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Annual Report 2014Year ended March 31, 2014
NEC will transform into a “Social Value Innovator” in an aim to build anaffluent and equitable society which makes efficient use of resourcesand where people lead safe and secure lives.Solutions for SocietyValue innovationFocusing onfundamentalissuesOpen innovationPartneringConsultingSystem integrationOutsourcingCore ICT technologiesBIGDATA, SDN, Cloud foundation,etc.New valueEditorial PolicyDue to growing interest in non-financial information amongstakeholders in recent years, the need for the integrated corporatedisclosure of financial and non-financial information has beenincreasing. NEC has published an integrated annual report thatprovides both financial and non-financial information since 2013.By exchanging opinions with the International Integrated ReportingCouncil (IIRC), institutional investors, customers and other relatedpersons, NEC will continue to provide clearer and more usefulinformation going forward.01NEC CorporationAnnual Report 2014Reporting PeriodApril 1, 2013 to March 31, 2014(This report also includes informationobtained after this reporting period.)Scope of ReportNEC Corporation andits Consolidated SubsidiariesReference Guidelines Global Reporting Initiative (GRI)“Sustainability ReportingGuidelines 3.1” United Nations Global Compact ISO 26000
IBusiness Report/Management PoliciesContentsI Business Report/Management Policies03 Message from the President07 Progress on “Mid-term Management Plan 2015”II Business Activities for Value Creation13 Performance Highlights15 At a Glance17 Review of Operations25 Contribute to Sustainable Growth in Myanmar through Communications Infrastructure27 Utilize ICT to Enhance Disaster Response Capabilities in the ASEAN Region28 Realize Safer Bus Operations in Hong Kong29 Promote Renewable Energy with Energy Storage Systems30 Reduce CO2 through Saving Energy at Data Centers31 Improve Customer Services at Railway StationsValue for societyEnsuring a wide rangeof safety, from individualto countrySafetyIII Business Foundation to Support Value Creation33 Stakeholder Engagement35 Empowering Our People37 Earning Customer Trust38 Addressing Climate Change and EnvironmentalPreservation39 R&D and Intellectual Property Strategy41 Corporate Governance43 Risk Management and Compliance44 Messages from Outside Director and Outside Corporate Auditor45 Directors and Corporate Auditors47 Business Execution Structure49 Overseas Business Execution StructureSecurityServing society andthe earthSecurityEfficiencyRealizing sustainable growthEfficiencyEqualityIIIBusiness Foundation to Support Value CreationEqualityClosing the social divideand eliminating inequalityBusiness Activities for Value CreationSafetyIIIV Corporate Data50 Financial Section59 Non-Financial Section60 Corporate OverviewEvaluation by External PartiesDow Jones Sustainability Asia Pacific Index IVOther Related Information Earnings releases/annual securitiesreport Corporate Governance Report Corporate Social Responsibility(CSR) Annual Environmental Report Information Security Report Social Contribution ActivitiesFTSE4Good Global Index Euronext Vigeo World 120 Index oekom rated as Prime Corporate Data ETHIBEL PIONEER & EXCELLENCE MS-SRI Morningstar SociallyResponsible Investment IndexNEC is a signatory to theUnited Nations GlobalCompact.NEC CorporationAnnual Report 201402
MESSAGE FROM THE PRESIDENTSustainable DevelopmentNobuhiro EndoPresident, NEC Corporation03NEC CorporationAnnual Report 2014At NEC, we ensure continual development of theNEC Group and contribute to a sustainable societyby implementing The NEC Way, a cohesive framework that outlines the NEC Group’s managementpractices and operations.NEC is working to realize “an information societyfriendly to humans and the earth” as asserted in theNEC Group Vision 2017, based on NEC’s CorporatePhilosophy. With belief that enterprises must contribute to the well-being of society, everyone at NECis committed to meeting compliance standards indaily business operations and putting into practicethe NEC Group Core Values. In doing so, the NECGroup aims to solve social and environmentalissues which affect people’s lives. We are also committed to maintaining active disclosure of activities and challenges, as well as to keepingopen communications with stakeholders to improveour operations and build relationships of trust.One of the ongoing practices began in 2005,when NEC became a signatory to the UnitedNations Global Compact (UNGC). NEC continues toconduct corporate business activities in compliancewith the ten principles in the areas of human rights,labor, the environment, and anti-corruption based onthe UNGC framework. Looking ahead, we will striveto address social issues from a global perspectiveby contributing to a range of UN-formulated initiatives directed at developing a sustainable society.The concept of innovation takes on a very important meaning in the context of NEC’s efforts to solvesocial issues. To be an innovative company, it is vitalto establish a diverse culture where people fromdifferent backgrounds with different ideas can collaborate. In line with this, NEC participated in theMinistry of Health, Labor and Welfare’s Declarationof Positive Action, an initiative aimed at promotingwomen’s success in the workplace, during thefiscal year under review (the year ended March 31,2014). Going forward, NEC will promote innovationas well as global leaders who will lead innovationto enhance societal value.
IBusiness Report/Management PoliciesChallenges NEC Accepts in Order to Achieve Sustainable DevelopmentHow we aim to serve societyEstablish a safe andsecure societyAddress climate change andenvironmental preservationProvide everyone the benefitsof the digital societyBuild reliable information andcommunications infrastructureWhat we value in our business activitiesEarning customer trustStrengtheningrisk management andenforcing compliance Degree of interest among customersand society at large Opinions on CSR activities Suggestions by SRI research institutes Formulation of CSR standards, etc.Stakeholder Interests andSocial ConcernsEmpowering our people The NEC Way Maximizing corporate value How business activities contribute tosociety and the global environment, etc.NEC’s PerspectiveMarket Environment Outlook and Long-term ProspectsLooking ahead to the year 2050, the global population is forecast to increase from seven billion to ninebillion. As this happens, the ratio of urban population is projected to rise from 50% to 70% as urbanization progresses. The shift to city living will boostdemand for energy, food, water and resourcesfaster than population growth, which will contributeto rapid economic growth. However, rapid economicgrowth is also expected to create social issuesrelated to urbanization and population increases.In addressing these issues, an innovative socialinfrastructure will be imperative to maintaining asafe and secure society while making efficient useof resources.NEC CorporationAnnual Report 201404
Focus on Solutions for SocietyLooking ahead, NEC will provide new solutionsand services which are more diversified and sophisticated, using technologies such as big data, cloudand software-defined networking (SDN). In doingso, I am confident that the value NEC offers to society through ICT will elevate. As a next step, we willimplement quantitative assessments of the societalvalue we provide, and then implement initiativesaimed at maximizing that value. At present, one ofthe quantitative indicators NEC has established isthe amount of CO2 emissions reduced by the ITsolutions we provide to customers and society.Going forward, we will strive to expand solutionsfor society to maximize the contributions we maketo society from a broader perspective, thereby maximizing their societal value.At the NEC Group, with our focus on “Solutions forSociety,” we are leveraging our strengths in information and communications technology (ICT) to provide new social infrastructure that will make societysafer, more secure, efficient and a fair place, inwhich people can lead prosperous lives.NEC already supplies a vast array of advancedICT-based social infrastructure—traffic management, firefighting and disaster prevention systems,water resource management systems, seafloorseismographs and systems for electronic medicalrecords. To these systems, we applied our extensive line-up of original sensing, next-generationnetworking and IT platform technologies, whichoperate in environments ranging from the seafloorto outer space. We are proud to provide these infrastructures which play an essential role in supportingpeople’s everyday lives.NEC’s solutions for societyResponsible Business Unit: Seafloor optical cables Seafloor seismographsPublicEnterpriseTelecom Carriers Satellite communications Earth observation Digital TV transmission Air traffic control Diverse Electronic Fingerprint recognition business systems TV studios Electronic government Water managementmedical records Leak detection POSAirportsCompaniesSeafloorBanksPortsDams/Water supplyBroadcastersHospitalsRoadsRetail storesGovernmentBroadcasting towersFire departmentsDistribution centersRailImportant facilitiesCommunicationsEnergyPost officesFactories Harbor surveillance Underwater surveillanceSpaceSmart Energy Rail communications Production management Factory management Traffic management Facility surveillance Bank ATMs Logistics Firefightingsystems Post sorting machines Communications systemsNEC ICT supporting social infrastructure and systemsNext-generation network technologiesHigh-performance, high-reliability core IT technologiesDiverse sensor and human interface technologies05NEC CorporationAnnual Report 2014 Smart energy
IBusiness Report/Management PoliciesToward Achieving the “Mid-term Management Plan 2015”In line with the “Mid-term Management Plan 2015”which we announced in April 2013, we havedeclared our commitment to transforming NEC intoa “Social Value Innovator.” By creating both socialand corporate value, we aim to achieve growth byaddressing issues of real importance to society.NEC has a history of more than 100 years since ourfounding, and we believe that our transformation tobecome a social value innovator will build a soundfoundation for the next century of our growth.Based on this belief and amid our ongoing business activities to achieve our mid-term management plan, NEC is promoting “Solutions for Society”to our customers and business partners around theworld. NEC also initiates the implementation of thesolutions in the NEC Group, as we announced ournew corporate key message; “Orchestrating abrighter world.”This message encapsulates our strong determination to collaborate closely with people around theglobe to enrich and brighten people’s lives, society,and the future through the provision of value thatwill ensure the safety, security, efficiency and equality of society. At NEC, we strive to achieve the midterm management plan, and moreover, to achieveour goal as a social value innovator to make world abrighter place.Looking back, the first year of the “Mid-termManagement Plan 2015” was a year of preparationin which we established a foundation for futuregrowth. I believe that this second year, the fiscalyear ending March 31, 2015, will be crucial in capitalizing on this foundation to deliver results. In thefinal year of this three-year plan, the fiscal yearending March 31, 2016, we will be ready for fullscale growth as a social value innovator.To successfully achieve the “Mid-term ManagementPlan 2015,” I particularly focus on sharpening ourglobal competitiveness. As a social value innovator,NEC is committed to delivering safety, security,efficiency and equality worldwide. We will continueto create new value to achieve our mid-term management plan and realize our Group vision, togetherwith the sustainable growth of society and the NECGroup in the future.We look forward to your continued understandingand support as we endeavor to reach our goals.June 2014Nobuhiro EndoPresident, NEC CorporationNEC CorporationAnnual Report 201406
Progress on “Mid-term Management Plan 2015”In April 2013, NEC announced “Mid-term Management Plan 2015,” and declared its focus on “Solutions for Society.”In fiscal 2014, the first year of the plan, we made good progress in preparing for future growth. We madeinvestments in areas of focus, acquired businesses, and revised the Group’s business portfolio.We see fiscal 2015, the second year of the plan, as a year to capitalize on our achievements in the previous year.In this section, let us review the progress we made and look at what we aim to achieve in fiscal 2015.billion, mainly due to decreased sales from the mobilephone sales business and the sale of patents related toLCD in the previous fiscal year. Consolidated netincome was 33.7 billion, a year-on-year improvementof 3.3 billion, mainly due to gain on sales of subsidiaries’ and affiliates’ stocks, despite the lower consolidated operating income and increased non-operatingexpenses. Results of net sales, operating income andnet income exceeded the Company forecasts, and adividend of 4 per share was issued as promised at thebeginning of the period.Fiscal 2014 PerformanceThe NEC Group recorded consolidated net sales of 3,043.1 billion for fiscal 2014, a decrease of 28.5billion, or 0.9% year on year. This was mainly fromdecreased sales in Others, due to the deconsolidationof a mobile phone sales business and a decline inmobile phone shipments, in spite of increased sales inthe Public, Enterprise and System Platform businessunits. Regarding profitability, consolidated operatingincome lowered by 8.5 billion year on year, to 106.2FY2013/3(Billion )Net salesOverseas salesOverseas sales ratio3,071.6483.115.7%3,000.0Operating incomeOperating income ratioNet income114.63.7%30.410
2014). Going forward, NEC will promote innovation as well as global leaders who will lead innovation to enhance societal value. Sustainable Development nobuhiro Endo President, NEC Corporation 03 NEC Corporation Annual Report 2014. Challenges nEC accepts in order to achieve Sustainable Development Market Environment Outlook and Long-term Prospects Looking ahead to the year 2050, the global .
