(As of June 22, 2017)

Fundamental Management Policy

The NEC Group has formulated the following Group Corporate Philosophy and Group Vision.

NEC Group Corporate Philosophy:
NEC strives through “C&C” to help advance societies worldwide toward deepened mutual understanding and the fulfillment of human potential.

NEC Group Vision:
“To be a leading global company leveraging the power of innovation to realize an information society friendly to humans and the earth”

Based on this philosophy and vision, the NEC Group focuses on the “Solutions for Society” that aims to create a more advanced social infrastructure indispensable to society from the position of a company like no other as it has networking technologies and computing technologies.

Through these business activities, NEC creates social values such as safety, security, efficiency and equality to enable people to lead more prosperous lives and works in concert with all stakeholders to make “an information society friendly to humans and the earth.”

To realize these goals, NEC has collated and puts into practice the NEC Group Core Values as a sense of values and principles of behavior for all NEC employees.

NEC Group Core Values:
Passion for Innovation, Self-help, Collaboration, Better Products, Better Services

The NEC Group will strive to provide satisfaction and inspiration for our customers through the efforts of self-reliant individuals, motivated by a “passion for innovation,” who work as part of a team to continuously pursue the provision of better products and services. The NEC Group aims to pursue its Corporate Philosophy and realize the Group Vision through actions based on the Values that have been passed down and fostered over the more than 100-year history of the NEC Group.

The NEC Group aims for sustained growth for society and business through efforts to increase its corporate value by practicing the “NEC Way” which systemizes the structure of the NEC Group’s management activities such as Corporate Philosophy, Vision, Core Values, Charter of Corporate Behavior, Code of Conduct and its drive to bring satisfaction to all its stakeholders, including shareholders, customers, communities and employees alike.

Management Indicator Goals

The NEC Group aims to realize certain operating results as a leading global corporate group, and attaches paramount importance to ROE as a management indicator for improving profitability. The NEC Group recorded an ROE of 3.4% in the fiscal year ended March 31, 2017.

Middle and Long Term Management Strategy and Challenges to be Addressed by the NEC Group

The NEC Group aims to be “a leading global company leveraging the power of innovation to realize an information society friendly to humans and the earth.”

In the “Mid-term Management Plan 2018” announced in April 2016, the NEC Group put forth a management policy consisting of (1) Earnings structure rebuilding plan, and (2) Returning to growth, and is pursuing the following initiatives.

a. Earnings structure rebuilding plan
The NEC Group aims to establish an earnings structure for realizing a 5% operating income. Specifically, the NEC Group will restructure the Smart Energy business and reinforce project management strength as part of suppressing losses from unprofitable projects. Moreover, the NEC Group will promote the acceleration of operational reform projects and work to strengthen the management platform to globally support the competitiveness of the NEC Group.

b. Returning to growth
The NEC Group aims to drive the globalization of the Solutions for Society. Specifically, in order to achieve business expansion, the NEC Group has defined (i) Safety business (surveillance, cyber security), (ii) Global carrier network business (TOMS, SDN/NFV) and (iii) IT Service business for retailers as its core business areas, and concentrates resources on these potentially growing areas.

The fiscal year ended March 31, 2017 was the first year of the “Mid-term Management Plan 2018,” however, the NEC Group downwardly revised its consolidated financial forecasts on January 30, 2017. Given this, the NEC Group will promote reforms with the aim of further improvement of management speed in order to quickly respond to changes in the market environment and customer trends.
Specifically, the NEC Group revises the creation process of both its Mid-term Management Plan and its annual budget, and is accelerating the process from strategy creation to implementation. Furthermore, in order to promote its business based on a company-wide, cross-sectional strategy, the NEC Group accelerates its decision-making process by advancing the delegation of authority to Chief Officers and expanding and clarifying their roles, authority, and responsibility.
In the domestic business, the NEC Group is implementing reforms of struggling businesses and building a strong domestic earnings platform by improving business profitability. Furthermore, in the overseas business, by continuing investments geared toward achieving global competitiveness, as well as expanding the scale of businesses and improving profitability utilizing M&A, the NEC Group will further promote its three (3) core businesses. Additionally, the NEC Group is formulating a new strategy to expand business in overseas growth fields utilizing NEC’s core assets. In implementing these policies, the NEC Group will continuously review its business portfolio, selecting and concentrating on highly profitable businesses.

In July 2016, NEC was recognized by the Japan Fair Trade Commission for having violated Act on Prohibition of Private Monopolization and Maintenance of Fair Trade (“Antimonopoly Act”) with respect to transactions with Tokyo Electric Power Co., Inc. (currently Tokyo Electric Power Company Holdings, Incorporated) on telecommunications equipment for electric power systems, and in February 2017, NEC received Cease and Desist Orders and Surcharge Payment Orders from the Japan Fair Trade Commission for activities in violation of the Antimonopoly Act with respect to transactions for wireless digital emergency firefighting equipment, and with respect to transactions for hybrid optical communication equipment and equipment for transmission lines for Chubu Electric Power Co., Inc.

The NEC Group regards compliance as one of the most important management issues, and the NEC Group makes every effort to observe compliance and to continuously establish and implement its internal control system. In light of the above events, in addition to repeated messages by top management on compliance, the NEC Group has reviewed the contents and methods of its fair trade education and its internal review and monitoring system for fair trade, working to reform employee awareness. Going forward, by constantly reviewing its compliance system, the NEC Group will increase its efforts to thoroughly prevent reoccurrence and to recover trust.

The NEC Group will devote its full attention to contributing to the safety, security, efficiency and equality of society and to accelerating its growth and transformation to a “Social Value Innovator.”

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