Consolidated Financial Statements for the First Nine Months of Fiscal Year ending March 31, 201730/Jan/2017
These financial statements have been prepared in accordance with accounting principals generally accepted in Japan.

NEC Networks & System Integration Corporation

Stock exchange listing: Tokyo
Code number:
1973

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

1. Consolidated Results for the First Nine Months (April 1, 2016 to December 31, 2016)of Fiscal Year ending March 31, 2017

(Rounded down to the nearest million yen.)(1) Net Sales and Income

9 months/FY Mar2017
9 months / FY Mar2016

Net sales(¥ million)

Year-on-yearchange (%)

OperatingincomeYear-on-yearchange (%)

Ordinary
incomeYear-on-yearchange (%)

179,314-7.6

3,456-47.9

3,594-46.9

194,120-3.1

6,634-20.9

6,768-21.0

Net income
attributable
Net income
Year-on-year
to owners ofper sharechange (%)
the parent(¥)(¥ million)

Net income
per share(diluted) (¥)

9 months/FY Mar
2,132-46.8
42.96
—
2017
9 months/ FY Mar
4,007
-21.8
80.74
—
2016
c.f. Comprehensive income: 9 Months/FY Mar 2017: ¥2,341 million (-50.4%); 9 Months/FY Mar 2016: ¥4,717 million (-18.0%)(2) Financial Position
Owner'sNet assets
equity ratio
per share (¥)(%)
31/Dec/2016
184,006
93,26249.7
1,843.92
31/Mar/2016
196,569
94,39747.2
1,868.25
c.f. Owner's equity: 31/Dec/2017: ¥91,528 million; 31/Mar/2016: ¥92,738 million
Total assets(¥ million)

Net assets(¥ million)

2. Dividends

FY ending Mar.
2017
FY ended Mar. 2016

1stquarter

Dividends per share (¥)
3rd
InterimYear-endquarter

Full year—36.00—36.00 ※

72.00 ※

—

35.00

—

35.00

70.00

※ Forecasts

Note: Revisions to projected dividends for the quarter under review: no3. Financial Forecasts for Fiscal Year ending March 31, 2017 (April 1, 2016 to March 31, 2017)(¥ million)(%)(Percentages represent change compared to the previous corresponding period.)
Net income attributable to Net income
Operating income
Ordinary income
owners of the parentper share(¥ million)(%)(¥ million)(%)(¥ million)(%)(¥)

260,000-7.1

10,000Net sales
FY ending Mar. 2017-29.1

10,000

-29.2

6,000

0.1

120.87

Note: Revisions to projected results for the quarter under review: yes
Cautionary Statement
Forecasts of results mentioned in this document are future estimates and are thus inclusive of risks and uncertain factors since they are not based on
definite facts. Please be aware that a variety of factors could cause actual results to differ significantly from those projected. The major factors affecting
actual results include the economic climate and social trends surrounding the business of this Company’s group, consumer trends vis-a-vis systems
and services provided by this Company’s group, as well as pressure to lower prices and ability to cope with the market in response to intensifiedcompetition.
Factors affecting results are not limited to the ones mentioned above.

4. Business Results(1) Business Results for the First Nine Months for the Fiscal Year Ending March 31, 2017
During the First Nine Months for the fiscal year ending March 31, 2017 (the period from April
1, 2016 to December 31, 2016), the Japanese economy continued to experience a moderate
recovery, supported by the effects of various policies amid the continued improvement ofemployment and income conditions. However, there were some signs of weakness, such as astandstill in the improvement of corporate earnings.
In the fields of information and communication technology (ICT), in which NEC Networks &System Integration Corporation (“the Company”) operates, differences were observed in eachfield under these economic conditions.
First, in the corporate market, while corporate managers continued to hold critical views on
the effects of investment, there was active investment for enhancing business management
and competitiveness, including investment in work style innovation.
The environment surrounding the telecom carrier business remained severe, because of theongoing restraint on capital spending on network infrastructure.
In the central and local governments as well as the public interest market, while investmentin the digitalization of fire-fighting and emergency radio systems came to an end with the arrivalof the deadline for migration from analog systems in May 2016, investments for the safety andsecurity and for the improvement of urban infrastructure, including infrastructure in thebroadcasting business, remained firm. Meanwhile, there was weakness in some areas, suchas the public sector (roads, etc.), in which there were delays in bidding.
Meanwhile, overseas, particularly in Asia, there is a demand for the construction of suchinfrastructure as mobile communications networks.
Positioning the current fiscal year as a year for consolidating its foothold for regrowth in themedium term in this market environment, the Company and its consolidated subsidiaries(hereinafter the “Group”) worked to reinforce their sales capabilities and actively develop
promotion activities for solutions, while moving forward internally with initiatives to strengthen
the Group’s business capabilities, such as the development of next-generation ERP systems
and the continuous improvement of cost effectiveness. For enterprises, it launched NetsVoice,a cloud-based voice service, to drive service-oriented businesses by addressing demand for
PBX renewals, and it also opened an IoT laboratory to conduct validations and evaluations ofcustomers’ IoT solutions while they are under development and a new base for providing
technical services for IoT devices and other equipment. By doing so, the Group proceeded withmeasures for expanding its strategic business fields such as EmpoweredOffice*, IoT/MVNO.
Overseas, the Group also strengthened its efforts in the Myanmar market, into which it madea full-scale entry in the previous fiscal year, by establishing ICT Star Group Myanmar Co., Ltd.,an overseas subsidiary, in April 2016 through joint venture with local companies. The purposeof this joint venture is to strengthen its business base and further expand its business bysecuring and cultivating engineers in Myanmar where infrastructure investment is expected togrow in the future.

As a result, the Group posted the following consolidated results for the First Nine Months
under review:Net sales¥179,314 million7.6%

decrease year on year

Operating income¥3,456 million

47.9%

decrease year on year

Ordinary income¥3,594 million

46.9%

decrease year on year

Net income attributable¥21,32 million

46.8%

decrease year on year

¥202,127 million

2.4%

increase year on year

to owners of the parent＜Reference＞
Orders received

Net sales decreased 7.6% year on year, to ¥179,314 million. This was caused by a
substantial decline in sales in the Carrier Networks business linked to the restraint on capitalspending by telecom carriers, despite an increase in sales to other enterprises. Another factor
was the completion of projects in response to the digitaliization of fire-fighting and emergency
radio systems in May 2016. Orders received increased 2.4% year on year, to ¥202,127 million,
due to solid sales to enterprises and orders for large-scale projects for the construction of solar
power generation plants, despite effects such as the restraint on capital spending by telecom
carriers and the completion of projects in response to the digitalization of fire-fighting andemergency radio systems.

On the profit front, operating income and ordinary income declined ¥3,177 million and¥3,174 million year on year, respectively, to ¥3,456 million and ¥3,594 million, chiefly reflecting
the significant decrease in net sales and increases in pro forma standard tax and thedevelopment of next-generation ERP systems costs , despite an improvement in the cost ofsales ratio mainly in the Enterprise Networks and Carrier Networks businesses due to theimprovement of cost effectiveness. As a result, net income attributable to owners of the parent
also decreased ¥1,875 million year on year, to ¥2,132 million.

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

Net sales by business segment
Enterprise

CarrierSocialNetworks

Networks

Infrastructures

OtherTotal

9M Fiscal 2017.3

77,40442,64654,311

4,951

179,314

9M Fiscal 2016.3

76,63750,48463,735

3,263

194,120

Increase or decrease

766-7,837-9,423

1,688-14,806

Ratio of increase/decrease

1.0-15.5-14.8

51.7-7.6(%)（Million yen）

Reference: Orders received by business segment
Enterprise

CarrierSocialNetworks

Networks

Infrastructures

OtherTotal

9M Fiscal 2017.3

85,35450,05462,3594,359

202,127

9M Fiscal 2016.3

77,20748,927

66,7404,548

197,423

Increase or decrease

8,146

1,127-4,381

-188

4,704

10.6

2.3-6.6-4.1

2.4

Ratio of increase/decrease(%)

1. Enterprise Networks businessNet sales increased 1.0% year on year, to ¥77,404 million, reflecting solid sales ofEmpoweredOffice, a solution for office innovation, as ICT investment for work style reform
remained firm.
2. Carrier Networks businessNet sales declined 15.5% year on year, to ¥42,646 million, due to the effect of cut incapital spending by telecom carriers, particularly in mobile communications base stations.
3. Social Infrastructures businessDespite an increase in broadcast/cable TV business, net sales dropped 14.8% year onyear, to ¥54,311 million, reflecting a fall in sales related to the digitalization of fire-fighting
and emergency radio systems because of the arrival of the deadline for migration fromanalog systems in May 2016.

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

<Outline of Business Segments>
Business Segment

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

Enterprise Networks

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

Carrier Networks

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

Social Infrastructures

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

OthersSales of purchased equipment(2) Outlook for the Fiscal Year Ending March 31, 2017
Consolidated net sales in the fiscal year ending March 31, 2017 (April 1, 2016 – March 31, 2017)
are forecast to be ¥260 billion, a decline of ¥10 billion from the previous forecast, chiefly reflecting
the effects of intensifying competition and delays in bidding mainly in the public sector (roads, etc.)
in the Social Infrastructures business and lower-than-expected sales in broadcast/cable TV
business, a growth field, although the business will perform well. Both operating income andordinary income are forecast to decline ¥3.5 billion respectively from the previous forecast, to¥10.0 billion. Net income attributable to owners of the parent is expected to be ¥2.0 billion lessthan the previous forecast.

Net sales¥260 billion

7.1% decrease year on year

Operating income¥10.0 billion

29.1% decrease year on year

Ordinary income¥10.0 billion

29.2% decrease year on year

Net income attributable¥6.0 billion

0.1% increase year on year

to owners of the parent

5. Consolidated Financial Statements(1) Consolidated Balance Sheets
As ofMarch 31, 2016
AssetsCurrent assets
Cash and cash equivalents
Notes and accounts receivable
Purchased goods,materials and supplies
Work in process
Other
Allowance for doubtful accounts
Total current assets
Non-current assets
Property and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
OtherAllowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Notes and accounts payable
Short-term bank loans
Current installments of long-term debt
Accruedncome taxes
Accrued bunuses to directors and corporate auditors
Accrued warranty on products
Accrued losses on sales contracts
Other current liabilities
Total current liabilities
Long-term liabilities
Long-term debt
Liabilities for retirement benefits
Other liabilities
Total long-term liabilities
Total liabilities
Net assets
Shareholders' equity
Capital stock
Capital surplus
Retained earnings
Treasury stock, at cost
Total shareholders' equity
Accumulated other comprehensive income
Net unrealized holding gain on other securities
Foreign currency translation adjustments
Accumulated adjustments for retirement benefits
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets(Millions of yen)
As ofDecember 31, 2016

43,889104,841
2,878
6,311
9,760
(44)
167,638

56,59976,731
2,648
9,501
10,675(50)
156,105

10,967

10,785

1,944
3,080
5,025

1,753
2,945
4,698

12,979(41)
12,93728,931
196,569

12,454(37)
12,41627,900184,006

39,190
4,154
163
3,883
99
189
399
19,032
67,11330,200
4,207
171
1,044
19
125
339
19,77155,881

4,185
28,9601,911
35,057102,171

4,057
28,6882,116
34,86190,743

13,122
16,65067,597(270)
97,10013,122
16,652
66,205(271)
95,70832(376)(4,018)(4,362)
1,659
94,397
196,569

42(677)(3,545)(4,179)1,733
93,262
184,006

(2) Consolidated Statements of Income and Comprehensive Income(Consolidated Statements of Income)(Millions of yen)
FY Mar/2016 1Q-3Q

FY/Mar 2017 1Q-3Q(9 months ended Dec. 2015)(9 months ended Dec. 2016)

Net sales

194,120179,314

Cost of sales

164,326

151,381

Gross profit

29,79327,932

Selling, general and administrative expenses

23,15924,476

Operating income

6,634

3,456

Interest income

4431

Insurance income

172

190

Other291

219

Total non-operating income

509

441

Non-operating income

Non-operating expenses
Interest expenses

5765

Business reconstruction expenses for subsiriaries

4378

Other273

159

Total non-operating expenses

374

303

6,768

3,594

Gain on sale of investment in affiliates

40―

Total extraordinary income

40―

Ordinary income
Extraordinary income

Extraordinary losses
Closing of affiliates cost―

87

Retirement benefit expenses

464―

Relocation expenses for subsidiaries

118―

Total extraordinary losses

583

87

Income before income taxes

6,225

3,507

Income taxes

2,128

1,233

Net income
Net income attributable to non-controlling interests
Net income attributable to owners of the parent

4,097
89

2,273
141

4,007

2,132
(Millions of yen)

FY3/2016 1Q-3Q

FY/3 2017 1Q-3Q(9 months ended Dec. 2015)(9 months ended Dec. 2016)

4,097

2,273

(0)

11Foreign currency translation adjustments(516)(417)Adjustments for retirement benefit

1,137473

Net income
Other comprehensive income
Net unrealized holding loss on other securities

Total other comprehensive income
Comprehensive income

619

67

4,717

2,341

4,7552,315(38)26Comprehensive income attributable to:
Owners of the parent
Non-controlling interests

(3) Consolidated Statements of Cash Flows

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

FY Mar/2016 1Q-3Q(9M ended Dec. 2015)(Millions of yen)
FY Mar/2017 1Q-3Q(9M ended Dec. 2016)

6,225
2,347
239
(195)
438
(102)
(78)
17
(57)
57
21,344(4,085)(14,460)(1,543)(2,108)
8,040
57
(51)
(5,300)
2,746

3,507
2,164
191
(70)
534
(80)
(63)
(55)
(40)
65
26,870(3,004)(8,749)(861)
1,990
22,39640(62)(4,060)18,314(1,943)
(532)
(7)
(4)
5
151
(49)
(2,380)(1,340)
(550)
(7)
(1)
4―(120)(2,017)

2,070
(120)
(3,321)(18)(367)(1,757)(310)(1,701)
38,951
37,250551(120)(3,514)(14)(383)(3,482)(104)
12,70943,88956,599(4) Segment Information
Business Segment Information
1Q-3Q of fiscal March 2017 (9 months ended December 2016)
Enterprise
Networks
Sales(1) Sales to third parties(2) Intersegment sales
Total
Operating income (loss)(Millions of yen)

Carrier
Networks
42,64642,646
1,663

77,404
77,404
5,416Social
Infrastructures
54,311
54,311
2,793

Others

4,951
4,951
178

Adjustments(6,596)

1Q-3Q of fiscal March 2016 (9 months ended December 2015)
Enterprise
Networks
Sales(1) Sales to third parties(2) Intersegment sales
Total
Operating income (loss)

76,637
76,637
5,405

Total

179,314
179,3143,456(Millions of yen)

Carrier Networks

SocialInfrastructures

50,48450,484
1,955

63,73563,735
4,974

Others

3,263
3,263
330

Adjustments(6,032)

Total

194,120
194,120
6,634