―(*1) “Cash and cash equivalents” are not disclosed because they are cash and are settled in a short period of time and theirfair value approximates their book value. “Accounts receivable – leases”, “Income taxes receivable”, “Notes and accounts
payable-trade”, “Short-term borrowings”, “Accounts payable, other", “Accrued income taxes” and “Deposits received”
are not disclosed as well because they are settled in a short period of time and their fair value approximates their bookvalue.
(*2) “Purchased receivables”, “Receivables from companies in bankruptcy and reorganization” and “Payables under
securitized lease receivables” are not disclosed because they are quantitatively immaterial.
(*3) An allowance for doubtful accounts that has been provided for installment sales receivable, lease receivables andinvestment in leases, loans receivable has been deducted.
(*4) The amounts presented in the consolidated balance sheet and the fair value provided for include the estimated residual
value.
(*5) The amount of assets and liabilities incurred from derivative transactions is presented on a net basis. Items that fall
into net liabilities are presented in ( ).
(*6) Investments securities that do not have quoted market prices are not included in “Asset (4) Operational investment
securities and investment securities” and the amount recognized in the consolidated balance sheet is as follows.
Amount presented in the consolidated balance sheet

Millions of Yen
Unlisted stocks¥34,003

Thousands of
U.S. Dollars$254,628(*7) The investment in partnerships and other similar entities recognized at the net amount corresponding to the portion
pertaining to the equity interests owned by the Company on the consolidated balance sheet are not disclosed. The bookvalue of such investments recognized on the consolidated balance sheet is ¥42,366 million ($317,253 thousand).

35

NEC Capital Solutions Limited Integrated Report 2023(Financial Section)
The following table shows the scheduled maturity payments of monetary claims and securities with maturity dates after
March 31, 2023
Millions of Yen

Millions of Yen￥35,558

Due after
1 year through5 years¥─

Due after
5 years through10 years¥─

181,596

316,887

20,8305,294

19,255
124,240
22,035
4,061
754

20,141
92,616
─
4,066
─

315
14,061
─
295
─

─
1,851
─
32
─

─
¥387,499

235¥433,945

533¥36,034

─
¥7,177

Due within
1 yearCash and cash equivalents
Lease receivables
and investment in leases (*1)(*2)
Installment sales receivables (*1)(*2)
Loans receivables (*2)
Accounts receivables-leases (*2)
Purchased receivables (*3)
Income taxes receivable
Available-for-sale securities
Debt/bondTotal

Due after
10 years¥─

Thousands of U.S. Dollars$266,271

Due after
1 year through5 years$─

Due after
5 years through10 years$─

1,359,862

2,372,975

155,981

39,643

144,197
930,358
165,003
30,4085,644

150,825
693,543
─
30,444
─

2,355
105,292
─
2,217
─

─
13,863
─239
──
$2,901,743

1,762$3,249,549

3,991$269,836

─
$53,745

Due within
1 yearCash and cash equivalents
Lease receivables
and investment in leases (*1)(*2)
Installment sales receivable (*1)(*2)
Loans receivables (*2)
Accounts receivable-leases (*2)
Purchased receivables (*3)
Income taxes receivable
Available-for-sale securities
Debt/bondTotal

Due after
10 years$─(*1) The amount of interest income is included in the maturity table above.
(*2) Receivables from companies in bankruptcy and reorganization of ¥2,014 million ($15,087 thousand) are not included in
the table above, because payments are not expected to be collected on schedule.
(*3) Purchased receivables of ¥3,965 million ($29,696 thousand) are not included in the table above, because payments are
not expected to be collected on schedule.

36NEC Capital Solutions Limited Integrated Report 2023(Financial Section)
The following table shows the scheduled maturity payments of unsecured bonds, long-term debt and other interest-bearing
liabilities subsequent to March 31, 2023.
Millions of Yen
Due within
1 yearShort-term borrowings¥270,091

Due after
1 yearthrough
2 years¥─

Due after
2 years
through
3 years¥─

Due after
3 years
through
4 years¥─

Due after
4 years
through
5 years¥─

Due after
5 years¥─

Unsecured bonds

20,00015,00020,00015,000150

30,000Long-term debt
Payables under securitizedlease receivables
Total

149,486

109,094

185,917

23,568

9,745

7,312

1,287

484

421

200

200

1,394

¥440,864¥124,578¥206,338¥38,768¥10,095¥38,706

Thousands of U.S. Dollars
Due within
1 yearShort-term borrowings$2,022,545

Unsecured bonds
Long-term debt
Payables under securitizedlease receivables
Total

Due after
1 yearthrough
2 years$─

Due after
2 years
through
3 years$─

Due after
3 years
through
4 years$─

Due after
4 years
through
5 years$─

Due after
5 years$─

149,768

112,326

149,768

112,326

1,123

224,652

1,119,410

816,937

1,392,219

176,484

72,98054,756

9,635

3,623

3,151

1,498

1,497

10,443$3,301,358$932,886$1,545,138$290,308$75,600$289,851

3. Fair value of financial instruments by each level
The fair value of financial instruments is classified into the following three levels based on the observability and materialityof the inputs used to determine fair value.
Level 1 fair value: Fair value is calculated based on quoted prices of assets or liabilities subject to the calculation of fairvalues that are formed in an active market out of observable inputs to a fair value measurement.
Level 2 fair value: Fair value is calculated based on inputs that are other than the inputs to a fair value measurement oflevel 1, out of observable inputs to a fair value measurement.
Level 3 fair value: Fair value is calculated based on unobservable inputs.
When multiple inputs that have a significant effect on fair value measurement are used, fair value isclassified into the level with the lowest priority in the calculation of fair value among the levels to whichthose inputs belong.
(1) Financial instruments recognized at fair value on the consolidated balance sheet
March 31, 2023
Fair value (Millions of Yen)
Level 2
Level 3

Level 1
Operational investment securities andinvestment securities
Other securities
Equity securities
Debt securities
Other
Derivative transactions
Interest-related transactions
Total assets
Derivative transactions
Currency-related transactions

Total¥1,694
－
656

¥88
－
5,084

¥－
720
－

¥1,782720
5,740－¥2,350172¥5,344－¥720

172¥8,414－(2,767)－(2,767)37

NEC Capital Solutions Limited Integrated Report 2023(Financial Section)
Total liabilities¥－¥(2,767)¥－¥(2,767)

March 31, 2023
Fair value (Thousands of U.S. Dollars)
Level 2
Level 3

Level 1
Operational investment securities andinvestment securities
Other securities
Equity securities
Debt securities
Other
Derivative transactions
Interest-related transactions
Total assets
Derivative transactions
Currency-related transactions
Total liabilities

Total$12,692
－
4,909

$655
－
38,076$－
5,393－$13,347
5,393
42,985－$17,601

1,290$40,021－$5,393

1,290$63,015－$－(20,718)$(20,718)－$－(20,718)$(20,718)(2) Financial instruments other than those recognized at fair value on the consolidated balance sheet
March 31, 2023

Installment sales receivables
Lease receivables and investment inleasesLoans receivables
Total assets
Bonds (including current portion)
Long-term debt (including current
portion)Total liabilities

Level 1¥－

Fair value (Millions of Yen)
Level 2
Level 3¥－¥38,150

Total¥38,150－－

512,417

512,417

－
¥－
－

－
¥－
98,986

224,442¥775,009
150

224,442¥775,009
99,136－－484,916

484,916¥－¥98,986¥485,066¥584,052

March 31, 2023
Level 1
Installment sales receivables
Lease receivables and investment inleasesLoans receivables
Total assets
Bonds (including current portion)
Long-term debt (including current
portion)Total liabilities

Fair value (Thousands of U.S. Dollars)
Level 2
Level 3$－$－$285,678

Total$285,678－－

3,837,178

3,837,178

－
$－
－

－
$－
741,242

1,680,712$5,803,568
1,121

1,680,712$5,803,568
742,363－－3,631,242

3,631,242$－$741,242$3,632,363$4,373,605(Note 1) Description of the valuation techniques and inputs used to measure fair value
Operational investment securities and investment securities
The fair values of securities for which unadjusted quoted prices in active markets are available are classified as Level 1.
The fair values of securities for which quoted prices are available, but their markets are inactive, are classified as Level 2.
The fair value of investment trusts without market prices is based on a unit price if there are no restrictions that are
significant enough to cause market participants to demand compensation for risks with respect to cancellation or
repurchase requests, and the fair value is categorized as level 2.
The fair values of private placement bonds are determined based on reasonably estimated amounts and their discountrates are not observable, and therefore, these are classified as Level 3.
Derivative transactions
The fair values of derivative transactions are determined based on quotes obtained provided by dealers and financial
institutions and these are classified as level 2 if observable inputs are available or the impact of unobservable inputs to thefair value is immaterial.

38

NEC Capital Solutions Limited Integrated Report 2023(Financial Section)
Installment sales receivables, lease receivables and lease investments
The fair values of these items are calculated by the present values based on the sum of principal and interest of eachcontract discounted by interest rates estimated to be applied to similar new transactions and these are classified as level 3.
The fair values of the doubtful receivables are calculated based on the estimated future cash flows of each contract
discounted by risk-free rate and these are classified as level 3.
Loans receivables
With respect to loans receivables with variable interest rates, the interest rates reflect the market interest rates in the
short term. Unless the credit conditions of debtors significantly change after the executions of loans, the book values ofsuch loans receivables are presented as the fair values because their fair value approximates their book value and these
are classified as level 3. With respect to loans receivables with fixed interest rates, the fair values are determined based on
the present values that are calculated by discounting the estimated future cash flows of each contract at interest rates
estimated to be applied if newly obtaining a loan with similar terms and conditions and these are classified as level 3.
The fair values of the doubtful receivables are calculated based on the estimated future cash flows of each contract
discounted by risk-free rate and these are classified as level 3.
Bonds
The fair values of bonds issued by the Company are determined based on their published market prices and these areclassified as level 2.
The fair values of bonds issued by the consolidated subsidiaries of the Company are determined by the present values
based on the sum of principal and interest of such bonds discounted by the interest rates estimated to be applied if newly
procuring funds with similar terms and conditions and these are classified as level 3.
Long-term debt
With respect to long-term debt with variable interest rates, the interest rate reflects the market interest rates in the shortterm. Accordingly, the book values of such debt are presented as the fair values because their fair value approximates theirbook value and these are classified as level 3.
With respect to long-term debt with fixed interest rates, the fair values are determined based on the present values that arecalculated by discounting the estimated future cash flows of each debt at interest rates estimated to be applied if newly
obtaining a debt with similar terms and conditions and these are classified as level 3.
(Note 2) Information concerning the fair values of level 3 financial assets and liabilities that are stated at fair value in the
consolidated balance sheet.
(1) Quantitative information on significant unobservable inputs
March 31, 2023
Significant
unobservable
inputsValuationtechniqueRange of inputs

Weighted
average of inputs

5.2％-7.0%

6.3%

Operational investment securities
and investment securities
Other securities
Debt securities

Present value
methodDiscount rate

39

NEC Capital Solutions Limited Integrated Report 2023(Financial Section)(2) Reconciliation between beginning balance and ending balance, and net unrealized gains (losses) recognized in profit orloss in the period
Year ended March 31, 2023
(Millions of Yen)
Operational
investment
securities andinvestment
securities

Beginning balance

Other securities
Debt securities¥801(Thousands of U.S. Dollars)
Operational
investment
securities andinvestment
Total
securities
Total
Other securities
Debt securities¥801$6,001$6,001

Recognized in profit or loss or other comprehensive
income for the year
Recognized in profit or loss (*1)
7
7
53
53
Recognized in other comprehensive income (*2)
Purchases, sales, issuance and redemption
50
50
374
374
Purchases
－
－
－
－
Sales
－
－
－
－
Issuance－－－－
Redemption－－－－
Reclassification to Level 3 fair value－－－－
Reclassification from level 3 fair value
(138)
(138)
(1,036)(1,036)
Other
¥720
¥720
$5,392$5,392Ending balance
Net unrealized gains (losses) recognized in the period－－－－with respect to those financial assets and liabilities
held at the end of the period. (*1)(*1) Included in "Costs” in the consolidated statements of income(*2) Included in “Net unrealized gains (losses) on marketable securities” of “Other comprehensive income (loss)” in the
consolidates statements of comprehensive income.
(3) Description of the fair value measurement process
The Company develops valuation techniques and methods for classifying fair value levels in accordance with the policies
concerning fair value measurement and classification of fair value levels. The Company also verifies the appropriateness ofthe valuation techniques used to determine fair value, the inputs used, the calculated fair values and classified fair valuelevels in accordance with such policies.
(4) Description of the effects of the fair value with respect to changes in significant unobservable inputs
Significant unobservable inputs used to calculate the fair values of debt securities with fixed rates included in othersecurities are considered as discount rates. The discount rates represent estimates of interest rates to be applied when new
similar transactions. Generally, a significant decline (increase) in discount rates causes a significant increase (decline) in
their fair values.

40NEC Capital Solutions Limited Integrated Report 2023(Financial Section)
Year ended March 31, 2022
1.Fair value of financial instruments
Millions of Yen
Amountrecorded in the
consolidatedbalance sheet(1) Lease receivables andinvestment in leases
Allowance for doubtful
accounts (*3)(*4)(2) Installment sales receivable
Allowance for doubtful
accounts (*3)(3) Loans receivable
Allowance for doubtful
accounts (*3)(4) Operational investment
securities and Investment
securities(*6) ,(*7), (*8)
Total assets
(1)
Bonds
(2)
Long-term debt
Total liabilities
Derivatives (*5)

Fair Value

Difference

528,340

824

34,952(135)

210,879

211,381

502

3,712

3,712

―

¥777,193¥110,150
485,328¥595,478¥(1,967)¥778,385¥109,811
485,711¥595,522¥(1,967)¥1,191¥(339)
383¥44¥―¥529,610(2,094)
527,516
35,342(256)
35,086217,254(6,375)(*1) “Cash and cash equivalents” are not disclosed because they are cash and are settled in a short period of time and theirfair value approximates their book value. “Accounts receivable – leases”, “Income taxes receivable”, “Notes and accounts
payable-trade”, “Short-term borrowings”, “Accounts payable, other", “Accrued income taxes” and “Deposits received”
are not disclosed as well because they are settled in a short period of time and their fair value approximates their bookvalue.
(*2) “Purchased receivables”, “Receivables from companies in bankruptcy and reorganization” and “Payables under
securitized lease receivables” are not disclosed because they are quantitatively immaterial.
(*3) An allowance for doubtful accounts that has been provided for installment sales receivable, lease receivables andinvestment in leases, loans receivable has been deducted.
(*4) The amounts presented in the consolidated balance sheet and the fair value provided for include the estimated residual
value.
(*5) The amount of assets and liabilities incurred from derivative transactions is presented on a net basis. Items that fall
into net liabilities are presented in ( ).
(*6) Investments securities that do not have quoted market prices are not included in “Asset (4) Operational investment
securities and investment securities” and the amount recognized in the consolidated balance sheet is as follows.
Amount presented in the
consolidated balance sheet

Millions of Yen
Unlisted stocks¥25,090(*7) The investment in partnerships and other similar entities recognized at the net amount corresponding to the portion
pertaining to the equity interests owned by the Company on the consolidated balance sheet are not disclosed. The bookvalue of such investments recognized on the consolidated balance sheet is ¥34,861 million.
(*8) The fair value of investment trusts that have no quoted market price is not disclosed in accordance with the transitional
treatment of the paragraph 26 of “Guidance on Accounting Standard for Fair Value Measurement” (ASBJ Guidance No.
31, July 4, 2019). The book value of such investment trusts recognized on the consolidated balance sheet is ¥6,440 million.

41

NEC Capital Solutions Limited Integrated Report 2023(Financial Section)
The following table shows the scheduled maturity payments of monetary claims and securities with maturity dates after
March 31, 2022
Millions of Yen

Millions of Yen￥37,467

Due after
1 year through5 years¥─

Due after
5 years through10 years¥─

177,431

330,185

23,428

6,542

16,833112,657
20,6801,293
371

19,187
86,982
─
2,802
─

271
13,673
─
923
─

─
4,005
─
315
─

─
¥366,732

71¥439,227

698¥38,993388¥11,250

Due within
1 yearCash and cash equivalents
Lease receivables
and investment in leases (*1)(*2)
Installment sales receivables (*1)(*2)
Loans receivables (*2)
Accounts receivables-leases (*2)
Purchased receivables (*3)
Income taxes receivable
Available-for-sale securities
Debt/bondTotal

Due after
10 years¥─(*1) The amount of interest income is included in the maturity table above.
(*2) Receivables from companies in bankruptcy and reorganization of ¥1,856 million are not included in the table above,
because payments are not expected to be collected on schedule.
(*3) Purchased receivables of ¥2,677 million are not included in the table above, because payments are not expected to becollected on schedule.
The following table shows the scheduled maturity payments of unsecured bonds, long-term debt and other interest-bearing
liabilities subsequent to March 31, 2022.
Millions of Yen¥240,581

Due after
1 yearthrough
2 years¥─

Due after
2 years
through
3 years¥─

Due after
3 years
through
4 years¥─

Due after
4 years
through
5 years¥─

Unsecured bonds

30,00020,00015,000─

15,15030,000Long-term debt
Payables under securitizedlease receivables
Total

171,662

148,128

114,808

33,511

10,227

6,992

2,385

1,287

484

420

200

1,594

¥444,628¥169,415¥130,292¥33,931¥25,577¥38,586

Due within
1 yearShort-term borrowings

Due after
5 years¥─

2. Fair value of financial instruments by each level
The fair value of financial instruments is classified into the following three levels based on the observability and materialityof the inputs used to determine fair value.
Level 1 fair value: Fair value is calculated based on quoted prices of assets or liabilities subject to the calculation of fairvalues that are formed in an active market out of observable inputs to a fair value measurement.
Level 2 fair value: Fair value is calculated based on inputs that are other than the inputs to a fair value measurement oflevel 1, out of observable inputs to a fair value measurement.
Level 3 fair value: Fair value is calculated based on unobservable inputs.
When multiple inputs that have a significant effect on fair value measurement are used, fair value isclassified into the level with the lowest priority in the calculation of fair value among the levels to whichthose inputs belong.

42

NEC Capital Solutions Limited Integrated Report 2023(Financial Section)(1) Financial instruments recognized at fair value on the consolidated balance sheet
March 31, 2022
Fair value (Millions of Yen)
Level 2
Level 3

Level 1
Operational investment securities andinvestment securities
Other securities
Equity securities
Debt securities
Other
Derivative transactions
Interest-related transactions
Total assets
Derivative transactions
Currency-related transactions
Total liabilities

Total¥1,785
－
640

¥87
399
－

¥－
801
－

¥1,8721,200
640－¥2,425

211
¥697

－
¥801

211
¥3,923－¥－(2,179)¥(2,179)－¥－(2,179)¥(2,179)(2) Financial instruments other than those recognized at fair value on the consolidated balance sheet
March 31, 2022
Level 1
Installment sales receivables
Lease receivables and investment inleasesLoans receivables
Total assets
Bonds (including current portion)
Long-term debt (including current
portion)Total liabilities¥－

Fair value (Millions of Yen)
Level 2
Level 3¥－¥34,952

Total¥34,952－－

528,340

528,340

－
¥－
－

－
¥－
109,661

211,381¥774,673
150

211,381¥774,673
109,811－－

485,710

485,710¥－¥109,661¥485,860¥595,521(Note 1) Description of the valuation techniques and inputs used to measure fair value
Operational investment securities and investment securities
The fair values of securities for which unadjusted quoted prices in active markets are available are classified as Level 1.
The fair values of securities for which quoted prices are available, but their markets are inactive, are classified as Level 2.
The fair values of private placement bonds are determined based on reasonably estimated amounts and their discountrates are not observable, and therefore, these are classified as Level 3.
Derivative transactions
The fair values of derivative transactions are determined based on quotes obtained provided by dealers and financial
institutions and these are classified as level 2 if observable inputs are available or the impact of unobservable inputs to thefair value is immaterial.
Installment sales receivables, lease receivables and lease investments
The fair values of these items are calculated by the present values based on the sum of principal and interest of eachcontract discounted by interest rates estimated to be applied to similar new transactions and these are classified as level 3.
The fair values of the doubtful receivables are calculated based on the estimated future cash flows of each contract
discounted by risk-free rate and these are classified as level 3.
Loans receivables
With respect to loans receivables with variable interest rates, the interest rates reflect the market interest rates in the
short term. Unless the credit conditions of debtors significantly change after the executions of loans, the book values ofsuch loans receivables are presented as the fair values because their fair value approximates their book value and these
are classified as level 3. With respect to loans receivables with fixed interest rates, the fair values are determined based on
the present values that are calculated by discounting the estimated future cash flows of each contract at interest rates
estimated to be applied if newly obtaining a loan with similar terms and conditions and these are classified as level 3.
The fair values of the doubtful receivables are calculated based on the estimated future cash flows of each contract
discounted by risk-free rate and these are classified as level 3.

43NEC Capital Solutions Limited Integrated Report 2023(Financial Section)
Bonds
The fair values of bonds issued by the Company are determined based on their published market prices and these areclassified as level 2.
The fair values of bonds issued by the consolidated subsidiaries of the Company are determined by the present values
based on the sum of principal and interest of such bonds discounted by the interest rates estimated to be applied if newly
procuring funds with similar terms and conditions and these are classified as level 3.
Long-term debt
With respect to long-term debt with variable interest rates, the interest rate reflects the market interest rates in the shortterm. Accordingly, the book values of such debt are presented as the fair values because their fair value approximates theirbook value and these are classified as level 3.
With respect to long-term debt with fixed interest rates, the fair values are determined based on the present values that arecalculated by discounting the estimated future cash flows of each debt at interest rates estimated to be applied if newly
obtaining a debt with similar terms and conditions and these are classified as level 3.
(Note 2) Information concerning the fair values of level 3 financial assets and liabilities that are stated at fair value in the
consolidated balance sheet.
(1) Quantitative information on significant unobservable inputs
March 31, 2022
Significant
unobservable
inputsValuationtechniqueRange of inputs

Weighted
average of inputs

4.9％-7.1%

6.0%

Operational investment securities
and investment securities
Other securities
Debt securities

Present value
methodDiscount rate(2) Reconciliation between beginning balance and ending balance, and net unrealized gains (losses) recognized in profit orloss in the period
Year ended March 31, 2022
(Millions of Yen)
Operational
investment
securities andinvestment
Total
securities
Other securities
Debt securities¥1,795¥1,795

Beginning balance
Recognized in profit or loss or other comprehensive
income for the year
Recognized in profit or loss (*1)
Recognized in other comprehensive income (*2)
Purchases, sales, issuance and redemption
Purchases
Sales
Issuance
Redemption
Reclassification to Level 3 fair value
Reclassification from level 3 fair value
Ending balance
Net unrealized gains (losses) recognized in the periodwith respect to those financial assets and liabilities
held at the end of the period. (*1)(*1) Included in "Costs” in the consolidated statements of income

44

(11)
(8)

(11)
(8)

24
(1,000)
－
－
－
－
¥801

24
(1,000)
－
－
－
－
¥801

－

－

NEC Capital Solutions Limited Integrated Report 2023(Financial Section)(*2) Included in “Net unrealized gains (losses) on marketable securities” of “Other comprehensive income (loss)” in the
consolidates statements of comprehensive income.
(3) Description of the fair value measurement process
The Company develops valuation techniques and methods for classifying fair value levels in accordance with the policies
concerning fair value measurement and classification of fair value levels. The Company also verifies the appropriateness ofthe valuation techniques used to determine fair value, the inputs used, the calculated fair values and classified fair valuelevels in accordance with such policies.
(4) Description of the effects of the fair value with respect to changes in significant unobservable inputs
Significant unobservable inputs used to calculate the fair values of debt securities with fixed rates included in othersecurities are considered as discount rates. The discount rates represent estimates of interest rates to be applied when new
similar transactions. Generally, a significant decline (increase) in discount rates causes a significant increase (decline) in
their fair values.

45

NEC Capital Solutions Limited Integrated Report 2023(Financial Section)
15. Derivatives
Year ended March 31, 2023
(1) Derivatives for which hedge accounting is not applied
Derivatives related to currency at March 31, 2023 were as follows:
March 31, 2023
Amount ofcontract

Gain
Loss
Millions of Yen

Fair value

Interest rate currency swap transactions¥25,830¥―¥2,680¥(2,680)

820

―

46

(46)

2,012

―

59

(59)

receipt U.S. dollar, payment Malaysian Ringgit

681

12

―

12

receipt Yen, payment Malaysian Ringgit

765

7

―

7

receipt Yen, payment U.S. dollar
receipt Yen, payment EUR
receipt Yen, payment Singapore dollar

March 31, 2023
Amount ofcontract

Gain
Loss
Thousands of U.S. Dollars

Fair value

Interest rate currency swap transactions
receipt Yen, payment U.S. dollar$193,427$―$20,067$(20,067)

receipt Yen, payment EUR

6,139

―

342

(342)

receipt Yen, payment Singapore dollar

15,067

―

444

(444)

receipt U.S. dollar, payment Malaysian Ringgit

5,097

86

―

86

receipt Yen, payment Malaysian Ringgit

5,725

49

―

49

The fair value is determined based on quoted prices provided by dealers and other financial institutions.
(2) Derivatives for which hedge accounting is applied
Derivatives related to currency at March 31, 2023 were as follows:
Not applicable
Interest rate related transactions at March 31, 2023 were as follows:
Interest rate swaps that are accounted for using deferral hedge accounting
March 31, 2023

Hedged item

Notional amountexpiring on April
1, 2023 or after

Notional
amountFair value (*1)

Millions of Yen
Interest rate swap transactions
pay fixed, receive variable

Borrowings¥225,441¥120,300¥172

March 31, 2023

Hedged item

Notional
amountNotional amountexpiring on April
1, 2023 or after

Fair value (*1)
Thousands of U.S. Dollars

Interest rate swap transactions
pay fixed, receive variable

Borrowings$1,688,191$900,854(*1) The fair value is determined based on quoted prices provided by dealers and other financial institutions.

46$1,290NEC Capital Solutions Limited Integrated Report 2023(Financial Section)
Year ended March 31, 2022
(1) Derivatives for which hedge accounting is not applied
Derivatives related to currency at March 31, 2022 were as follows:
March 31, 2022
Amount ofcontract

Gain

Loss
Millions of Yen

Fair value

Interest rate currency swap transactions
receipt Yen, payment U.S. dollar
receipt U.S. dollar, payment Malaysian Ringgit¥23,835¥―¥2,188¥(2,188)

454

8

―

8

The fair value is determined based on quoted prices provided by dealers and other financial institutions.
(2) Derivatives for which hedge accounting is applied
Derivatives related to currency at March 31, 2022 were as follows:
Not applicable
Interest rate related transactions at March 31, 2022 were as follows:
Interest rate swaps that are accounted for using deferral hedge accounting
March 31, 2022

Hedged item

Notional
amountNotional amountexpiring on April
1, 2022 or after

Fair value (*1)

Millions of Yen
Interest rate swap transactions
pay fixed, receive variable

Borrowings¥233,071¥181,071(*1) The fair value is determined based on quoted prices provided by dealers and other financial institutions.

47

¥212

NEC Capital Solutions Limited Integrated Report 2023(Financial Section)
16.Stock options
1.Details, number and movement of advance grant-type stock options as part of free stock options granted to directors ascompensation(1) Details of advance grant-type stock options
Advance grant-type stock options for 2021
Title and number ofgrantees (Persons)Class and number ofshares granted
Date of grantVesting conditions

Service period

Advance grant-type stock options for 2022

4 directors of the Company

4 directors of the Company

4,568 shares ordinary stocks

4,366 shares ordinary stocks

August 27, 2021
August 24, 2022
The restriction with respect to all the
The restriction with respect to all theshares granted will be lifted at theshares granted will be lifted at the
expiration of the transfer restriction
expiration of the transfer restriction
period, provided that the grantees
period, provided that the grantees
continue to be directors of the Company
continue to be directors of the Company
during the period from July 1, 2021 to theduring the period from July 1, 2022 to thecompletion of the ordinary general meeting completion of the ordinary general meetingof shareholders for the fiscal year endedof shareholders for the fiscal year ended
March 31, 2022 (hereinafter referred to as
March 31, 2023 (hereinafter referred to as
the “service period”). If a grantee loses
the “service period”). If a grantee loses
his/her position as director during thehis/her position as director during theservice period, the restriction with respect
service period, the restriction with respect
to the number of granted shares calculated to the number of granted shares calculated
by multiplying number of months for theby multiplying number of months for theperiod from July 2021 to the month which
period from July 2022 to the month which
his/her resignation date belongs to andhis/her resignation date belongs to anddivided by 12 (fraction number of shares
divided by 12 (fraction number of sharesshall be rounded down if any) will be liftedshall be rounded down if any) will be liftedat the expiration of the restriction period.
at the expiration of the restriction period.
From July 1, 2021 to June 28, 2022

From July 1, 2022 to June 26, 2023

(2) Number of advance grant-type stock options and their movement(i)Amount and accountSelling, general, and administrative
expenses

Year ended March 31, 2022

Year ended March 31, 2023

¥7 million¥9 million ($67thousand)(ii)Number of shares
The following table shows the information of advance grant-type stock options with outstanding non-vested shares during
the year ended March 31, 2023.

As of March 31, 2022 (shares)

Advance grant-type stock options Advance grant-type stock optionsfor 2021
for 2022
4,568―

Granted (shares)

―

4,366

Forfeited (shares)

―

―

4,568

―

―

4,366

¥2,152¥2,101

Vested (shares)
As of March 31, 2023 (shares)(iii) Price information
Fairly value at date of grant (Yen)

2.Details, number and movement of subsequent grant-type stock options as part of free stock options granted to directors
as compensation
None

48

NEC Capital Solutions Limited Integrated Report 2023(Financial Section)
3.Estimation method for fair unit value
The Company used the closing price of the Company’s common stock on the Tokyo Stok Exchange on the business day
immediately preceding the date of resolution by the Board of Directors.
4.Estimation method for the number of shares to be vested
For advance grant-type stock options, basically, it is difficult to reasonably estimate the number of shares to be forfeited.
Therefore, the Company adopted a method by reflecting the actual number of shares forfeited only.

49NEC Capital Solutions Limited Integrated Report 2023(Financial Section)

17. Segment Information
Years ended March 31, 2023 and 2022
(1) Overview of reportable segments(i) Methods of identification of reportable segment
The reportable segment of the Group is a component of the Group for which discrete financial information is available andwhose operating results are regularly reviewed by the management to make decisions about resources to be allocated to thesegment and assess its performance.
The Group mainly provides financial services such as leases, installment sales and corporate loans for a wide range ofcustomers, such as public offices, local governments, large companies, and small and medium enterprises.
Additionally, certain consolidated subsidiaries of the Group provide corporate investment, loan asset investment andadvisory services directly and indirectly through funds, as well as the new businesses the Group pursuing, and a range ofother services. The Group has four reportable segments (Leasing Business, Finance Business, Investment Business andOther Business), which are determined based on the nature of their main business transactions.
(ii) Products and services by reportable segment
The Leasing Business includes leasing and rental of information and communication devices, office equipment, and otherequipment investments, installment sales, etc., as well as sales of equipment associated with leasing, sales of used equipment
of off-leased or terminated leasing contracts, rendering of maintenance services for leased equipment etc.
The Finance Business includes loans, factoring, and investment activities for securities held to obtain dividend income, etc.
The Investment Business includes investment for venture business aiming at receiving gains on sales of such investment,
etc., as well as asset, real estate, and finance and advisory service business, etc. operated by RISA Partners, Inc.
The Other Business includes new businesses in the field of energy, tourism, agriculture and healthcare, PFI/PPP business,other services and etc.

(2) Method of calculating revenues, profit or loss, assets, liabilities, and other items by reportable segment
The accounting policies for the reportable segments presented are the same as described in Note 2 “Summary of Significant
Accounting Policies”.

50

NEC Capital Solutions Limited Integrated Report 2023(Financial Section)(3) Information about revenues, profit or loss, assets, liabilities, and other items by reportable segment as of March 31, 2023
and 2022 was as follows:
2023

Adjustment

Amountrecorded intheconsolidated
financialstatements

Reportable segments
Leasing andInstallment
Sales

Finance

Investme
nt

Other

Total

Millions of Yen
Revenues
Revenues from customers¥224,303¥6,569¥22,778¥4,456¥258,106¥―¥258,106

3

―

35

7

45

(45)

―

¥224,306¥6,569¥22,813¥4,463¥258,151¥(45)¥258,106

Segment income¥6,368¥2,154¥4,412¥493¥13,427¥(1,714)¥11,713

Segment assets

644,758

241,341

103,270

39,342

1,028,711

27,165

1,055,876¥17,617

¥76

¥106

¥852

¥18,651¥81¥18,732

163

―

18

20

201

―

201

959

154

8,237

6,205

15,555―

15,555

21,249

384

62

3,342

25,037408

25,445Adjustment

Amountrecorded intheconsolidated
financialstatements

Intersegment revenues
Total

OthersDepreciation
Amortization of goodwill
Investment in affiliatedcompanies
Increase in property andequipment and intangible
assets2023
Reportable segments
Leasing andInstallment
Sales

Finance

Investme
nt

Other

Total

Thousands of U.S. Dollars
Revenues
Revenues from customers$1,679,674$49,194$170,574$33,368$1,932,810$―$1,932,810

25

―

260

54

339

(339)

―

$1,679,699$49,194$170,834$33,422$1,933,149$(339)$1,932,810

Segment income$47,692$16,131$33,041$3,698$100,562$(12,827)$87,735

Segment assets

4,828,198

1,807,258

773,322294,611

7,703,389

203,422

7,906,811$131,926

$566

$796

$6,380$139,668$602$140,270

1,218

―

131

153

1,502

―

1,502

7,180

1,156

61,68046,466

116,482―

116,482

159,123

2,875

462

25,026

187,486

3,059

190,545

Intersegment revenues
Total

OthersDepreciation
Amortization of goodwill
Investment in affiliatedcompanies
Increase in property andequipment and intangible
assets51

NEC Capital Solutions Limited Integrated Report 2023(Financial Section)
・

・
・
・

Adjustment of ¥(1,714) million ($(12,827) thousand) in segment income is an amount of difference between segment
income and operating income on the consolidated statement of income, which is mainly general administrative expenses
not attributable to each reportable segment.
Adjustment of ¥27,165 million ($203,422 thousand) in segment assets is corporate assets not allocated to each reportablesegment.
Adjustment of ¥408 million ($3,059 thousand) in increase in property and equipment and intangible assets is aninvestment in corporate assets.
Increase due to new consolidation is not included in increase in property and equipment and intangible assets.

2022

Adjustment

Amountrecorded intheconsolidated
financialstatements

Reportable segments
Leasing

Finance

Investme
nt

Other

Total

Millions of Yen
Revenues
Revenues from customers¥224,198¥5,220¥16,322¥4,168¥249,908¥―¥249,908

3

―

44

12

59

(59)

―

¥224,201¥5,220¥16,366¥4,180¥249,967¥(59)¥249,908

Segment income¥7,121¥(655)¥5,396¥275¥12,137¥(1,690)¥10,447

Segment assets

650,293

217,833

95,64725,829989,602

41,016

1,030,617¥13,213

¥76

¥139

¥713

¥14,141¥90¥14,231

149

―

69

20

238

―

238

915

142

9,188

1,176

11,421―

11,421

13,448

145

34

1,517

15,144172

15,316

Intersegment revenues
Total

OthersDepreciation
Amortization of goodwill
Investment in affiliatedcompanies
Increase in property andequipment and intangible
assets・・・・

Adjustment of ¥(1,689) million in segment income is an amount of difference between segment income and operating
income on the consolidated statement of income, which is mainly general administrative expenses not attributable toeach reportable segment.
Adjustment of ¥41,016 million in segment assets is corporate assets not allocated to each reportable segment.
Adjustment of ¥172 million in increase in property and equipment and intangible assets is an investment in corporate
assets.
Increase due to new consolidation is not included in increase in property and equipment and intangible assets.

(4) Related Information(i) Information by geographical areasa) Revenues
Disclosure of revenues by geographical areas is omitted because the amount of domestic revenues is more than 90% of theamount of the consolidated revenues.
b) Property and equipment
Disclosure of property and equipment by geographical areas is omitted because the amount of domestic property andequipment is more than 90% of the amount of the consolidated property and equipment.
(ii) Information by major customers
Information by major customers is not disclosed because there are no customers whose revenues are more than 10% of theamount of the consolidated revenues.

52

NEC Capital Solutions Limited Integrated Report 2023(Financial Section)(5) Information about impairment losses of property and equipment and intangible assets by reportable segment
Not applicable(6) Information about amortization of goodwill and unamortized balances by reportable segment at March 31, 2023 and 2022
was as follows:
2023
Reportable Segments
Leasing andInstallment
Sales

Finance

Investment

Other

Total

Corporateor
Elimination

Total

Millions of Yen
Amortization for thecurrent fiscal year
Balance at March 31,
2023

¥163

¥―

¥18

¥20

¥201

¥―

¥201

1,247

―

―

313

1,560

―

1,560

2023
Reportable Segments
Leasing andInstallment
Sales

Finance

Investment

Other

Total

Corporateor
Elimination

Total

Thousands of U.S. Dollars
Amortization for thecurrent fiscal year
Balance at March 31,
2023$1,218

$―

$131

$153

$1,502$―$1,502

9,335

―

―

2,347

11,682―

11,682

2022
Reportable Segments
Leasing

Finance

Investment

Other

Total

Corporateor
Elimination

Total

Millions of Yen
Amortization for thecurrent fiscal year
Balance at March 31,
2022

¥149

¥―

¥69

¥20

¥238

¥―

¥238

1,292

―

―

334

1,626

―

1,626

(7) Information about negative goodwill by reportable segment
Not applicable53NEC Capital Solutions Limited Integrated Report 2023(Financial Section)
18. Net Assets
Under the Law and its related regulations, the entire amount paid for new shares is required to be designated as common
stock. However, a company may, by a resolution of the Board of Directors, designate an amount not exceeding one-half of theprice of the new shares as additional paid-in capital, which is included in capital surplus in the accompanying consolidatedbalance sheets.
The Law provides that earnings in an amount equal to at least 10 percent of appropriations of retained earnings to be paid
as dividends should be appropriated as a capital surplus or a legal reserve until the total of capital surplus and legal reserve
equals 25 percent of stated common stock. Legal reserve is included in retained earnings in the accompanying consolidatedbalance sheets. In addition to transfer from capital surplus to stated common stock, either capital surplus or legal reserve
may be available for dividends by resolution of the general meeting of shareholders.
Under the Law, all additional paid-in capital and all legal reserve may be transferred to other capital surplus and retained
earnings, respectively, which are potentially available for dividends.
The maximum amount that the Company can distribute as dividends is calculated based on the non-consolidated financial
statements of the Company in accordance with the Law.
At the meeting of the Board of Directors of the Company held on May 22, 2023, cash dividends amounting to ¥1,571 million($11,764 thousand) were approved. This appropriation has not been reflected in the accompanying consolidated financial
statements for the fiscal year ended March 31, 2023.

19. Related Party Transactions
Year ended March 31, 2023:(1) Transactions with parent and major shareholder of the Company
The Company procured equipment for lease transactions from NEC Corporation that has a 37.7% ownership share in the
Company at a transaction amount of ¥42,737 million ($320,032 thousand) for the year, and the outstanding balance of ¥4,813
million ($36,039 thousand) at the year-end has been included in “Notes and accounts payable – trade.” The Company enteredinto factoring contracts with NEC Corporation at a transaction amount of ¥22,924 million ($171,665 thousand) and theoutstanding balance of ¥7,613 million ($57,008 thousand) at the year-end has been included in “Accounts receivable – Loans.”(2) Transactions with subsidiaries of the Company’s other affiliated companies
The Company procured equipment for lease transactions from NEC Fielding, Ltd. at a transaction amount of ¥20,511
million ($153,592 thousand) for the year, and the outstanding balance of ¥2,580 million ($19,320 thousand) at the year-end
has been included in “Notes and accounts payable – trade.”
The Company entered into factoring contracts with NEC Platforms, Ltd. at a transaction amount of ¥24,387 million($182,617 thousand) and the outstanding balance of ¥7,816 million ($58,532 thousand) at the year-end has been included in“Accounts receivable – Loans.”
Year ended March 31, 2022:(1) Transactions with parent and major shareholder of the Company
The Company procured equipment for lease transactions from NEC Corporation that has a 37.7% ownership share in the
Company at a transaction amount of ¥62,078 million for the year, and the outstanding balance of ¥3,635 million at the yearend has been included in “Notes and accounts payable – trade.” The Company entered into factoring contracts with NEC
Corporation at a transaction amount of ¥26,608 million and the outstanding balance of ¥8,180 million at the year-end has
been included in “Accounts receivable – Loans.”(2) Transactions with subsidiaries of the Company’s other affiliated companies
The Company entered into factoring contracts with NEC Platforms, Ltd. at a transaction amount of ¥26,101 million andthe outstanding balance of ¥7,568 million at the year-end has been included in “Accounts receivable – Loans.”

54

NEC Capital Solutions Limited Integrated Report 2023(Financial Section)

20. Significant subsequent events(Issuance of domestic straight bond)
The Company issued unsecured bond on June 7, 2023, based on the maximum amount of issuance of domestic unsecured
straight bond for the year ending March 31, 2024 and its outline resolved at the Board of Directors’ meeting held on March
29, 2023.
The contents are as follows.

（1）Name25rd unsecured straight bond (with inter-bond pari passu clause)（2）Amount of issue¥10,000 million ($74,884 thousand)（3）Payment dateJune 7, 2023

（4）Issue price¥100 ($0.75) per face value of ¥100 ($0.75)（5）Interest rate

0.340% per annum（6）Maturity dateJune 5, 2026

（7）Method of redemption

Redemption on maturity (however, the redemption by purchase will beavailable any time on and after the following day of the issue date)（8）Use of proceeds

Equipment funds (including lease asset purchase funds)

55Independent Auditor’s Report
NEC Capital Solutions Limited
For the Years ended March 31,
2023 and 2022

KPMG AZSA LLC
October 2023

This independent auditor’s report prepared by KPMG AZSA LLC (including the one that issigned with electoronic signatures) shall not be reprinted, disclosed, quoted, summarized,
translated, cited, circulated or otherwise used, in whole or in part, to any third party including
posting on the web without prior written consent as specified by KPMG AZSA LLC, except forthe purpose of compliance with laws, regulations and the like, or for usage in response to anorder or request from an administrative or judicial body.

© 2023 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law
and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee. All rights reserved.

Independent auditor’s report
To the Board of Directors of NEC Capital Solutions Limited:
OpinionWe have audited the accompanying consolidated financial statements of NEC Capital Solutions
Limited. (“the Company”) and its consolidated subsidiaries (collectively referred to as “the Group”),
which comprise the consolidated balance sheets as at March 31, 2023 and 2022, the consolidated
statements of income and comprehensive income, changes in net assets and cash flows for the years
then ended, and notes, comprising a summary of significant accounting policies and other explanatory
information.
In our opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Group as at March 31, 2023 and 2022, and its
consolidated financial performance and its consolidated cash flows for the years then ended inaccordance with accounting principles generally accepted in Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the
Audit of the Consolidated Financial Statements section of our report. We are independent of the Groupin accordance with the ethical requirements that are relevant to our audit of the consolidated financial
statements in Japan, and we have fulfilled our other ethical responsibilities in accordance with theserequirements. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements of the current period. These matters were addressed in thecontext of our audit of the consolidated financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.

Determination of the borrower categories for operating receivables related to the Leasing Business and the
Finance Business

The key audit matter

How the matter was addressed in our audit

The Group reported installment salesreceivable of ¥38,828 million, leasereceivables and investment in leases of¥517,945 million, accounts receivable-leasesof ¥22,034 million, accounts receivable loans of ¥231,611 million, purchased
receivables of ¥12,419 million, receivables

The primary procedures we performed to assess theappropriateness of the determination of the borrower
categories for operating receivables related to the
Leasing Business and the Finance Business of theCompany included the following:(1) Internal control testingfrom companies in bankruptcy andreorganization of ¥2,014 million, andallowance for doubtful accounts for thebalances of these receivables of ¥11,851
million in the consolidated balance sheet asof March 31, 2023. These were mainly
related to the Leasing Business and the
Finance Business of the Company.
As described in Note 3 “Significant
Accounting Estimates” to the consolidated
financial statements, the Company
determines borrower categories for its
customers based on the degree of credit risks
and categorizes the receivables into general
receivables, doubtful receivables andreceivables from companies in bankruptcy
and reorganization based on the borrower
categories. Allowance for doubtful accounts
is recorded to provide for probable losses
based on historical write-off ratio of bad debt
losses for general receivables, and based onan estimate of the uncollectible amounts after
reviewing the collectibility of specificreceivables by considering the financial
position and business performance of theborrower, as well as the amount expected tobe collected through credit protection
measures for doubtful receivables andreceivables from companies in bankruptcy
and reorganization.
Judgements on the borrower categories forthe customers according to the degree ofcredit risks are determined based on apredetermined criteria for recognizing
allowances for each borrower category,taking into consideration quantitative factors
such as repayment status (including
delinquency information) and financial
indicators, as well as qualitative factors. In
particular, judgment of the classification of
the borrower categories based on qualitative
factors such as abilities to repay debts basedon future outlook of business performanceand profitability of projects based on
business plans involves judgment bymanagement.
We, therefore, determined that ourassessment of the appropriateness of thedetermination of the borrower categories for
operating receivables related to the Leasing
Business and the Finance Business was of

We tested the design and operating effectiveness ofcertain of the Company’s internal controls relevant to
the process of recognizing allowance for doubtful
accounts, with a particular focus on the following:⚫ whether the repayment status (including
delinquency information), which was the basis fordetermining the borrower categories, wasaccurately identified; and⚫ whether the judgment of the borrower categories
were appropriately determined by considering
quantitative factors such as financial indicators andqualitative factors such as future outlook ofbusiness performances.
(2) Assessment as to whether the borrower
categories were appropriately determined
In order to assess whether the borrower categories wereappropriately determined, we:⚫ assessed whether the criteria for recognizing
allowances for each borrower category were inaccordance with accounting principles generally
accepted in Japan; and⚫ selected borrowers, determined by borrower
categories that may have a significantly affect on
profit or loss, such as large borrowers andborrowers with repayment status concerns, fromamong the borrowers of operating receivables
related to the Leasing Business and the FinanceBusiness of the Company based on certain criteria,
and performed the following procedures:-inspection of records and documents related todetermination of the borrower categories basedon the results of financial information analysis
performed by the Company-

inspection of records and documents related todetermination of the borrower categories
performed by the Company based on thequalitative factors; and-inquiry of personnel in the departments
responsible for credit.

most significance in our audit of theconsolidated financial statements for thecurrent fiscal year, and accordingly, a key
audit matter.

Other Information
The other information comprises the information included in the Annual Report, but does not include
the consolidated financial statements, the financial statements, and our auditor’s reports thereon.
Management is responsible for the preparation and presentation of the other information. Corporate
auditors and the board of corporate auditors are responsible for overseeing the directors’ performanceof their duties with regard to the design, implementation and maintenance of the reporting process forthe other information.
Our opinion on the consolidated financial statements does not cover the other information and we do
not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read theother information and, in doing so, consider whether the other information is materially inconsistent
with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears
to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of thisother information, we are required to report that fact.
We have nothing to report in this regard.
Responsibilities of Management and Corporate Auditors and the Board of Corporate Auditors
for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with accounting principles generally accepted in Japan, and for such internal
control as management determines is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern inaccordance with accounting principles generally accepted in Japan.
Corporate auditors and the board of corporate auditors are responsible for overseeing the directors’
performance of their duties with regard to the design, implementation and maintenance of the Group’s
financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’sreport that includes our opinion. Reasonable assurance is a high level of assurance, but is not aguarantee that an audit conducted in accordance with auditing standards generally accepted in Japan
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected toinfluence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of our audit in accordance with auditing standards generally accepted in Japan, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, andobtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The riskof not detecting a material misstatement resulting from fraud is higher than for one resulting fromerror, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or theoverride of internal control.

Obtain an understanding of internal control relevant to the audit in order to design audit proceduresthat are appropriate in the circumstances, while the objective of the audit is not to express an
opinion on the effectiveness of the Group’s internal control.

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.

Conclude on the appropriateness of management’s use of the going concern basis of accounting
and based on the audit evidence obtained, whether a material uncertainty exists related to events orconditions that may cast significant doubt on the Group’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’sreport to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor’s report. However, future events or conditions may cause the Group tocease to continue as a going concern.



Evaluate whether the presentation and disclosures in the consolidated financial statements are inaccordance with accounting standards generally accepted in Japan, the overall presentation,
structure and content of the consolidated financial statements, including the disclosures, andwhether the consolidated financial statements represent the underlying transactions and events in amanner that achieves fair presentation.

Obtain sufficient appropriate audit evidence regarding the financial information of the entities orbusiness activities within the Group to express an opinion on the consolidated financial statements.
We are responsible for the direction, supervision and performance of the group audit. We remainsolely responsible for our audit opinion.

We communicate with corporate auditors and the board of corporate auditors regarding, among othermatters, the planned scope and timing of the audit, significant audit findings, including any significant
deficiencies in internal control that we identify during our audit.
We also provide corporate auditors and the board of corporate auditors with a statement that we havecomplied with relevant ethical requirements regarding independence, and communicate with them all
relationships and other matters that may reasonably be thought to bear on our independence, and whereapplicable, related safeguards.
From the matters communicated with corporate auditors and the board of corporate auditors, we
determine those matters that were of most significance in the audit of the consolidated financial
statements of the current period and are therefore the key audit matters. We describe these matters in
our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter should not be communicated in our reportbecause the adverse consequences of doing so would reasonably be expected to outweigh the public
interest benefits of such communication.
Convenience Translation
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year
ended March 31, 2023 are presented solely for convenience. Our audit also included the translation of
yen amounts into U.S. dollar amounts and, in our opinion, such translation has been made on the basis

described in Note 1 to the consolidated financial statements.
Interest required to be disclosed by the Certified Public Accountants Act of Japan
We do not have any interest in the Group which is required to be disclosed pursuant to the provisions of
the Certified Public Accountants Act of Japan.
Koji Fukai
Designated Engagement Partner
Certified Public Accountant

Yoshimori Takahashi
Designated Engagement Partner
Certified Public Accountant

KPMG AZSA LLC
Tokyo Office, Japan
October 16, 2023
Notes to the Reader of Independent Auditor’s Report:
This is a copy of the Independent Auditor’s Report and the original copies are kept separately by theCompany and KPMG AZSA LLC.

Integrated Report 2023 (Financial Section)
NEC Capital Solutions Limited
Publication: October 2023 (Published annually)
https://www.necap.co.jp/english/© NEC Capital Solutions Limited 2023