(As of June 28, 2024)

(1) Fundamental Management Policy

The NEC Group defines its corporate philosophy, “the NEC Way,", which summarizes the management practices and operations that the NEC Group adheres to, including its values and the driving principles behind its actions.

The NEC Way articulates NEC’s "Purpose" and "Principles" as a company as well as the expected behaviors, “Code of Values” and “Code of Conduct”, that all of the members comprising the NEC Group are expected to demonstrate.


Purpose
The "Purpose" is a declaration based on the statement of "Orchestrating a brighter world" to contribute to a prosperous society.

Principles
"Principles" are the basis for the NEC Group's actions and are comprised of three important positions.

Code of Values
The “Code of Values” should be embodied by each and every one of the NEC Group, regardless of their position or level in the company.

Code of Conduct
To ensure NEC's ability to maintain society's trust and its commitment as a Social Value Innovator, the “Code of Conduct” details what is expected of each and every one of the NEC Group from today's society with respect to integrity and standards of conduct.

To fulfill the Purpose of NEC Corporation (hereinafter, “the Company”), the NEC Group aims to create social values continuously and to maximize its corporate value by implementing its middle and long term management strategy including its "Mid-term Management Plan" based on the Company’s Principles.

Each and every one of the NEC Group, must compare our work style and organization structures to the Code of Values and identify where we need to strengthen and improve, and must conform to this Code of Conduct and conduct ourselves with high ethical standards and integrity.

The value that customers and society expect from us is constantly changing. To remain an essential company in the eyes of society in the years to come, we must create new value by constantly keeping our finger on the pulse of what it consists of. The NEC Group combines ICT technologies with diverse knowledge and ideas in collaboration with people around the world. We realize bright, hope-filled societies and ways of life, this is our aim.

(2) Management Indicator Goals

To realize its corporate value, the NEC Group will strive as one to achieve “Purpose”, “Strategies” and “Culture” as its management policies. In order to realize Purpose, the Company positions its EBITDA growth rate^*1 for Strategies and its engagement score for Culture as core indicators. In addition, the Company sets targets of revenue, adjusted operating profit^*2, Non-GAAP operating profit^*3, Non-GAAP net profit attributable to owners of the parent^*4, EBITDA^*5 and ROIC^*6 as management indicators.

(3) Business environment

During the fiscal year ended March 31, 2024, the global economy saw the pace of improvement moderate due to elevated inflation and the effects of monetary tightening policies already in place, mainly in Europe and the United States. The Japanese economy also saw the pace of improvement moderate, especially in private demand, due to the impacts of inflation and other factors.

At the same time, IT investment is becoming more active worldwide, and there is a record level of investment appetite in Japan. Demand is being strongly supported by the cloud shift of conventional IT infrastructure and the enhancement of communications infrastructure. As a result, the digitalization of the whole society is progressing. In addition, “generative AI,” which generates sentences and images in response to questions and instructions, has attracted a great deal of attention, and there is also great interest in AI-driven changes in work style and society. As social issues such as environmental problems become more serious and complex, companies are required to contribute to the realization of a sustainable society and the role of technologies is increasing.

Under such business environment, NEC Group formulated the “Mid-term Management Plan 2025” that sets forth management’s policy to address challenges ahead with the integrity of purpose, strategy and culture. Highly motivated, NEC Group aims to achieve growth centered on IT Services Business and Social Infrastructure Business, and to reinforce sustainability management infrastructure, under this “Mid-term Management Plan 2025”.

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

The NEC Group’s Directors, corporate officers and employees are striving as one to carry out its management policies, combining its “(i) Purpose”, “(ii) Strategies” and “(iii) Culture”. These policies are based on the “Mid-term Management Plan 2025”, announced in May 2021.

(i) Purpose

In the “NEC Way” the NEC Group defines its Purpose as creating the social value of safety, security, fairness and efficiency to promote a more sustainable world where everyone has the chance to reach their full potential. As a corporate group seeking to create social values, the NEC Group will aim to realize it by “Seize the Future Together” with society and customers.

(ii) Strategy

By converting NEC Group’s advantage of capabilities in technology into customer value, the NEC Group will achieve growth centered on the “IT Services Business” and “Social Infrastructure Business”.

In the “IT Services Business” in Japan, regarding the “NEC Digital Platform”^*1, which is a common platform of the DX (digital transformation) business, the Company will seek to achieve strong sales growth and profitability by mainly enhancing cloud, modernization, AI (especially generative AI), and security. In the business providing consulting driven services to support strategy concept formulation through implementation and operation from end to end (Consulting-based business), through collaboration with ABeam Consulting Ltd., the Company will expand its value co-creation business with customers, starting with upstream consulting. Additionally, with regard to projects driving social transformation, the Company will create new business opportunities by utilizing its strengths and working in tandem with government policies. In the overseas “IT Services Business” (digital government and digital finance), the Company aims to raise profits by growing sales, focus on the highly profitable software/SaaS businesses, and strengthen its competitiveness by expanding offshoring and reducing costs.

Within the “Social Infrastructure Business,” in the telecom services business, the Company aims to improve profitability by promoting the virtualization and openness of the telecommunications domain and expanding high-value-added areas such as software services and DX of telecommunications carriers. In addition, by strengthening cooperation with partner companies, the Company will expand its sales channels in Japan and overseas. In the aerospace and national security business, the Company will steadily execute the projects already under contracts and expand the business by acquiring new projects.

In new business development, in the AI, healthcare and life sciences business, and business related to carbon neutrality domains, the NEC Group will promote commercialization by collaborating with advanced customers and research institutes, including overseas, and using its new business development know-how and methods cultivated in recent years, based on technologies where the NEC Group has global strengths.

In addition, the NEC Group is steadily improving low profitable business by enhancing monitoring under the leadership of the CFO and making management decisions if improvement plans are not attained, including withdrawing from businesses, aiming to achieve steady growth in each business and profitability exceeding that of competitors.

With regard to financial strength, the prerequisite for implementing and supporting these growth strategies, the NEC Group will generate cash flows by continuously growing EBITDA and optimizing portfolio assets. The Company will implement capital allocation emphasizing business growth with these as capital, strive to construct a sound financial base, and support future growth investments.

In addition, in order to promote its Purpose management, the NEC Group has identified the “Materiality,” which are management priorities from an ESG perspective. Through the practice of the Materiality, the NEC Group aims to create significant social, environmental, and economic value, and to be continuously included in major ESG indices.

(iii) Culture

In order to realize its Purpose, as highly motivated employees are indispensable, the NEC Group is embarking on people and culture reforms aimed to transform itself into an “Employer of Choice.” In fiscal year ending March 31, 2025, the Company will step up the dissemination of company-wide policies and strategies so that employees understand and embrace the Company’s direction based on the NEC Way and take pride in their work.

Specifically, the Company will hold town hall meetings among the NEC Group companies globally to strengthen communication with management. In addition, by holding chain meetings in which the leaders of each organization convey their organization’s NEC Way practices, the Company will promote employees’ understanding of the direction the organization is heading. The Company will also introduce a job-based human resource management system for all employees in order to respond flexibly and promptly to changes in the market and to provide fair evaluations based on performance, and the Company will promote the realization of “the right time, the right place and the right person,” and further promote diversity as a source of innovation. Furthermore, with regard to management infrastructure, in order to change the very way to work for employees, the NEC Group will strengthen change management which is a management method for leading organizational transformation to success and promote management to objectively understand events by analyzing and using data and continuously make data-driven decisions in all aspects of business (Data-driven management). This will lead to the NEC Group’s growth and improvement in profitability.

Through these measures, the NEC Group aims to achieve EBITDA growth rate of 8%, engagement score of 50%, revenue of 3.5 trillion JPY, adjusted operating profit of 300 billion JPY (ratio to revenue: 8.6%), Non-GAAP operating profit of 300 billion JPY (ratio to revenue: 8.6%), Non-GAAP net profit attributable to owners of the parent of 185 billion JPY (ratio to revenue: 5.3%), EBITDA of 425 billion JPY (ratio to revenue: 12.1%), and ROIC of 6.5% in the fiscal year ending March 31, 2026.

By achieving the “Mid-term Management Plan 2025” for achievement of its Purpose, the NEC Group will contribute to the achievement of the Sustainable Development Goals (SDGs) set by the United Nations.