Integrated Report 2019 Contents Editorial Policy NEC has published integrated annual reports containing both financial and non-financial information since 2013. Starting in 2018, having defined its materiality, Business Strategy and Vision NEC has changed the name of the report to the “Integrated Report.” 03 What's NEC Integrated Report 2019 comprises four chapters, respectively titled Business Strategy and Vision, 05 NEC's Value Creation Journey Business Activities, Management Foundation, and Corporate Data. 07 Message from the President Business Strategy and Vision describes the progress 13 Value Creation Process of the Mid-term Management Plan 2020 and our initiatives to create value, such as implementation of 15 Feature: NEC Safer Cities our priority themes from an Environmental, Social and Governance (ESG) perspective, or “materiality.” Business 19 Initiatives to Ensure Respect for Human Activities includes a message from the CFO along with an overview from each of our segments and an Rights Such as Privacy Policies and introduction of our principle international locations. Measures Aligned with Societal Expectations Management Foundation introduces the Company’s initiatives in support of sustainable management. 21 Sustainably and Socially Literate NEC will keep endeavoring to provide increasingly Human Resources transparent and continuous information while incorporating feedback from various stakeholders. 23 Environmental Action with a Particular Reporting Period Focus on Climate Change April 1, 2018 to March 31, 2019 (hereinafter referred 27 Innovation Management to as “Fiscal 2019.” Any other fiscal years are referred to similarly) This report also includes information 29 Dialogue and Co-Creation with obtained after this reporting period. Our Stakeholders Scope of Report NEC Corporation and its consolidated subsidiaries Business Activities Reference Guidelines • ISO 26000 31 Message from the CFO • GRI Standards • United Nations Global Compact 33 Performance Highlights • International Integrated Reporting Council’s 35 At a Glance “International Integrated Reporting Framework” • Japan’s Ministry of Economy, Trade and Industry’s 37 Review of Operations “Guidance for Collaborative Value Creation” 37 Public Business 41 Enterprise Business 43 Network Services Business 45 System Platform Business NEC is a signatory to the United Nations Global Compact. 47 Global Business 49 Main Locations Globally Management Foundation 51 Corporate Governance Other Related Information 55 Ensuring Compliance • Earnings Releases/Annual Securities Report • Corporate Governance Report 56 Messages from an Outside Director • Sustainability Report and an Outside Audit & Supervisory • Information Security Report Board Member 57 Directors and Audit & Supervisory Board Members 59 Cross-company Corporate Strategy Promotion Framework Corporate Data 61 Financial Section 64 Non-Financial Section 65 Corporate Overview 01 NEC Corporation Integrated Report 2019 NEC Corporation Integrated Report 2019 02 What’s NEC What’s NEC Foundation Number of employees*2 Number of Ratio of male and Ratio of employees AI researchers*2*4 female hires*1*4 returning after childcare leave*3*4 1899 Approximately Approximately Male 70.6% 120th Anniversary 110,000 500 Female29.4% 97.3% Market capitalization Revenue*1 R&D expenses*1 Technological capabilities Facial recognition*5 Public Business 31% Enterprise Business 15% Composition of Network Services Business 16% revenue System Platform Business 17% Global Business 14% Approximately Others 7% Fingerprint recognition*6 1 trillion yen 2,913.4 billion yen 108.1 billion yen Global No. 1 2 2 2 Owner’s equity ratio* Consolidated subsidiaries* Rate of contribution to CO2 Number of patents* emission reductions across the whole supply chain.*1 Iris recognition*7 Consolidated 327 subsidiaries Approximately Approximately 29.1% countries and 169 regions 6 times 49,000 *1 Actual results for the fiscal year ended March 31, 2019 *5 Ranked 1st four consecutive times in task assessment sponsored by the U.S. National *2 As of March 31, 2019 Institute of Standards and Technology (NIST) *3 Ratio of employees returning to work who started childcare leave in fiscal 2017 *6 Ranked 1st eight times in task assessment sponsored by NIST *4 For NEC Corporation on a standalone basis *7 Ranked 1st in task assessment sponsored by NIST 03 NEC Corporation Integrated Report 2019 NEC Corporation Integrated Report 2019 04 NEC's Value Creation Journey NEC's Value Creation Journey Corporate Philosophy NEC strives through C&C to help advance societies Company name NEC Corporation NEC established as Japan's first venture with foreign capital worldwide toward deepened mutual understanding and (joint venture with U.S. firm Western Electric Company) Founded July 17, 1899 Started business in import and sale of telephones and switching systems the fulfillment of human potential. * Renamed NEC Corporation, effective April, 1983, both expressed as NEC hereafter Nippon Electric Company, Ltd. established* C&C announced Formulation of Brand Statement 120th Founding Anniversary The integration Founding spirit: of computer and “Better Products, NEC brings together and integrates technology and expertise to create communications the ICT-enabled society of tomorrow. Better Service," technologies We collaborate closely with partners and customers around the world, orchestrating each project to ensure all its parts are fine-tuned to local needs. Founder: Kunihiko Iwadare Every day, our innovative solutions for society contribute to greater safety, security, efficiency and equality, Create a company that provides customers with world-class products “Early in the 21st century, it will become possible for people to and enable people to live brighter lives. and take responsibility for them through after-sales service talk to each other and see each other anytime, anywhere" 1899 1977 2014 2019 Network 1899 1928 1964 1970 1987 2007 2010 2016 Nippon Electric Transmitted scenes of International satellite Japan's first satellite, Started manufacturing Ultra-compact radio Asteroid explorer Submarine cable Company, Ltd. Imperial Accession TV broadcasts of the Osumi optical submarine communications system “HAYABUSA" installation reaches established Ceremony of Emperor Tokyo Olympics relay equipment PASOLINK secured top successfully over 250,000km, Hirohito global market share returned to Earth enough to encircle the earth six times NEC's strengths IT 1954 1958 1974 1982 2002 2012 2015 developed Begins Developed the first The ACOS Series 77 The PC-9801 The Earth Simulator, the Built ICT infrastructure Contributed to research domestically produced mainframe computer personal computer world's fastest supercomputer for multiple stadiums implementation of to date into fully transistorized family is announced is announced system for resolving global used in the Soccer World the Individual computers NEAC-2201 computer environmental problems, Cup held in Brazil Number System is completed AI 1960 1971 1984 2004 2009 2016 Started development Fully automated postal Received an order in No. 1 in fingerprint No. 1 in facial Biometrics solutions adopted of optical character sorting system the U.S. for fingerprint authentication*1 authentication *2 in 70 countries in total recognition (OCR) matching services *1 Ranked 1st eight times in task assessment sponsored by the U.S. National Institute of Standards and Technology (NIST) *2 Ranked 1st four consecutive times in task assessment sponsored by NIST 05 NEC Corporation Integrated Report 2019 NEC Corporation Integrated Report 2019 06 Message from the President Message from the President I will transform NEC‘s culture Continue Providing Value as a Social Value Innovator and mindset to survive in an era NEC was founded in 1899 and marked its 120th anniversary Moreover, to maximize the economic and social value that on July 17, 2019. Over these 120 years, the value that we create, in 2018 we defined our materiality—priority of dramatic change customers and society have expected from us has been management themes from an ESG perspective. This outlines constantly changing. We have survived because of our efforts the approach to social value creation that we have practiced to engage in solving issues facing customers and society, since our foundation and connects our business strategies providing better value by making use of our strong with ESG initiatives as a new declaration to our various technological capabilities based on our founding spirit of stakeholders of our commitment to achieving the mutual “Better Products, Better Service.” NEC has demonstrated its growth of NEC and society. To promote the sustainable growth own approach to each era, adopting the concept of “C&C (the of society and NEC, we engage in dialogue with diverse integration of computer and communications)” in 1977, stakeholders, including customers, and promote initiatives followed in 2014 by “Orchestrating a brighter world.” The together with them with a view to contributing to the common thread running through all these concepts is NEC’s achievement of the Sustainable Development Goals (SDGs) set constant commitment to providing better value to society. by the United Nations. In 2005, NEC became a signatory to the United Nations Global Compact (UNGC), a global initiative aimed at sustainable growth for society and companies. In our corporate activities we now observe the compact’s 10 principles pertaining to the fields of human rights, labor, the environment, and anti-corruption. In