NEC NETWORKS & SYSTEM INTEGRATION CORPORATIONAND CONSOLIDATED SUBSIDIARIES
Consolidated Financial Statementswith Independent Auditor’s Report.
March 31, 2023 and 2024

CONSOLIDATED BALANCE SHEETSNEC Networks & System Integration Corporation and Consolidated Subsidiaries
as of March 31, 2023 and 2024
Thousands of
U.S. dollars

Millions of yen(note 3)
2024

2023

2024

68,549 ¥585
1,165
88,33834,372
3,151
12,932
11,724(85)
220,735

73,507452
2,025
97,662
36,233
2,441
10,111
15,069(40)
237,464

1,546
14,888662
17,677695
705(21,832)
14,343

1,546
14,269821
17,765
330
572(21,707)
13,597

10,21094,240
5,422
117,3302,179
3,777(143,365)
89,802Intangibles, net of accumulated amortization (note 8)

3,745

3,383

22,343

Investments and other assets
Investment securities (notes 5 and 6)
Asset for retirement benefits (note 11)
Deferred tax assets (note 10)
Other assets (note 22)
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets

7,427
293
14,172
6,379(97)
28,17546,264

5,391
6,302
12,9625,897(102)
30,45147,43335,605
41,62285,60838,947(673)
201,116
313,275

AssetsCurrent assets:
Cash and cash equivalents
Notes receivable - trade
Electronically recorded monetary claims
Accounts receivable – trade (note 22)
Contract assets (notes 22 and 24)
Purchased goods, materials and supplies (note 7)
Work in process (note 7)
Other current assets (note 22)
Allowance for doubtful accounts
Total current assets¥

Non-current assets:
Property and equipment
Land
Buildings and structures
Machinery, equipment and vehicles
Tools, furniture and fixtures
Construction in progress
Other
Accumulated depreciation
Property and equipment, net

Total assets¥

267,000¥

284,897$$

485,483
2,985
13,374645,016
239,303
16,121
66,77899,524(264)
1,568,350

1,881,626(Continued)-1-Thousandsof U.S.
dollars(note 3)

Millions of yen
2023

2024

8,653 ¥
202
44,571
1,467
7,968
4,493
144
161
515
3
394
18,31486,8906,230
3,000
49,176
1,415
9,499
5,048
163
182
166
3
―
21,941
96,8263,000
28,4242,970
34,395―27,663
2,925
30,589121,285

127,416―
182,702
19,318202,027
908,297
841,529

13,122

13,122

86,665

16,708112,486

16,726
120,740

110,468
797,437

(252)

(244)

(1,611)

142,065

150,344992,959

1,382

342

2,258

10
(284)

3
(177)

19
(1,169)(1,930)2,043

13,493

(822)

2,211

14,602

Non-controlling interests

4,471

4,925

32,527

Total net assets

145,714

157,4811,040,096

267,000 ¥284,897$ 1,881,626

Liabilities and Net Assets
Current liabilities:
Short-term bank loans (note 9)
Current installments of long-term debt (note 9)
Notes and accounts payable (note 22)
Electronically recorded obligations
Contract liabilities (notes 22 and 24)
Accrued income taxes (note 10)
Accrued bonuses to directors
Accrued warranty on products
Accrued losses on sales contracts (note 7)
Accrued compensation for damage
Accrued office transfer cost
Other current liabilities
Total current liabilities¥

Non-current liabilities:
Long-term debt (note 9)
Liability for retirement benefits (note 11)
Other liabilities (notes 10 and 12)
Total non-current liabilities
Total liabilities
Shareholders’ equity (note 13):
Common stock:

2024

$

41,146
19,813324,787
9,345
62,73633,339
1,076
1,202
1,096
19
―
144,911
639,495

Authorized 300,000,000 shares; issued and outstanding
149,321,421 shares as of March 31, 2023 and 2024

Capital surplus
Retained earnings
Treasury stock, at cost;

366,954 shares as of March 31, 2023 and354,681 shares as of March 31, 2024

Total shareholders’ equity
Accumulated other comprehensive income:Net unrealized holding gains on available-for-salesecurities (note 5)
Diferred gains or losses on hedges
Foreign currency translation adjustments
Accumulated adjustments for retirement benefits(note 11)
Total accumulated other comprehensive income

Total liabilities and net assets¥

The accompanying notes to consolidated financial statements are an integral part of these consolidated financial statements.

-2-

CONSOLIDATED STATEMENTS OF INCOME
NEC Networks & System Integration Corporation and Consolidated Subsidiaries
Years ended March 31, 2023 and 2024
Thousands of
U.S. dollars

Millions of yen

2023
Net sales (note 22)¥

Cost of sales (notes 7 and 22)
Gross profit
Selling, general and administrative expenses(notes 15 and 16)
Operating income

320,802(note 3)
2024

2024
¥

359,505$

2,374,380

254,257

288,276

1,903,942

66,54571,228

470,431

43,794

46,108

304,524

22,751

25,120165,907

16
(219)
164
72
―
(35)
(65)
287
219
22,970

16
(371)
102
106
87
(190)
(202)
15
(436)
24,684105(2,450)673
700
574(1,254)(1,334)99(2,879)163,027

―
571
147
106
825
22,145

720
―
―
―
720
23,964

4,755
―
―
―
4,755
158,272

7,536
(272)
7,264
14,880

8,321
(78)
8,243
15,721

54,956(515)
54,441
103,830

1,067
13,813 ¥391
15,3292,582
101,241

Other income (expense):
Interest income
Interest expense
Dividends income of insurance
Insurance claim income
Reversal of provision for head office relocation
expensesLosson disposal of non-current assets
Loss on investments in investment partnerships
Other, net
Subtotal
Ordinary Income
Extraordinary loss
Loss on valuation of investment securities
Expenses relating to move of the head office
Loss on liquidation of subsidiaries
Loss on revision of retirement benefit plan
Subtotal
Net income before income taxes
Income taxes (note 10):
Current
Deferred
Subtotal
Net Income
Net Income attributable to:Non-controlling interests
Owners of the parent¥$

Per share information (notes 13 and 19)
Yen
U.S. dollars
948.23 ¥1,024.09
6.76
Net assets (basic)
¥
$
92.74
102.91
0.67
Net income (basic)
46.00
49.00
0.32
Cash dividends
The accompanying notes to consolidated financial statements are an integral part of these consolidated financial
statements.

-3-

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
NEC Networks & System Integration Corporation and Consolidated Subsidiaries
Years ended March 31, 2023 and 2024
Thousands of
U.S. dollars

Millions of yen
2023
Net Income¥

Other comprehensive income arising during the year
(note 18):
Net unrealized holding gains or losses onavailable-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustments
Adjustments for retirement benefit
Share of other comprehensive income of entities
accounted for using equity method
Total other comprehensive income orlosses arising during the year
Comprehensive income¥(note 3)
2024

2024

14,880¥15,721$

103,830140(1,040)(6,868)

10
362
(716)

(6)
197
3,973

(39)
1,301
26,240

(1)

(1)

(6)

(204)

3,122

20,61914,676¥

18,843$

124,450

Comprehensive income attributable to:13,479 ¥18,363
121,279
Owners of the parent
¥
$
1,196
479
3,163
Non-controlling interests
The accompanying notes to consolidated financial statements are an integral part of these consolidated financial
statements.

-4-

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSNEC Networks & System Integration Corporation and Consolidated Subsidiaries
Years ended March 31, 2023 and 2024
Millions of yen
Numbers of
Shareholders’ equity
shares ofCommonCapitalRetained
Treasurycommon stock
stock
surplusearnings
stock
Balance on April 1, 2022
Changes arising during the year:
Cash dividends(Thousands)

149,321 ¥Net income attribute to owners of
the parent
Purchase of treasury stock
Disposal of treasury stock
Net changes in accounts otherthan shareholders’ equity
Total changes during the year––
Balance on March 31, 2023
149,321
Changes arising during the year:
Cash dividends
Net income attribute to owners of
the parent
Purchase of treasury stock
Disposal of treasury stock
Net changes in accounts otherthan shareholders’ equity––
Total changes during the year
Balance on March 31, 2024
149,321 ¥13,122 ¥16,694 ¥105,673 ¥

14
16,708(259) ¥

135,230(7,000)(7,000)13,813(1)
8

13,813
(1)
23
––

7
(252)

6,834
142,065(1)
8(7,075)
15,329
(1)
26

14
––
13,122

Total

6,812
112,486(7,075)
15,32917––
13,122 ¥17
16,726 ¥

8,254
120,740 ¥Millions of yen
Accumulated other comprehensive income
Net unrealized
holding gains or Deferred gains Foreign currency
Accumulated
losses on
or losses ontranslation
adjustments foravailable-forhedges
adjustments
retirement benefits
sale securities–– ¥Balance on April 1, 2022 ¥1,242 ¥
(517) ¥
(1,213) ¥Changes arising during theyear:
Cash dividends
Net income attribute toowners of the parent
Purchase of treasury stock
Disposal of treasury stock
Net changes in accounts
140
10
232
(716)
other than shareholders’equity
140
10
232
(716)
Total changes during the year
Balance on March 31, 2023
1,382
10
(284)
(1,930)Changes arising during theyear:
Cash dividends
Net income attribute toowners of the parent
Purchase of treasury stock
Disposal of treasury stock
Net changes in accounts
other than shareholders’(1,040)
(6)
107
3,973
equity(1,040)
(6)
107
3,973
Total changes during the year
Balance on March 31, 2024 ¥342 ¥3¥(177) ¥
2,043 ¥

-5-

Total(488) ¥

7(244) ¥

8,279
150,344(Continued)

Noncontrollinginterests

Total net
assets3,407 ¥

138,149(7,000)13,813
(1)
23

(333)

1,063

730

(333)
(822)

1,063
4,471

7,564
145,714(7,075)
15,329
(1)
26

3,034

453

3,487

3,034
2,211 ¥

453
4,925 ¥

11,766
157,481(Continued)

Thousands of U.S. Dollars (note 3)
Shareholders’ equity
Commonstock
Balance on April 1, 2023
Changes arising during the year:
Cash dividends
Net income attribute to owners of
the parent
Purchase of treasury stock
Disposal of treasury stock
Net changes in accounts otherthan shareholders’ equity
Total changes during the year
Balance on March 31, 2024$

86,665 $CapitalsurplusRetainedearnings

110,349 $742,923 $Treasury
stock

Total

(1,664) $938,280(46,727)(46,727)

101,241

101,241
(6)
171

(6)
52

112

––
$

––
86,665 $112
110,468 $

54,514
797,437 $46(1,611) $54,679992,959

Thousands of U.S. Dollars (note 3)
Accumulated other comprehensive income

Net unrealized
holding gain or Deferred gains Foreign currency
Accumulated
losses on
or losses ontranslation
adjustments foravailable-forhedges
adjustments
retirement benefits
sale securities$
9,127 $
66 $
(1,875) $ (12,746) $Total

Noncontrollinginterests

Total net
assetsBalance on April 1, 2023
(5,428) $29,529 $ 962,380
Changes arising during theyear:
Cash dividends(46,727)
Net income attribute to101,241owners of the parent
Purchase of treasury
(6)
Stock
Disposal of treasury
171
Stock
Net changes in accounts
other than shareholders’(6,868)(39)
706
26,24020,0382,991
23,030equityTotal changes during the year
(6,868)(39)
706
26,24020,0382,991
77,709$Balance on March 31, 2024 $2,258 $
19
(1,169) $13,493 $14,602 $32,527 $ 1,040,096
The accompanying notes to consolidated financial statements are an integral part of these consolidated financial
statements.

-6-

CONSOLIDATED STATEMENTS OF CASH FLOWSNEC Networks & System Integration Corporation and Consolidated Subsidiaries
Years ended March 31, 2023 and 2024
Thousands of
U.S. dollars

Millions of yen

Cash flows from operating activities:
Net income before income taxes
Depreciation and amortization
Amortization of goodwill
Expenses relating to move of the head office
Loss (gain) on liquidation of subsidiaries
Loss (gain) on revision of retirement benefit plan
Increase (decrease) in allowance for doubtful
accounts¥(note 3)
2024

2023

2024

22,145 ¥
4,170
235
571
147
106

23,964
3,727
67
―
―
―

$

158,272
24,615
442
―
―
―

47

(53)

(350)

(Increase) decrease in asset for retirement benefits

(189)

(234)

(1,545)

Increase (decrease) in liability for retirement
benefits

(208)

(829)

(5,475)

Increase (decrease) in accrued bonuses to directors

(1)

19

125

Increase (decrease) in accrued warranty on
products
Increase (decrease) in accrued losses on sales
contracts
Increase (decrease) in provision for compensation
for damage
Interest and dividend income

46

21

138

(1,756)(370)(2,443)

(0)

―

―

(47)

(43)

(283)

Interest expense

219

371

2,450

Loss (gain) on valuation of investment securities

―

720

4,755

(Increase) decrease in notes and accounts
receivable-trade and contract assets(10,486)(10,953)(72,340)(Increase) decrease in inventories(5,309)3,546

23,419

Increase (decrease) in notes and accounts payable
Increase (decrease) in accrued consumption taxes
Other, net
SubtotalInterest and dividend received
Interest paid
Income taxes paid
Net cash provided by operating activities

4,187(1,192)(2,315)
10,37147(214)(7,386)
2,816

4,469
2,404
2,334
29,16143(371)(8,605)
20,22829,515
15,877
15,415
192,596283(2,450)(56,832)
133,597(Continued)-7-

Thousands of
U.S. dollars

Millions of yen
2023

2024

(note 3)2024

(1,309)0(1,144)(1,381)(7)
19(1,111)(4,934)(2,673)16(1,387)
(474)
(37)
2
(295)
(4,848)(17,654)105(9,160)(3,130)(244)
13(1,948)(32,019)(1,782)(264)(3,087)(202)(20,388)(1,334)

22

24

158

(6,990)(25)(202)(9,243)(7,067)(25)(161)(10,520)(46,674)(165)(1,063)(69,480)

Effect of exchange rate changes on cash and cash
equivalents

178

98

647

Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

(11,182)
79,732
68,549 ¥4,958
68,54973,50732,745452,737
485,483

Cash flows from investing activities:
Purchase of property and equipment
Proceeds from sale of property and equipment
Purchase of intangibles
Purchase of investment securities
Loans receivable madeCollection of loans receivable
Other, net
Net cash used in investing activities
Cash flows from financing activities:
Net increase (decrease) in short-term bank loans
Repayments of long-term debt
Proceeds from sale and purchase of treasury stock,net
Dividends paid to shareholders
Dividends paid to non-controlling interest
Other, net
Net cash used in financing activities¥$

The accompanying notes to consolidated financial statements are an integral part of these consolidated
financial statements.

-8-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NEC Networks & System Integration Corporation and Consolidated Subsidiaries
March 31, 2023 and 2024
1. BASIS OF PREPARATION
NEC Networks & System Integration Corporation (the “Company”) and its domestic subsidiaries maintain theirbooks of account in conformity with accounting principles generally accepted in Japan. Its foreign subsidiaries
maintain their books of account in conformity with those of their countries of domicile.
The accompanying consolidated financial statements have been compiled from the consolidated financial
statements prepared by the Company as required under the Japanese Financial Instruments and Exchange Law
and, have been prepared in accordance with accounting principles generally accepted in Japan, which are
different in certain respects as to the application and disclosure requirements of IFRSs.
As permitted by the Japanese Financial Instruments and Exchange Law, amounts of less than one million yen
have been omitted. As a result, the totals shown in the accompanying consolidated financial statements (both inyen and U.S. dollars) do not necessarily agree with the sum of the individual amounts.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(a) Consolidation
The Company has 17 subsidiaries (companies over which the Company can control their operations) as of March
31, 2024 (17 subsidiaries as of March 31, 2023) (the “Group”).
The accompanying consolidated financial statements include the accounts of the Company and the significant
companies controlled directly or indirectly by the Company. All significant intercompany balances andtransactions have been eliminated in consolidation.
The financial statements of the 5 subsidiaries with December 31st year-end have been consolidated. All materialtransactions that occurred in the period from December 31 to March 31, which is the Company’s year-end, havebeen adjusted.
The difference between the carrying amount and the underlying net assets at fair value at the respective dates ofacquisition is allocated to identifiable assets and liabilities based on fair market value at the dates of acquisition.
The unallocated portion of the difference, which is recognized as goodwill, is amortized by the straight-line
method over a period of up to 20 years in which the future benefit of each investment is expected.
The Company also has 3 affiliates accounted for using equity method.
If the fiscal year-end differs from that of the Company, financial statements prepared by their fiscal year-end areaccounted for.
(b) Foreign currency translation
Monetary assets and liabilities denominated in foreign currencies are translated into yen at the exchange rates
prevailing at the consolidated balance sheet date. All revenues and expenses associated with foreign currencies
are translated at the rates of exchange prevailing when such transactions were made. The resulting exchange
gain or loss is credited or charged to income.
The revenue and expense accounts of the foreign subsidiaries are translated into yen at the average exchange
rates prevailing during the year, and, except for the components of shareholders’ equity, the consolidated balance
sheet accounts are translated at the rates of exchange in effect at the consolidated balance sheet date. The
components of shareholders’ equity are translated at their historical exchange rates. Translation adjustments,
except for the portion included in non-controlling interests, are presented as a separate component of net assets
in the accompanying consolidated financial statements.
(c) Cash equivalents
Cash and cash equivalents include all highly liquid investments – generally with original maturities of threemonths or less – that are readily convertible to known amounts of cash and have negligible risk of changes invalue due to their short maturities.
(d) Investment securities
Marketable securities classified as available-for-sale securities are measured at fair value with any changes in
unrealized holding gain or loss, net of the applicable income taxes, included directly in net assets. Cost of-9-

securities sold is determined by the moving-average method.
Non-marketable securities classified as available-for-sale securities are carried at cost determined by the movingaverage method. Investments to investment limited partnerships (that are regarded as securities under Article 2,
Paragraph 2 of the Financial Instruments and Exchange Act.), are recognized at an amount equivalent to theCompany’s percentage share of the net assets of such partnerships, based on the latest financial statements
available at the reporting date stipulated in a partnership agreement.
(e) Inventories
Work in process is stated at the lower of cost or net selling value determined on a specific project basis.
Purchased goods and materials are stated at the lower of cost or net selling value determined primarily by themoving-average method.
(f) Depreciation and amortization
Depreciation of property and equipment is principally computed by the straight-line method.
Significant renewals and improvements are capitalized. Maintenance and repair costs are charged to expense.
The useful lives of property and equipment are summarized as follows:
Buildings and structures
2 to 50 years
Machinery, equipment, and vehicles 2 to 17 years
Tools, furniture, and fixtures
2 to 20 years
Intangibles are amortized by the straight-line method over their estimated useful lives.
Software for sale is amortized based on projected sales volumes over the estimated effective periods (within 3
years). Software for internal use is amortized by the straight-line method over the estimated useful lives (within
5 years).
(g) Allowance for doubtful accounts
The allowance for doubtful accounts is provided at an amount determined based on the historical experience ofbad debt with respect to ordinary receivables, and an estimate of uncollectible amounts determined by reference
to specific doubtful receivables from customers which are experiencing financial difficulties.
(h)Accrued warranty on products
Accrued warranty on products is provided for at the estimated warranty cost.
(i) Accrued losses on sales contracts
Accrued losses on sales contracts are provided for in the amount of estimated losses for work in process at theconsolidated balance sheet date. Among sales orders of the Company on hand at the consolidated balance sheet
date, for projects in which the estimated cost is expected to exceed the amount of the sales order, such excess
costs on sales contracts are accrued.
(j) Provision for compensation for damage
Provision for compensation for damage is provided for at the amount of estimated compensation for damage.
(k) Leases
Leased assets under finance lease transactions that do not transfer ownership are depreciated by using thestraight-line method over the lease term as their useful lives with zero residual value.
(l) Research and development costs
Research and development costs are charged to expense as incurred.
(m) Retirement benefits
Liability for retirement benefits is provided mainly at an amount calculated based on the retirement benefit
obligation and the fair value of the pension plan assets at the consolidated balance sheet dates. The retirement
benefit obligation is attributed to each period by the straight-line method over the estimated years of services ofthe eligible employees. Actuarial gain or loss is amortized from the subsequent year that it occurs by the straightline method within the average remaining years (10 to 16 years) of service of the employees. Past service costs
are amortized beginning from the year it is incurred by the straight-line method within the average remaining
years (12 to 13 years) of service of the employees.
- 10 -

Certain consolidated subsidiaries use a simplified method for calculating retirement benefit asset and liability
and retirement benefit costs.
For lump-sum payment plans, the payment for voluntary retirement at fiscal year-end is deemed as retirement
benefit obligation, and for annuity payment plans, the actuarial obligation on pension finance calculation in themost recent year is deemed as the retirement benefit obligation.
(n) Income taxes
Deferred tax assets and liabilities are determined based on the differences between financial reporting and thetax bases of the assets and liabilities and are measured using the enacted tax rates and laws which will be ineffect when the differences are expected to reverse.
(o) Derivative financial instruments
Derivatives are recorded at their fair value with any changes in unrealized gain or loss charged or credited toincome, except for those which meet the criteria for deferral hedge accounting under which unrealized gain or
loss, net of the applicable income taxes, is directly included in net assets.
Methods for significant hedge accounting(i) Hedge accounting method
Deferral hedge accounting is applied. For forward exchange contracts, the allocation method is applied if thecriteria for the allocation method are met.
(ii) Hedging instruments and hedged items
Hedging instruments: Forward exchange contracts
Hedged items: Any monetary receivables and payables and planned trading transactions that are denominatedin foreign currencies.
(iii) Hedging policy
The Company uses derivative transaction in accordance with internal policies to mitigate and avoid theforeign exchange fluctuation risk.
(iv) Hedging evaluation
Hedge effectiveness is evaluated by comparing the total changes in values of hedging instruments and hedged
items for the periods from the commencement of hedge contracts to the evaluation dates. For forward
exchange contracts which meet the criteria for the allocation method, the evaluation of hedge effectivenessis omitted.
(p) Revenue recognition
The contents of principal performance obligations and the normal point of time when the performance obligation
is fulfilled, which means the normal point of time of revenue recognition, on the major business related torevenues arising from the contracts with customers of the Company and its consolidated subsidiaries are as
follows:(System integration, development and construction)
The main performance obligation is to provide constructional service and work such as construction work forcustomers agreed upon in the contract, and we judge that these service and work are transactions for which theperformance obligation is fulfilled for a certain period of time. Revenue is recognized based on the degree ofprogress for those for which a reasonable estimate of progress can be made, and if a reasonable estimate ofprogress cannot be made, revenue is recognized based on a cost recovery basis to the extent of the costs incurred.
In the event that the period from the date of commencement of business under the contract to the time when
the obligation of full performance is expected to be fulfilled is very short, revenues are not recognized over acertain period of time; instead, revenue is recognized when the obligation of full performance is fulfilled.
(Provision of Services)
The principal performance obligation is to provide maintenance and operation support services, data center
services, contact center services. These services are deemed to be transactions for which the performanceobligation is fulfilled for a certain period of time, and revenue is recognized for a certain period of timedepending on the progress of the services. With respect to transactions for which the term of the contract isstipulated, such as support services for maintenance for a certain period, and for which almost the same service- 11 -

is continuously provided over that period, the performance obligation is deemed to be fulfilled over the lapse oftime, and the revenues are recognized equally throughout the contract period.
(Sale of Products)
The main performance obligation is the delivery of products such as equipment, and the sale of these products
is considered to be a transaction in which the performance obligation is fulfilled at any one time, and revenue isrecognized at the time of delivery of such products.
(q) Accrued bonuses to directors
The Company and its domestic consolidated subsidiaries provide accrued bonuses to directors based on theestimated amounts to be paid in respect of the year.
(r) Reclassifications"Loss on disposal of non-current assets" and "Loss on investments in investment partnerships", which were
included in "Other, net" under "Other income (expense)" in previous year, have been presented individually incurrent year. In addition, "Reward income" and "Share of profit of entities accounted for using equity method"under "Other income (expense)" in previous year has been included in "Other, net" in current year. To reflect
these changes in presentation, the consolidated financial statements for the previous consolidated fiscal year
have been reclassified.
As a result, in the consolidated statement of income for the previous consolidated fiscal year, ¥ 77 million of "Reward income ", ¥ 71 million of "Share of profit of entities accounted for using equity method" and ¥ 38 millionof "Other, net" under "Other income (expense)" have been reclassified as ¥ 35 million of "Loss on disposal of
non-current assets", ¥ 65 million of "Loss on investments in investment partnerships" and ¥ 287 million of "Other,net".
(s) Significant accounting estimates
Recognition of revenue from construction work for which the performance obligations is fulfilled over acertain period is as follows:(1) Carrying amounts in the current year’s consolidated financial statements
Thousands of
U.S. dollars
2024

Millions of yen

Recognition of revenue from construction work
for which the performance obligations is fulfilledover a certain period

2023

2024

82,616 ¥102,930¥$

679,809(2) Information on the nature of significant accounting estimates for identified items
The Group recognizes revenue from construction work over a certain period of time based on the progress infulfilling performance obligations that can be readily estimated, except for cases where the period is very short.
The progress in fulfilling performance obligations is estimated as a percentage of total costs incurred to dateover the estimated total construction costs (the input method).
Assumptions for estimating total construction costs are reviewed as necessary, and any changes are recognizedin the fiscal year in which the impact of the revisions in assumptions are reasonably estimated. In addition,changes in the assumptions used in estimating total construction costs in the future (such as design changes andnatural disasters) could cause changes in the initial estimates, which could materially affect the amounts
recognized in the consolidated financial statements for the following fiscal year.
(t) Accounting standards and guidance issued but not yet adopted
The following accounting standards and guidance were issued but not yet adopted.
“Accounting Standard for Current Income Taxes” (ASBJ Statement No.27, October 28, 2022, ASBJ)“Accounting Standard for Presentation of Comprehensive Income” (ASBJ Statement No.25, October 28, 2022,
ASBJ)“Guidance on Accounting Standard for Tax Effect Accounting” (ASBJ Guidance No.28, October 28, 2022, ASBJ)- 12 -

(1) Overview
Transfer of JICPA’s practical guidelines on tax effect accounting to ASBJ was completed with the issuance ofstandards and guidance including ASBJ Statement No.28, “Partial Amendments to Accounting Standard forTax Effect Accounting” (hereinafter collectively referred to as “ASBJ Statement No.28, etc.”) in February
2018. During their deliberations, it had been determined that the following issue would be further discussed
subsequent to the issuance of ASBJ Statement No. 28, etc. The above standards and guidance were issued as aresult of the discussions:“Categories in which income tax expense should be recorded (taxes on other comprehensive income)”(2) Effective date
The standards and guidance will be effective from the beginning of the fiscal year ending March 31, 2025.
(3) Effects of the application of the standards and guidance
The effects of application of “Accounting Standard for Current Income Taxes”, etc. on the consolidated
financial statements are currently under evaluation.
“Accounting and Disclosure for Income Taxes on the Global Minimum Taxation System” (ASBJ PITF No.
46, March 22, 2024)(1) Overview
In March 2024, Practical Issues Task Force (PITF) No. 46, "Accounting and Disclosure for Income Taxes
under the Global Minimum Taxation System" and other reports (PITF No. 46) were issued. This is aimed athaving the multinational enterprise group and other entities bear a corporate tax of at least 15% on theircountry-specific profits, and the enterprises that generate the net income (profit) that is the source of therelevant taxation have been deliberated and published on the treatment of income taxes (current taxes) related
to a new tax system (the Global Minimum Taxation System) in which the enterprises generating the net
income (profit), being the source of the relevant taxation differ from the enterprises actually bearing the tax
liability.
(2) Effective date
The standards and guidance will be effective from the beginning of the fiscal year ending March 31, 2025.
(3) Effects of the application of the standards and guidance
The effects of application of “Accounting and Disclosure Treatment for Income Taxes Related to The Global
Minimum Tax System.”, on the consolidated financial statements are currently under evaluation.
3. U.S. DOLLAR AMOUNTS
The translation of yen amounts into U.S. dollar amounts is included solely for the convenience of readers outside
Japan and has been made, as a matter of arithmetic computation only, at ¥151.41 = U.S.$1.00, the approximate
rate of exchange on March 31, 2024. The translation should not be construed as a representation that the yenamounts have been, could have been, or could in the future be, converted into U.S. dollars at that or any otherrate.
4. NOTES AND ELECTRONICALLY RECORDED MONETARY CLAIMS MATURING
Notes and electronically recorded monetary claims are settled on the date of clearing or settlement. As financial
institutions in Japan were closed on March 31, 2024, the following notes and electronically recorded monetaryclaims maturing on March 31, 2024 and collected or paid on the following business day, are included in the
consolidated balance sheet.
Millions of yen
2023
Notes receivable
Electronically recorded monetary claims
Notes payable
Electronically recorded obligations¥- 13 -

–– ¥
––
––
––

2024
17
107
11
37

Thousands of
U.S. dollars
2024
$

112
706
72
244

5. INVESTMENT SECURITIESThe components of unrealized gain or loss on marketable securities classified as available-for-sale securities
on March 31, 2023 and 2024 are summarized as follows:

March 31, 2023
Securities whose carrying value
exceeds their acquisition cost:(1) Equity securities(2) Corporate bonds
Subtotal
Securities whose acquisition costexceeds their carrying value:(1) Equity securities(2) Corporate bonds
Subtotal
Total

March 31, 2024
Securities whose carrying value
exceeds their acquisition cost:(1) Equity securities(2) Corporate bonds
Subtotal
Securities whose acquisition costexceeds their carrying value:(1) Equity securities(2) Share acquisition rights
Subtotal
Total

Carrying
value

¥

¥

2,338
667
3,005

––
50
50
3,055
Carrying
value

¥

¥

388
151
539

1,015
50
1,065
1,605

Millions of yen
Acquisition Unrealized
costgain (loss)

¥

¥

2,064
612
2,676

––
50
50
2,726

¥

¥

274
54
328

––
––
––
328

Millions of yen
Acquisition Unrealized
costgain (loss)

¥

¥

279
149
428

1,750
50
1,800
2,229

¥

¥

109
2
111

(735)
––
(735)
(624)

Thousands of U.S. dollars
Carrying
Acquisition Unrealized
value
cost
gain (loss)

$

$

2,562
997
3,559

$

1,842
984
2,826

6,703
330
7,033
10,60011,558330
11,888$ 14,721$(4,854)––(4,854)$ (4,121)

Sales of securities classified as available-for-sale securities for the years ended March 31, 2023 and 2024 aresummarized as follows:
Thousands ofMillions of yen
U.S. dollars
2023
2024
2024
Proceeds from sales
Gain (Loss) on sales

¥

11 ¥
(0)

63
25

$

416
165

Unlisted equity securities of ¥956 million, investment partnership of ¥3,123 million, on March 31, 2023 are notincluded in the above table.
Unlisted equity securities of ¥821 million ($5,422 thousand), investment partnership of ¥2,667 million ($17,614
thousand) on March 31, 2024 are not included in the above table.
During the fiscal year ended March 31, 2023, the Company recognized impairment losses of ¥6 million on
available-for-sale securities without market price. During the fiscal year ended March 31, 2024, the Company
recognized impairment losses of ¥720 million ($4,755 thousand) on available-for-sale securities without market
price.
Marketable securities whose fair value as at fiscal year-end has declined by 50% or more, the carrying value are
reduced to its fair value, except in cases where the decline in fair value is expected to be recoverable. If thedecline in their market value is between 30% and 50%, the carrying value are reduced to the amount that is- 14 -719
13
733

necessary, except in cases where the decline in fair value is expected to be recoverable. Non-marketablesecurities are impaired if the net asset per share has declined by 50% or more due to deterioration of issuers'
financial conditions.
6. INVESTMENT IN AN AFFILIATEThe aggregate carrying amount of investment in an affiliate as of March 31, 2023 and 2024 are ¥291 million and¥296 million ($ 1,954 thousand), respectively.
7. INVENTORIESa) Inventories on March 31, 2023 and 2024 are as follows:
Thousands of
U.S. dollars
2024

Millions of yen
2023
2024
Work in process
Purchased goods and materials
Total

12,932 ¥3,151
16,084 ¥¥¥10,111
2,441
12,552$$
S

66,77816,121
82,900b) Losses from revaluation of the lower of cost or net selling value included in cost of sales for the years ended
March 31, 2023 and 2024 were ¥(35) million and ¥482 million ($3,183 thousand), respectively.
c) Losses on sales contracts included in cost of sales for the years ended March 31, 2023 and 2024 were ¥608
million and ¥92 million ($607 thousand), respectively.
d) Accrued losses on sales contracts and work in process corresponding to the loss contract are not offset in theaccompanying consolidated balance sheets.
Work in process inventories corresponding to accrued losses on sales contracts on March 31, 2023 and 2024 are
as follows:
Thousands ofMillions of yen
U.S. dollars
2023
2024
2024
Work in process

¥

57 ¥

34

$

224

8. GOODWILL
Goodwill on March 31, 2023 and 2024 is recorded in the accompanying consolidated balance sheets under thefollowing captions:Thousands of
U.S. dollars
2024

Millions of yen
2023
2024
Intangibles, net of accumulated amortization

¥

153 ¥

85

$

561

According to Article 32 of the “Practical Guidelines on Accounting Standards for Capital Consolidation
Procedures in Preparing Consolidated Financial Statements” (Accounting Practice Committee Statement No. 7
amended on November 28, 2014 by the Japan Institute of Certified Public Accountants), goodwill is amortized.

- 15 -

9. SHORT-TERM BANK LOANS AND LONG-TERM DEBT
Short-term bank loans and long-term debt are unsecured.
The weighted average interest rates of current installments of long-term debt for the years ended March 31, 2023
and 2024 were approximately 0.4%, and that of long-term-debt for the year ended March 31, 2023 wasapproximately 0.4%.
The annual maturities of long-term debt on March 31, 2024 are as follows:
Millions of Thousands ofyen
U.S. dollars
Year ending March 31,
2025
2026
2027
2028
2029 and thereafter

¥

3,000
––
––
––
––

$

19,813––––––––As of March 31, 2023 and 2024, the Group have entered contracts for committed lines of credit totaling ¥8,000
million and ¥8,000 million ($52,836 thousand), respectively with two domestic banks and have unused
committed lines of credit amounting to ¥8,000 million and ¥8,000 million ($52,836 thousand), respectively.
10. INCOME TAXES
Income taxes applicable to the Company and its domestic subsidiaries comprise corporation, enterprise, andinhabitants’ taxes, which, in the aggregate, resulted in a statutory tax rate of approximately 30.6% for both 2023
and 2024. Income taxes of the foreign subsidiaries are based generally on the tax rates applicable in theircountries of incorporation.
The effective tax rates reflected in the consolidated statements of income for the years ended March 31, 2023
and 2024 differed from the statutory tax rate for the following reasons:Statutory tax rate
Effect of:
Expenses not deductible for tax purposes
Inhabitant tax per capita levy
Tax credit
Increase/(Decrease) in valuation allowance
Amortization of goodwill
Share of loss (profit) of entities accounted for using equity method
Other, net
Effective tax rate

- 16 -

2023

2024

30.6%

30.6%

0.8
0.7
(0.5)
0.5
0.1
(0.1)
0.7
32.8%

0.7
0.6
(0.4)
1.8
0.1
(0.0)
0.9
34.4%

Tax effects of significant temporary differences and tax loss carry-forward that resulted in deferred tax assets
or liabilities on March 31, 2023 and 2024 are as follows:
Thousands ofMillions of yen
U.S. dollars
2023
2024
2024
Deferred tax assets:
Accrued employees’ bonuses
Social security contribution on employees’ bonuses
Allowance for doubtful accounts
Accrued enterprise tax
Loss on revaluation of inventories
Unrealized profit on inventories
Accrued losses on sales contracts
Depreciation
Liability for retirement benefits
Asset retirement obligations
Deemed dividend
Impairment loss on investment securities
Impairment loss on assets
Allowance for compensation for damage
Provision for office transfer cost
Tax loss carry-forward (Note 2)
Other
Subtotal
Valuation allowance on tax loss carry-forward(Note 2)
Valuation allowance on total deductible
temporary differences and other
Subtotal (Note 1)
Total
Deferred tax liabilities:
Asset for retirement benefits
Restoration cost for asset retirement obligations
Liability adjustment account
Other
Total
Net deferred tax assets¥¥

2,392 ¥
334
82
342
1,392
26
65
320
8,782
877
110
61
528
1
120
1,324
1,099
17,863

2,868
397
25
401
1,519
20
39
571
8,440
695
110
276
522
1
─

─

1,403
1,028
18,3209,266
6,789
120,995(954)(1,121)(7,403)(1,399)(1,512)(9,986)(2,353)
15,509(2,633)
15,687(17,389)
103,606

(63)
(513)
(117)
(642)
(1,336)
14,172 ¥(1,955)
(461)
(110)
(197)
(2,724)
12,962 $(12,911)(3,044)(726)(1,301)(17,990)
85,608$18,941
2,622
165
2,648
10,032
132
257
3,771
55,742
4,590
726
1,822
3,447
6

(Note) 1. Valuation allowance was increased by ¥280 million ($1,849 thousand). The increase mainly resulted
from reassessment of recoverability of deferred tax assets.
2. The amounts of tax loss carry-forward and related deferred tax assets by carry-forward period is asfollows:
Millions of yen
Due within
one yearMarch 31, 2023
Tax loss carryforward (*1)
Valuation
allowance
Deferredtax assets

Due after
one yearthrough two
years

¥

0

¥

(0)
¥

––

645

Due after
two years
throughthree years

¥

(350)
¥

295

4

Due after
three years
throughfour years

¥

(4)
¥

––

- 17 -

─Due after
four years
through five
years

¥

─
¥

─

27

Due after
five years

¥

27

¥

(598)

─
¥

645

Total

¥

47

1,324
(954)

¥

370
(*2)

Millions of yen
Due within
one yearMarch 31, 2024
Tax loss carryforward (*1)
Valuation
allowance
Deferredtax assets

Due after
one yearthrough two
years

¥

359

¥

(287)
¥

71

4

Due after
two years
throughthree years

¥

(4)
¥

─

6

Due after
three years
throughfour years

¥

(6)
¥

─

29

Due after
four years
through five
years

¥

40

─
¥

29

Due after
five years

¥

40

¥

(822)

─
¥

962

Total

¥

139

1,403
(1,121)

¥

281
(*2)

Thousands of U.S. dollars
Due within
one yearMarch 31, 2024
Tax loss carryforward (*1)
Valuation
allowance
Deferredtax assets

Due after
one yearthrough two
years

$

2,371

$

(1,897)$473

32

Due after
two years
throughthree years

$

(32)
$

─

44

Due after
three years
throughfour years

$

(44)
$

─

195

Due after
four years
through five
years

$

─
$

195

268

Due after
five years

$

268

$

(5,431)

─
$

6,354

Total

$

922

9,266
(7,405)

$

1,860
(*2)

(*1) Tax loss carry-forward is after multiplying the statutory tax rate.
(*2) Deferred tax assets of ¥370 million and ¥281 million ($1,860 thousand) are recognized for tax loss carryforward of ¥1,324 million and ¥1,403 million ($9,266 thousand) for the years ended March 31, 2023 and2024, respectively, which are after multiplying the statutory tax rate, of the consolidated subsidiaries. As forthe above tax loss carry-forward, valuation allowance has not been recognized for the part that deemed to be
recoverable since future taxable income will be available.
11. RETIREMENT BENEFIT PLANS
The Company and its consolidated subsidiaries have funded or unfunded defined benefit plans and defined
contribution plans.
Lump-sum or annuity payments are paid from the corporate defined benefit pension plans, all of which are
funded based on the employees’ job grade and length of service.
Lump-sum payments are paid from unfunded lump-sum payment plans based on the employees’ job grade,
performance, and length of service.
Certain consolidated subsidiaries use a simplified method for calculating retirement benefit asset and liability
and retirement benefit costs.
For lump-sum payment plans, the payment for voluntary retirement at fiscal year-end is deemed as retirement
benefit obligation, and for annuity payment plans, the actuarial obligation on pension finance calculation in the
recent years is deemed as the retirement benefit obligation.
The information for the Company’s and the consolidated subsidiaries’ defined benefit plans on March 31, 2023
and 2024 for the years then ended is as follows:- 18 -

(1) Movement in retirement benefit obligations
Millions of yen
Retirement benefit obligation at beginning of year
Service cost
Interest cost
Actuarial gain or loss
Benefits paid
Other
Retirement benefit obligation at end of year

¥

¥

2023
59,115
2,516
489
569
(3,291)45
59,444¥¥2024
59,444
2,534
491(3,491)(3,835)
10
55,153Thousands of
U.S. dollars
2024$
392,602
16,736
3,242(23,056)(25,328)66$
364,262(Note) The above table excludes certain plans that have adopted the simplified method.
(2) Movements in plan assets
Millions of yen
2023
Plan assets at beginning of year
Expected return on plan assets
Actuarial gain or loss
Contributions paid by the employer
Benefits paid
Other
Plan assets at end of year¥¥

32,018799(1,008)1,080(1,372)
61
31,5812024¥¥

31,581
789
1,744
1,078
(1,289)79
33,984

Thousands of
U.S. dollars
2024
$

$

208,579
5,211
11,5187,119(8,513)521
224,450(Note) The above table excludes certain plans that have adopted the simplified method.
(3) Reconciliation of changes in liability for retirement benefits whose plans adopted the simplified method
Millions of yen
2023
Liability for retirement benefits at beginning of year
Retirement benefit costs
Benefits paid
Loss on revision of retirement benefit plan
Transfer due to change of plan
Other
Liability for retirement benefits at end of year

¥

¥

335
93
(36)
106
(210)
(21)
267

2024
¥

267
19
(73)
―
―
(21)
191

¥

Thousands of
U.S. dollars
2024
$

$

1,763
125
(482)
―
―
(138)
1,261

(4) Reconciliation from retirement benefit obligations and plan assets to liability (asset) for retirement benefits
Millions of yen
2023
Funded retirement benefit obligation
Plan assets¥

Unfunded retirement benefit obligation
Net liability for retirement benefits
Liability for retirement benefits
Asset for retirement benefits
Net liability for retirement benefits

31,827(32,049)(221)
28,352¥
28,130¥¥¥¥- 19 -

2024

28,424(293)
28,130¥¥Thousands of
U.S. dollars
2024

28,294(34,505)(6,211)
27,572
21,361$

186,870(227,891)(41,021)
182,101$
141,080

27,663(6,302)
21,361$$

182,702(41,622)
141,080

(Note) The above table includes certain plans that have adopted the simplified method.
(5) Retirement benefit costs
Millions of yen
2023
Service cost
Interest cost
Expected return on plan assets
Net actuarial loss amortization
Past service costs amortization
Retirement benefit costs calculated by the simplified
methodOther
Retirement benefit costs

¥

¥

2,516
489
(799)
626
(89)
93
51
2,887

2024
¥

2,534
491
(789)
595
(89)
19
32
2,793

¥

(6) Adjustments for retirement benefit (pretax)
Millions of yen
2023
Past service costs
Actuarial gains and losses
Total

¥
¥

(89)
(951)
(1,040)

2024
¥

(89)
5,831
5,742

¥

(7) Accumulated adjustments for retirement benefit (pretax)
Millions of yen
2023
Unrecognized past service costs
Unrecognized actuarial gains and losses
Total

¥
¥

(404)
3,173
2,768

2024
¥
¥

(315)
(2,658)(2,973)(8) Plan assets(a) The components of plan assets
Millions of yen
2023
Debt securities
Equity securities
General account
Alternative
Other
Total

¥

¥

11,806
6,374
3,563
9,773
63
31,5812024¥¥

12,7586,795
3,420
10,849160
33,984

Thousands of
U.S. dollars
2024
$

$

16,736
3,242(5,211)
3,929
(587)
125
211
18,446

Thousands of
U.S. dollars
2024
$
$

(587)
38,51137,923Thousands of
U.S. dollars
2024
$
$

(2,080)(17,554)(19,635)

Thousands of
U.S. dollars
2024
$

$

84,26144,87822,58771,653
1,056
224,450(Note) Total plan assets include ¥1 million and ¥1 million ($6 thousand) in a retirement benefit trust established
for the corporate pension plan as of March 31, 2023 and 2024, respectively.
Alternative is mainly investment to hedge fund.
(b) Long-term expected rate of return
Current and target asset allocations, historical and expected returns on various categories of plan assets havebeen considered in determining the long-term expected rate of return.

- 20 -

(9) Actuarial assumptions
The principal actuarial assumptions on March 31, 2023 and 2024 (expressed as weighted averages) are as
follows:
2023
2024
Discount rateLong-term expected rate of return
Expected increase rate of salary

0.8%
2.5%
4.0%

1.3%
2.5%
4.0%

The amounts to be paid by the Company and its consolidated subsidiaries to the defined contribution plans were¥560 million and ¥596 million ($3,936 thousand) for the years ended March 31, 2023 and 2024, respectively.
12. ASSET RETIREMENT OBLIGATIONS
The asset retirement obligations are based on estimated future restoration obligations related to leasehold
contracts of head office and other facilities.
The obligations are calculated based on the estimated office rental period of 2 years to 20 years and a discounted
rate of 0.0% to 2.2%.
The following table provides Company’s total asset retirement obligations for the years ended March 31, 2023
and 2024:
Thousands ofMillions of yen
U.S. dollars
2023
2024
2024
Balance, beginning of year
Obligations incurred by asset acquisition
Obligations settled
Accretion expense
Remeasurements
OthersBalance, end of year¥¥

1,602 ¥
262
―
7
964
―
2,837 ¥

2,837
―
(667)
13
82
22
2,288

$

$

18,737―(4,405)85541
145
15,111

Changes in the estimate of the amount of said asset retirement obligation:
In asset retirement obligations, which were recorded as obligations for restoration associated with our realestate lease contracts in the previous and current consolidated fiscal year, as new information was obtained, theestimates were revised regarding the cost of restoration to the original state and the estimated period of use.
An increase of ¥964 million in 2023 and ¥82 million ($541 thousand) in 2024 due to this change in estimate
has been added to the balance of asset retirement obligations before the change on March 31, 2023 and 2024.
13. SHAREHOLDERS’ EQUITY
Under Japanese laws and regulations, the entire amount paid for new shares is required to be designated ascommon stock. However, a company may, by resolution of the Board of Directors, designate an amount notexceeding one half of the price of the new shares as additional paid-in capital, which is included in capital surplus.
The Companies Act provides that an amount equal to 10% of distributions from retained earnings paid by theCompany and its domestic consolidated subsidiaries be appropriated as a legal earnings reserve. No further
appropriations are required when the total amount of the additional paid-in capital and the legal earnings reserve
equals 25% of their respective stated capital. The Companies Act also provides that additional paid-in capitaland legal earnings reserve are available for appropriations by the resolution of the shareholders.
The legal earnings reserve amounted to ¥546 million ($3,606 thousand) as of both March 31, 2023 and 2024.
Legal earnings reserve is included in retained earnings in the accompanying consolidated balance sheets.
Cash dividends charged to retained earnings for the years ended March 31, 2023 and 2024 represent dividends
paid out during those years. The amount available for dividends is based on the amount recorded in the
Company’s non-consolidated books of account in accordance with the Companies Act.

- 21 -

The movement of treasury stock is as follows:
2023
At beginning of year
Increase -purchase of odd lot shares
Disposal of Treasury Share as Share
Compensation with Restriction on Transfer
Decrease -sale of odd lot shares
At end of year

Shares2008

2024

379,090872

366,954657(12,900)(12,900)(108)
366,954(30)
354,681a) Dividends paid during the year ended March 31, 2023
The following was approved by the Board of Directors on April 28, 2022.
(a)
(b)
(c)
(d)

Total dividends
Cash dividends per common share
Record date
Effective date

¥3,574 million¥24.00March 31, 2022
June 3, 2022

The following was approved by the Board of Directors on October 28, 2022.
(a) Total dividends¥3,425 million¥23.00(b) Cash dividends per common share(c) Record date
September 30, 2022(d) Effective date
December 2, 2022b) Dividends to be paid after March 31, 2023 although record date for payment falls within the year
ended March 31, 2023
The following was approved by the Board of Directors on April 28, 2023.
(a)
(b)
(c)
(d)
(e)

Total dividends
Dividend source
Cash dividends per common share
Record date
Effective date

¥3,425 million
Retained earnings¥23.00March 31, 2023
June 2, 2023

c) Dividends paid during the year ended March 31, 2024
The following was approved by the Board of Directors on April 28, 2023.
(a) Total dividends¥3,425 million ($22,620 thousand)¥23.00 ($0.15)(b) Cash dividends per common share(c) Record date
March 31, 2023
(d) Effective dateJune 2, 2023
The following was approved by the Board of Directors on October 30, 2023.
(a) Total dividends¥3,649 million ($24,100 thousand)¥24.50 ($0.16)(b) Cash dividends per common share(c) Record date
September 30, 2023
(d) Effective date
December 4, 2023

- 22 -d) Dividends to be paid after March 31, 2024 although record date for payment falls within the year
ended March 31, 2024
The following was approved by the Board of Directors on April 26, 2024.
(a)
(b)
(c)
(d)
(e)

Total dividends
Dividend source
Cash dividends per common share
Record date
Effective date

¥3,649 million ($24,100 thousand)
Retained earnings¥24.50 ($0.16)
March 31, 2024
June 3, 2024

14. LEASES(1) Finance leases
Under finance leases that do not transfer ownership of the leased property to the lessee:
Most of leased properties are telecommunications equipment in DX Solutions Business. The leased properties
whose ownership are not transferred to lessee are depreciated using the straight-line method over the periodof the lease, with zero residual value.
(2) Operating leases
Future minimum operating lease payments after March 31, 2023 and 2024 for non-cancelable operating leases
are summarized as follows:
Thousands ofMillions of yen
U.S. dollars
2023
2024
2024
¥

Due within one year
Due over one year
Total

¥

2,552 ¥
10,472
13,025 ¥

1,956
8,517
10,474$$

12,91856,251
69,176

15. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
The significant components of selling, general and administrative expenses for the years ended March 31, 2023
and 2024 are as follows:
Thousands ofMillions of yen
U.S. dollars
2023
2024
2024
Employee’s salary¥

Provision for bonuses to directors

Retirement benefit costs
Provision of allowance for doubtful accounts

19,378 ¥
146
1,120
48

20,353
146
1,060
6

$

134,423
964
7,000
39

16. RESEARCH AND DEVELOPMENT COSTS
Research and development costs included in selling, general and administrative expenses amounted to ¥1,068
million and ¥1,092 million ($7,212 thousand) for the years ended March 31, 2023 and 2024, respectively.
17. WRITE-DOWN OF INVESTMENT SECURITIESLoss on valuation of investment securities were recorded on investment securities held by the Company due toa significant decline in their real value.

- 23 -

18. OTHER COMPREHENSIVE INCOME
The reclassification adjustment and the related income tax effects allocated to each component of othercomprehensive income for the years ended March 31, 2023 and 2024 are as follows:
Thousands ofMillions of yen
U.S. dollars
2023
2024
2024
Net unrealized holding gains on available-for-salesecurities:
Unrealized holding gain (loss) arising during the year¥

Reclassification adjustment for gain/loss realized in net income

Before tax amountTax effectNet-of-tax amount

200 ¥
0
200
(60)
140

(2,257)761(1,495)455(1,040)$(14,906)
5,026(9,873)
3,005(6,868)

14
─
14
(4)
10

116
(125)
(9)
2
(6)

766
(825)
(59)
13
(39)

260
147
407
(45)
362

197
─
197
─
197

1,301
─
1,301
─
1,301

(1,577)536(1,040)
324
(716)

5,236
505
5,742
(1,768)
3,973

34,581
3,335
37,923(11,676)
26,240

(1)
3,122

(6)
(20,619)

Deferred gains or losses on hedges
Deferred gains or losses on hedges arising during the year

Reclassification adjustment for gain/loss realized in net income

Before tax amountTax effectNet-of-tax amountForeign currency translation adjustments:
Foreign currency translation adjustments arising during the year

Reclassification adjustment for gain/loss realized in net income

Before tax amountTax effectNet-of-tax amount
Adjustments for retirement benefit:
Adjustments for retirement benefit arising during the year
Reclassification adjustment for gain/loss realized in net income

Before tax amountTax effectNet-of-tax amount
Share of other comprehensive income of entities
accounted for using equity method
Share of other comprehensive income of entities accounted
for using equity method arising during the year

Total other comprehensive income (loss)¥(1)(204) ¥$

19. AMOUNTS PER SHARE
Yen
2023
Net income per share
Net assets per share¥- 24 -

U.S. dollars
2024

2024

92.74 ¥ 102.91
948.23
1,024.09

$

0.67
6.76

The basis of calculation for net income per share is as shown below.
Millions of yen
2023
2024
Net income attributable to owners of the parent
Amounts not attributable to common stock
Net income attributable to owners of the parent related tocommon stock
Average number of shares during the term (thousands ofshares)Thousands of
U.S. dollars
2024¥

13,813 ¥––15,329––$101,241––¥

13,813 ¥15,329$101,241

148,950

148,963

983,838

20. FINANCIAL INSTRUMENTS
Conditions of Financial instruments(1) Management policy
The Group makes short-term deposits or uses high-security financial instruments for fund management
purposes. The Group obtains funding for capital expenditure plans mainly through bank loans.
The Group utilizes derivative financial instruments to hedge various risks as described in detail below anddoes not enter derivatives for trading or speculative purposes.
(2) Financial instruments and risks
The notes, accounts receivable and electronically recorded monetary claims are exposed to credit riskof customers. Operating receivables and payables denominated in foreign currencies are exposed to foreign
currency fluctuation risk.
Marketable and investment securities, except for short-term investments, are held for business and capitalalliances with business associates and are exposed to stock market fluctuation risk.
Maturities of notes, accounts payable and electronically recorded obligations are within one year.
Debts are for funding capital expenditure, and their maximum maturities are 2 years and 1 years after thebalance sheet date for the years ended March 31, 2023 and 2024, respectively. Part of the obligations has
floating interest rates and is exposed to interest rate risk.
To hedge the foreign exchange rates fluctuation risk associated with operating receivables and payables
denominated in foreign currencies, forward foreign exchange contracts are used.
Hedge accounting is applied for certain derivative transactions. Please refer to note 2 (o).
(3) Financial instruments risk management
1) Credit risk
To mitigate and quickly capture collectability issues, the Group regularly monitors customers’ credit status,and performs due date controls and balance controls for each customer.
When the Group utilizes derivatives or deposits money and purchases securities for cash management
purposes, to mitigate the counterparty risk, the counterparties to these transactions are financial institutions
with high credit ratings.
2) Market risk
The Group comprehends foreign currency fluctuation risk by currency and by month, and to mitigate therisk, the Group enters a forward exchange contract for hedging the cash flow fluctuation risk associatedwith operating receivables and payables denominated in foreign currencies.
To mitigate the stock market fluctuation risk, the Group regularly monitors stock prices and financial statusof its business associates and continuously considers whether the Group should hold the stock.
Derivative transactions entered by the Group are in accordance with policies and rules that provide for risk
management, approvals, reporting and verifications.
3) Liquidity risk
To mitigate the liquidity risk, the Group prepares and updates its funds management plan on a timely basis
and maintains an appropriate level of liquidity through its cash and cash equivalents and unused committed- 25 -

lines of credit.
(4) Supplemental explanation regarding fair value of financial instruments
Fair value of financial instruments for which quoted market price is not available is calculated based on certain
assumptions, and the fair value may differ if different assumptions are used. In addition, the contract amountof the derivative transactions described below in note 21 DERIVATIVES does not represent the market riskof the derivative transactions.
(5) Concentration of credit risk
At March 31, 2023 and 2024, 22% and 23%, respectively, of operating receivables were receivables from acertain major customer (NEC Corporation).
Fair value of financial instruments
Carrying amount, fair value and its variance between them are as follows:
Millions of yen
Carrying
amountMarch 31, 2023
Assets:Investment securities
Total
Liabilities:
Long-term debt
（Current installments of longterm debt are included.）
Total
Derivative transactions (*)¥

Fair value

3,055
3,055

3,055
3,055

¥

3,202
¥

Variance

¥

3,196

3,202
15

¥
¥

3,196
15

––
––

(5)
¥
¥

(5)
––

(*) Derivative receivables and liabilities are on a net basis.
Millions of yen
Carrying
amountMarch 31, 2024
Assets:Investment securities
Total
Liabilities:
Long-term debt
（Current installments of longterm debt are included.）
Total
Derivative transactions (*)

¥

1,605
1,605

Fair value
1,605
1,605

¥

3,000
¥
¥

3,000
5

Thousands of U.S. dollars

¥

3,000
¥
¥

3,000
5

Carrying
amountVariance
––
––

$

––
¥
¥

––
––

10,60010,600Fair value$

19,813$$

19,81333

10,60010,600

Variance$

19,813$$

19,81333––$$(*) Derivative receivables and liabilities are on a net basis.
(Note 1)
Assets:1) Cash and cash equivalents
2) Notes receivable3) Electronically recorded monetary claims
4) Accounts receivable
Notes are omitted because these instruments are cash and are settled in a short period of time, and theirfair values approximate their carrying amounts.
Liabilities:
1) Notes payable and accounts payable- 26 -

––
––

––
––

2) Electronically recorded obligations
3) Short-term bank loans
Since these instruments are settled in a short period of time, their fair values approximate their carrying
amounts, and thus the notes are omitted.
Derivative transactions:
Please see note 21 DERIVATIVES.
(Note 2) Carrying amount of stocks without market price.

Millions of yen
2023
2024
¥

Unlisted equity securities

1,247 ¥

1,118

Thousands of
U.S. dollars
2024
$

7,383

The above items are not included in "Investment securities."(Note 3) For limited liability investment partnerships, the Company applies the treatment that allows no fairvalue disclosures as such no fair value are presented. In addition, the amount recorded on the
consolidated balance sheet of this investment is as follow:
Thousands ofMillions of yen
U.S. dollars
2023
2024
2024
Limited liability investment partnership¥

3,123 ¥

2,667$

17,614(Note 4) Projected future redemption of monetary claims and securities with maturities on March 31, 2023:
Millions of yen

Due after
one yearthrough fiveyears

Due within
one year

Cash and cash equivalents
Notes receivable
Electronically recordedmonetary claims
Accounts receivable¥

68,549
585

¥

––
––

1,165
¥

88,338
158,639

Due after
five years
through ten
years

¥

––
––

––
––
––

¥

Due after
ten years

¥

––
––
––

¥

––
––
––

¥

––
––

Projected future redemption of monetary claims and securities with maturities on March 31, 2024:
Millions of yen

Due after
one yearthrough fiveyears

Due within
one year

Cash and cash equivalents
Notes receivable
Electronically recordedmonetary claims
Accounts receivable¥

73,507
452

¥

2,025
¥

97,662
173,648––––

Due after
five years
through ten
years

¥

––
¥

- 27 -

––
––

––
––

Due after
ten years

¥

––
¥

––
––

––
––
––

¥

––
––

Thousands of U.S. dollars

Due after
one yearthrough fiveyears

Due within
one year

Cash and cash equivalents
Notes receivable
Electronically recordedmonetary claims
Accounts receivable$

485,483
2,985

$

––
––

13,374645,016$ 1,146,872

Due after
five years
through ten
years

$

––
––

––
––
––

$

Due after
ten years

$

––
––

––
––
––

$

––
––
––

$

(Note 5) The annual maturities of long-term debt and other interest-bearing debt on March 31, 2023:

Due within
one year

Short-term bank loans ¥Long-term debt
(Long-termborrowings
scheduled to berefunded within
one year are
included.)

8,653

Millions of yen

Due after
one yearthrough
two years

¥

202

––

Due after
two years
throughthree years

¥

3,000

––

Due after
three years
throughfour years

¥

––

––

Due after
four years
throughfive years¥––

Due after
five years

¥

––

––

––

Due after
four years
throughfive years

Due after
five years––

The annual maturities of long-term debt and other interest-bearing debt on March 31, 2024:

Due within
one year

Short-term bank loans ¥6,230

Millions of yen

Due after
one yearthrough
two years¥––

Due after
two years
throughthree years¥––

Due after
three years
throughfour years

¥

––

¥

––

¥

––

Long-term debt
(Long-termborrowings
scheduled to berefunded within
one year are
included.)

Short-term bank loans $

3,000

––

Due within
one year

Due after
one yearthrough
two years

41,146

$

––

––

––

Thousands of U.S. dollars
Due after
two years
throughthree years$––

Due after
three years
throughfour years

$

––

$

––

––

Due after
four years
throughfive years

Due after
five years

––

$

––

Long-term debt
(Long-termborrowings
scheduled to berefunded within
one year are
included.)

19,813

––

––

––

––

––

Fair value information of financial instruments by level of inputs
Based on the observability and the significance of the inputs used to determine fair values, fair value
information of financial instruments is presented by categorizing measurements into the following three levels:- 28 -

Level 1 fair value: the fair value measured by quoted prices of identical assets or liabilities in active
markets.
Level 2 fair value: the fair value measured using observable inputs other than Level 1.
Level 3 fair value: fair values measured using unobservable inputs.
When multiple inputs of different categories are used in measuring fair value, the Company and its
subsidiaries classified fair values into a category to which the lowest priority is assigned.
(1) Financial instruments recorded in the consolidated balance sheets at fair value on March 31, 2023:
Fair value (Millions of yen)
Level 2
Level 3

Level 1
Investment securities
available-for-sale securities
Securities
Corporate bonds

¥

¥

2,338
─

─ ¥
717

─
─

15
733 ¥

─
─

Total
¥

2,338
717

Derivative transactions

Currency related
Total

¥

─
2,338

¥

¥

15
3,071

Financial instruments recorded in the consolidated balance sheets at fair value on March 31, 2024:
Fair value (Millions of yen)
Level 2
Level 3

Level 1
Investment securities
available-for-sale securities
Securities
Corporate bonds
Share acquisition rights

¥

¥

1,403
─
─

─
─
─

¥

─
151
50

Total
¥

1,403
151
50

Derivative transactions

Currency related
Total

¥

─
1,403

$

¥

─
201

¥

Fair value (Thousands of U.S. dollars)
Level 2
Level 3

Level 1
Investment securities
Inventories
Securities
Corporate bonds
Share acquisition rights

5
5

¥

9,266
─
─

$

─
─
─

$

─
997
330

$

5
1,610

Total

9,266
997
330

Derivative transactions

Currency related
Total

$

─
9,266

33
33

$

$

─
1,327

$

33
10,633(2) Financial instruments other than financial instruments included in the consolidated balance sheets at fairvalue on March 31, 2023:
Fair value (Millions of yen)
Level 1
Level 2
Level 3Total
Long-term debt
(Long-term borrowings
scheduled to be refundedwithin one year are included.)

Total

¥

─

¥

3,196

¥

─

¥

3,196

¥

─

¥

3,196

¥

─

¥

3,196

- 29 -

Financial instruments other than financial instruments included in the consolidated balance sheets at fair value
on March 31, 2024:
Fair value (Millions of yen)
Level 1
Level 2
Level 3Total
Long-term debt
(Long-term borrowings
scheduled to be refundedwithin one year are included.)

Total

¥

─

¥

3,000

¥

─

¥

3,000

¥

─

¥

3,000

¥

─

¥

3,000

Level 1

Fair value (Thousands of U.S. dollars)
Level 2
Level 3Total

Long-term debt
(Long-term borrowings
scheduled to be refundedwithin one year are included.)

Total

$

─

$

19,813$

─

$

19,813$

─

$

19,813$

─

$

19,813(Note 1) Valuation techniques and inputs used in measuring fair values
Investment securities
Listed stocks are valued using quoted prices and traded in an active market and, therefore, their fair values
are classified as Level 1 fair values.
Convertible bond-type bonds with share acquisition rights and J-KISS type share acquisition rights included
in corporate bonds and share acquisition rights are classified as Level 2 because, when quoted prices areavailable, they are not considered to be quoted prices in active markets. When quoted prices are not available,
the most recent market value is estimated by considering events that affect the value of financial instruments
based on historical transaction prices, and therefore, they are classified as Level 3.
Long-term debt
The fair value of these instruments is calculated using the discounted present value method based on theinterest rate taking into account the sum of principal and interest, the remaining term of the debt and credit
risk, and is classified as Level 2 fair value.
Derivative transactions
The fair value of forward foreign exchange contracts is determined using the discounted present value
method with observable inputs such as exchange rates and is classified as Level 2 fair value.
(Note 2) Information on Level 3 fair values of financial instruments whose carrying amounts are determinedbased on their fair values.
(1) Reconciliation of beginning balance to ending balance, unrealized gains/losses recognized in
profit or loss for the current fiscal year on March 31, 2024:(Millions of yen)
Other securities
Balance at beginning of year¥─Transfer to Level 3 fair value (*1)
50
Purchase and sale
Purchase
149
Current earnings or othercomprehensive income
Recognized in othercomprehensive income (*2)
2Balance at end of year201

- 30 -

(Thousands of U.S. dollars)
Other securities
Balance at beginning of year$─Transfer to Level 3 fair value (*1)
330
Purchase and sale
Purchase
984
Current earnings or othercomprehensive income
Recognized in othercomprehensive income (*2)
13Balance at end of year
1,327(*1) The transfer from Level 2 fair value to Level 3 fair value is due to a lack of observable market data due toa decrease in the frequency of market transactions during the period.
(*2) Included in net unrealized holding gains on available-for-sale securities in "Other comprehensive income"in the consolidated statements of comprehensive income.
(2) Description of the valuation process for market value
Financial instruments classified as Level 3 are measured at fair value in accordance with internal market
value accounting policies and procedures.
The fair value is calculated using the method that most appropriately reflects the nature, characteristics andrisks of individual assets.
21. DERIVATIVESThe Company enters forward exchange contracts with major Japanese banks to manage certain risks arising fromadverse fluctuations in foreign currency exchange rates.
On March 31, 2023 and 2024, the disclosure of fair value information for derivatives are as follows:(1) Derivatives that are not accounted for as hedges
For the year ended March 31, 2023
Millions of yen
Contract amount
Fair Value
Total
Over 1 year

Transaction typeTransactions
out of market

Forward exchange
contract
Order to buy:
Euro
Total

¥
¥

47
47

¥
¥

¥
¥

––
––

0
0

Valuation
gain/loss

¥
¥

0
0

There is no derivative that are not accounted for as hedges to report for the year ended March 31, 2024.
(2) Derivatives that are accounted for as hedges
For the year ended March 31, 2023
Transaction type
Deferral hedge
accounting
for forecasted
transactions
as hedged
item

Forward exchange
contract
Order to buy:
U.S. dollar
Euro
Total

Main
hedgeditem
Foreigncurrency
denomina
ted
forecasted
transactio
nsMillions of yen
Contract amount
Total
Over 1 year

Fair Value

¥

1,356

¥

––

¥

9

¥

237
1,594

¥

––
––

¥

4
14

- 31 -

For the year ended March 31, 2024
Transaction type
Deferral hedge
accounting
for forecasted
transactions
as hedged
item

Forward exchange
contract
Order to buy:
U.S. dollar
Euro

Main
hedgeditem
Foreigncurrency
denomina
ted
forecasted
transactio
ns

Total

Transaction type
Deferral hedge
accounting
for forecasted
transactions
as hedged
item

Forward exchange
contract
Order to buy:
U.S. dollar
Euro

Main
hedgeditem
Foreigncurrency
denomina
ted
forecasted
transactio
ns

Total

Millions of yen
Contract amount
Total
Over 1 year

Fair Value

¥

32

¥

––

¥

1

¥

168
201

¥

––
––

¥

3
5

Thousands of U.S. dollars

Contract amount
Total
Over 1 year

$

211

$

1,109
1,327

$

––

$

––
––

Fair Value

$

6

$

19
33

22. RELATED PARTY TRANSACTIONS(1) The Company’s balances with related parties and related transactions
NEC Corporation owned 51.41% and 51.40% of the Company’s outstanding common stock as of March 31,
2023 and 2024, respectively.
Balances with NEC Corporation on March 31, 2023 and 2024, and related transactions for the years then ended
are summarized as follows:

Transactions
Construction and maintenance of network
system:Transactions:
Sales
Balances:
Accounts receivable
Contract assets
Contract liabilities¥

Purchases of communication device:Transactions:Purchases
Balances:
Accounts payable
Advance payments

Millions of yen
2023
2024

Thousands of
U.S. dollars
2024

65,705$¥73,321

484,254

18,224
5,171
1,218

21,932
2,022
1,163

144,851
13,354
7,681

44,76847,848316,016

9,755
779

13,729855

90,674
5,646

23. SEGMENT INFORMATIONThe reported segments of the Company are the business units for which the Company can obtain respective
financial information separately for the Board of Directors to conduct periodic investigation to determine the
distribution of management resources and evaluate their business results.
- 32 -

The “DX Solutions Business,” “Network Solutions Business” and “Environmental & Social Solutions Business”
are the Company’s reportable segments. The Company combines business segments which have similar
economic characteristics into these reportable segments. The business segments are based on the operation
headquarters by service lines, which are the units used for internal reporting for performance management.
The DX Solutions Business mainly renders system integration related to ICT platform and outsourcing/cloudservices for business of enterprises and other customers and provision of solutions/services that are helpful forcustomers’ business transformation by using cutting-edge/digital technologies, and contact center services.
The Network Solutions Business mainly renders a business primarily aimed at telecom carriers as well as social
infrastructure operators for space, marine or broadcasting, etc., that require specialized technologies, involving
the provision of system integration and services related to highly public network infrastructure that requires
reliability, as well as the development/manufacture and sales of network equipment.
The Environmental & Social Solutions Business mainly renders a business primarily aimed at construction forproviders of social and public services, companywide service infrastructure, which includes the maintenanceand operation of various ICT systems and services provided by NESIC, and the provision of support services
including technical services utilizing that infrastructure, in addition to the construction of network infrastructureby the Group's local subsidiaries overseas.
Segment sales, income, assets, and others are calculated by accounting methods like those employed to prepare
the accompanying consolidated financial statements.
The reported segment information for the Company and its consolidated subsidiaries for the years ended
March 31, 2023 and 2024 is summarized as follows:
Millions of yen
March 31, 2023

DX
Solutions

Network
Solutions

Environmental& Social
Solutions

OthersAdjustments

¥

¥
¥

8,099
––
8,099

¥

¥

119,241––
119,241

Sales:(1) Sales to third parties(2) Intersegment sales
Total¥ 114,244¥––¥ 114,244¥

79,217––
79,217

Segment income¥ 13,210

¥

9,756

¥

10,683¥

Segment assets¥ 51,215¥

40,298¥79,029

¥

¥

421

¥

499

Others:Depreciation andamortization
Purchases ofproperty andequipment, andintangible assets
Investment to entities
accounted for using
equity method

1,424

Total

––
––
––

¥
¥

320,802––
320,802302¥ (11,202)¥

22,751¥

2,610¥ 93,845¥

267,000

¥

37

¥

¥

4,170

¥

1,787

1,529

416

2,209

72

1,213

5,441

291

––

––

––

––

291

- 33 -

Millions of yen

March 31, 2024

DX
Solutions

Environmental& Social
Solutions

OthersAdjustments

¥

¥
¥

9,545
––
9,545

¥

¥

137,161––
137,161

Network
Solutions

Total

Sales:(1) Sales to third parties(2) Intersegment sales
Total¥ 129,710¥––¥ 129,710¥

83,088––83,088Segment income¥ 15,669

¥

9,387

¥

12,609¥Segment assets¥ 57,040¥

44,058¥81,429

¥

¥

490

¥

731

1,896

729 ¥

642

69

1,338

4,676

296

––

––

––

––

296

Others:Depreciation andamortization
Purchases of property
and equipment, andintangible assets
Investment to entities
accounted for using
equity method

March 31, 2024
Sales:(1) Sales to third parties(2) Intersegment sales
Total

1,352

DX
Solutions$$

856,680––
856,680$548,761––548,761

Segment income$

103,487$

Segment assets$

376,725$

8,929

Others:Depreciation andamortization
Purchases ofproperty andequipment, andintangible assets
Investment to entities
accounted for using
equity method$

Network
Solutions

––
––
––

¥
¥

359,505––
359,505249¥ (12,795)¥

25,120¥3,335¥ 99,032¥

284,897

¥

41

¥

¥

3,727

¥

1,111

Thousands of U.S. dollars
Environmental& Social
Solutions
OthersAdjustments

$

$

$

$

905,891––
905,891$

63,040––63,04061,997$

83,277$1,644$ (84,505)$$

290,984$

537,804$

22,026$ 654,065$ 1,881,626

$

3,236

$

4,827

$

270

$

$

$

––
––
––

Total

7,337

$ 2,374,380––$ 2,374,380
165,90724,615

12,522

4,814

4,240

455

8,836

30,883

1,954

––

––

––

––

1,954

(Note)
1. "Others" includes purchases of information and telecommunications equipment, etc., which are notincluded in the reportable segment.
2. “Adjustments” of ¥ 11,202 million and ¥ 12,795 million ($84,505 thousand) in segment income for theyears ended March 31, 2023 and 2024, respectively, are mainly personnel and other expenses in theadministrative department.
3. “Adjustments” of ¥ 93,845 million and ¥ 99,032 million ($654,065 thousand) in segment assets on March
31, 2023 and 2024, respectively, mainly consist of surplus funds (cash and deposits), land, long-term
deposits and assets related to the administrative operations of the parent company.
4. Segment income is adjusted with operating income in the consolidated statements of income.
5. “Purchases of property and equipment, and intangible assets” for the years ended March 31, 2023 and 2024
include long-term prepaid expenses.
Related information
Related segment information for the years ended March 31, 2023 and 2024 are as follows:(1) Information by products and services
Please refer to the reported segment information.
(2) Geographical information- 34 -

1) Sales
Disclosures are omitted because sales to Japanese customers are over 90% of sales in the consolidated
statements of income.
2) Property and equipment
Disclosures are omitted because property and equipment located in Japan are over 90% of property andequipment in the consolidated balance sheets.
(3) Information by major customers

Customer name:
NEC Corporation
Sales

Millions of yen
2023
2024

Thousands of
U.S. dollars
2024

70,597$¥¥

77,708513,228

The above sales are related to the “DX Solutions Business”, “Network Solutions Business” and“Environmental & Social Solutions Business”.
Information of impairment loss on fixed assets by reported segments for the years ended March 31,
2023 and 2024
There are no amounts to report.
Information of amortization of goodwill and balances of goodwill by reported segments as of and forthe years ended March 31, 2023 and 2024
Millions of yen
March 31, 2023
Amortization of goodwill

DX
Solutions

Network
Solutions

Environmental& Social
Solutions

OthersAdjustments

¥

¥ 224
120

¥

¥

¥

Balances of goodwill

10
33

––
––

––
––

––
––

Total

¥

235
153

Millions of yen
March 31, 2024

DX
Solutions

Network
Solutions

Environmental& Social
Solutions

Amortization of goodwill

¥

¥

¥

Balances of goodwill

7
25

60
60

––
––

OthersAdjustments

¥

¥

––
––

––
––

Total

¥

67
85

Thousands of U.S. dollars

March 31, 2024

DX
Solutions

Network
Solutions

Environmental& Social
Solutions

Amortization of goodwill

$

$

$

Balances of goodwill

46
165

396
396

––
––

OthersAdjustments

$

$

––
––

––
––

Total

$

442
561

Negative goodwill incurred by reported segments for the years ended March 31, 2023 and 2024
There are no amounts to report.
24. REVENUE RECOGNITION(i).Information that decomposes revenues arising from contracts with customers
The Group's reportable segments are the DX Solutions Business, the Network Solutions Business, and theEnvironmental and Social Solutions Business.
The Group's revenue is broken down and recognized into two types: "Service delivery contracts (including- 35 -

outsourcing and maintenance)" and "System integration and construction contracts."
The relationship between revenues broken down by type of goods or services and the Group's reportablesegments is as follows:
Millions of yen
March 31, 2023
Service delivery
contracts (including
outsourcing andmaintenance)
System Integration andConstruction
Contracts
Total

DX
Solutions¥60,648

Network
Solutions¥

53,596¥114,244

28,149Environmental &Social Solutions

Others¥¥

51,067¥

79,217

¥

Total

––

¥ 119,825

88,2138,099

200,977

119,241¥ 8,099¥ 320,802

31,027(Note) 1.

"Others" is a business segment that is not included in reportable segments and includes the purchaseand sale of information and telecommunications equipment.
2. In service delivery contracts including outsourcing and maintenance, the revenues are recognizedprimarily over a certain period in each segment.
3. Of system integration and construction contracts, the ratio of revenues recognized over a certain periodof time is approximately 30% in the DX Solutions Business, approximately 30% in the Network
Solutions Business and approximately 60% in the Environmental and Social Solutions Business.
Millions of yen

March 31, 2024
Service delivery
contracts (including
outsourcing andmaintenance)
System Integration andConstruction
Contracts
Total

DX
Solutions¥

61,748

Network
Solutions¥

67,962¥

129,710

21,417

Environmental &Social Solutions

Others¥¥––¥ 114,477

105,849

9,545

245,027

137,161¥ 9,545¥ 359,505

Environmental &Social Solutions

Others

Total

$

$

61,670¥83,088Total¥

31,311Thousands of U.S. dollars
March 31, 2024
Service delivery
contracts (including
outsourcing andmaintenance)
System Integration andConstruction
Contracts
Total

DX
Solutions$

407,819

Network
Solutions$

448,860$

856,680

141,450

407,304$

548,761$

206,796––$756,072

699,088

63,0401,618,301

905,891$ 63,040$ 2,374,380(Note) 1.

"Others" is a business segment that is not included in reportable segments and includes the purchaseand sale of information and telecommunications equipment.
2. In service delivery contracts including outsourcing and maintenance, the revenues are recognizedprimarily over a certain period in each segment.
3. Of system integration and construction contracts, the ratio of revenues recognized over a certain periodof time is approximately 40% in the DX Solutions Business, approximately 30% in the Network
Solutions Business and approximately 60% in the Environmental and Social Solutions Business.

(ii).Underlying information to understand the revenues from contracts with customers(1)Information on Contracts and Performance Obligations- 36 -

(Contracts with Customers)
The Group recognizes revenue from contracts with customers involved in system integration, development
and construction, the provision of services and the sale of products. For these contracts, multiple contracts
concluded with the same customer at the same time or at nearly the same time shall be judged to be necessary
for the combination of contracts, and contracts deemed to be necessary for the combination shall be treated asa single contract.
(Identification of Separate Performance Obligations in Contracts with Customers)
The Group accounts separately if the goods or services promised in the contract with the customer are
separate, i.e., if the customer is able to benefit alone or in combination with other resources readily available
to the customer from the goods or services and if the goods or services can be distinguished separately fromother promises contained in the contract, identifying them as separate performance obligations.
(2)Information on the calculation of transaction prices
In calculating the transaction price, the Group measures the price in the amount of consideration that theenterprise expects to be entitled to in exchange for goods or services promised to customers.
(3)Information concerning the calculation of the amount to be distributed to the performance obligation
The Group allocates the transaction prices to their respective performance obligations to depict the amountof consideration that the Group expects to be entitled to transfer and exchange promised goods or services tocustomers. In order to allocate the transaction price to each performance obligation in proportion to the
independent sales price, the independent sales price at the commencement of the contract for the separate goods
or services on which each performance obligation under the contract is based is calculated, and the transaction
price is allocated in proportion to the independent sales price. If the independent sales price is not directly
observable, the independent sales price is estimated.
(4)Information on the time of fulfillment of the obligation
The Group recognizes revenue when the performance obligations is fulfilled by transferring promised goods
or services to customers or as the performance obligations is fulfilled over a period of time. The case that
control over goods or services is transferred and its performance obligation is fulfilled for a period of time is
to: 1) the customer enjoys the benefit as the Group fulfills its obligations in the contract with customer; 2) the
asset arises or the value of the asset increases by fulfilling the obligation in the contract with customer, and as
the asset arises or the value of the asset increases, the customer takes control of the asset; or 3) as a result offulfilling the obligation in the contract with customer, the asset that cannot be diverted to another use arises
and the Group has a compelling right to receive the consideration for the fulfilled part of its performanceobligations in the contract with customer. For these transactions, the performance obligations are to be fulfilled
for a period of time, and the revenue is accordingly recognized over a period of time.
In other cases, revenue is recognized at a point in time when control over the assets is determined to havebeen transferred to the customer.
In the case of recognizing revenue over a period of time, the Group measures the degree of progress to portraythe performance in transferring control over promised goods or services to customers. Revenue is recognizedbased on the degree of progress for those for which a reasonable estimate of progress can be made, and if areasonable estimate of progress cannot be made, revenue is recognized based on a cost recovery basis to theextent of the costs incurred.
The method for estimating the progress of fulfilling the performance obligations is the input method basedon the incurred cost.
(iii).Information on the relationship between the fulfillment of performance obligations under contracts withcustomers and the cash flow arising from such contracts and the amount and timing of revenue expected to berecognized in the following consolidated fiscal year and thereafter from contracts with customers existing at
the end of the current consolidated fiscal year
(1)Balance of Contract Assets and Contract Liabilities
Contract assets are the rights of the enterprise to the consideration received in exchange for goods orservices transferred by the enterprise to its customers, and contract liabilities are mainly advances received
from customers in construction contracts.
The revenue amounts recognized for the years ended March 31, 2023 and 2024 that were included in the- 37 -

beginning balance of contract liabilities are ¥5,304 million and ¥5,416 million ($35,770 thousand),
respectively.
(2)Transaction price allocated to the remaining performance obligations
The total amount of the transaction price allocated to the remaining performance obligations and theestimated period of recognition of revenue are as follows.

Due within one year
Due after one year

¥

Total

¥

Millions of yen
2023
2024
157,421¥
170,972
43,792
47,982201,213
218,954¥

25. SUBSEQUENT EVENTS
There are no subsequent events to be disclosed.

- 38 -

Thousands of U.S.
dollars2024$
1,129,198
316,901
1,446,099$

Independent auditor’s report
To the Board of Directors of NEC Networks & System Integration Corporation:
Report on the Audit of the Consolidated Financial Statements
OpinionWe have audited the accompanying consolidated financial statements of NEC Networks & System
Integration Corporation (“the Company”) and its consolidated subsidiaries (collectively referred to as“the Group”), which comprise the consolidated balance sheets as at March 31, 2024 and 2023, theconsolidated statements of income, statements of comprehensive income, statements of changes in net
assets and statements of cash flows for the years then ended, and notes, comprising a summary ofsignificant 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, 2024 and 2023, 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.
Reasonableness of the Group’s estimate of total costs in recognizing revenue from construction
work for which the performance obligations are fulfilled over a certain period
The key audit matter

How the matter was addressed in our audit

In the consolidated statements of income, theGroup recognized net sales of ¥359,505
million, which included net sales of ¥102,930

The primary procedures we performed to assess thereasonableness of the Group’s estimate of total costs inrecognizing revenue from construction work for whichmillion from construction work for which theperformance obligations were fulfilled over acertain period.
As described in Note 2, “SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES,(t) Significant accounting estimates, 1.
Recognition of revenue from construction
work for which the performance obligations
are fulfilled over a certain period” to theconsolidated financial statements, the Group
recognizes revenue from construction workover a certain period of time based on the
progress in fulfilling performance obligations
estimated as a percentage of total costs
incurred to date over the estimated total
construction costs (the input method).
Therefore, the Group needs to reasonably
estimate total costs when receiving an orderand to change the estimated total costs in atimely and appropriate manner according to
the changes in assumptions subsequent to thestart of construction.
The estimate of total costs includes
assumptions about work details and work
hours. In a construction project, theassumptions about work details and work
hours may be changed due to facts foundsubsequent to the start of construction andchanges in site conditions, and therefore theestimate of total costs involves uncertainty.
Especially an estimate of total costs for a
project with a large contract amount may
involve a high degree of uncertainty due toits characteristics about the size andconstruction period.
We, therefore, determined that ourassessment of the reasonableness of theGroup’s estimate of total costs in recognizing
revenue from construction work for which
the performance obligations are fulfilled overa certain period was of most significance in
our audit of the consolidated financial
statements for the current fiscal year, andaccordingly, a key audit matter.

the performance obligations are fulfilled over a certain
period included the following:(1) Internal control testing
We tested the design and operating effectiveness ofcertain of the Group’s internal controls relevant to theprocess of estimating total costs of a project. In thisassessment, we focused our testing on the following:・ controls to ensure compliance with the internal
rules for estimating total costs about how toaccumulate work hours of each activity, what
information to be used and how to reflect the riskof any uncertainties; and・ controls to verify that any changes incircumstances that occur subsequent to the start ofconstruction are reflected within the estimatedtotal construction costs in a timely and appropriatemanner.
(2) Assessment of the reasonableness of the estimatedtotal costs
In order to assess the reasonableness of the Group’s
estimate of total costs, for projects that had a large
contract amount, we:・ inquired of an appropriate responsible person
regarding the degree of consideration about
uncertainty in estimating total costs of a project inorder to select significant assumptions withuncertainty, and inspected the related meeting
materials;
・ inquired of an appropriate responsible person
regarding the basis of the selected significant
assumptions with uncertainty after considering theresults of the above procedures, and assessed theappropriateness of the assumptions based on the
results of inspection of the related documents thatserved as the basis of the assumptions; and・ performed a comparative analysis of thepercentage of progress toward completion of theconstruction and the percentage of costs incurredagainst the estimated total construction costs at theend of the fiscal year in order to assess theappropriateness of the Group’s judgment as towhether the total costs should be revised;
regarding the projects for which the difference
between these two percentages was significant,inquired of an appropriate responsible person as towhether there was any revised construction workthat required the revision of total costs; andinspected the minutes of the project status
meetings and the construction timeline that served
as the basis for the Group’s responses to ourinquiries.

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 and using the going concern basis ofaccounting unless management either intends to liquidate the Group or to cease operations, or has no
realistic alternative but to do so.
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 toinfluence 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, actions taken to eliminate threats or safeguards applied.
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.
Fee-related Information
Fees paid or payable to our firm and to other firms within the same network as our firm for audit andnon-audit services provided to the Company and its subsidiaries for the current year are 173 million yen
and 21 million yen, respectively.
Convenience Translation
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year
ended March 31, 2024 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 3 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.
/S/ Naoki Matsumoto
Designated Engagement Partner
Certified Public Accountant/S/ Tomoaki Murakami
Designated Engagement Partner
Certified Public Accountant
KPMG AZSA LLC
Tokyo Office, Japan
June 24, 2024
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.