Consolidated Financial Statements for the First Half of Fiscal Year ending March 31, 2016
29-Oct-15
These financial statements have been prepared in accordance with accounting principals generally accepted in Japan.

NEC Networks & System Integration Corporation

Stock exchange listing: Tokyo
Code number:
1973

http://www.nesic.co.jp/english/index.html
1. Consolidated Results for the First Half (April 1, 2015 to September 30, 2015)(Rounded down to the nearest million yen.)(1) Net Sales and Income(Percentages represent change compared with the same period of the previous fiscal year.)Net sales(¥ million)

Year-on-yearchange (%)

Operatingincome(¥ million)

Year-on-yearchange (%)

Ordinary income(¥ million)

Year-on-yearchange (%)

127,834-2.1

3,531-21.5

3,597-22.8

130,590

13.3

4,501

7.7

4,662

10.1

Profitattributable toowners of parent(¥ million)

Year-on-yearchange (%)

1,945-27.6

39.19

—

2,6860.1

54.03—

Total assets(¥ million)

Net assets(¥ million)

Owner's equity
ratio (%)

Net assets per
share (¥)

6 months ended 9/15
(1H / FY3/2016)
6 months ended 9/14
(1H / FY3/2015)

6 months ended 9/15
(1H / FY3/2016)
6 months ended 9/14
(1H / FY3/2015)

ProfitProfitattributable toattributable toowners of parent
owners of parent
per share(diluted) (¥)(¥)(2) Financial Position

30/09/2015
187,804
94,76649.6
1,876.23
31/03/2015
201,964
94,17345.8
1,864.61
c.f. Owner's equity: 30/09/15 ¥93,134million ; 31/03/15: ¥92,559million
2. Dividends
1stquarter
FY ended 3/2015——Dividends per share (¥)
3rdInterim
Year-endquarter
32.00
35.00

——32.00
35.00
FY ending 3/2016(projected)
Note: Revisions to projected dividends for the quarter under review: noFull year
64.00
70.00
(projected)

3. Financial Forecasts for Fiscal Year ending March 31, 2016 (April 1, 2015 to March 31, 2016)(Percentages represent change compared to the previous corresponding period.)
Profitattributable
Profit attributable toOperating income
Ordinary income
Net sales
to owners ofowners of parent
parent pershare(¥ million)(%)(¥ million)(%)(¥ million)(%)(¥ million)(%)(¥)
FY ending 3/2016
295,000
1.0
16,5002.1
16,5001.99,500
21.9191.38
Note: Revisions to projected results for the quarter under review: noCautionary Statement
Forecasts of results mentioned in this document are future estimates and are thus inclusive of risks and uncertain factors since they are not based on
definite facts. Please be aware that a variety of factors could cause actual results to differ significantly from those projected. The major factors
affecting actual results include the economic climate and social trends surrounding the business of this Company’s group, consumer trends vis-a-vis
systems and services provided by this Company’s group, as well as pressure to lower prices and ability to cope with the market in response tointensified competition.
Factors affecting results are not limited to the ones mentioned above.

4． Business Results（1） Business Results for the 1H for the Fiscal Year Ending March 31, 2016

During the first half for the fiscal year ending March 31, 2016 (the period from April 1, 2015 toSeptember 30, 2015), the outlook for the Japanese economy remained uncertain due to concern
over the downturn in overseas economies, particularly China and emerging economies in Asia.
Nevertheless, in general the economy experienced a moderate recovery, supported by thegovernment’s economic measures and financial policy and corporate earnings and employment
improved.

In the fields of information and communication technology (ICT), in which NEC Networks &System Integration Corporation (“the Company”) operates, differences were observed in eachfield under these economic conditions.
First, in the corporate market, although corporate managers continued to hold severe views on
investment effects, ICT investments recovered on the back of the economic recovery. As aresult, investments for enhancing business management and competitiveness, in particular,
the reform of work style, remained firm.
Capital spending by telecommunications carriers faced increasingly severe conditions, withcapital spending in network infrastructure curbed further.
In the central and local governments as well as the public interest market, ICT-related publicinvestments implemented under the concept of safety and security, such as national resilience,remained solid. Investments in the digitization of fire-fighting and emergency radio systems
peaked out in terms of order placement. However, installation work is in full swing in
preparation for the deadline for migration in May 2016.
Meanwhile, overseas, particularly in Asia, there is a demand for the construction of suchinfrastructure as mobile communications networks.

In the environment for this market, the Company and its consolidated subsidiaries (hereinafterthe “Group”) strived to strengthen their sales capabilities and promote the sales of
EmpoweredOffice* by reinforcing the business structure. The Group also moved forward withsteady initiatives to respond to projects that were gaining momentum, such as the digitizationof fire-fighting and emergency radio systems. In addition, the Group moved forward with its
efforts to win orders by utilizing the new SCM base built in the previous period in the Tokyo Bay
area and its management expertise. Meanwhile, the Group strengthened its business bases in
preparation for expanding the service businesses by establishing a company that specializes
in multi-lingual services, for which demand has been increasing recently, and launching an

MVNO service that predominantly targets the IoT field, where growth is expected. The Groupalso expanded new services. Overseas, it established a branch of its Thai subsidiary in
Myanmar, in which investments in infrastructure going forward are expected to expand, andbegan full-scale operations.

As a result, the Group posted the following consolidated results for the 1H under review:

Net sales¥127,834 million

2.1% decrease year on year

Operating income¥3,531 million

21.5% decrease year on year

Ordinary income¥3,597 million

22.8% decrease year on year

Net income attributable¥1,945 million

27.6% decrease year on year

¥141,500 million

9.5% decrease year on year

to owners of parent＜Reference＞
Orders received

Net sales totaled ¥127,834 million, and remained mostly flat year-on-year. Due to the impact ofCAPEX cuts by telecom carriers, sales in the field of carrier networks declined. The results,
however, reflected the Group’s aggressive initiatives to capture business opportunities fromincreased ICT investments in the field of enterprise networks, public investments for safety andsecurity, and steady investments in the social infrastructure, such as the development of earth
stations for satellite communications. There was an increase in orders from companies andbusinesses outside Japan, but overall orders received decreased 9.5% year-on-year to¥141,500 million because telecom carriers cut CAPEX and the digitization of fire-fighting andemergency radio systems peaked out in terms of order placement.
On the profit front, the Group worked to steadily expand earnings in the fields of enterprisenetworks and social infrastructure, where sales increased, but in the field of carrier networks,
sales declined and cost cutting was delayed due to the rapid change in the businessenvironment. Consequently, operating income and ordinary income fell year-on-year to ¥3,531
million and ¥3,597 million, respectively. As a result, profit attributable to owners of parent
decreased 27.6% year-on-year to ¥1,945 million, despite the occurrence of an extraordinary
loss associated with the realignment of domestic subsidiaries.

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

Net sales by business segment
Enterprises

CarrierSocialNetworks

Networks

Infrastructure

OtherTotal

1H Fiscal 2016.3

50,95635,61839,373

1,886

127,834

1H Fiscal 2015.3

48,13941,18438,394

2,871

130,590

Increase or decrease2,816-5,565

979-985-2,755

5.9-13.5

2.6-34.3-2.1

Ratio of increase/decrease(%)（Million yen）

Reference: Orders received by business segment
Enterprises

CarrierSocialNetworks

Networks

Infrastructure

OtherTotal

1H Fiscal 2016.3

52,83934,71251,0102,936

141,500

1H Fiscal 2015.3

53,761

43,28556,775

2,542

156,364

Increase or decrease-921-8,572-5,764394-14,863

Ratio of increase/decrease-1.7-19.8-10.2

15.5-9.5(%)1). Enterprise Networks businessNet sales increased 5.9% from one year ago to ¥50,956 million, thanks to further sales
efforts by the Group with a focus on its office innovation solution EmpoweredOffice,aggressively responding to the recovery of ICT investments and the need for
management innovation on the part of customers.

2). Carrier Networks businessAlthough the Group boosted sales in the enterprise and public sectors by using assets fortelecom carriers, net sales decreased 13.5% year-on-year to ¥35,618 million, reflecting
the impact of CAPEX cuts by telecom carriers.

3). Social Infrastructure businessNet sales increased 2.6% from one year ago to ¥39,373 million, reflecting aggressive
initiatives to capture business opportunities from ICT-related public investments
implemented under the concept of safety and security and investments in thedevelopment of earth stations for satellite communications.

*EmpoweredOffice:EmpoweredOffice is our office innovation solution. It combines our strengths in ICT andfacility installation to enable more intellectual and creative styles of work through process
reforms. It also proposes new methods and places of work that enable customers to fulfill
their social responsibilities, such as the strengthening of security and environmentalresponsiveness.
Outline of Business Segments
Business Segment

Descriptions of Main Businesses
Service integration of ICT solutions, mainly for the enterprises market

Enterprises Networks

Total office solutions based on ICT with securities or environmental solutions
and related operation/monitoring services, as well as outsourcing services
using our own contact centers and data centers
Service integration mainly for telecom carriers’ ICT platforms (from mobile
communications base stations to core networks), including systems
integration, installation, and related services such as operations andCarrier Networks

monitoring.
Systems integration of large-scale, wide-area, carrier-grade ICT platforms
and data centers and related operations, monitoring services
Development, manufacturing, sales and systems integration of network
equipment and other equipment.
Service integration of ICT infrastructure for governments and public utilities

Social Infrastructure(broadcasters, electric power companies, etc.), such as systems integration,
installation, operation, and monitoring, and operations in markets other than
the Tokyo, Nagoya, and Osaka areas. Overseas subsidiaries

OthersSales of purchased equipment*The Group implemented the realignment of domestic subsidiaries to facilitate the efficientmanagement of group companies, such as the integration (absorption-type merger) of Toyo Networks& System Integration Co., Ltd by NEC Magnus Communications, Ltd. As a result, changes were madeto the consolidated financial results from the first quarter under review, such as the inclusion of Toyo
Networks & System Integration Co., Ltd, which had been included in the “others” segment previously,in the “Carrier Networks” segment, which includes NEC Magnus Communications, Ltd.
Segment information for the previous 1H has been changed to reflect the change in the content ofbusiness segments.

（2） Outlook for the Fiscal Year Ending March 31, 2016
The Japanese economy is showing signs of recovery, reflecting the effect of economic measuresby the government and the improvement of factors such as employment and income. However, it
continues to face the risk of downward pressure due to factors such as concern over a downturn inthe overseas economy. CAPEX by telecom carriers is expected to remain on a downward trend.
In this environment, the Group’s business results in the first half fell below the plan due to weak
performance in the carrier network field. However, the Group plans to improve earnings bypromoting cost cuts and other initiatives, and thus its consolidated forecast for FY2016/3 (April 1,2015 to March 31, 2016) remains unchanged from the initial forecast.
Net sales¥295 billion

1.0% increase year on year

Operating income¥16.5 billion

2.1% increase year on year

Ordinary income¥16.5 billion

1.9% increase year on year

Net income attributable¥9.5 billion

21.9% increase year on year

to owners of parent

5. Consolidated Financial Statements(1) Consolidated Balance Sheets
As ofMarch 31, 2015
AssetsCurrent assets
Cash and deposits
Notes and accounts receivable - trade
Purchased goods,materials and supplies
Work in process
Other
Allowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total assets(Millions of yen)
As of
September 30, 2015

38,951
113,921
2,820
7,314
8,105
-52
171,061

52,25382,764
3,358
8,324
10,057-48
156,709

10,83011,057

2,728
3,143
5,871

2,568
3,150
5,719

14,252-52
14,19930,902201,964

14,370-52
14,31731,095
187,804(Millions of yen)
As ofMarch 31, 2015
Liabilities
Current liabilities
Notes and accounts payable - trade
Short-term loans payable
Current portion of long-term loans payable
Income taxes payable
Provision for directors' bonuses
Provision for product warranties
Provision for loss on order received
Other
Total current liabilities
Non-current liabilities
Long-term loans payable
Net defined benefit liabilityOther
Total non-current liabilities
Total liabilities
Net assets
Shareholders' equity
Capital stock
Capital surplus
Retained earnings
Treasury shares
Total shareholders' equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets

As of
September 30, 2015

48,662
1,633
3,168
4,358
125
280
163
20,90979,302

36,074
3,518
3,168
1,54744212
118
19,201
63,885

1,349
25,832
1,307
28,488
107,790

1,264
26,128
1,759
29,152
93,03813,122
16,65064,932-266
94,43813,122
16,65065,283-269
94,78747
2-1,927-1,878
1,613
94,173201,964

29-108-1,574-1,652
1,631
94,766
187,804

(2) Consolidated Statements of Income(Millions of yen)

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Dividend income of insurance
Other
Total non-operating income
Non-operating expenses
Interest expenses
Loss on retirement of non-current assets
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of shares of subsidiaries and associates
Total extraordinary income
Extraordinary losses
Retirement benefit expenses
Affiliated companies transfer cost
Area business restructuring cost
Total extraordinary losses
Income before income taxes and minority interests
Income taxes
ProfitProfit attributable to non-controlling interests
Profit attributable to owners of parent

FY3/2015 1H(6 months ended 9/2014)
130,590
110,207
20,382
15,881
4,501(6 months ended 9/2015)

127,834
108,691
19,143
15,611
3,531

32
121
222
376

32
172
177
382

40
30
144
215
4,662

35
77
204
317
3,597

―
―

40
40

―
―
221
221
4,440
1,670
2,769
82
2,686

464
116
―
581
3,056
1,073
1,982
37
1,945

(Millions of yen)(Consolidated Statements of Comprehensive Income)

ProfitOther comprehensive income
Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Remeasurements of defined benefit plans, net of tax
Total other comprehensive income
Comprehensive income
Comprehensive income attributable toComprehensive income attributable to owners of parent
Comprehensive income attributable to non-controlling interests

FY3/2016 1H

FY3/2015 1H(6 months ended 9/2014)
2,769

FY3/2016 1H(6 months ended 9/2015)

1,982

4-60
249
193
2,963

-14-137
353
201
2,184

2,895
67

2,171
12

(3) Consolidated Statements of Cash Flows(Millions of yen)
FY3/2015 1H(6 months ended 9/2014)
Cash flows from operating activities
Income before income taxes and minority interests
Depreciation
Amortization of goodwill
Increase (decrease) in net defined benefit assetIncrease (decrease) in net defined benefit liability
Increase (decrease) in provision for directors' bonuses
Increase (decrease) in provision for product warranties
Increase (decrease) in provision for loss on order received
Interest and dividend income
Interest expenses
Decrease (increase) in notes and accounts receivable - trade
Decrease (increase) in inventories
Increase (decrease) in notes and accounts payable - trade
Increase (decrease) in accrued consumption taxes
Other, net
SubtotalInterest and dividend income received
Interest expenses paid
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities
Purchase of securities
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Purchase of investment securities
Payments of loans receivableCollection of loans receivable
Proceeds from sales of shares of subsidiaries and associates
Other, net
Net cash provided by (used in) investing activities
Cash flows from financing activities
Net increase (decrease) in short-term loans payable
Repayments of long-term loans payable
Proceeds from sale and purchase of treasury stock, net
Cash dividends paid
Dividends paid to non-controlling interests
Other, net
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

FY3/2016 1H(6 months ended 9/2015)

4,440
1,360
180
-146
541
-43
-50
-28
-41
40
18,761-4,292-5,355-439
1,176
16,10341-40-4,411
11,691

3,056
1,352
159
-61646-81-67-44-43
35
31,012-1,563-12,545-2,075-157
19,62143-34-4,113
15,516-5,000-1,77513-345-5-2
3―-183-7,295―-1,3472-411-4-2
3
151-363-1,973-100-88-1-1,489-16-245-1,94151
2,505
44,43446,940

1,872
-84
-2
-1,590-18-233-56-184
13,301
38,951
52,253

(4) Segment Information
Business Segment
First half of fiscal 3/2016 (6 months ended September 2015)(Millions of yen)Enterprises Networks

Orders receivedSales(1) Sales to third(2) Intersegment sales
Total
Operating income and loss

Carrier Networks

Social Infrastructures

OthersAdjustments

Total

52,83934,71251,0102,936---

141,500

50,956--50,956
3,432

35,618--35,618
1,430

39,373--39,373
2,587

1,886
--1,886196------(4,115)

127,834--127,834
3,531First half of fiscal 3/2015 (6 months ended September 2014)(Millions of yen)Enterprises Networks

Orders received
Sales(1) Sales to third parties(2) Intersegment sales
Total
Operating income and loss

Carrier Networks

Social Infrastructures

OthersAdjustments

Total

53,761

43,28556,775

2,542

---

156,364

48,139--48,139
3,031

41,184--41,184
2,906

38,394--38,394
2,538

2,871
--2,871113------(4,089)

130,590--130,590
4,501