Annual Report 2013
Year Ended March 31, 2013

NEC Networks & System Integration Corporation

NEC Networks & System Integration Corporation

ProfileGrowing with evolving communications,
NEC Networks & System Integration Corporation
will celebrate its 60th anniversary.
Since its establishment in 1953, NEC Networks andSystem Integration Corporation (NESIC) has expanded
its businesses from the installation of telecommunications
infrastructure to the SI and maintenance of office networks
and the service businesses, including the operation of
network systems and outsourcing. NESIC offers uniqueservices, including EmpoweredOffice, an office innovation
solution, taking advantage of its ability to provide a broad
range of ICT related services, from system integration to

installation and other services for diverse customers in an
integrated manner.
Leveraging the strengths it has developed over 60
years, NESIC aims to grow by revitalizing its customers’communications and adding new value. This is the 30th year
since the Company first listed its shares. We aim to enhance
our enterprise value to become the top brand in the industry
and increase the satisfaction of all stakeholders as an entitythat contributes to society in various ways.

Sales¥ 10 bn
1973
Founded in 1953

Crossbar switchingequipment
First construction of
TV broadcasting systems

1953

Construction ofbroadcast automation
systems for NHK

The Kashima Branchof the Radio ResearchLaboratory of the former
Ministry of Posts andCommunications

Nippon Electric Installation
Company founded

1950

1960

Age ofsupporting the baseof telecommunications

Age ofsupporting global
communications

Nippon Electric Installation Company
founded (1953)

Full-scale development of international communications
and satellite communications• Starting with the installation of switching,broadcasting, and radio systems• Building communications infrastructure worldwide• Contributing to the creation ofcommunications infrastructure in the
postwar years of recovery

1970• Expanding the installation of broadcasting systems,
submarine cables, and radio communication systems(satellite communications, microwave communications)

Construction of satellite
communication systems
in Switzerland

NEC Networks & System Integration Corporation

Contents
Financial Highlights

2

Interview with the President

3

Topics6

Priority businesses in the medium-term plan

7

Business performance by segment

8

Corporate Governance10

Corporate Social Responsibility (CSR)

13

Directors and Corporate Auditors

14

Six-Year Summary of Selected Financial Data

15

Consolidated Financial Statements

16

Global Network & Investor Information

48

Construction ofmobile base stations

¥

Sales
100 bn

¥

1988

1996

Cautionary Statement with Respect to
Forward-Looking Statements
This annual report contains forward-looking statements
concerning NEC Networks & System Integration
Corporation and its consolidated subsidiaries’ current plans,
projections, strategies and performance. These forwardlooking statements are not historical facts. Rather, they
represent the assumptions and beliefs of the company
management based on information currently available. The
company therefore wishes to caution readers that actual
results may differ materially from expectations, and thatforward-looking statements are subject to a number of risks
or uncertainties.

Sales
200 bn¥Sales
235.7bn2013
A corporate message
announced as theCompany celebrates
its 60th anniversary:“Re-designing yourCommunication”

2011
Industry classification on theTokyo Stock Exchangechanged from Construction to
Information & Communication

2010

Integrating intra-office
voice network systems

1983
Listed on the Tokyo Stock
Exchange Second Section

The head office relocated to Iidabashi
Submarine cables /Submarine seismometersystems

1980

1992

The company name changed to
NEC System Integration & Construction, Ltd.

Listed on the Tokyo Stock
Exchange First Section

1980

Acquired NEC Telenetworks Co., Ltd. merged

2005
The company name changed to
NEC Networks & System Integration Corporation

2000

Now

Age ofresponding to the diversificationof communications

Age ofcreating value
in communications

Age ofdesigning new communications
creating new value

Liberalization of telecommunications,the rise of New Common Carriers

Developing IP and broadband networks• Accelerating the expansion of“EmpoweredOffice”• Expanding business for NCCs and thebuilding of mobile communications networks• Responding to the digitizationof terrestrial broadcasting andcommunity informatization• Expanding system integration
business for companies

1990

2006

• The solution business expanding

Starting “EmpoweredOffice” (2007)• Concept for changing ways ofworking and communication,using ICT and office facility• Promoting measures toenhancing service businesses• Promoting the digitization offire-fighting and disasterprevention networks, speeding up
mobile networks

Annual Report 20131

NEC Networks & System Integration Corporation

Financial Highlights
Key points of the resultsof the fiscal year under review
1 Both orders and net sales rose in all segments.
2 Income at all levels reached record highs.
3 Shareholder return expanded, as NESIC strengthened its earnings power.

Net sales¥235.7 billion

Operating income¥12.5 billion

15.2% increase year on year

215.4
¥ billions

Net income¥7.5 billion

28.1% increase year on year

241.3

245.0

¥ billions¥ billions

63.1% increase year on year
60
45

53.5
51.2
%
%

2012/3

2013/3

2014/3(Forecast)(Forecast)

Orders¥241.3 billion

Owner’s equity ratio
51.2%

12.0% increase year on year

204.7

2.3 points decrease from the endof the previous fiscal year

235.7

240.0

¥ billions¥ billions¥ billions

2012/3

March 2013
(Forecast)March 2012

204.7

235.7

240.0

¥ billions¥ billions¥ billions

2013/3

2014/3(Forecast)

2012/3¥28¥

2012/3

2013/3

Annual Report 20132014/3(Forecast)(Forecast)

Annual dividends¥45 per share¥17 increase year on year

204.7

235.7

240.0

¥ billions¥ billions¥ billions

2013/3

2014/3(Forecast)

2012/3

2013/3

Forecast figures are based on data as of April 26, 2013.
For the latest Company news and IR information, please use its website. (http://www.nesic.co.jp/english/index.html)

2¥

2014/3(Forecast)NEC Networks & System Integration Corporation

Interview with the President
NESIC’s corporate message:
Re-designing Your Communication
NESIC has adopted a corporate message. We aim to facilitate active communications in society.
The message expresses our determination to enhance value for our customers and to help
enrich society not only by building secure, safe and reliable networks but also by designing futurecommunications from customers’ perspectives.
Q What were the results for the fiscal
year under review (from April 1, 2012
to March 31, 2013)?
A We achieved record operating income
and net income.
Orders, net sales and income all exceeded our forecasts.
Orders rose 12% year on year, to ¥241.3 billion. Net
sales increased sharply, 15% year on year, to ¥235.7 yen.
Operating income and net income reached record highs,
at ¥12.5 billion and ¥7.5 billion, respectively.
In the Enterprises Networks business, we bolstered
our sales force and focused on customers’ needs tostrengthen their management, which produced results.
In the Carrier Networks business, we responded
to telecommunications carriers’ strengthening their
networks associated with rapidly increasing numbers ofsmartphone users. We integrated submarine seismometersystems based on submarine cable communications
systems, and this significantly boosted sales.
In the Social Infrastructure business, sales increased
primarily in association with the digitization of fire andemergency radio and the installation of base stations formobile networks for new frequency bands.

Masao Wada
President

Q Could you tell us your forecast for
the next fiscal year?
A We will steadily expand sales
and profits.
We will celebrate our 60th anniversary in December thisyear. In the first year for new growth, we aim to expand
sales and profits to achieve net sales of ¥240 billion,
operating income of ¥13 billion, and net income of ¥7.8
billion.
Annual Report 2013

3

NESIC has been actively investing in growth. We havealso pursued alliances and acquisitions. In the fiscal year
under review, we formed a business alliance with MOSHI
MOSHI HOTLINE, Inc. for outsourcing routine
administrative operations, such as administration, personnel
affairs and accounting. We have also formed a capitalalliance with Q&A Corporation, which excels in the contact
center business in the technical support field. We havedecided to integrate the mobile communication base station
business of NEC Mobiling, Ltd. Our plan is to steadily
expand sales and profits through these growth investments.

per share of ¥60 for next fiscal year. These figures reflect
our gratitude to our shareholders as we celebrate our 60th
anniversary, but the increase differs from a commemorative
dividend. We will bolster our earnings power to meet ourshareholders’ expectations in terms of returns.

Q You have increased dividends
significantly.

On May 9 we announced our medium-term plan for theperiod up to the fiscal year ending March 31, 2016.
We aim to achieve growth both in sales and profits andto record net sales of ¥260 billion and an operating marginof 6% in the fiscal syear ending March 31, 2016. As for
ROE, an index that shows how capital from shareholders
generates profits, we aim to achieve 10%. As a listedcompany, we will seek to enhance our shareholder value.
Our strength is that compared to our competitors wehave an operating base covering a broader range of fields,
including installation/construction, ICT technologies,

A We will meet our shareholders’ expectations
by increasing our earnings strength.
With net income exceeding expectations, we will distributea year-end dividend of ¥26 per share, which will make theannual dividend per share ¥45, an increase of ¥17 year on year.
With our earnings power increasing, we plan to pay aninterim dividend per share of ¥30 and an annual dividend

Q Could you describe the medium-termbusiness plan?
A We aim to achieve growth, while shifting
our focus to service businesses.

Targets for FY2015 (ending March 31, 2016)
Net sales: ¥260 billion | Operating margin: 6% | ROE: 10%

Medium-term management policy
Expanding new businesses and service businesses | Strengthening a common operating base that supports businesses

Clients• Enterprises• Government Offices,
local governments• Social Infrastructure
Business• Overseas Vendors• Overseas Carriers

Integrated proposals and sales for each customer

Strategic
investments

Using and strengthening a common operating base

• Development of
new businesses• Alliances withother companies

Base for
Installation

4• Carriers

Annual Report 2013

Base forICT Technologies

Base for
Supportand support services. Our basic policy is to achieve
growth by making strategic investments, seizing market
opportunities through full, integrated use of thisoperating base, and changing our business structure tofocus more on service businesses.
In the medium term, the market for conventional
system integration and maintenance focused on
hardware is unclear or is expected to decline overall.
Meanwhile, some infrastructure markets are set to
expand. Service businesses using ICT (information andcommunications technology) should grow sharply.
Given these market conditions, we have developed
the following policies in line with ourstrategy map.

3 In overseas operations, we will expand our support
to our domestic customers expanding into Asianmarkets and our existing infrastructure businessthrough our overseas subsidiaries and affiliates, basedon good relations with our customers.
4 We aim to expand high value-added service
businesses to achieve stable growth over the medium
to long terms.
We will seek to achieve growth, focusing on
EmpoweredOffice, which promotes workingstyle innovation in offices through the contact
center-related services and an ICT renewal, in theEnterprises Networks business and on the technicaloutsourcing business, including multi-vendor
services, in the Carrier Networks business.

1 In our conventional businesses, we will enhance ourstrong relations with customers to promote these
operations.
2 In the Social Infrastructure business, we will focus
on infrastructures for fire-fighting and disasterprevention systems and mobile communications basestations, which are expected to grow in the medium
term. We will seek to expand market share, while
enhancing price competitiveness.

Following our 60th anniversary, we will strive to achieve
the medium-term plan to realize our dream of becoming
the top brand in the industry and will enhance ourenterprise value through the growth of our businesses,organization and each employee. As we pursue this goal,
we hope that we can count on the continued supportand expectations of our stakeholders.

Digitization of fire-fighting
and disaster prevention
systems

Market’s growth potential

Mobilecommunications

Social Infrastructure Service
Business
Fire-fighting and disasterprevention services

From construction
to services

Overseas
Business
Overseas

Data centers,
cloud computing

Multi-vendor
services
Operation,
outsourcing

EmpoweredOffice Technical Outsourcing
Business
BusinessStrengthening
and expansion

The Company’s
main service
bases

Services in collaboration
with carriersContact center
business
ICT
renewalExHigh

Infrastructure
Businesspan
Bu Se dinsin rvic ges esPriority business fields (strategy map)

nTOC
Network Total Operation
CenterNetwork
Construction
PBX
Communication
Equipment
Installation

Conventional
Business

MaintenanceDeepening

pDOC
Parts Delivery Operation
Center

The business model shifting from “flow” to “services”

Annual Report 20135

NEC Networks & System Integration Corporation

TopicsAn initiative to bolster the
EmpoweredOffice business
Making Q&A Corporation a consolidated
subsidiary

An initiative to strengthen theinfrastructure business
Integrating the mobile communication basestation business of NEC Mobiling, Ltd.

Expanding service businessTo strengthen its contact center business, NESIC strengthened
its capital alliance with Q&A Corporation and made Q&A
Corporation a consolidated subsidiary on June 7, 2013. On
the same day, NESIC made Daiichi Ad System Co., Ltd., its
subsidiary, a consolidated subsidiary of Q&A Corporation to
expand new services led by Q&A Corporation.

Enhancing NESIC’s ability to provide a broad range ofservices, from the design of base stations distribution
to their installation and maintenance in an integrated
manner.
On April 1, 2013, NESIC consolidated the mobile
communication base station business of NEC Mobiling,
Ltd. into its mobile communication base station business.
In response to increasing communications traffic
associated with rapidly increasing diffusion rates ofsmartphones, carriers are striving to enhance their mobile
communications networks, for example by introducing the
LTE system, a new mobile communications technology.
On April 1, NESIC integrated the base station businessof NEC Mobiling, Ltd. With this integration, NESIC
can provide services covering the whole process related
to base station installation, including, in addition to basestation construction work, where NESIC has been strong,
front-end services, such as research for and the design ofthe effective distribution of base stations, and maintenanceservices, where NEC Mobiling has exelled.
NESIC can now provide a range of services related
to mobile communications base stations in an integrated
manner and can make optimal comprehensive proposals
involving a backbone communications network.
With this enhanced business structure, NESIC will
expand its business, more actively responding to carriers’
needs for strengthening their networks.

Three objectives of the reinforcement of the capital alliance:
1. Strengthening and streamlining the contact center
service infrastructure
NESIC will integrate the contact center systems of Q&A
Corporation and Daiichi Ad System into NESIC’s contact
center infrastructure and will streamline the infrastructure
significantly. NESIC will provide the infrastructure tocontact center service providers as a common service base,using cloud computing systems.
2. Providing new services, making full use of the operatingbase of each company
NESIC will create and provide new services by combining
ICT systems and services for companies and public offices,where NESIC excels, and Q&A Corporation’s ability toprovide services for individual customers.
3. Expanding high value-added contact center service
businesses
We will expand high value-added contact center service
businesses, for example by extending to Daiichi Ad
System’s customers value-added services that Q&A
Corporation has provided to its corporate customers.
NESIC will provide competitive contact center infrastructureand high value-added contact center services and will achieve
medium- to long-term growth, taking advantage of synergies
between the two lines of services.
Q&A Corporation
Representative: Yuichi Kanagawa, President
Head office:Shibuya, Tokyo
Employees:
1,199
Capital:897.4 million yen
Q&A Corporation provides on-site support services and contact
center services that offer technical support to deal with failures,
troubles and the way to use digital products by visiting customers
or by telephone or e-mail.

6

Annual Report 2013

Base Station Establishment
Process

Former NEC
Mobiling, Ltd.

Establishing a one-stop service systemthrough the business integration.

System design
Area design(Distribution ofbase stations)

Engineering Solutions
Overall planningof optimal system

NEC Networks & System Integration Corporation

Priority businesses in the medium-term plan
EmpoweredOffice business
Main segment: Enterprises Networks business

Infrastructure business
Main segment: Social Infrastructure business

Expanding the market of EmpoweredOffice• Expanding the market to include local governments,
hospitals, and public facilities in addition to companies;
developing overseas operations
Expanding service businesses• Enhancing competitiveness by leveraging andstrengthening a common operating base
• Expanding value-adding services in collaboration with
Daiichi Ad System Co., Ltd. and Q&A Corporation

Fire-fighting and disaster prevention business• Expanding orders in cooperation with NEC Group
companies• Enhancing our ability to complete projects throughstructural changes

EmpoweredOffice Center

Technical outsourcing business
Main segment: Carrier Networks business

Overseas business

Leveraging NESIC’s operating base and expanding
technical services, including acceptance inspectionsof IT and network equipment, configuration, logistics
and maintenance• Deepening and expanding the carrier market• Developing new service fields• Expanding services for companies

nTOC
Network Total Operation Center

pDOC
Parts Delivery Operation Center

NEC Networks & System
Integration Corporation

Former NEC
Mobiling, Ltd.

Construction
planning

Equipment
testing

Base station
construction

Planning and Construction
Quality, safety andschedule control

Mobile business• Making the most of synergies through the integration ofpart of the business of NEC Mobiling, Ltd.
• Increasing the earnings strength by promoting costreforms• Promoting self-manufacture and acceleratingprocess reform and standardization

Expanding the JOC (Japan Originated Companies)business (support of overseas operations ofdomestic customers)• Expanding the EmpoweredOffice business into Asia
• Leveraging the NEC Group’s assets
Expanding the infrastructure business, taking
advantage of relations with local customers• Building mobile communications infrastructure in
Thailand• Constructing communications systems at oil plantfacilities in Saudi Arabia

Testing forsystemoptimization

Engineering Solutions
System optimization

Systemmaintenanceand repair
services

Maintenance andRepair Services
Responding tousers’ needs
in collaboration
with carriers

Annual Report 20137

NEC Networks & System Integration Corporation

Business performance by segment
Our three core businesses

This business provides ICT solutions primarily forcompanies.
We provide EmpoweredOffice, an office innovation solution
for improving productivity and efficiency and saving energy
in offices. We also operate and monitor systems related to
EmpoweredOffice and provide cloud computing services
using our data centers.
We expanded comprehensive services to help customers
improve business processes and management, focusing
on EmpoweredOffice, an office innovation solution, andproviding other services including cloud computing services
and BPO services. The results of these initiatives were thatnet sales rose 5.7% year on year, and orders increased 8.8%
year on year.

8

Annual Report 2013

6.2%

Enterprises Networks
business

Sales by Segment
Net

Other

NESIC provides a range of services fromplanning to system design, maintenance, andoperation in an integrated manner in a variety
of fields ranging from ICT within companies topublic and social infrastructure. NESIC has threecore businesses: the Enterprises Networks
business, Carrier Networks business, and Social
Infrastructure business.
We will help a range of customers enhancetheir value, harnessing our ability to makeproposals from customers’ perspectives and ourexpertise and technological capabilities for all
sorts of networks.

SocialInfrastructure
34.4%

Enterprises
Networks
36.2%

Carrier
Networks
23.2%

2013*

billions

88.0

Net Sales¥85.3 billion

2012billions

85.3

5.7% increase year on year

2011

billions

80.7

Sales Trends

Forecast

Carrier Networks
business
This business provides services related to public networks,
principally for telecommunications carriers.
We support carriers and daily communication tools,
including mobile phones and the Internet, throughintegrated services, including the construction of highquality and highly reliable networks and maintenance andoperation services using a nationwide support and service
network.

Sales Trends

2013*billions

56.0

Net Sales¥54.7 billion

2012billions

54.7

17.2% increase year on year

2011 billions 46.7

Sales Trends

2013*billions

83.0

Net Sales¥80.9 billion

2012billions

80.9

25.4% increase year on year

2011 billions 64.5

Forecast

We focused on helping carriers improve their networks
in response to increasing numbers of smartphoneusers. In addition, there were sales related to an
submarine seismometer system using a submarine cablecommunications system. Net sales increased 17.2% year on
year, and orders climbed 4.5% year on year.

Social Infrastructurebusiness
This business builds, operates and monitors systems
for ICT infrastructure primarily for government offices,
local governments and public-service corporations(such as broadcasters and electric power companies).

Forecast

We help build social infrastructures, including regional
public networks and fire-fighting and disaster prevention
systems, to help everyone live a secure, safe and convenientlife. We also construct telecommunications infrastructures
such as base stations for mobile phones.
We actively responded to increasing investments in thedigitization of fire-fighting and disaster prevention systems
and expanding investments in the installation of basestations for mobile phones for new frequency bands. Net
sales rose 25.4% year on year, and orders increased 20.5%
year on year.

*Forecast figure is based on data as of April 26, 2013
Annual Report 20139NEC Networks & System Integration Corporation

Corporate Governance(As of June 27, 2013)

The Company believes that the cornerstone of corporate governance is ensuring managementsoundness and transparency by establishing a management system that enables quick decisionmaking to respond promptly to changes in the operating environment, and by practicing timely,
appropriate disclosure. To that end, the Company has adopted a Board of Corporate Auditors
system and has established a corporate governance system in which the Board of Directors andBoard of Corporate Auditors play key roles.
The Company has also adopted an executive officer system to clearly demarcate the supervisory
function and the business execution function. To enhance management transparency, the Company
has outside directors and outside corporate auditors and seeks to achieve sound management byencouraging cooperation among corporate auditors, the Internal Auditing Division, and independentaccounting auditors.

I. Description of Corporate Organs
1 Board of Directors
The Board of Directors is composed of nine directors,
including four outside directors. In addition to maintaining
the number of directors at an optimum level for quick
decision making, the Company has reduced the terms of
directors to one year in order to clarify the management
responsibility of directors and strengthen its management
structure.

2 Executive Officers, Executive Committee,
and Business Execution Committee

4 Internal Auditing Division
The Internal Auditing Division (10 members) has been
established as an internal audit unit independent from thebusiness execution divisions. It examines through internal
audits whether business execution is being conducted legallyand properly according to relevant laws, regulations andCompany rules.

5 Accounting Auditors

Based on an executive officer system, the Company also
formed the Executive Committee, to discuss policies
pertaining to key management and operating issues, and theBusiness Execution Committee, to monitor the progressof and report on significant matters concerning businessexecution, consisting of mainly executive officers at senior
vice president level and higher and corporate auditors.

The Company has an audit contract with KPMG AZSA
LLC as its accounting auditors. KPMG AZSA LLC
expresses its views on the financial statements as an auditor
from an independent viewpoint.

3 Board of Corporate Auditors

The Company has established a basic policy for thedevelopment of internal control systems, as shown
below, under Article 362, Paragraph 4, Item 6 of theCompany Law and Article 100, Paragraphs 1 and 3 ofthe Enforcement Regulations of the Company Law. The
Company maintains the appropriate execution of operations
under the basic policy, laws and regulations, and internal
regulations.

The Board of Corporate Auditors consists of five corporate
auditors, including three outside auditors. It decides audit
policies and related matters, and reports on the status ofaudits performed by each auditor. Corporate auditors also
attend Board of Directors meetings and other important
meetings, examine significant documents related to

10

final decisions, and listen to directors and employees on
performance of their duties, thus contributing to a system forsufficiently scrutinizing directors’ performance of their duties.

Annual Report 2013

II. Development of Internal Control
Systems

The Company’s mechanisms of business execution, management oversight, and internal control

General Meeting of Shareholders
Elect/Dismiss

Elect/Dismiss

Elect/Dismiss

Management/Supervision
Board of Directors(Directors)

Audit

Board of Corporate Auditors(Corporate Auditors)

Supervise

Cooperate

Audit
Cooperate

Business Execution

Independent
Auditors

Cooperate
Executive Committee

Executive Officers

Business Execution Committee

Internal Auditing Division

Management Quality
Improvement Committee
Audit
Cooperate

Staff, Management Units and Business UnitsGroup Companies

Internal Reporting and Consultation Office(Corporate Ethics Hotline)

III. Situation of Outside Directors andOutside Corporate Auditors
Of the Company’s nine directors, four are outside directors.
The Company believes this number is appropriate forgiving advice and participating in decision making from fairand objective standpoints, strengthening the Company’s
corporate governance.
Outside Director Takayuki Matsui is a professor at theGraduate School of Professional Accountancy of Aoyama
Gakuin University. The Company has Mr. Matsui use his
expert knowledge in business administration, includinginternal control, to ensure transparency in the managementof the Company and to strengthen corporate governance.
Mr. Matsui attended all 13 meetings of the Board of
Directors held in the fiscal year ended March 31, 2013. He
has been designated as an independent director definedin Rule 436-2, Paragraph 1 of the Securities Listing
Regulations of the Tokyo Stock Exchange.

Outside Director Tetsujiro Arano is engaged in the network
solution business of NEC Corporation and uses his
extensive experience and knowledge for the management of
the Company. Mr. Arano attended 10 of 11 meetings of theBoard of Directors held in the fiscal year ended March 31,
2013 after his appointment on June 26, 2012.
Outside Director Yumiko Ichige is a lawyer at Nozomi
Sogo Attorneys at Law. Using her professional knowledge
and viewpoint about corporate legal affairs, Ms. Ichige
oversees the business execution of the Company from a fairand objective standpoint of an outsider. Ms. Ichige attended
all 11 meetings of the Board of Directors held in the fiscal
year ended March 31, 2013 after her appointment onJune 26, 2012. She has been designated as an independent
director defined in Rule 436-2, Paragraph 1 of the Securities
Listing Regulations of the Tokyo Stock Exchange.
Outside Director Naoki Hashitani is engaged in the IT
Service business of NEC Corporation and uses his extensive
experience and knowledge for the management of theAnnual Report 201311

Company. Mr. Hashitani attended 9 of 11 meetings of theBoard of Directors held in the fiscal year ended March 31,
2013 after his appointment on June 26, 2012.
Of the Company’s five corporate auditors, three areoutside corporate auditors. We believe this number isappropriate for auditing the directors’ execution of theirduties from fair and objective standpoints, to strengthen the
Company’s corporate governance.
Outside Corporate Auditor Junichi Okuyama has been
engaged in monitoring of sales activities and accounting formany years. Taking advantage of his extensive experienceand knowledge relating to internal control, Mr. Okuyama
primarily audits the legality of business execution from afair and objective standpoint. Mr. Okuyama attended all
11 meetings of the Board of Directors and all 10 meetingsof the Board of Corporate Auditors held in the fiscal year
ended March 31, 2013 after his appointment on June 26,
2012.
Outside Corporate Auditor Harutame Umezawa isqualified as a lawyer and has considerable knowledge infinance and accounting. Using his professional knowledge
and viewpoint about the law, Mr. Umezawa audits the
directors’ performance of their duties from a fair andobjective standpoint of an outsider. He attended 12 of 13
meetings of the Board of Directors and all 13 meetingsof the Board of Corporate Auditors held in the fiscal year
ended March 31, 2013. Mr. Umezawa has been designatedas an independent auditor defined in Rule 436-2, Paragraph
1 of the Securities Listing Regulations of the Tokyo Stock
Exchange.
Outside Corporate Auditor Takaaki Yamamoto isengaged in accounting in NEC Corporation. Making
full use of his extensive experience and knowledge relating
to internal control, Mr. Yamamoto chiefly audits thelegality of business execution from a fair and objective
standpoint. Mr. Yamamoto became an outside auditor at
the ordinary general meeting of shareholders held on June25, 2013.
There are no special interests between the Company andits outside directors or outside corporate auditors.
The outside directors and outside corporate auditors
regularly exchange information and consult with theInternal Auditing Division and staff departments, receiving
reports on business execution at meetings of the Board of
Directors and on other occasions.
The outside corporate auditors cooperate with theindependent auditors, exchanging information andconsulting with them regularly at meetings of the Board of
Corporate Auditors and on other occasions.

12

Annual Report 2013

IV. Internal Audits and Audits by Auditors
The Internal Auditing Division cooperates with thecorporate auditors. The division reports the results of audits
carried out under an audit plan for each fiscal year to thecorporate auditors once a year and exchanges opinions withthem as necessary.
The corporate auditors, the Internal Auditing Division,and the accounting auditors cooperate with each other,exchanging opinions as necessary for statutory audits.

NEC Networks & System Integration Corporation

Corporate Social Responsibility (CSR)
CSR Policy
NEC Networks & System Integration Corporation is a
network system integrator that creates new communication.
Harnessing its strengths—technologies and experience
associated with networks—and its expertise in IT, NESIC
engages in a range of services, from planning and design tosystem integration, installation and outsourcing, for systems
that enable diverse forms of communication.
The Company’s corporate message, “Re-designing
your communication,” expresses its aspirations to enhancecommunication through those services and to create anddevelop connections, ties, and links between people, between
people and society, and between people and the earth. In
addition to contributions through our services, we will
engage in a range of activities that help to protect the global
environment and strengthen our connection with the earth.
We will also take steps to enhance customer satisfaction
so that we build trust and strengthen our connection
with our customers. Meanwhile, we will participate inlocal contribution activities to maintain and enhance ourconnection with communities.
The basis of those connections are our human resources,
organization, and activities to ensure compliance, safety andsecurity. We are hiring diverse human resources and offeringsystematic career development. In addition, we are creating
better working environments. We ensure compliance andsecurity while developing and providing secure systems andservices with reliable quality.
Through a range of challenges in society through all
our corporate activities, we are contributing to sustainable
development in society and the world.

Major Themes in CSR
1 People’s communication
As a network system integrator, we will fuse our strengths—
technologies and experience associated with networks—and
our IT expertise to provide systems that enable diverse
forms of communication. Through these systems, we will
enhance human communication and help to create anddevelop connections between people, between people andsociety, and between people and the earth.

2 Connection with the earth
We will offer systems and services that help reduce CO2
emissions and energy consumption. Meanwhile, we willcontribute to reducing society’s environmental footprint(load) and protecting the global environment throughactivities in our business that minimize the environmental
burden, use resources effectively, and maintain biologicaldiversity.

3 Connection with customers
As a partner of our customers, we will strive to build trust
by providing systems and services that contribute to ourcustomers’ businesses.

4 Connection with communities
As a good corporate citizen, we will engage in assistance todisaster areas and international cooperation, among otheractivities, in response to demands from society. We willcontribute to communities through communication withthem.

5 Enhancing compliance and achieving
safety and security
We will consistently enhance compliance and pursue
and ensure information security and safe work. We will
deliver systems and services that have reliable quality.

6 Cultivating diversity and creating betterworking environments
We will respect fundamental human rights in all corporate
activities and will hire and cultivate human resources
with diverse individuality. We will take steps to create
better working environments where people can fulfill theirpotential.

Assistance in disaster areas
Volunteer reconstruction assistance in areas affected by theGreat East Japan Earthquake

Contribution to education
for the young
Antarctic Club natural science classes are held in elementary
schools. In the classes, NESIC employees that we havedispatched to the Antarctic each year to join winter groups
there come together for talks.

Annual Report 201313

NEC Networks & System Integration Corporation

Directors and Corporate Auditors(As of June 25, 2013)(From top left)
Mr. Minami
Mr. Wada
Mr. Kodama
Mr. Hara
Mr. Sato

Board of Directors

Corporate Auditors

President
Masao Wada

Junichi Okuyama (full-time) *3
Akinori Kanehako (full-time)
Hirotaka Akizuki
Harutame Umezawa *3, 4
Takaaki Yamamoto *3

Senior Vice President and Member of the Board
Takahiko Hara
Yoichi Sato
Shougo Minami
Yoshifumi Kodama
Member of the Board
Takayuki Matsui *1, 2
Tetsujiro Arano *1
Yumiko Ichige *1, 2
Naoki Hashitani *1*1: Outside directors as stipulated in Item 15 of Article 2 of theCompany Law of Japan*2: Independent director stipulated in Rule 436-2, Paragraph
1 of the Securities Listing Regulations of the Tokyo Stock
Exchange

14

Annual Report 2013

*3: Outside corporate auditors as stipulated in Item 16 of
Article 2 of the Company Law of Japan*4: Independent auditor stipulated in Rule 436-2, Paragraph
1 of the Securities Listing Regulations of the Tokyo Stock
ExchangeNEC Networks & System Integration Corporation

Six-Year Summary of Selected Financial Data
NEC Networks & System Integration Corporation and Consolidated Subsidiaries
Years ended March 31
Thousands of
U.S. dollars 1

Millions of yen

2013

2012

2011

2010

2009

2008

241,271 ¥

215,373 ¥

212,277 ¥

222,046 ¥245,257 ¥

254,512 $ 2,561,535

Net sales

235,716

204,658

217,948

217,727

249,070258,2122,502,559

Selling, general and administrative expenses

24,69922,332

22,297

23,07024,501

24,824

262,225

Operating income

12,483

9,747

10,835

9,867

10,968

10,743

132,530

Net income

7,492

4,593

4,747

5,806

5,154

4,412

79,541

Free Cash Flows-4,662

16,053-3,49914,185

4,778

6,355

-49,496

Capital expenditures

3,070

2,533

2,762

1,928

2,529

2,611

32,594

Depreciation and amortization

2,164

1,941

2,151

2,244

2,270

2,130

22,975

98

92

52

119

290

419

1,040

2013

For the year:
Orders¥Research and development costs
At year-end:
Total assets¥

168,295 ¥ 149,707 ¥ 149,923 ¥ 146,915 ¥ 147,462 ¥

154,171 $ 1,786,761

Shareholders’ equity

86,54080,69277,44574,043

69,33465,251

918,781

Total net assets

86,79780,651

77,464

74,221

69,34066,132

921,510150.67 ¥92.36 ¥

95.46 ¥

116.74 ¥103.61 ¥88.67 $Per share of common stock (yen and U.S. dollars) :Net income¥

Net assets (BPS)

1,600

1,731.29

1,610.38

1,546.42

1,479.62

1,381.92

1,311.71

18,381

45.00

28.00

26.00

25.00

22.00

20.00

478

Operating income to net sales (%)

5.3

4.8

5.0

4.5

4.4

4.2

Net income to net sales (%)

3.2

2.2

2.2

2.7

2.1

1.7

7.9

6.4

7.4

6.9

7.4

6.9

9.0

5.9

6.3

8.2

7.7

7.0

51.2

53.5

51.3

50.1

46.6

42.3

0.05

0.05

0.08

0.07

0.07

0.09

6,024

5,936

5,939

5,998

5,906

5,817

39,130 ¥34,475 ¥36,516 ¥36,580 ¥42,493 ¥42,247 $415,437

1,244

774

795

975

879

722

13,207

Cash dividends applicable to the year
Ratios and return indicators:

Return on assets (ROA) (%)
Return on equity (ROE) (%)

2

3

Owners' equity (Net worth) ratio (%)
Debt to equity ratio (times)

4

Number of employees
Net sales per employee (thousands of yen)

5¥

Net income per employee (thousands of yen) 6
Notes

1. U.S. dollar amounts have been translated from yen, for convenience only,

4. Debt to equity ratio: Interest-bearing debt / Net assets

at the rate of ¥94.19 = U.S.$1.00, the approximate Tokyo foreign exchange market rate

5. Net sales per employee: Net sales / Average number of employees during the term

as of March 31, 2013.

6. Net income per employee: Net income / Average number of employees during the term

2. Return on assets: Ordinary income / Average total assets during the term
3. Return on equity: Net income / Average net assets during the term

Annual Report 201315

Operating Income

Net Sales(Millions of yen)

(Millions of yen)
249,070

250,000

235,716
217,727

217,948

15,00012,483

204,658

200,000

12,00010,968

10,8359,867

150,000

9,000

100,000

6,000

50,0003,000(As of March)

2009

2010

2011

2012

2013

(As of March)

2010

2013

2012

2011

Total Assets and Total Net Assets

Net Income(Millions of yen)

(Millions of yen)

7,492

8,000

Total assets

Total net assets

200,000
168,295

7,000
6,000

2009

9,747

147,462

5,806
5,154

150,000
4,747

5,000

146,915

149,923

149,707

4,593
100,000

4,000

69,3403,000

74,221

77,46480,65186,79750,000

2,000
1,000

(As of March)

2009

2010

2011

2012

2013

Operating income to net sales

2009

2010

2011

2012

2013

ROE and ROA

Operating Income to Net Sales
and Net Income to Net Sales(%)(As of March)

Net income to net sales

6(%)

ROE (Return on equity)

ROA (Return on assets)

10

5

8

4
6
3
4

2

2

1

(As of March)

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Annual Report 2013

2009

2010

2011

2012

2013

(As of March)

2009

2010

2011

2012

2013

Consolidated
Financial
Statements
Contents
Consolidated Balance Sheets

18

Consolidated Statements of Income

20

Consolidated Statement of Comprehensive Income

21

Consolidated Statements of Changes in Net Assets

22

Consolidated Statements of Cash Flows23

Notes to Consolidated Financial Statements

26

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Annual Report 2013NEC Networks & System Integration Corporation

Global Network(As of March 31, 2013)

Head Office

Certifications

2-6-1 Koraku, Bunkyo-ku, Tokyo 112-8560, Japan
Tel: +81-3-6699-7000
Fax: +81-3-6699-7405

Certificate No. :JQA-0471

Major Domestic Regional Offices

ISO14001: 2004

Higashinihon, Nakanihon, Kansai, Nishinihon, Hokkaido, Tohoku, Shin-etsu,
Kitakanto, Kanagawa, Chubu, Shizuoka, Hokuriku, Keiji, Kobe, Chugoku,
Shikoku, Kyushu

ISO/IEC27001: 2005

Subsidiaries and Affiliates
Toyo Networks & System
Integration Co., Ltd.
Head office: Kanagawa, Japan
Established: May 2005
Capitalization: ¥400 million
Voting rights: 100.0%
Subsidiaries: Toyo Alphanet Co., Ltd.
		TNSi Europe GmbH
Nichiwa Co.
Head office: Hyogo, Japan
Established: January 1953
Capitalization: ¥50 million
Voting rights: 100.0%
Q&A Corporation
Head office: Tokyo, Japan
Established: July 1997
Capitalization: ¥897 million
Voting rights: 55.9%
Subsidiaries: DAIICHI AD SYSTEM Co., Ltd.
		Net Life Partner
		
Corporation (NLP)
		 ARKPOWER Co., Ltd.
NEC Networks & System Integration
Engineering, Ltd.
Head office: Tokyo, Japan
Established: October 1992
Capitalization: ¥50 million
Voting rights: 100.0%
NEC Networks & System Integration
Services, Ltd.
Head office: Tokyo, Japan
Established: July 1988
Capitalization: ¥60 million
Voting rights: 100.0%

50

ISO9001: 2008

Annual Report 2013

NESIC Ascerent, Ltd.
Head office: Tokyo, Japan
Established: June 1951
Capitalization: ¥20 million
Voting rights: 100.0%
NESIC BRASIL S/A
Head office: Sao Paulo, Brazil
Established: November 1976
Voting rights: 87.4%
NESIC (Thailand) Ltd.
Head office: Bangkok, Thailand
Established: March 1991
Voting rights: 49.0%
NESIC PHILIPPINES, Inc.
Head office: Manila, Philippines
Established: April 1991
Voting rights: 100.0%
NESIC (GUANGZHOU) Co., Ltd.
Head office: Guangzhou, China
Established: August 1998
Voting rights: 100.0%
Networks & System Integration
Saudi Arabia Co. Ltd.
Head office: Al-Khobar, Saudi Arabia
Established: April 2006
Voting rights: 95.0%

Certificate No. :JQA-EM0640

Certificate No. :C03J0025

Organization :Office Service Division			(SI & Services Operations Unit)			

(Security Control Center)

Certificate No. :JQA-IM0190

Organization :Office Service Division			(SI & Services Operations Unit)			(Service Infrastructure			Construction Department)			(Network Service & Operation

			

Department)

Certificate No. :JQA-IM0351

Organization :Service Infrastructure Division			(SI & Services Operations Unit)			(ICT Help Desk Service Department)			(Remote Operation Service Department)

Certificate No. :BSKS0027

Organization :Public Infrastructure Systems

			Division (Network Infrastructures			

Operation Unit) *as of March 31, 2013

Certificate No. :JQA-IM1086

Organization :Fire & Disaster Prevention

			

Systems Division			(Network Infrastructures Operation Unit)

Certificate No. :JQA-IM1013

Organization :Kansai 1st Service Center			(Regional Operations Unit)			

Kansai 2nd Service Center			(Regional Operations Unit)			

Kansai SI Department

			(Regional Operations Unit)			*as of March 31, 2013

ISO/IEC 20000-1:2011
Certificate No. :JQA-IT0037

Organization :Office Service Division			Customer Engineering Division			Service Infrastructure Division			(SI & Services Operations Unit)

Privacy Mark
Certificate No. :21000053

BS25999-2: 2007
(Business Continuity Management System)
Certificate No. : 		BCMS539922

Certified Organization :NEC Group

Scope of the Company’s Certification:
Operation and Maintenance Business(Unified Communication Network in Tokyo)
Carrier Operation and Maintenance BusinessNEC Networks & System Integration Corporation

Investor Information(As of March 31, 2013)

Major Shareholders

Corporate Data
Corparate Name

NEC Networks & System Integration Corporation

Established

December 1, 1953
(registered as a stock company on November 26, 1953)

Number of Employees

4,530 (Non-consolidated)
6,024 (Consolidated)

URL
Listing

Number of
Shares Held(Thousands)

Percentage ofTotal Shares
Outstanding 2

19,10638.42%

6,400

12.87%

http://www.nesic.co.jp/english/

Japan Trustee Services Bank, Ltd.
(Sumitomo Mitsui Trust Bank, Limited beneficiary trust
account, NEC Corporation retirement benefit trust account)

Tokyo Stock Exchange, First Section

Japan Trustee Services Bank, Ltd. (Trust account)

3,502

7.04%

Ticker Code1973

The Master Trust Bank of Japan, Ltd. (Trust account)

1,892

3.81%

Fiscal Year

April 1 - March 31
Annual meeting held in June

Sumitomo Realty & Development Co., Ltd.

1,200

2.41%

Japan Trustee Services Bank, Ltd. (Trust account 9)

928

1.87%

Common Stock Authorized

100,000,000 shares

Employees' Stock Ownership Plan

724

1.46%

Issued49,773,807 shares

CMBL S . A . Re Mutual Funds

685

1.38%

Number of Shareholders

9,272

1.34%

Sumitomo Mitsui Trust Bank, Limited
1-4-1, Marunouchi, Chiyoda-ku, Tokyo 100-8233, Japan

Mellon Bank, N.A. As Agent For Its Client Mellon Omnibus
US Pension

665

Transfer Agent

1.27%

KPMG AZSA & Co.

The Chase Manhattan Bank , N.A. London Secs Lending
Omnibus Account630

Independent Auditors

Name of Shareholder
NEC Corporation
1

Composition of Shareholders

Notes
1

Shares held by Japan Trustee Services Bank, Ltd. (Sumitomo Mitsui Trust Bank,
Limited beneficiary trust account, NEC Corporation retirement benefit trust
account) give NEC Corporation material voting rights because NEC Corporation

0.54%

17.58%

9.91%

30.80%

41.04%

has contributed shares of the Company to its retirement benefit trust.
The percentage of material voting rights held by NEC Corporation as of March 31,
2013 was 51.42%.
2

Securities
companies

Individuals
and others

Foreigninvestors, etc

Financial
institutions

Other domestic
companies

The percentage of total shares outstanding is calculated based on the number ofshares excluding treasury stock (48,219 shares).

Monthly Stock Price Range
Yen

Blue: Opening Price > Closing PriceWhite: Closing Price > Opening Price

2,000

High
Opening
Closing
Low

1,600
1,200

High
Closing
Opening
Low

800
400

2008

2009

2010

2011

2012

2013

2009

2010

2011

2012

2013

Monthly Trading Volume
Thousand of shares
5,000
4,000
3,000
2,000
1,000

2008

Annual Report 201351

CAT.NO.131100304-TA-001
Printed in Japan