Consolidated Financial Statements for the First Half of Fiscal Year ending March 31, 2018

31/Oct/2017
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, 2017 to September 30, 2017)of Fiscal Year ending March 31, 2018
(1) Net Sales and Income
Net sales

Year-on-year

Operating

Year-on-year

Ordinary

Year-on-year(¥ million)change (%)

incomechange (%)

incomechange (%)

119,937

0.9

2,514

45.8

2,640

42.5

118,833-7.0

1,725-51.2

1,852-48.5

Net income

Net income

per shareper share(¥)(diluted) (¥)

32.51

—

6 months ended
September 2017
6 months ended
September 2016

(Rounded down to the nearest million yen.)

Net income
attributableto owners of
the parent
6 months ended
September 2017
6 months ended

Year-on-yearchange (%)(¥ million)
1,613

59.5

1,011-48.0
20.39—
September 2016c.f. Comprehensive income: 1H/FY Mar 2018: ¥2,004 million ( 86.8 %); 1H/FY Mar 2017: ¥1,072 million (-50.9%)(2) Financial Position
Total assets

Net assets(¥ million)(¥ million)

Owner'sequity ratio

Net assets

per share (¥)(%)
30/Sep/2017
192,879
96,86449.1
1,907.71
31/Mar/2017
197,469
96,67447.9
1,906.03
c.f. Owner's equity: 30/Sep/2017: ¥94,692 million; 31/Mar/2017: ¥94,611 million
2. Dividends
1stquarter
FY ended Mar. 2017
FY ending Mar.

Dividends per share (¥)
3rd
InterimYear-endquarter—36.00——37.00—36.00※37.002018
Note: Revisions to projected dividends for the quarter under review: noFull year
72.00

※74.00※※ Forecasts

3. Financial Forecasts for Fiscal Year ending March 31, 2018 (April 1, 2017 to March 31, 2018)(¥ million)(%)(Percentages represent change compared to the previous corresponding period.)
Net income attributable to Net income
Operating income
Ordinary income
owners of the parent
per share(¥ million)(%)(¥ million)(%)(¥ million)(%)(¥)

270,000

4.7

10,500Net sales
FY ending Mar. 2018

5.3

10,500

5.3

6,700

2.3

134.98

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 to intensifiedcompetition.
Factors affecting results are not limited to the ones mentioned above.

4. Business Results(1) Business Results for the 1H for the Fiscal Year Ending March 31, 2018
During the first half for the fiscal year ending March 31, 2018 (the period from April 1, 2017
to September 30, 2017), the Japanese economy continued to experience a moderate recovery,
supported by the effects of various policies amid a recovery of capital spending and animprovement of corporate earnings and employment.
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, while corporate managers continued to hold critical views on
the effects of investment, there was healthy investment for enhancing business management
and competitiveness, including investment in work style innovation.
In the telecom carrier business, restraints on capital spending for network infrastructure havebottomed out and signs of recovery began to appear. In the central and local governments aswell as the public interest market, investment in improvements in safety and security and otherurban infrastructure remained strong; however, the market also faced some harsh conditions
as part of the business environment deteriorated. Following the revision of the Feed-In Tariff(FIT) Act, demand for the construction of solar power generation plants has become brisk. In
the overseas market, while demand for the development of infrastructure for mobile
communications and other businesses grew, particularly in Asia, market weakness was also
evident, for instance in postponed projects in other regions.

In this market environment, the Group stepped up its initiatives for businesses related to thework style innovation, including EmpoweredOffice , and new technologies and themes such as
robotics and AI in response to the growing momentum of work style reforms. The needs forteleworking, in particular, have been growing recently, and in July 2017, the Company
introduced teleworking throughout the organization based on the results of an internal field trialthat had been underway since 2015. At the same time, the Company implemented active
promotion for sales expansion. In addition, the Group bolstered its overseas business, inparticular offering both the know-how it has developed through its extensive track record withdomestic telecom carriers and its high quality construction to overseas telecom carriers.
Meanwhile, in projects for the construction of large mega-solar power generation plants , orders
for which were received during the previous fiscal year, construction proceeded steadily under
the company-wide project management system.

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

Net sales¥119,937 million

0.9% increase year on year

Operating income¥2,514 million

45.8%

increase year on year

Ordinary income¥2,640 million

42.5%

increase year on year

Net income attributable¥1,613 million

59.5%

increase year on year

¥128,653 million

10.9%

decrease year on year

to owners of the parent＜Reference＞
Orders received

Net sales increased 0.9% year on year, to ¥119,937 million. This result reflected growthin sales of services for telecom carriers in the Carrier Networks business, the contribution tosales of projects for the construction of large mega-solar power generation plants, orders forwhich were received in the previous fiscal year, and an increase in sales in the key areas underthe medium-term business strategy (announced in May 2016), including the area related to thework style innovation. Orders received decreased 10.9% year on year, to ¥128,653 million, due
mainly to the larger orders received for the construction of large mega-solar power generation
plants and for a large maintenance business for a telecom carrier that existed in the previousfiscal year.
On the profit front, operating income increased 45.8% year on year, to ¥2,514 million,ordinary income grew 42.5% year on year, to ¥2,640 million yen, and net income attributableto owners of the parent rose 59.5% year on year, to ¥1,613 million. This was a result primarilyof an improved project mix and continuous cost structural reforms in the Enterprise Networks
business and Carrier Networks business, which offset a decline in the Social Infrastructures
segment due to a higher cost of sales ratio and an increase in selling, general andadministrative expenses.

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

Net sales by business segment
Enterprises

CarrierSocialNetworks

Networks

Infrastructures

OtherTotal

1H Fiscal 2018.3

51,97130,40335,244

2,318

119,937

1H Fiscal 2017.3

52,06028,47734,9283,366

118,833

(89)

1,925

316

(1,048)

1,104(0.2)

6.8

0.9(31.1)

0.9

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

Reference: Orders received by business segment
Enterprise

CarrierSocialNetworks

Networks

Infrastructures

OtherTotal

1H Fiscal 2018.3

52,92031,03741,923

2,771

128,653

1H Fiscal 2017.3

60,51235,21045,565

3,096

144,385

Increase/(decrease)(7,591)(4,173)(3,642)(324)(15,732)(12.5)(11.9)(8.0)(10.5)(10.9)

Ratio of increase/(decrease)(%)

1. Enterprise Networks business
While net sales remained generally unchanged year on year at ¥51,971 million, ICT
investment in work style reform remained active and EmpoweredOffice, an officeinnovation solution business achieved growth.
2. Carrier Networks businessNet sales rose 6.8 % year on year, to ¥30,403 million thanks to the expansion ofbusinesses for telecom carriers.
3. Social Infrastructures businessNet sales climbed 0.9% year on year, to ¥35,244 million, owing to the contribution of theconstruction of large mega-solar power generation plants, which were received in theprevious fiscal year, offsetting a decrease in sales in the overseas businesses.
*EmpoweredOffice:EmpoweredOffice is our office innovation solution. It combines our strengths in ICT andfacility installation to enable more intellectual and creative styles of work through process
reforms. It also proposes new methods and places of work that enable customers to fulfill
their social responsibilities, such as the strengthening of security and environmental
responsiveness.

<Outline of Business Segments>
Business Segment

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

Enterprise Networks

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

Carrier Networks

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

Social Infrastructure

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

Sales of purchased equipment(2) Outlook for the Fiscal Year Ending March 31, 2018
The Japanese economy is expected to show a moderate recovery, reflecting the effect ofgovernment measures and improvements in employment and income conditions. However, thedomestic economy continues to face downward pressure due to such factors as the sharp
appreciation of the yen and concerns over a downturn in overseas economies.
In this economic environment, the consolidated forecast for the fiscal year ending March 31,2018 remains unchanged from the plans on a company-wide basis, without any change from theinitial forecast.

Net sales¥270 billion

4.7% increase year on year

Operating income¥10.5 billion

5.3% increase year on year

Ordinary income¥10.5 billion

5.3% increase year on year

Net income attributable¥6.7 billion

2.3% increase year on year

to owners of the parent

5. Consolidated Financial Statements(1) Consolidated Balance Sheets
As ofMarch 31, 2017
AssetsCurrent assets
Cash and cash equivalents
Notes and accounts receivable
Purchased goods,materials and supplies
Work in process
Other current assets
Allowance for doubtful accounts
Total current assets
Non-current assets
Property 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
Liabilities
Current liabilities
Notes and accounts payable
Short-term bank loans
Current installments of long-term debt
Accrued income taxes
Accrued bunuses to directors and corporate auditors
Accrued warranty on products
Accrued losses on sales contracts
Other current liabilities
Total current liabilitiesLong-term liabilities
Long-term debt
Liabilities for retirement benefits
Other liabilities
Total long-term liabilities
Total liabilities
Net assets
Shareholders' equity
Capital stock
Capital surplus
Retained earnings
Treasury stock, at cost
Total shareholders' equity
Accumulated other comprehensive income
Net unrealized holding gain on other securities
Foreign currency translation adjustments
Accumulated adjustments for retirement benefits
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets(Millions of yen)
As ofSeptember 30, 2017

59,64891,152
2,679
5,815
9,796
(92)
168,999

69,20575,834
2,897
7,304
9,538
(99)
164,681

10,71910,464

1,689
2,871
4,561

1,561
3,282
4,843

13,240(51)
13,18828,469197,469

12,939(50)
12,88928,198
192,879

36,474
4,069
171
2,964
67
123
645
18,981
63,49832,361
4,081
171
1,419
38
119
528
19,962
58,681

4,014
31,206
2,075
37,296
100,795

3,928
31,434
1,971
37,33396,015

13,122
16,652
70,622(272)
100,124

13,122
16,65570,449(274)
99,95235(394)(5,154)(5,513)
2,062
96,674
197,469

48(431)(4,877)(5,259)2,171
96,864
192,879

(2) Consolidated Statements of Income and Comprehensive Income(Consolidated Statements of Income)(Millions of yen)
1H, FY March 2017

1H, FY March 2018

(6 months ended September 2016)(6 months ended September 2017)

Net sales

118,833

119,937

Cost of sales

100,748

100,921

Gross profit

18,08519,016

Selling, general and administrative expenses

16,35916,501

Operating income

1,725

2,514

Interest income

2113

Dividends income of insurance

190

197

Other

154

101

Total non-operating income

366

312

Interest expenses

4255

Business reconstruction expenses for subsiriaries

41

37

Other

154

94

Total non-operating expenses

238

187

1,852

2,640

Closing of affiliates cost

79－

Total extraordinary losses

79－

Income before income taxes

1,773

2,640

655

902

1,118

1,737

106

123

1,011

1,613

Non-operating income

Non-operating expenses

Ordinary income
Extraordinary losses

Income taxes
Net income
Net income attributable to noncontrolling interests
Net income attributable to owners of theparent(Millions of yen)

Net income(Millions of yen)

1H, FY March 2017

1H, FY March 2018

(6 months ended September 2016)(6 months ended September 2017)

1,118

1,737

412

Foreign currency translation adjustments

(378)

(22)

Adjustments for retirement benefit

328

277

Total other comprehensive income

(45)

267

1,072

2,004

1,080

1,867

(7)

136

Other comprehensive income
Net unrealized holding loss on other securities

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

(3) Consolidated Statements of Cash Flows(Millions of yen)1H, FY March 2018

1H, FY March 2017
Cash flows from operating activities
Net income (loss) before income taxes
Depreciation and amortization
Amortization of goodwill(Increase) decrease in asset for retirement benefit
Increase (decrease) in liability for retirement benefits
Increase (decrease) in accrued bonuses to directors andcorporate auditors
Increase (decrease) in accurued warranty on products
Increase (decrease) in accurued losses on sales
contracts
Interest and dividend income
Interest expense(Increase) decrease in notes and accounts receivable(Increase) decrease in inventories
Increase (decrease) in notes and accounts payable
Increase (decrease) in accrued consumption taxes
Other, net
SubtotalInterest and dividend income received
Interest paid
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities
Purchase of property and equipment
Proceeds from sale of property and equipment
Purchase of intangibles
Proceeds from sale of intangibles
Purchase of investment securities
Proceeds from sale of investment securities
Loans receivable madeCollection of loans receivable
Other, net
Net cash used in investing activities
Cash flows from financing activities
Net increase (decrease) in short-term bank loans
Repayments of long-term debt
Dividends paid to shareholders
Dividends paid to minority shareholders of subsidiaries
Other, net
Net cash provided by used in financing activities
Effect of exchange rate changes on cash and cash
equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period(6 months ended September(6 months ended September 2017)

1,773
1,431
127(63)275

2,640
1,275
127
196
548

(65)
(47)

(29)
(4)

524
(28)
42
28,735(1,849)(7,944)(1,214)954
22,65328(42)(3,564)
19,074

(117)
(20)
55
15,291(1,706)(4,115)(429)
2,127
15,83820(55)(2,492)
13,311

(991)
0
(172)
－
(4)
3(1)
2(39)
(1,204)(779)
4(860)
3(8)
4(0)
1(6)
(1,641)626(84)(1,735)(14)(249)(1,458)0(85)(1,785)(17)(226)(2,114)(64)
16,34743,88960,237

19,556
59,64869,205

(4) Segment Information
Business Segment Information
First half of fiscal March 2018 (6 months ended September 2017)

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

(Millions of yen)Enterprise

CarrierSocialNetworks

Networks

Infrastructures

51,971
51,971
4,346

30,40330,403
2,109

35,24435,244
118

Others

2,318
2,318
98

Adjustments(4,158)First half of fiscal March 2017 (6 months ended September 2016)
Enterprise
Networks
Sales(1) Sales to third parties(2) Intersegment sales
Total
Operating income and loss

52,06052,060
3,621

Total

119,937119,937
2,514(Millions of yen)

Carrier Networks

28,47728,477
1,048

SocialInfrastructures
34,92834,928
1,459

Others

3,366
3,366
106

Adjustments(4,511)

Total

118,833
118,833
1,725