(As of June 25, 2018)

Fundamental Management Policy

The NEC Group aims for sustained growth for society and business through efforts to increase its corporate value by practicing the “NEC Way” and its drive to bring satisfaction to all its stakeholders, including shareholders, customers, communities and employees alike.

Management Indicator Goals

The NEC Group sets operating targets of revenue, operating profit margin, net profit, free cash flows and ROE (Return On Equity) as management indicators. NEC attaches paramount importance to operating profit margin among other indicators.

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

Under the "Mid-term Management Plan 2018" announced in April 2016, the NEC Group worked on (1) Earnings structure rebuilding plan and (2) Returning to growth. In measures for the Earnings structure rebuilding plan, the Company made steady progress overall on reforming underperforming businesses and unprofitable projects, business process optimization projects, and optimization of development and manufacturing functions. However, with regard to measures for the Returning to growth, existing businesses underperformed significantly, making it difficult to realistically achieve the operating profit target of 150 billion yen for the fiscal year ending March 31, 2019.

Based on this situation, the NEC Group proceeded to formulate a new management plan. In January 2018, the NEC Group established the "Mid-term Management Plan 2020" consisting of (1) Reform of profit structure, (2) Achievement of growth, and (3) Restructuring of execution capabilities. The NEC Group is certain that major reforms need to be made now in order to build a foundation for the NEC Group's next 100 years.
With this in mind, executives and employees will strive as one to realize the "Mid-term Management Plan 2020."

a. Reform of profit structure
The NEC Group will implement fundamental profit structure reforms, including reduction of fixed costs, aiming to realize the investments needed to return to growth. Specifically, the NEC Group will reduce fixed costs, including personnel expenses, by conducting structural reforms domestically in back office function and the hardware business area, as well as improving efficiency of fixed property costs and other costs. The NEC Group will also restructure the telecom carrier business and the energy business. In the telecom carrier business, the NEC Group will strengthen software and services while improving its profitability in the network infrastructure domain. In the energy business, the NEC Group will continue to focus on the energy SI (service integration) business to improve the profitability. Factories in Japan will be streamlined by reorganizing and integrating the factories of NEC Platforms, Ltd.

b. Achievement of growth
The NEC Group will aim to grow by leveraging its biometric and AI technologies to realize "NEC Safer Cities." Through "NEC Safer Cities," the NEC Group works on in order to realize safety, security, efficiency, and equality for all people and an abundant society by providing solutions for Public Safety, Digital Government, Smart Transportation, and other services.
The NEC Group has set "NEC Safer Cities" as an engine for growth and will aim to become a category leader in Public Safety, Digital Government, and other services in Japan and overseas. The NEC Group will also continue to accelerate M&As to expand its business in these areas.
Furthermore, the NEC Group will also aim to grow in the fields of "The formation of a sustainable, smart supply chain," and "The realization of safe and comfortable connected cars," with a primary focus in Japan by using its strengths. At the same time, the NEC Group will transform into a business model that provides services by leveraging partnerships, including customers, in order to solve social challenges.

c. Restructuring of execution capabilities
The NEC Group considers restructuring of execution capabilities as a vital step to promote the reform of its profitability and achievement of growth. The NEC Group is working to reinforce business development capabilities and to realize an organization with the capacity to carry out actions to completion. In terms of reinforcement of business development capabilities, by breaking away from the self-sufficiency mindset, development of solutions via co-operation in collaborations with partners, and strengthening relations with various stakeholders such as government, international institutions and standardization bodies, the NEC Group will realize creation of new social value beyond existing frameworks. Next, to realize an organization with the capacity to carry out actions to completion, the NEC Group will define the management's responsibilities and authorities more clearly and introduce mechanism to strengthen management's commitment to results. At the same time, the NEC Group will introduce an evaluation and compensation system for NEC Group employees to encourage innovative actions and challenges. In these ways, the NEC Group will restructure to enable employees to maximize their capabilities. Furthermore, the NEC Group will actively hire and appoint human resources with diverse talents into executives and other positions in order to quickly respond to market changes and challenges.

Through these measures, the NEC Group aims to achieve revenue of 3,000 billion yen, an operating profit ratio of 5%, net profit of 90 billion yen, free cash flows of 100 billion yen, and ROE of 10% for the fiscal year ending March 31, 2021.

Moreover, the NEC Group recognizes that ensuring compliance in all of its operations is essential to continuing to exist as a good corporate citizen in society. The NEC Group will continue working to promote compliance.

The NEC Group will give consideration to ESG (Environmental, Social and Governance) issues, and leverage its strengths in technology to contribute to the achievement of the United Nations' Sustainable Development Goals (SDGs).