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AN
NU
AL
RE
PO
RT
20
13
ANNUALREPORTyear ended March 31, 2013
2013
005_7014401372603.indd 3 2014/03/28 10:19:44
In the fiscal year ended March 31, 2013 (fiscal 2012), on a consolidated basis, revenues amounted to 229.2
billion yen, operating income was 9.1 billion yen, and net income was 4.3 billion yen.
Revenues decreased 1.5% year on year reflecting a decrease in lease-operating assets due to the
effects of the discontinuation of the small-scale leasing business, despite large-scale real estate sales in the
RISA business. Gross profit fell in the leasing and installment sales business, but operating income rose
12.8% year on year owing to a decrease in selling, general and administration expenses attributable to a
significant improvement in credit costs thanks to the large-scale reversal of allowance for doubtful accounts
booked in the previous fiscal year. In terms of extraordinary income, gain on extinguishment of debts
amounted to 200 million yen, but 800 million yen in minority interests in net income attributable to the
RISA business was booked, resulting in a 9.0% increase in net income compared with the previous year.
Note: The significant increase in net assets in fiscal 2011 was attributable to the inclusion of RISA Partners and its consolidated subsidiaries in the scope of consolidation.
Revenues
Net income (loss)
Operating income
Net assets & Equity ratio
Net assets Equity ratio
0 50,000 100,000 150,000 200,000 250,000 300,000
(million yen)
262,247
265,310
265,739
264,116
260,995
260,995
237,379 227,622 232,760 229,205
(Millions of Yen)
06
2009
05
07
08
09
2010 2011 2012 20130
100,000
200,000
300,000
0 50,000 100,000 150,000 200,000 250,000 300,000
(million yen)
262,247
265,310
265,739
264,116
260,995
8,096
(Millions of Yen)
06
2009
05
07
2010
08
2011
09
2012 2013
9,132
0
2,000
4,000
6,000
8,000
10,000
3,615
9,128
7,679
0 50,000 100,000 150,000 200,000 250,000 300,000
(million yen)
262,247
265,310
265,739
264,116
260,995
82,368
7.5
7.97.5
8.19.3
(Millions of Yen) (%)
06
2009
05
07
2010
08
2011
09
2012 2013
79,728
0
25,000
50,000
75,000
100,000
0.0
2.5
5.0
7.5
10.0
56,388
78,188
60,040
0 50,000 100,000 150,000 200,000 250,000 300,000
(million yen)-6,000
-3,000
0
3,000
6,000
0 50000 100000 150000 200000 250000 300000
-3,806
3,122
262,247
265,310
265,739
264,116
260,995
3,974 4,333
(Millions of Yen)
06
2009
05
07
2010
08
2011
09
2012 2013
3,720
NEC Capital Solutions LimitedYears ended March 31, 2012 and 2013
Financial Highlights
(Millions of Yen)Thousands of U.S. Dollars
2012 2013 Changes 2013
Revenues ¥232,760 ¥229,205 -1.5% $2,438,089Operating income 8,096 9,132 12.8% 97,144Net income 3,974 4,333 9.0% 46,092Net income per share (yen/U.S.Dollar) 184.55 201.23 – 2.14Cash dividends per share (yen/U.S.Dollar) 44.00 44.00 – 0.47Total assets 793,341 731,973 -7.7% 7,786,121Net assets 82,368 79,728 -3.2% 848,086ROE 6.3% 6.5% – –Equity ratio 8.2% 9.3% – –
The U.S. dollar amounts represent translation of Japanese yen, for convenience only, at the rate of ¥94.01=U.S.$1.00 in effect on March 31, 2013.
1a
Helping Societies Advance through
Capital Solutions.The Company provides services integrating information and communication technology (“ICT”) and finance through the three pillars of “NEC Group innovation,” “diverse solutions creating social capital infrastructure” and “lease business con-tributing to the development of a recycling-based society.”
Our management is built around the concept that our business activities themselves contribute to the environment and society and thus are CSR activities.
CONTENT S
1 Financial Highlights2 Interview with the President5 Business at a Glance8 Procurement of Funds9 Topics10 The Medium-Term Business Plan 201114 Corporate Social Responsibility16 Corporate Governance19 Officers: Directors and Corporate Auditors20 Financial Section51 Corporate/Stock Information
The statements in this annual report with respect to the Company’s current plans, strategies and decisions are forward-looking statements. Such forward-looking statements are based on management’s assumptions and decisions in the light of information currently available. Since these forward-looking state-ments involve risks and uncertainties, actual results could differ materially from them. Therefore, we caution that you should not place undue reliance on them.
Capital Solutions: The Company’s own term referring to the provision of solutions (“Solutions”) for a wide range of issues related to customers’ management resources (“Capital”)
Forward-Looking Statements
NEC Capital Solutions (the “Company”) was established in November 1978 as a specialist in sales financing for NEC Corporation (NEC), a leading Japanese electronics enterprise. The sole financial services specialist of the NEC Group in Japan, the Company provides a wide variety of services centering on leas-ing, underpinned by strengths in ICT equipment and businesses focused on the public sector.
Profile
005_7014401372603.indd 4 2014/03/28 10:19:450100_7014401372509.indd 1-1 2014/03/28 10:29:18
Although revenues decreased slightly compared
with the previous year, ordinary income rose
11.6% year on year to 9.4 billion yen and net
income rose 9.0% year on year to 4.3 billion yen.
However, this gain in income was primarily due to
the rebound after large-scale reversal of allowance
for doubtful accounts booked in the previous
fiscal year, and once we exclude this, there is little
reason for satisfaction when assessing the figures
on a real basis. As a result of the shrinking
domestic lease market over the past five years,
competition among lease companies remains
intense, and income generated by lease assets is
accordingly on the decline.
At the same time, both new transactions and
contracts executed rose compared with the
previous year. The balance of operating assets
decreased overall owing to the sale of large-scale
real estate assets and the discontinuation of the
small-scale lease business, but when this factor is
excluded, we note that operating assets increased
year on year for the first time in six years for the
mainstay leasing and installment sales business,
which points to the success of the measures taken
over the past year.
The operating environment for our business is
challenging, but we plan to expand profit-
generating opportunities while implementing
various measures. We have decided to maintain
dividends at 22 yen per share (44 yen in annual
dividends) in line with our key policy of continuing
stable dividends.
This was the second year of our Medium-Term
Business Plan 2011, positioned as the year in
which we take specific actions to achieve business
and revenue growth in line with our priority goal
of “Pursuit of the Distinctive Features of NEC
Capital Solutions.”
On the marketing side, we divided our
marketing activities between the government
offices and the private sector, which contributed
significantly to contracts executed and new
transactions during the fiscal year in oder to
improve marketing in terms of both quality and
quantity. In addition, we expanded the service
menu for PIT managed services, various one-stoop
services tailored to the life cycles of ICT-related
equipment, and this contributed to profit.
We also established local overseas offices in
Hong Kong and Singapore as part of our initiatives
in China and other parts of Asia, key regions for
NEC. We invested in the Innovative Venture Fund
and Fukushima Growth Industry Development
Fund. We also moved ahead with new initiatives
such as fundraising through the SMBC Business
Continuity Assessment Loan Program, and put
CSR management into place in a year full of
specific actions in line with the medium-term
business plan.
Many people have asked why we are forecasting
a decline in income in our earnings forecasts for
the current fiscal year. It is certainly true that
borrowing rates remain low and we are able to
raise funds stably, and corporate bankruptcies are
on the decline in terms of both number and
amount. Moreover, operating conditions are
solid, surpassing those of the previous year.
That said, the profit gains in the fiscal year
under review were primarily due to a special
factor, namely, the reversal of allowance for
doubtful accounts posted the previous year, and
we must formulate our earnings forecasts for this
fiscal year based on actual conditions excluding
this reversal. Although we feel that current
operating conditions are promising, given the
nature of the lease business it will be some time
before our measures contribute to improvements
in terms of revenues and income. Moreover, we
must adopt a conservative stance on bankruptcy
costs in view of concern that corporate
bankruptcies may increase owing to the impact
of expiration of the SME Finance Facilitation Act*
in March 2013.
This fiscal year is the year in which we will “gain
necessary basic business strengths to establish stable
revenue bases” and undertake reforms with profits in
mind. In April, we reorganized the sales operations in
order to extend corporate sales to Kansai. Corporate
sales produced excellent results in fiscal 2012. We are
also aiming for stable profit contributions from RISA
Partners, which returned to a bottom-line profit.
Through RISA Partners, we anticipate an expansion in
corporate rehabilitation business in collaboration with
regional financial institutions in line with the expiry of
the SME Finance Facilitation Act.
Internally, we plan to cultivate an environment in
which each employee has a strong awareness of
company-wide profit and loss by changing evaluation
standards, and to take activities to the next level
with kaizen (continuous improvement) involving
Interview with the President
I ncome rose substantially in the fiscal year ended March 2013. What was the background to that?
W hat were the principal achievements in fiscal 2012?
T he Company is forecasting a shift to lower income in the earnings forecasts for the current fiscal year. Why is that?
T his fiscal year is the final year of the medium-term business plan. What are your thoughts on that?
* The SME Finance Facilitation Act
(The Act Concerning Temporary Measures to Facilitate Financing for Small- and Medium–Sized Enterprises, etc.)
An act requiring financial institutions to give exemptions from paying interest or extensions of repayment periods to SMEs
or housing loan borrowers that have made applications for a relaxation of loan repayment burdens. Expired in March 2013.
Masahiro Annaka, President
32
010_7014401372509.indd 2-3 2013/09/12 10:35:46
Business at a Glance
the entire company in solving problems in the field
to improve customer satisfaction. We announced
the forthcoming relocation of our head office in a
recent press release, and this move will overlap
with a review of employee work styles as we seek
to improve our business through a greater
awareness of kaizen in our business operations.
The environment in which we operate has changed
drastically over the past 10 years. Due to changes
in lease accounting standards, there is no longer
any advantage in keeping assets off balance sheets,
and the collapse of Lehman Brothers led to a steep
drop in private sector capital investment. While
being subjected to the vicissitudes of this business
environment, we kept the lease business at the
core of our operation and also worked to expand
the market by offering added value throughout
NEC Group. When I consider the next 10 years, my
belief that we cannot survive on the basis of the
traditional value of the financial industry gives me a
strong sense of urgency. We are still in the midst of
our discussions, but I believe that we should not
only build business schemes that would contribute
to our financial business supporting customers in a
peripheral manner (economic value), but also
schemes that would improve our social value so
that at the same time our business is contributing
directly to society.
Society is faced with significant issues,
including reducing environmental impact,
stabilizing the financial sector and measures
countering the aging society, and many companies
will strive to address these issues and needs in the
future. While we would like to be one of these
companies ourselves, we also believe that our role
is to provide a range of services to our customers
aspiring to create this kind of social value.
The Environment/Reconstruction (from the
Great East Japan Earthquake) Support Syndicated
Loan is a good example of what I have in mind (for
further information, please refer to page 9). If we
build on such initiatives, we can create value that
enhance our corporate value. By addressing social
issues, we can create social value and, as a result,
create economic value as well. We hope to pursue
this kind of corporate management.
Interview with the President
P lease comment on the medium- to long-term forecasts.
We aim to enhance our corporate valueby pursuing the creation of social value
We lease equipment under long-term lease contracts to customers that need funds for capital expenditures. Utilizing leases
reduces expenses and the clerical work required for customers to raise money for capital investments and maintain facilities
and equipment, and thus improves business efficiency. Moreover, the leased products are always returned, making this a
service that contributes to a recycling-based society. Off-lease ICT products are reused if possible and otherwise disposed of
through the 3R system. We recommend that our customers switch to lease and rentals to alleviate their burden, thus
contributing to the creation of a society that emphasizes resource recycling.
Leasing and Installment Sales BusinessRevenues: Gross profit:billion yen billion yen182.8 14.7
Business in brief
Leasing
Other
ICT
Other dealers
NEC
Public sector
NEC-affiliated dealers
Private sector
Leasing contractsexecuted
by equipment
Leasing contractsexecuted
by supplier
Leasing contracts executed by
customers’ sector
Eco-leases
We are actively involved in eco-leases and eco-finance, recognized according to our own assessment criteria, in
order to promote new energy and energy conservation. Going forward, we will focus in particular on promoting the
use of solar power and other forms of new energy, including NEC’s energy solutions, energy storage systems and
EV charging infrastructure, as well as energy-saving services such as those for smart cities.
As the NEC Group’s sole domestic finance company, NEC Capital Solutions is providing finance
services to a broad range of customers, including government agencies, large companies and small-
and medium-sized companies. We have four business segments: the Leasing and Installment Sales
Business, the Loan Business, the RISA Business, and Other Business.
Consolidated Gross Profit Composition
This segment consists of leases and installment sales, our core businesses.
We lease a broad range of equipment, but ICT products account for almost 80% of our leases due to our history as a
financing company promoting NEC sales. Almost two-thirds of executed contracts are with NEC and NEC-affiliated dealer. We
also provide leases that combine NEC products and services, such as maintenance leases and vendor-collaborating programs.
More than half of our customers are in the public sector.
Features of the Leasing Business
54
010_7014401372509.indd 4-5 2013/09/12 10:35:47
Business at a Glance
We extend business loans principally to NEC Group companies and their business partners for the purpose of
providing programs for liquidation of receivables. We also provide customers with loans through structured
finance for capital investment.
We led the industry in establishing Denshi Saiken Acceptance Limited in anticipation of growing demand
in the market in line with the new Electronically Recorded Monetary Claims Act*.
Utilizing cutting-edge technology, this BPO cloud service* optimizes customers’ ICT asset operation and
management in all phases of the ICT life cycle, including introduction, use and disposal.
Revenues: Gross profit:billion yen billion yen4.3 3.5
Business Loans
PIT Managed Services
The loan business, consisting of business loans and factoring services, plays a role as
the “door knocker” linking new customers to our mainstay lease business.
Business in brief
RISA BusinessRevenues: Gross profit:billion yen billion yen27.6 4.2We made RISA Partners a subsidiary in 2010 with the aim of diversifying our financial services. The
RISA Business consists of the investment and financing business, the real estate business and the
advisory services business. In the corporate, claims and asset business field, we offer the three
functions of investment, financing and advisory. RISA has relationships with 171 financial institutions
nationwide and is involved with many regional corporate revitalization funds.
Business in brief
Other BusinessRevenues: Gross profit:billion yen billion yen17.6 1.6Revenues of other business include fees for structured finance, revenues of off-lease equipment in
the leasing business, revenues from the cancelation of lease contracts, and the collection of mainte-
nance fees and accounts receivable management on behalf of customers to meet their needs for
operational efficiency and outsourcing.
PIT managed services that integrate ICT and financial services are also included in this segment.
Business in brief
Consolidated Gross Profit Composition
Consolidated Gross Profit Composition
Investment and financing business
Corporate investment (equity investment)Loan asset investment (non-performing loan investment)Various financing (corporate loans, leveraged loans, loan arrangement)
Real estate businessProperty management service (sale of RISA’s property, income gain) Discontinued business
Advisory services business
Financial advisoryCorporate growth and revitalization advisoryReal estate advisory, CREServicing, due diligenceRevitalization fund across prefecture (create and operate joint public-private sector funds)
* BPO cloud serviceBPO (Business Process
Outsourcing) does not
simply offer a system,
but shoulders certain
aspects of the customer’s
business and provides
high-quality services.
With cloud services,
administration and other
services are provided on
an as-needed basis since
the customer does not
need to set up a server.
Support for theRemoval and Selling
of Equipment
use and m
anagement
Operation andManagement
Support
Introduction andDeployment
Support
Support forProcurement
Tasks
Dat
a M
igra
tion,
Exchange and
Rem
oval,
Disposal
Planning and Procurement
Operational Monitoring
and Maintenance
Configurat
ion,
Deployment a
nd In
stal
lati
on
rem
oval
and sale
supply
introduct
ion
Loan BusinessConsolidated Gross Profit Composition
NEC Group’s 3R system
We resell any ICT off-lease and off-rental products that can be resold. Our affiliate Reboot Technology Services removes
and erases data, and we then resell about half of this off-lease equipment in Japan or overseas.
Regarding products unsuitable for resale, their parts are reused through the NEC Group’s 3R system. After the parts
are reused, the products are sorted into steel, copper and aluminum so that ultimately 98% is reused or recycled.
Information feedbackEasy dismantling, space saving, easy-to-recycle materials, etc.
Material recycling (Precious metals, non-ferrous metals, steels, plastics, glass, etc.)
Thermal recycling (Incineration disposal heat recovery energy)
Material recycling(Melt treatment melted slag construction materials)
Landfill approx. 2% (Some shredder dust)
Reuse of parts
Functional destruction of HDDs etc.
NEC Group
NEC Capital Solutions
Reuse of products
Recycle (effectively use resources)
Reuse
Reduce (waste) Suppliers
Materialssuppliers
Reboot Technology Services
Pre-owned goods dealers
Customers
NEC Capital Solutions
Off-lease equipment
Applying the 3R system throughout the Group
The installment sales business involves purchasing equipment on behalf of customers that require funds for capital
expenditures and equipment acquisition, and then selling the equipment to them on installment plans. The purchase
cost, interest, etc. are collected in installments.
Installment Sales
* Electronically Recorded Monetary Claims Act
Electronically Recorded Monetary Claims Act came into force in December 2008. Under this act,
Electronically recorded monetary claims was established as a type of monetary claim. Electronically
recorded monetary claims are expected to become increasingly prevalent as a financial means owing to
the opening of Densai Net, a recording institution, by the Japanese Bankers Association.
76
010_7014401372509.indd 6-7 2013/09/12 10:35:47
TOPICS
The Fukushima Growth Industry Development Fund , in which we invest, acquired shares in CYBERDYNE Inc
(“CYBERDYNE”), a venture company business that originated in the University of Tsukuba. This was the fund’s
first investment project.
CYBERDYNE is a venture company established in Tsukuba city, Japan with the aim of developing practical
applications for the research results of Professor Yoshiyuki Sankai a professor of the Department of Systems and
Information Engineering at the University of Tsukuba. The company carries out research and development, pro-
duces and sells the robot suit HAL® (Hybrid Assistive Limbs), the result of
Professor Sankai’s research. The company set up a new office in Koriyama,
Fukushima, in November 2011 as part of recovery and reconstruction
efforts in Fukushima prefecture following the Great East Japan Earthquake,
and has proactively expanded this office’s business, with a particular
emphasis on product development. The Fukushima Growth Industry
Development Fund decided to invest in CYBERDYNE based on the expecta-
tion that it would contribute to Fukushima prefecture’s rejuvenation, and
we aspire to contribute to business development through our stock acqui-
sition in this company and practical support.
We raised funds through the Environment/Reconstruction Support Syndicated Loan with the principal aim
of supporting the reconstruction following the Great East Japan Earthquake. This is a fundraising program
administered primarily by NEC Capital Solutions and the Development Bank of Japan Inc. (“DBJ”) to sup-
port the initiatives of companies and public service organizations that seek to conduct their operations
with a focus on the environment and to support reconstruction of areas affected by the earthquake with a
syndicated loan formed by 17 financial institutions in Japan based on the DBJ’s environmental rating loans.
We have signed the Agreement on Cooperation with Operations Promoting Environmental Measures and
have received the highest rating on environmental rating loans for nine straight years. We will continue to
collaborate in environment-related fields.
We formed a syndicated loan in February 2012 for the same purpose, and have already executed the
planned 6 billion yen loan. As we anticipate ongoing demand for loans in
the Tohoku region, we have executed a second round of loans.
These funds will be used for reconstruction from earthquake damage
in the Tohoku region and further development, including the construction
of disaster-resistant communities that have established BCM* (business
continuity management) and construction of a “smart city” based on
renewable energy, or the construction of next-generation medical and
nursing systems.
First investment made by “Fukushima Growth Industry Development Fund”
Fundraising through the Environment/Reconstruction Support Syndicated Loan
* BCM (Business Continuity Management)
Management approach enabling a company to continue its business and minimize the reduction of customer services in
the event that a risk, such as a disaster, materializes.
TOPICS 1
TOPICS 2
Procurement of Funds
By utilizing loans at preferential rates (eco-funds) from the Development Bank of Japan Inc. (“DBJ”), we
diversify our financing and also promote introduction of eco-lease and eco-finance projects. In fiscal 2012, we
raised 23 billion yen in eco-funds.
In fiscal 2012, we received a rating of 206 points (out of a possible total of 250 points) in the DBJ
environmental rating program and earned the highest rating for “especially advanced efforts in consideration
of the environment” for the ninth straight year, since 2004 when we were the first in the lease industry to
obtain a rating. We obtained financing under this eco-financing scheme, and received a special award as a
model company for environmental financing.
Use of eco-funds
March, 2011 March, 2012 March, 2013
Loan-to-value ratio(Interest-bearing debt/Total assets)
84.6% 83.0% 83.8%
Direct funding ratio 22.9% 23.2% 14.3%
Rating Agency Long-term
Rating and Investment Information, Inc. (R&I) Issuer Rating: BBB+
Japan Credit Rating Agency, Ltd. (JCR) Issuer Rating: A-
Corporate rating
We raise much of the funding needed to purchase products for new lease and installment sales and to provide
loans from financial institutions and others. The Group’s fundraising must be consistent with operating assets,
and accordingly our fundraising is in line with fluctuations in lease assets.
The Group is careful to ensure that it does not rely on a particular institution or method for its financing in
order to adapt flexibly to fluctuations in financial conditions. In our direct financing, we focus on stable
fundraising while diversifying fundraising methods such as the issuance of corporate bonds and commercial
paper. Moreover, in our indirect financing, we have transactions with a wide range of financial institutions while
maintaining good relationships with major financial institutions.
Basic Policy
98
Meeting with the Governor of Fukushima Prefecture(middle of the picture)
Receiving the Certification of DBJ’s Environmental Rating Evaluation Results
010_7014401372509.indd 8-9 2013/09/12 10:35:48
The Medium-Term Business Plan 2011 is a three-year plan established in April 2011.
The results for fiscal 2012 and the policies for fiscal 2013 are introduced below.
Medium-term goals
Driving force
Capital Solutions
A company that will take the leadin creating social capital infrastructure through ICT
Solutions to customer issues
Expansion of the customer base
Solutions to issues related to the assetsand resources that companies,societies, and countries need
Expand the scope of capital solutions
* BPO
The abbreviation of business process outsourcing that refers to the partial outsourcing of a company’s operations to a third-
party service provider. Entrusting functions to a specialized company can be expected to improve operational efficiency.
A company that will take the lead in creating social capital infrastructure
through ICTLeveraging the NEC brand value, expand the existing leasing, business loan, and asset loan businesses.
Basic policies
Develop and expand capital solutions
Strengthen the relationship with the NEC Group
Create new businesses
Achievements in Fiscal 2012
We took action to expand business and revenue based on the priority policy of “Pursuit of the
Distinctive Features of NEC Capital Solutions Limited (NECAP).”
Strengthen existing businesses
Upgrade management infrastructure along with new business structure
We divided the marketing division for our existing lease busi-
ness into two lines, one dedicated to the public sector and
the other to the private sector, in order to enhance special-
ization for each business type, thus enhancing marketing
qualitatively and quantitatively. The value of contracts exe-
cuted, excluding the small-scale lease business that as a
matter of policy no longer takes on new business, grew at a
rate exceeding the industry average.
We improved efficiency through business reform and optimized business processes by absorbing some of the
functions of RISA Partners staff as well as introducing a new enterprise system (large-scale application soft-
ware packages) in December 2012.
The Medium-Term Business Plan 2011
-20
-10
0
10
20
2009 2010
The Company（％） The lease transaction volume †
2011 2012
Establish Business Activities and Systems Capable of Providing Stable Growth
Fiscal Year 2011 (FY2011) Fiscal Year 2013 (FY2013)
Lay Foundation for Achieving Medium-Term Plan
Mido Holdings Ltd. Overlay-Based Network Virtualization Solution
CONNECTEC JAPAN CorporationAdvanced Damage-Free LSI Packaging
Inventit Inc.M2M Platform & MDM Solution
Groovenauts Inc.Distributed Computing for Game-cloud Services
Transition to new business structure
PIT managed services, which we have been conducting as an ICT-related service business, are a BPO*
cloud service utilizing cutting-edge technology and optimizing customers’ operation and management
of ICT assets. We augmented our service line-up to expand revenue from this service business and
transformed it into a revenue-generating business.
Generating revenue from PIT managed services
We established overseas offices in Hong Kong and Singapore as part of our measures to expand global
business in line with the NEC Group’s strategy. Operations began in March 2013. These offices will
provide flexible local support for NEC business.
Establishment of overseas offices in Hong Kong and Singapore
We established the Innovative Venture Fund
Investment Limited Partnership together with SMBC
Venture Capital Co., Ltd. and the independent
administrative entity Organization for Small &
Medium Enterprises and Regional Innovation in
order to foster innovative venture companies that
help improve the competitiveness of Japanese
industry. The fund, which deploys the financial
solutions strengths of the Sumitomo Mitsui Banking
Group combined with the NEC Group’s technical
judgment, invested in four companies in fiscal 2012.
Launch of innovative venture fund investment limited partnership and investment in four companies
We have established a division specializing in corporate advisory operations in order to expand this
function, and this is already yielding results. The division matches small and medium-sized companies
with business succession issues with our customers and provides support for finding solutions.
Full-scale operations in corporate advisory
Contracts executed in leasing/installment sales business (year on year change, excluding small-scale leasing)
Investment portfolio
Fiscal Year 2012 (FY2012)
Deployment of Specific Activities for Business and Revenue Growth
1110
† source: lease statistics of Japan Leasing Association
010_7014401372509.indd 10-11 2013/09/12 10:35:48
The Corporate Sales Division, which has been achieving an excellent performance, conducts
consultation-based marketing* primarily in the Tokyo metropolitan area. By reorganizing the sales
& marketing structure to include Kansai in this division’s coverage, we aim to expand the operating
base in fiscal 2013. Moreover, in the government office sales business, which requires a long follow-
up period between policy decisions and contracts, we plan to build up prime assets by reinforcing our
integrated relationship with NEC.
The RISA business contributed to revenue in fiscal 2012, and we target substantially higher revenue in fiscal
2013. Specifically, we will pursue new management contracts for regional corporate revitalization funds and
proactive investment activities in light of the expiration of the SME Financing Facilitation Act. In addition, we
aim to record steady profits in debt servicing, one of our core businesses, maximize revenue from Corporate
Solution Funds, and record steady revenue from new finance initiatives.
The Medium-Term Business Plan 2011
Initiatives in the fiscal year ending March 2014
Establish Businesses and a Structure that Enables Stable GrowthPriority policies
Strengthen existing businesses Further stabilize RISA business
Expand corporate sales, which yielded excellent results in fiscal 2012, to Kansai As well as contributing to revenues by establishing new business systems and methodologies,
promote management integration with the Company.
*1 BPR
BPR (Business Process Reengineering) refers to the analysis of workflows and organizations to optimize a business.
*2 BCP
BCP (Business Continuity Planning) refers to plans that businesses prepare in advance of a large-scale disaster or
similar risk in order to ensure that they can continue operations and minimize problems in service delivery for
business partners.
INDIANOIDA CITY
BANGLADESHDACCA VIETNAM
HA-NOI
SINGAPORE
HEAD OFFICE(TOKYO)
HONG KONG
SOUTH KOREASEOUL
TAIWANTAIPEI
JAPAN
PHILIPPINESMANILA
NEW ZEALANDWELLINGTONAUSTRALIA
MELBOURNE
CHINA BEIGING
INDONESIADJAKARTA
MALAYSIAKUALA LUMPUR
THAILANDBANGKOK
PAKISTAN ISLAMABAD
NEC Bases
Our Network
* Consultation-based marketing
A marketing style in which our sales staff use their specialized knowledge to offer the optimal solution (problem-
solving) to resolve the issues faced by client companies, rather than simply selling specific products.
We have established our local offices in Hong
Kong and Singapore, and we are driving our
business activity together with NEC.
Strengthening our relationship with NEC, it
promotes to create proposal opportunities of
our financial solutions in nation wide.
Some of deals have already done, as result, we
have built up good relationship locally.
Investment in new businesses and recoupment of investment
Ensure to make new business launched in fiscal 2012 to profitable faster.
Accelerate to generate New NEC business fields by enhancing collaboration with NEC
Build up and establish of business platform in global business market.
We plan to move to Shinagawa (Tokyo, Japan) together with RISA Partners in mid-November, coinciding
with the 35th anniversary of our founding. This move is an opportunity to ensure adherence to customer-
first principles, improve BCP*2, and improve floor efficiency and communication, thus realizing true Group
management. This move also provides an opportunity to reform work style and promote kaizen to improve
the profitability of business operations.
Company-wide, across-the-board reductions in selling, general and administrative expenses
Promote BPR*1 utilizing new core systems
Transform work patterns by relocating head office
Thorough risk management by strengthening screening functions
Establish Business Activities and Systems Capable of Providing Stable Growth
Fiscal Year 2011 (FY2011) Fiscal Year 2013 (FY2013)
Lay Foundation for Achieving Medium-Term Plan
Fiscal Year 2012 (FY2012)
Deployment of Specific Activitiesfor Business and Revenue Growth
1312
010_7014401372509.indd 12-13 2013/09/12 10:35:48
The Waku-waku Children’s Pond Project is one of
the voluntary environmental activities primarily
carried out by employees of NEC Capital Solutions.
In cooperation with NPO the Asaza Fund, and local
governments, volunteers visit schools throughout
Japan to promote environmental education by
helping to create biotopes.
Through a series of programs, including
lectures, the project helps youngsters deepen their
We aspire to contribute to the sustainable
development of society through the integration of
ICT and environmental finance.
We will utilize the strengths specific to the NEC
Group, which offers advanced environmental ICT
technology and services, and add the new concept
of integrating ICT and environmental finance to our
Support for the Waku-waku (Exciting) Children’s Pond Project
Environmental Philosophy
knowledge of local creatures and learn about the
practicalities and importance of ecosystem
conservation. In this way, by offering opportunities
for firsthand experience, the project raises
awareness among young people of the need to
preserve biodiversity.
In fiscal 2012, we created biotopes for nine
schools in Tokyo.
previous concept of improving customers’ and
society’s environmental benefit (value). This will take
our activities thus far to the next level and enable us
to pursue solutions focused more tightly on social
issues related to sustainable development such as
low carbon, energy and social infrastructure.
Contributing to the CommunityEnvironmental Initiatives
The NEC Group launched the NEC “TOMONI” Project
(“We are with you”) to support reconstruction efforts
after the Great East Japan Earthquake. Group
employees, including NEC Capital Solutions
employees, volunteered to lend a hand in the areas
affected by the earthquake. The NEC Group will
continue to pool its strengths to provide support in
line with conditions and needs in the affected
communities to restore them as soon as possible.
Great East Japan Earthquake reconstruction volunteer work
NEC“TOMONI” Project
Residents of Iitate in Fukushima prefecture have
continued to live in temporary accommodation away
from their village since the accident at the Fukushima
Daiichi Nuclear Power Plant triggered by the Great
East Japan Earthquake. The Iitate Carnation Society
was organized by housewives and elderly women
living in temporary housing who wanted to pick up
the pieces and get on with their lives. We provide
ongoing support to the Carnation Society, which
makes and sells handicrafts made from kimono.
We helped with the society’s exhibition sales as
volunteers in Singapore in January 2013, where we
set up an
overseas office.
Support for Iitate
Corporate Social Responsibility
We were the pioneer in the industry to acquire ISO
14001 certification in 1999, and have continued to
pursue environmental management. In addition, we
were among the first to recognize that leasing is a
recycling-based business, and have helped to raise
customers’ and society’s environmental benefit (value)
and their environmental awareness overall. In 2011 we
established a new environmental philosophy and
environmental policy, and are conducting increasingly
sophisticated environmental activities.
Reducing the environmental burden Improving the environmental benefit
Activity periodZero
Plus
Minus
Reducing the environmental burdens of society and customersStreamlining business management
Reducing paper and other office wasteReducing electricity use and industrial waste
Valued activities [CS and CSR (social contribution)]
Unobtrusive activities [Reducing the Company’s
environmental burden to zero]
Value
Basic Concept of Environmental Benefit and Environmental Burden
We have established an environmental policy that will
serve as action guidelines enabling us to concretely
realize our environmental philosophy.
We engage in the five priority initiatives of
“support for expansion of new energy and energy
conservation,” “pursuit of 3Rs for products with
expired leases,” “activities to reduce our environmental
burden,” “creation of human resources with strong
environmental awareness” and “environment-oriented
financing” in order to achieve the goals of our
environmental policy—“creation of a low-carbon
society,” “development of a recycling-based society”
and “biodiversity conservation.”
Environmental Policy
1 Accelerate development of a low-carbon, recycling-based society by combining cutting-edge ICT technology designed to promote new energy and energy conservation with our unique services, such as eco-leases and eco-finance.
2 Strive to reduce the environmental impact of our business activities and pursue activities related to biodiversity conservation.
3 Comply with environmental laws and regulations and other requirements to which the Company has agreed.
4 Act in line with environmental objectives and goals based on these policies and strive for continuous improvements to the environmental management system through a regular review by the Environmental Management Committee.
1514
010_7014401372509.indd 14-15 2013/09/12 10:35:50
NEC Capital Solutions is an equity-method affiliate of
NEC (a major shareholder with a 37.66% direct equity
stake as of March 31, 2013), and as the NEC Group’s
only domestic financing company, our management
practices are aligned with those of the NEC Group and
enable us to help our customers resolve their
management issues based on our own unique
approach. At the same time, we bear the business
risks typical of the financing industry, and are enhancing
our independence by setting up risk management
infrastructure in light of the risks, hiring talented human
resources in the financial field and creating a corporate
culture suited to the financial sector.
Major shareholders
Relationship with NEC Group
Corporate Governance
In order to achieve sustainable growth and maximize corporate value, NEC Capital
Solutions views strengthening of corporate governance as one of the most important
issues, and is pursuing institutional reform of management.
We are an equity-method affiliate of Sumitomo Mitsui
Finance and Leasing Company, Limited (a major
shareholder with a 25.03% direct equity stake as of
March 31, 2013).
Although NEC Capital Solutions and Sumitomo
Mitsui Finance and Leasing Company, Limited conduct
similar businesses, they impose no restrictions at all
on the operations of NEC Capital Solutions, nor is
Sumitomo Mitsui Finance and Leasing Company,
Limited represented by directors on the board of NEC
Capital Solutions.
Relationship with Sumitomo Mitsui Finance and Leasing Company, Limited
The Company’s Board of Auditors consisting of four
auditors of whom two are outside auditors, meets
every quarter, and holds additional meetings as
necessary.
In addition, auditors meet with the president of
the Company every month, attend business
meetings and other important internal meetings, and
To facilitate its CSR activities, the Company
established the CSR Promotion Committee and the
CSR Promotion Section. The CSR Promotion
Committee is headed by the President and consists
Reinforcement of audit function
System for CSR promotion
The Company’s Board of Directors consists of eight
directors, of whom four are outside directors. Two of
these outside directors are independent with no
interests in the Company or major shareholders, and
no risk of conflicts of interest with general
shareholders. Their names are submitted as
independent directors in accordance with the Tokyo
Stock Exchange’s stipulations.
We expect outside directors to provide advice
on management from an objective perspective
based on their deep understanding and rich
experience of the financial business, ICT business
and corporate management.
In addition, a Compensation Committee
consisting primarily of outside directors discusses
policies, levels and systems for director
compensation as a voluntary advisory body for the
Board of Directors.
Role of outside directors
Under the leadership of the president, we are
developing an internal control system based on the
Basic Policy on Internal Control System under the
Companies Act. The internal control system is
continually reviewed and strengthened so that the
Company can build and develop an efficient and
legitimate compliance management control system.
The Company’s Internal Control Committee,
chaired by the president, discusses policies on
developing, promoting, maintaining and strengthening
Internal control system and compliance
We have established a Code of Conduct that
stipulates that all directors and employees are
required to comply with relevant laws in their daily
business activities and to take action consistent
with social ethics.
In addition, in order to reliably implement this
Code of Conduct, we provide compliance education
to all directors and employees and also educate
employees on compliance and provide information
Compliance concept and promotion system
directly receive reports about operations from
directors and employees.
The Auditing Department gives specific advice
and recommendations on improving operations
through internal audits, and provides advice on the
design and operation of internal controls and
evaluation of their maintenance and administration.
primarily of Board members who discuss CSR
activities from the perspective of the overall
Company. The CSR Promotion Section examines
specific CSR initiatives.
the company-wide internal control system; reinforcing
internal audits; establishing and refining regulations;
establishing and improving various systems; and
implementing training programs with the aim of
ensuring compliance and executing business efficiently.
The Company also endeavors to ensure the reliability
and appropriateness of its financial reporting in order to
maintain and improve the system from the perspective
of “ensuring reliability of financial reporting” based on
the Financial Instruments and Exchange Act.
through internal company newsletters.
Regarding the Company’s compliance
promotion system, the Internal Controls Committee,
which meets once a quarter, oversees all of the
Company’s initiatives. On a regular basis, the
Auditing Department conducts internal audits on
the status of compliance with laws, articles of
incorporation and regulations.
PresidentRisk Management Task ForceEnterprise Risk Management Department General Affairs Department
General managerInternal Control Audit (Auditing Department)
ReportInstruction
Report
Cooperation
CooperationCooperationCooperation
Cooperation
Report
ChairpersonSignificant Risk Occurs
Loan Review (Auditing Department)
Other Risks(Enterprise Risk Management Department)
Information Systems(Information Systems Department
Financial Report(Controller Department)
Compliance(Auditing Department)
Interest Rate Riskliquidity Risk
Risk Management Committee
Internal Control Committee
Information Security Committee
ALM CommitteeManagement Risk
Strategy Risk
Management Committee
Promotion/Enhancement /Improvement
Internal Control System
1716
010_7014401372509.indd 16-17 2013/09/12 10:35:50
Officers: Directors and Corporate AuditorsCorporate Governance
We have established a whistleblower system both
inside and outside the Company so that employees
who become aware of, or suspect, wrongdoing can
Internal reporting system
We have set up the Information Security Committee
and prepared basic policies on information security to
maintain and improve information security throughout
the Company. In addition, we properly store and
manage documents related to important meetings and
Information management system
The Company has prepared Risk Management
Regulations by anticipating and classifying specific
risks in order to avert and minimize risks in the event
of any unexpected occurrence. The Company has
also established a Risk Management Committee,
chaired by the president, to develop a risk
management system for the following purposes: to
determine overall risks, discuss countermeasures,
communicate information quickly and accurately, and
fully comply with directions and orders in the event
that a risk materializes.
The Risk Management Office in the Corporate
Risk management
The Company has established a business continuity
plan (BCP) in which the basic policy is set out. In
the event of a major earthquake or other disaster,
we will perform the necessary tasks for business
continuity and speedy restoration in accordance
with the basic policy.
Business continuity plan (BCP)
The Company’s Code of Conduct stipulates that
employees shall have no relations with antisocial forces
that threaten the order and security of civil society, and
Policy on exclusion of antisocial forces
BCP external evaluation through the SMBC Business Continuity Assessment Loan Program
The Company concluded an agreement with SMBC to raise funds through the SMBC Business Continuity Assessment Loan Program. This was the first such agreement concluded by a leasing company in Japan. This scheme will enable the Company to receive financing support in emergencies, and we believe it is also significant in that an external assessment body has approved our business continuity plan. The Company made use of the Great East Japan Earthquake as an opportunity to strengthen the BCP, which is one of the most important issues for management, and schemes for operating and improving the BCP.
report it anonymously. Steps are taken to ensure that
the whistleblower does not suffer any unfavorable
consequences.
job execution pursuant to internal rules.
We have gained ISO27001 certification, the
international standard for information security
management systems, to ensure and maintain the
confidentiality of the Company’s information assets.
Planning Department, which had been promoting
company-wide risk management, was reorganized as
the Enterprise Risk Management Department in January
2013 in order to strengthen the risk management
system at the consolidated level, and reinforce the risk
management system in a multifaceted manner.
The Company applies a quantitative approach to
risk management and measures credit, interest rate and
other risks in a uniform manner. We total the risk
exposure and compare it to the Company’s capital and
use the results to confirm that the Company’s balance
sheet remains healthy.
that all employees shall be resolute in their stand against
such forces.
From left: Ryozo Aoki, Soichiro Matsuyama, Masahiro Annaka, Tomoo Imazeki
Notes:1. Messrs. Shigehiko Yamamoto, Tetsuya Fujioka, Takashi Nawa and Katsutoshi Aoki are outside directors.2. Messrs. Shigeho Yamamoto and Takashi Nawa are independent directors in line with the Tokyo Stock Exchange’s regulations.3. Messrs. Naotaka Minami and Yoshikazu Funatsu are outside corporate auditors.
President Masahiro Annaka
Members of the Board Soichiro Matsuyama
Tomoo Imazeki
Ryozo Aoki
Shigehiko Yamamoto
Tetsuya Fujioka
Takashi Nawa
Katsutoshi Aoki
Corporate Auditors Tatsuoki Shibuya
Junichi Inoue
Naotaka Minami
Yoshikazu Funatsu
As of June 26, 2013
1918
010_7014401372509.indd 18-19 2013/09/12 10:35:51
CONTENT S
21 5-Year Summary (Consolidated)
22 Operating and Financial Review
24 Consolidated Balance Sheets26 Consolidated Statements of Income and Comprehensive
Income27 Consolidated Statements of Changes in Net Assets
28 Consolidated Statements of Cash Flows
29 Notes to Consolidated Financial Statements
49 Independent Auditor’s Report
Millions of YenThousands of U.S. Dollars
2013 2012 2011 2010 2009 2013
For the year:
Revenues ¥229,205 ¥232,760 ¥227,622 ¥237,379 ¥260,995 $2,438,089
Income (loss) before income taxes and minority interests 9,315 9,099 7,100 5,374 (6,172) 99,080
Net income (loss) 4,333 3,974 3,720 3,122 (3,806) 46,092
At year-end:
Total assets ¥731,973 ¥793,341 ¥821,461 ¥741,253 ¥754,126 $7,786,121
Total net assets 79,728 82,368 73,188 60,040 56,388 848,086
Yen U.S. Dollars
Per share data:
Basic net income (loss) ¥201.23 ¥184.55 ¥172.78 ¥145.01 ¥(176.75) $2.14
Cash dividends 44.00 44.00 44.00 44.00 44.00 0.47
Key indicators (%):
Price earnings ratio 11.68 7.43 7.89 8.32 – –
Number of employees 629 690 761 519 500 –
The U.S. dollar amounts represent translation of Japanese yen, for convenience only, at the rate of ¥94.01=U.S.$1.00 in effect on March 31, 2013.
NEC Capital Solutions LimitedYears ended March 31
5-Year Summary (Consolidated)
21
FinancialSection.
010_7014401372509.indd 20-21 2013/09/12 10:35:52
500
0
200
300
400
100
Billions of yen
2012 2013
■ Leasing and Installment sales business■ Other business■ Loan business
279.0
438.9
156.9
3.0
264.8
417.2
149.5
2.9
180
0
120
60
Billions of yen
2012 2013
■ Information and communication equipment■ Others
117.7
35.1
156.1
3.4
102.3
30.0
135.6
3.3
■ Office equipment
800
600
Billions of yen
700
0
200
300
400
500
100
2012 2013
■ Leasing and Installment sales business■ Loan business
648.8
429.7
160.6
56.0
703.7
449.5
170.9
83.4
■ RISA business
1. Business ResultsIn the fiscal year ended March 31, 2013, the Japanese economy continued on a gradual recovery track, supported by reconstruction demand associated with the Great East Japan Earthquake of March 11, 2011. Following the dissolution and the general election for the House of Representatives in November 2012 and the change of government toward the end of the year, rising expectations concerning the future outlook led to major changes in the market environment. Due to the announcement of new economic policies, collectively known as Abenomics, the yen weakened and share prices rose, corporate earnings improved centering on large companies, and forecasts of business conditions became more optimistic in view of rising exports and the beneficial effects of economic and monetary policies. Although these changes in the market raised expectations, it remains unclear whether a full-scale recovery of the real economy will materialize. Since realization of a “growth strategy that encourages private-sector investment” the third arrow of Abenomics, and whether the Japanese economy will enter a “virtuous cycle of growth and wealth creation” depend on the successful execution of various economic policies and the trend of overseas economies, it will take some time before the prospects for the Japanese economy become clearer.
In the leasing industry in which the Group operates, based on reconstruction demand, etc., the upward trend continued from the previous fiscal year. Mainly due to increases in construction machinery and transportation equipment, the total value of leasing contracts in the leasing industry increased by 6.6% from the previous year to ¥4,890 billion, a growth rate exceeding that of the previous year (based on Lease Statistics published by the Japan Leasing Association).
In these circumstances, the Leasing and Installment Sales Business of the Company sought to maintain the transaction scale by utilizing good business relationships with government offices, which are our main customers, as well as seeking demand in the private sector by promoting consulting-type sales. As a result, the value of contracts secured and the value of contracts executed both increased compared with the previous fiscal year.
In the Loan Business, the Company aimed to handle finance projects for a wider range of customers, extending beyond the existing business channels of NEC Group, while also promoting collaboration with RISA Partners, Inc., which became a consolidated subsidiary in December 2010. The value of contracts secured and the value of contracts executed both increased compared with the previous fiscal year, as was the case for the Leasing and Installment Sales Business.
In the Risa Business, the sale of land in Higashi-ueno, which had been a concern, was completed and progress was made toward withdrawal from the real estate business following the consolidation of Risa Partners. In addition to the net revenue from the fund business, the Company started to generate stable net revenue from the finance business, which the Company launched in the year under review.
Contracts executedby business
Leasing business contractsexecuted by equipment
Operating assets balancesby business
2. Forecasts for Fiscal Year Ending March 31, 2014
The Japanese economy in the fiscal year ending March 31, 2014, is expected to remain on a gradual recovery track based on depreciation of the yen and rising share prices led by the three arrows of Abenomics (dynamic monetary easing, agile fiscal policies, and a growth strategy that encourages private-sector investment), last-minute demand prior to an increase in consumption taxes in April 2014, and other factors. On the other hand, careful attention should be paid to such matters as the effect of the expiration of the Finance Facilitation Act in March 2013, and developments in overseas such as the possibility of a resurgence of the European sovereign debt crisis and the slowing of the U.S. and emerging economies, and the political situation on the Korean Peninsula. In the leasing industry, following the application of the new lease accounting standards in 2008 and the revision of the tax system, the size of the leasing market halved from its peak. However, there are signs that customers are overcoming their reluctance to use leasing services and the value of leasing contracts executed in the fiscal year ended March 31, 2013 throughout the leasing industry exceeded the previous year’s figure, a trend continuing from the previous year. This was mainly due to a large increase in leasing contracts executed for construction machinery from the previous year owing to demand for reconstruction following the Great East Japan Earthquake. Leasing contracts executed for various other equipment also increased compared with the previous year. Thus, there are indications that the value of leasing contracts executed, even excluding reconstruction demand, has bottomed out. Given this context, in order to grow as a company with “NEC” in its name and to contribute to the revival of Japan, the NEC Capital Solutions Group intends to play a leading role in the creation of social capital infrastructure based on ICT technologies through solutions businesses. As a fundamental policy, the Group will strive to expand capital solutions based on a consulting sales style, strengthen its relationship with the NEC Group and development of full-scale overseas operations. The value of leasing contracts executed is expected to increase, minimizing the decline in revenues of the Leasing and Installment Sales Business. At the same time, the Group will strengthen the Loan Business and Other Business. On a consolidated basis, the Group forecasts revenues of ¥210 billion for the fiscal year ending March 31, 2014, an 8.4% decrease from the previous fiscal year. This is because there were major sales of real estate for the year ended March 31, 2013, and the increase in total revenue appears a certain period after the increase in the value of leasing contracts executed. Furthermore, regarding the credit cost, which has turned out to be a gain, the Group has inspected recent balance sheets and calculated EL (Expected Loss) and UL (Unexpected Loss), as well as estimating costs of each credit expected to occur, and consolidated net income is forecast to be ¥3 billion.
In Other Business, the Company increased the scope of the business by expanding the range of ICT asset operating services covering the entire life cycle of ICT equipment from purchase and installation to removal and sale.
With regard to the development of new businesses, the Group established overseas bases to which personnel have been assigned since March 2013. For the time being, the Group plans to establish a business foundation by cooperating with the overseas operations of NEC.
The value of contracts executed is on a recovery track due to promotion of these business activities, it has yet to contribute sufficiently to operating assets and revenue. Accordingly, total revenue decreased compared to the previous fiscal year. On the other hand, selling, general and administrative expenses decreased due to a decrease in allowance for doubtful accounts, which led to an increase in operating income.
As a result of the Company’s initiatives, total revenues declined 1.5% year on year, to ¥229,205 million ($2,438,089 thousand) on a consolidated basis for the fiscal year under review. Operating income rose 12.8%, to ¥9,132 million ($97,144 thousand), and net income rose 9.0%, to ¥4,333 million ($46,092 thousand).
A description of outcomes by business segment is provided below:
(i) Leasing and Installment Sales BusinessTotal revenues in this segment decreased 2.4% from the previous year, to ¥182,790 million ($1,944,366 thousand). Operating income decreased 6.2%, to ¥10,747 million ($114,315 thousand), despite a decrease in selling, general and administrative expenses resulting from a decrease in the provision for allowance for doubtful accounts.
(ii) Loan BusinessTotal revenues in this segment were down 5.8% from the previous year, to ¥4,253 million ($45,237 thousand). Operating income improved by ¥2,564 million ($27,274 thousand) from the previous year, to ¥1,244 million ($13,229 thousand), due to a decrease in selling, general and administrative expenses resulting from a decrease in the provision for allowance for doubtful accounts.
(iii) Risa BusinessDue to major sales of real estate, total revenues in this segment increased by 6.2% from the previous fiscal year, to ¥27,579 million ($293,362 thousand). Operating income improved by ¥1,396 million ($14,852 thousand) from the previous fiscal year, to ¥143 million ($1,520 thousand), due to decreases in funding costs and selling, general and administrative expenses such as outsourcing expenses and expenses related to the real estate business.
(iv) Other BusinessDue to an increase in sales related to cancellations and other factors, total revenue in this segment increased by 15.9% from the previous fiscal year, to ¥17,636 million ($187,598 thousand). Selling, general and administrative expenses increased mainly due to an increase in expenses related to new businesses, and an operating loss of ¥799 million ($8,496 thousand) was recorded.
3. Assets, Liabilities, and Net Assets Total assets at the end of the fiscal year under review decreased ¥61,368 million ($652,780 thousand) year on year, to ¥731,973 million ($7,786,121 thousand). This decrease mainly reflected a decrease of ¥21,980 million ($233,804 thousand) in lease receivables and investment in leases and a decrease of ¥17,192 million ($182,871 thousand) in real estate for sale, offsetting an increase of ¥4,801 million ($51,068 thousand) in leased assets. Liabilities at the end of the fiscal year under review decreased ¥58,728 million ($624,699 thousand) year on year, to ¥652,245 million ($6,938,035 thousand). This decrease mainly reflected a decrease of ¥69,100 million ($735,024 thousand) in short-term borrowings and a decrease of ¥3,021 million ($32,133 thousand) in current portion of long-term debt, offsetting an increase of ¥27,089 million ($288,156 thousand) in long-term debt. Net assets at the end of the fiscal year under review decreased ¥2,640 million ($28,081 thousand) year on year, to ¥79,728 million ($848,086 thousand). This decrease primarily reflected a decrease of ¥947 million ($10,078 thousand) in retained earnings for dividends, a decrease of ¥5,507 million ($58,574 thousand) in minority interests and a decrease of ¥520 million ($5,535 thousand) in accumulated other comprehensive income, offsetting an increase of ¥4,333 million ($46,092 thousand) in retained earnings for net income.
4. Cash Flow StatusCash and cash equivalents at the end of the fiscal year under review were ¥35,239 million ($374,840 thousand). The following is a description of cash flows and significant factors:
(Cash Flows from Operating Activities)Net cash provided by operating activities was ¥42,638 million ($453,545 thousand), compared with cash inflows of ¥32,736 million for the previous fiscal year. The major factors were a decrease in lease receivables and investment in leases of ¥21,980 million ($233,804 thousand) and a decrease in real estate for sale of ¥17,040 million ($181,260 thousand).
(Cash Flows from Investing Activities)Net cash provided by investing activities was ¥5,808 million ($61,779 thousand), compared with cash outflows of ¥6,207 million for the previous fiscal year. This was primarily attributable to proceeds from sales of investment securities of ¥4,047 million ($43,046 thousand) and proceeds from redemption of securities of ¥2,000 million ($21,274 thousand), offsetting payments of loans receivable of ¥2,043 million ($21,726 thousand).
(Cash Flows from Financing Activities)Net cash used in financing activities was ¥53,572 million ($569,851 thousand), compared with cash outflows of ¥32,113 million for the previous fiscal year. This was primarily attributable to repayment of long-term debt of ¥150,862 million ($1,604,747 thousand) and a decrease in short-term borrowings of ¥69,026 million ($734,242 thousand), offsetting an increase in long-term debt of ¥173,745 million ($1,848,150 thousand).
300
0
100
150
200
250
50
Billions of yen
2012 2013
■ Loan business■ Leasing and Installment sales business
182.8
17.627.6
229.2
4.3
187.2
15.226.0
232.8
4.5
■ RISA business ■ Other business
700
0
200
300
400
500
600
100
Billions of yen
20132012
■ Payable under securitized lease receivable■ Long-term debts ■ Short-term borrowing
15.067.0
613.1
511.9
13.3
25.0125.0
658.1
480.9
24.4
5.92.9
■ Bonds■ Commercial paper
1.4
1.2
0
0.4
0.6
0.8
1.0
0.2
2012 2013
%
Funding cost ratio (%)= Cost of funding ÷ average balance ofinterest-bearing debts
0.96 0.97
Revenue by business Interest-bearing debts Funding cost ratio
(excluding small-scale leasing)2012 2013
(Reference) Including Small-scale Leasing 149.5 156.9 2322
Operating and Financial Review
011_7014401372509.indd 22-23 2013/09/12 10:47:02
AssetsMillions of Yen
Thousands of U.S. Dollars (Note 1)
2013 2012 2013
Current assets:
Cash and cash equivalents (Notes 10, 11) ¥ 35,239 ¥ 40,304 $ 374,840
Time deposits 588 – 6,250
Lease receivables and investment in leases (Notes 6, 9, 11) 390,223 412,203 4,150,864
Accounts receivable:
Installment sales (Note 11) 13,755 16,245 146,315
Loans (Notes 6, 11, 16) 164,950 172,723 1,754,599
Leases (Note 11) 17,721 18,118 188,496
Purchased receivables (Notes 10, 11) 17,429 16,405 185,398
Allowance for doubtful accounts (15,063) (16,187) (160,231)
Operational investment securities (Notes 4, 11) 13,043 17,779 138,737
Real estate for sale (Note 10) 11,022 28,214 117,248
Securities (Notes 4, 11) – 1,992 –
Deferred tax assets (Note 7) 5,890 7,789 62,657
Other (Note 11) 5,342 6,070 56,833
Total current assets 660,139 721,655 7,022,006
Property and equipment, net:
Leased assets 24,957 20,156 265,475
Allowance for loss on disposal of property for lease – (9) –
Assets held for own use 654 863 6,957
Property and equipment, net 25,611 21,010 272,432
Intangible assets:
Computer programs leased to customers 739 859 7,858
Goodwill 8,687 9,764 92,402
Software and other 5,761 6,379 61,284
Total intangible assets 15,187 17,002 161,544
Investments and other assets:
Investment securities (Notes 4, 10, 11) 14,282 25,392 151,920
Deferred tax assets (Note 7) 3,473 3,335 36,940
Other (Note 11) 18,011 11,671 191,597
Allowance for doubtful accounts (4,730) (6,724) (50,318)
Total investments and other assets 31,036 33,674 330,139
Total assets ¥731,973 ¥793,341 $7,786,121
The accompanying notes are an integral part of these statements.
NEC Capital Solutions LimitedMarch 31, 2013 and 2012
Liabilities and net assetsMillions of Yen
Thousands of U.S. Dollars (Note 1)
2013 2012 2013
Current liabilities:
Short-term borrowings (Notes 5, 10, 11) ¥ 80,256 ¥149,356 $ 853,700
Current portion of long-term debt (Notes 5, 6, 10, 11) 142,834 145,855 1,519,354
Notes and accounts payable – trade (Notes 11, 16) 13,429 16,081 142,845
Accrued income taxes (Note 11) 43 4,562 459
Deposits received (Note 11) 5,972 5,949 63,529
Allowance for head office transfer costs 38 – 404
Allowance for loss on disaster 10 12 105
Other (Note 11) 10,887 15,970 115,790
Total current liabilities 253,469 337,785 2,696,186
Long-term liabilities:
Long-term debt (Notes 5, 6, 10, 11) 390,012 362,923 4,148,627
Accrued retirement benefits (Note 8) 1,571 1,476 16,709
Other 7,193 8,789 76,513
Total long-term liabilities 398,776 373,188 4,241,849
Total liabilities 652,245 710,973 6,938,035
Net assets:
Shareholders’ equity
Common stock 3,777 3,777 40,175
Authorized: 86,000,000 shares
Issued: 21,533,400 shares
Capital surplus (Note 15) 4,648 4,648 49,442
Retained earnings (Note 15) 59,336 55,949 631,161
Treasury stock, at cost 349 shares in 2013 and 2012 (1) (1) (5)
Total shareholders’ equity 67,760 64,373 720,773
Accumulated other comprehensive income
Net unrealized gains on marketable securities 222 523 2,359
Deferred (losses) gains on hedging derivatives (232) 17 (2,467)
Foreign currency translation adjustments 21 (9) 228
Total accumulated other comprehensive income 11 531 120
Minority interests 11,957 17,464 127,193
Total net assets 79,728 82,368 848,086
Total liabilities and net assets ¥731,973 ¥793,341 $7,786,121
2524
Consolidated Balance Sheets
011_7014401372509.indd 24-25 2013/09/12 10:47:02
Consolidated Statements of IncomeMillions of Yen
Thousands of U.S. Dollars (Note 1)
2013 2012 2013Revenues:
Leases ¥182,319 ¥186,519 $1,939,357Loans and installment sales 4,520 4,807 48,083Other 42,366 41,434 450,649
Total revenues 229,205 232,760 2,438,089
Costs:Leases 163,565 164,805 1,739,870Interest expense 6,183 6,428 65,770Other 36,212 33,757 385,187
Total costs 205,960 204,990 2,190,827Gross profit 23,245 27,770 247,262
Selling, general, and administrative expenses 14,113 19,674 150,118Operating income 9,132 8,096 97,144
Other income (expenses):Interest and dividend income 42 52 452Interest expense (74) (77) (792)Equity in earnings of affiliates 43 29 460Gain on sales of investment securities 63 307 673Foreign exchange gains (losses) 47 (1) 502Gain on redemption of investments in capital 58 – 612Loss on disposal of property and equipment – (17) –Rent expenses (16) (49) (172)Gain on extinguishment of debts 212 – 2,251Reversal of provision for doubtful accounts – 760 –Reversal of provision for loss on disaster – 99 –Gain on reversal of subscription rights to shares – 70 –Loss on retirement of noncurrent assets (71) – (759)Impairment loss (87) – (930)Head office transfer cost (87) – (930)Loss on valuation of investment securities (14) (178) (150)Other, net 69 36 737
Income before distribution of net income from anonymous partnerships, income taxes and minority interests 9,317 9,127 99,098
Distribution of net income from anonymous partnerships 2 28 18Income before income taxes and minority interests 9,315 9,099 99,080
Income taxes (Note 7):Current 1,720 6,928 18,292Deferred 2,105 (2,159) 22,389
3,825 4,769 40,681
Income before minority interests 5,490 4,330 58,399Minority interests in net income 1,157 356 12,307Net income ¥ 4,333 ¥ 3,974 $ 46,092
Consolidated Statements of Comprehensive IncomeMillions of Yen
Thousands of U.S. Dollars (Note 1)
2013 2012 2013Income before minority interests ¥5,490 ¥4,330 $58,399Other comprehensive (loss) income:
Net unrealized (losses) gains on marketable securities (492) 501 (5,237)Deferred losses on hedging derivatives (249) (127) (2,650)Foreign currency translation adjustments 30 (1) 322
Total other comprehensive (loss) income ¥ (711) ¥ 373 $ (7,565)Comprehensive income ¥4,779 ¥4,703 $50,834
Comprehensive income attributable to:Comprehensive income attributable to owners of the parent 3,813 4,315 40,557Comprehensive income attributable to minority interests 966 388 10,277
Yen U.S. Dollars (Note 1)
2013 2012 2013Amounts per share:
Basic net income ¥201.23 ¥184.55 $2.14Cash dividends applicable to the year 44.00 44.00 0.47
The accompanying notes are an integral part of these statements.
NEC Capital Solutions LimitedYears ended March 31, 2013 and 2012
Millions of Yen
Shareholders’ Equity Accumulated other comprehensive income
Subscription rights to shares
Minority interests
Total net assets
Number of shares issued (Thousands of
shares) Common stock Capital surplusRetained earnings
Treasury stock
Net unrealized gain on
marketable securities
Deferred (losses) gains on hedging derivatives
Foreign currency
translation adjustments
Balance at March 31, 2011 21,533 ¥3,777 ¥4,648 ¥52,955 ¥(1) ¥ 53 ¥ 145 ¥(8) ¥ 70 ¥11,549 ¥73,188
Net income 3,974 3,974Cash dividends (947) (947)Change of scope of equity method (33) (33)
Purchase of treasury stock – –Other, net 470 (128) (1) (70) 5,915 6,186
Balance at March 31, 2012 21,533 3,777 4,648 55,949 (1) 523 17 (9) – 17,464 82,368
Net income 4,333 4,333Cash dividends (947) (947)Change of scope of consolidation 1 1
Purchase of treasury stock – –Other, net (301) (249) 30 – (5,507) (6,027)
Balance at March 31, 2013 21,533 ¥3,777 ¥4,648 ¥59,336 ¥(1) ¥ 222 ¥(232) ¥21 ¥ – ¥11,957 ¥79,728
Thousands of U.S. Dollars (Note 1)
Shareholders’ Equity Accumulated other comprehensive income
Subscription rights to shares
Minority interests
Total net assetsCommon stock Capital surplus
Retained earnings
Treasury stock
Net unrealized gain on
marketable securities
Deferred (losses) gains on hedging derivatives
Foreign currency
translation adjustments
Balance at March 31, 2012 $40,175 $49,442 $595,133 $(5) $ 5,566 $ 183 $ (94) $– $185,768 $876,168Net income 46,092 46,092Cash dividends (10,078) (10,078)Change of scope of consolidation 14 14Purchase of treasury stock – –Other, net (3,207) (2,650) 322 – (58,575) (64,110)
Balance at March 31, 2013 $40,175 $49,442 $631,161 $(5) $ 2,359 $(2,467) $228 $– $127,193 $848,086
The accompanying notes are an integral part of these statements.
NEC Capital Solutions LimitedYears ended March 31, 2013 and 2012
2726
Consolidated Statements of Income and Comprehensive Income Consolidated Statements of Changes in Net Assets
011_7014401372509.indd 26-27 2013/09/12 10:47:02
1. Basis of PresentationNEC Capital Solutions Limited (the “Company”) maintains its books of account in accordance with the provisions set forth in the Corporation Law of Japan (the “Law”), and the Financial Instruments and Exchange Act of Japan and in conformity with accounting principles generally accepted in Japan (“Japanese GAAP”), which are different in certain respects as to the application and disclosure requirements of International Financial Reporting Standards. The accompanying consolidated financial statements have been compiled from the consolidated financial statements that were filed with the Director of the Kanto Local Finance Bureau as required by the Financial Instruments and Exchange Act of Japan. In preparing the accompanying consolidated financial statements, certain reclassifications and rearrangements have been made to the consolidated financial statements issued domestically in order to present them in a format that is more familiar to readers outside Japan. In addition, certain reclassifications of previously reported amounts have been made to conform to the current year presentation. The translation of Japanese yen amounts into U.S. dollar amounts is included solely for convenience, as a matter of arithmetic computation only, at ¥94.01 = U.S.$1.00, the approximate rate of exchange in effect on March 31, 2013. This translation should not be construed as a representation that Japanese yen amounts have been, could have been, or could in the future be, converted into U.S. dollar amounts at this or any other rate.
2. Summary of Significant Accounting Policies
a) ConsolidationThe consolidated financial statements include the accounts of the Company and its 48 consolidated subsidiaries for the year ended March 31, 2013, such as Capitech Limited, TEAM Cignus Limited, RISA Partners, Inc. (40 consolidated subsidiaries for the year ended March 31, 2012). NEC Capital Solutions Singapore Pte. Limited, NEC Capital Solutions Hong Kong Limited, Denshi Saiken Acceptance Limited and 2 other companies are included in consolidated subsidiaries since their establishment in the fiscal year ended March 31, 2013. Reboot Technology Services Limited is also included in consolidated subsidiaries due to additional stock acquisition made in the fiscal year ended March 31, 2013. Anonymous partnership R-J Fund is excluded from the scope of consolidation due to liquidation of anonymous partnerships. Non-consolidated subsidiaries are excluded from consolidation because they are small in scale, and their total assets, net revenues, net income (the Company’s interest share) and retained earnings (the Company’s interest share), etc. are not material to the Company’s consolidated financial statements. With regard to investment in affiliated companies, Energy and Partners Limited is accounted for by the equity method due to the stock acquisition in the fiscal year ended March 31, 2013. Reboot Technology Services Limited was excluded from the scope of affiliated companies accounted for by the equity method due to the additional stock acquisition and inclusion in consolidated subsidiaries in the fiscal year ended March 31, 2013. The Company does not apply the equity method to certain non-consolidated subsidiaries and affiliates because net income (the Company’s interest share) and retained earnings (the Company’s interest share) of these companies are not material to the Company’s consolidated financial statements even though the equity method is not applied, and these companies are not material as a whole. The financial statements of affiliated companies used by the Company in applying the equity method, whose fiscal year-ends are different from the Group’s fiscal year-end, are those as of their respective fiscal year-ends. The fiscal year-ends of 39 consolidated subsidiaries are different from the Group’s fiscal year-end, and are mainly December 31. Anonymous partnership Phoenix was consolidated by using its financial statements as of the Group’s fiscal year-end, which are prepared solely for consolidation purposes. With regard to other consolidated subsidiaries,
financial statements as of their respective fiscal year end are used for consolidation and necessary adjustments are made to the consolidated financial statements to reflect any significant transactions between their fiscal year-ends and March 31. All significant intercompany balances and transactions have been eliminated in consolidation.
b) Revenue recognitionLeases:Revenues from finance lease contracts with customers and corresponding costs are recognized at the time the payments under the leases are due as stipulated in the lease contracts without regard to the actual collection of such payments.
Installment sales:Installment sales and the related costs are recognized when the installment payments become due according to the installment sales contracts. Revenues from installment sales are reported net of installment sales and the related costs.
c) Allocation of interest expenseInterest expense on borrowings is allocated to operating expenses and other expenses based on the balances of the respective assets relating to operating and other activities. Interest expense classified as an operating expense is recorded net of the corresponding interest income from deposits.
d) Allowance for doubtful accountsAllowance for doubtful accounts is recorded to provide for probable losses on bad debts based on historical experience for those receivables other than specific doubtful accounts, and based on an estimate of the uncollectible amounts after a review of the collectibility for the specific doubtful receivables.
e) Allowance for loss on disposal of property for lease
For lease contracts that are likely to incur losses on the disposal of the relevant leased property and equipment as a result of the cancellation of such lease contracts, the estimated amount of such losses has been provided as an allowance for loss on disposal of property for lease.
f) Cash and cash equivalentsCash and cash equivalents consist of cash on hand, callable cash deposits at banks and short-term investments with original maturities of three months or less that are readily convertible into cash with only an insignificant risk of any change in their value.
g) Investment securitiesInvestment securities are classified into two categories and accounted for as follows:1. Held-to-maturity securities
Held-to-maturity securities are stated at amortized cost.2. Available-for-sale securities
Marketable available-for-sale securities are reported at fair value, with any unrealized gain or loss, net of the applicable taxes, reported as a separate component of net assets. The cost of securities sold is determined by the moving-average method. Non-marketable available-for-sale securities are stated at cost determined by the moving-average method. Investments in anonymous partnerships are determined by the specific identification method.
h) Investments in anonymous partnershipsInvestments in anonymous partnerships are included in investment securities based on the portion of interest shares of anonymous partnerships’ net assets. The gains and losses arising from anonymous partnerships are included in total revenues for anonymous partnerships held for business purposes, and other income (expenses) for non-business purposes, with the corresponding adjustments made to investment securities in the same amount. Capital refunds from anonymous partnerships by their general partners were deducted from investment securities.
NEC Capital Solutions LimitedYear ended March 31, 2013 and 2012
Millions of YenThousands of
U.S. Dollars (Note 1)
2013 2012 2013Cash flows from operating activities:
Income before income taxes and minority interests ¥ 9,315 ¥ 9,099 $ 99,080Adjustments to reconcile income before income taxes and minority
interests to net cash provided by (used in) operating activities:Depreciation and amortization 4,934 3,921 52,484Impairment loss 87 – 930Amortization of goodwill 1,089 1,009 11,586(Decrease) Increase in allowance for doubtful accounts (3,117) 2,325 (33,159)Increase in allowance for head office transfer costs 38 – 404Decrease in allowance for loss on disaster (2) (214) (18)Gain on reversal of subscription rights to shares – (70) –(Gain) Loss on sales/disposal of leased assets (1,264) 427 (13,449)Gain on sales of investment securities (63) (307) (673)Loss on valuation of investment securities 14 178 150Gain on redemption of investments in capital (58) – (612)Gain on extinguishment of debts (212) – (2,251)Proceeds from sales of leased assets 2,594 1,525 27,594Interest and dividend income (42) (52) (452)Interest expense 6,200 6,190 65,953Exchange loss 1,046 32 11,125Gain on valuation of derivatives (18) (165) (194)Equity in earnings of affiliated companies (43) (29) (460)Decrease in installment sales receivable 2,490 5,645 26,487Decrease in lease receivables and investment in leases 21,980 28,337 233,804Decrease (Increase) in loans receivable 7,773 (10,383) 82,680Purchases of leased assets (6,699) (9,573) (71,255)(Increase) Decrease in purchased receivables (1,024) 1,709 (10,891)Decrease (Increase) in operational investment securities 5,173 (3,786) 55,021Decrease in real estate for sale 17,040 12,343 181,260Other, net (12,297) (2,006) (130,803)
Subtotal 54,934 46,155 584,341Interest and dividend income received 160 256 1,697Interest paid (6,111) (6,542) (65,006)Income taxes paid (6,345) (7,133) (67,487)
Net cash provided by operating activities 42,638 32,736 453,545
Cash flows from investing activities:Proceeds from redemption of securities 2,000 500 21,274Purchases of assets held for own use (264) (1,609) (2,809)Purchases of investment securities (455) (7,730) (4,835)Proceeds from sales of investment securities 4,047 1,147 43,046Proceeds from redemption of investment securities 2,015 692 21,430Purchase of investments in subsidiaries – (1,823) –Proceeds from withdrawal of membership – 32 –Payments of loans receivable (2,043) (241) (21,726)Collection of loans receivable 1,259 3,086 13,395Proceeds from purchase of investments in subsidiaries resulting
in change in scope of consolidation 121 – 1,290Proceeds from sales of investments in subsidiaries resulting in
change in scope of consolidation 22 – 230Payments for sales of investments in subsidiaries resulting in
change in scope of consolidation – (263) –Other, net (894) 2 (9,516)Net cash provided by (used in) investing activities 5,808 (6,207) 61,779
Cash flows from financing activities:Decrease in short-term borrowings, net (69,026) (8,749) (734,242)Increase in long-term debt 173,745 135,240 1,848,150Repayment of long-term debt (150,862) (163,540) (1,604,747)Cash dividends paid (948) (947) (10,079)Cash dividends paid to minority shareholders (7,307) (4,542) (77,722)Proceeds from stock issuance to minority shareholders 844 10,456 8,977Other (18) (31) (188)Net cash used in financing activities (53,572) (32,113) (569,851)
Foreign currency translation adjustments on cash and cash equivalents 71 4 753
Net decrease in cash and cash equivalents (5,055) (5,580) (53,774)Cash and cash equivalents at beginning of year 40,304 45,884 428,719Decrease in cash and cash equivalents resulting from
exclusion of subsidiaries from consolidation (10) – (105)Cash and cash equivalents at end of year ¥ 35,239 ¥ 40,304 $ 374,840
The accompanying notes are an integral part of these statements.
NEC Capital Solutions LimitedYears ended March 31, 2013 and 2012
2928
Notes to Consolidated Financial StatementsConsolidated Statements of Cash Flows
011_7014401372509.indd 28-29 2013/09/12 10:47:03
i) Real estate for saleReal estate for sale is stated at cost determined by the identified method (carrying value is reduced based on a decline in profitability of real estate).
j) Property and equipmentProperty and equipment are stated at cost less accumulated depreciation. Depreciation of assets held for own use is computed by the declining-balance method over the respective useful lives of the assets. The useful lives of buildings and furniture and fixtures are from 8 to 18 years and from 3 to 15 years, respectively. Property and equipment leased to customers are depreciated over the term of the lease using the straight-line method.
k) Computer softwareCosts related to software purchased for internal use are amortized by the straight-line method over an estimated useful life of 3 to 5 years.
l) Accounting for derivativesDerivatives are carried at fair value with any changes in unrealized gain or loss credited or charged to earnings, except for those that meet the criteria for deferral hedge accounting under which unrealized gain or loss is deferred as a separate component of net assets. The Company utilizes derivative financial instruments principally in order to mitigate the risk of fluctuation in interest rates on borrowings. The Company has established entity level controls that include policies and procedures for risk assessment in accordance with the Company’s rules for interest-rate swap transactions. Under these rules, the Company conducts transactions within a certain range and places limits on the applicable assets and liabilities based on the actual demand. In addition, the Company also assesses the effectiveness of the hedging and verifies the approval, reporting and monitoring of all transactions involving derivatives. The Company does not hold or issue derivative financial instruments for trading purposes. The effectiveness of the hedge transactions is assessed by calculating the cumulative changes in cash flows of the hedging instruments and the cumulative changes in cash flows of the hedged items for a period from the beginning of the hedge to the assessment date, and then verifying that their ratio is within a fixed range. In cases where interest rate swap contracts are used as a hedge and meet certain hedging criteria, the interest rate swaps are not recorded at fair value, instead, the net amount to be paid or received under the interest rate swap contract is added to or deducted from the interest on the assets or liabilities for which the swap contract was executed.
m) Retirement benefit planEmployees’ retirement benefits:The Company has a defined-benefit corporate pension plan, which is essentially a defined-benefit plan with guaranteed benefits and a defined-contribution pension plan, as well as a severance indemnity plan covering virtually all employees other than directors and corporate auditors. Under the terms of these plans, eligible employees upon retirement are entitled to lump-sum severance payments or annuity pension payments based on their level of compensation upon termination and their years of service with the Company. To provide a portion of the lump-sum benefits or annuity payments, the Company participates in the NEC corporate pension fund established for NEC Group companies in accordance with the Welfare Pension Insurance Law. Accrued retirement benefits have been provided for employees’ retirement benefits, based on an estimate of the projected benefit obligation and the pension plan assets at the end of the year.
n) Allowance for loss on disasterAllowance for loss on disaster is recorded based on an estimated amount as of the fiscal year-end to provide for the restoration of the assets damaged by the Great East Japan Earthquake of March 11, 2011.
o) Allowance for head office transfer costsThe Company and some consolidated subsidiaries recorded a reasonable estimate of head office transfer costs as of the fiscal year-end to provide for the expenses expected to be incurred in relation to the head office transfer.
p) GoodwillGoodwill is amortized on a straight-line basis over a period within 20 years. Goodwill related to the acquisition of RISA Partners, Inc. is amortized over 10 years.
q) Income taxesIncome taxes are calculated based on taxable income and charged to income on an accrual basis. Deferred income tax assets and liabilities are recognized for the temporary differences between the financial reporting and the tax bases of the assets and liabilities that will result in taxable or deductible amounts in the future. Calculations of deferred tax assets and liabilities are based on the enacted tax laws at the end of the year.
r) Per share dataBasic net income per share is calculated by dividing the net income available to shareholders of common stock by the weighted-average number of shares of common stock outstanding during the year. Diluted net income per share has not been disclosed because no potentially dilutive shares were outstanding.
3. Change in Accounting Policiesa) Accounting Standard for Accounting Changes
and Error CorrectionsFor changes in accounting policies and corrections of figures on and after the beginning of the fiscal year ended March 31, 2012, the Company adopted the Accounting Standard for Accounting Changes and Error Corrections (ASBJ Statement No. 24 issued on December 4, 2009) and the Guidance on Accounting Standard for Accounting Changes and Error Corrections (ASBJ Guidance No. 24 issued on December 4, 2009).
b) Changes in accounting policies that are difficult to distinguish from changes in accounting estimates
In accordance with the revision of the Corporation Tax Act of Japan, the Company and its domestic consolidated subsidiaries have changed the method of depreciation based on the revised Corporation Tax Act for property and equipment acquired on or after April 1, 2012. The impact of this change on operating income and income before income taxes and minority interests for the fiscal year ended March 31, 2013 was minimal.
c) Unapplied accounting standardsAccounting Standard for Retirement Benefits (ABSJ Statement No. 26 May 17, 2012) and Guidance on Accounting Standard for Retirement Benefits (ASBJ Guidance No. 25 issued on May 17, 2012) are revised in order to improve financial reporting and reflect international trends, and they require revisions that are mainly focusing on accounting treatment for unrecognized actuarial gains and losses and unrecognized past service costs, calculation methods for projected benefit obligation and service costs, and enhancement of disclosures. The accounting standard and guidance will be adopted at the end of the fiscal year ending March 31, 2014. However, the changes in calculation methods for projected benefit obligation and service costs will be adopted at the beginning of the fiscal year ending March 31, 2015. The effects of the adoption of the revised accounting standard and guidance on the consolidated financial statements are currently being assessed.
4. Investment SecuritiesInvestment securities at March 31, 2013 and 2012 consisted of the following:
Millions of YenThousands of U.S. Dollars
2013 2012 2013Current:
Marketable available-for-sale securities ¥ – ¥ 2,842 $ –Non-marketable available-for-sale securities 13,043 16,929 138,737
Total ¥13,043 ¥19,771 $138,737Non-current:
Marketable available-for-sale securities ¥ 3,982 ¥10,826 $ 42,359Non-marketable available-for-sale securities 10,187 14,095 108,360Non-consolidated subsidiaries and affiliated companies 113 471 1,201
Total ¥14,282 ¥25,392 $151,920
Impairment of securitiesDuring the fiscal year ended March 31, 2013, the Company recognized impairment losses of ¥15 million ($164 thousand) on non-marketable available-for-sale securities. During the fiscal year ended March 31, 2012, the Company recognized impairment losses of ¥174 million on non-marketable available-for-sale securities and ¥4 million on non-consolidated subsidiaries.
The acquisition cost and aggregate fair value of available-for-sale securities with readily determinable market value at March 31, 2013 and 2012 were as follows:
March 31, 2013
Acquisition cost
Unrealized gain
Unrealized loss Fair value
Millions of Yen
Available-for-sale securities:
Non-current
Equity securities ¥1,185 ¥157 ¥157 ¥1,185Debt securities 1,600 – 3 1,597Other (trust beneficiary rights, etc.) 1,359 38 197 1,200
Total ¥4,144 ¥195 ¥357 ¥3,982
March 31, 2012
Acquisition cost
Unrealized gain
Unrealized loss Fair value
Millions of Yen
Available-for-sale securities:
Current
Equity securities ¥ 579 ¥ 271 ¥ – ¥ 850Debt securities 1,992 11 11 1,992
Non-current
Equity securities 985 322 68 1,239Debt securities 2,533 – 1 2,532Other (trust beneficiary rights, etc.) 6,655 434 34 7,055
Total ¥12,744 ¥1,038 ¥114 ¥13,668
March 31, 2013
Acquisition cost
Unrealized gain
Unrealized loss Fair value
Thousands of U.S. Dollars
Available-for-sale securities:
Non-current
Equity securities $12,602 $1,673 $1,673 $12,602Debt securities 17,020 – 31 16,989Other (trust beneficiary rights, etc.) 14,462 407 2,101 12,768
Total $44,084 $2,080 $3,805 $42,359
Non-marketable available-for-sale securities whose fair value was not readily determinable at March 31, 2013 and 2012 were as follows:
Carrying value Millions of YenThousands of U.S. Dollars
2013 2012 2013Non-marketable available-for-sale securities:
Equity securities ¥13,135 ¥24,556 $139,718Debt securities 2,885 – 30,692Other (investment in partnerships, etc.) 7,209 6,468 76,686
Total ¥23,229 ¥31,024 $247,096
Available-for-sale securities sold during the fiscal year ended March 31, 2013 and 2012 were as follows:
Millions of YenThousands of U.S. Dollars
2013 2012 2013Equity securities:
Sales prices ¥6,349 ¥851 $67,539Total gains on sales 304 341 3,230Total losses on sales 4 – 47
Debt securities:
Sales prices ¥ 126 ¥ – $ 1,340Total losses on sales 0 – 1
Other:
Sales prices ¥ – ¥289 $ –Total gains on sales – 5 –
5. Short-Term Borrowings and Long-Term Debt
Short-term borrowings at March 31, 2013 and 2012 were as follows:
Millions of YenThousands of U.S. Dollars
Weighted-average interest
rate
2013 2012 2013 2013Short-term loans from banks ¥13,256 ¥ 24,356 $141,010 0.34%
Commercial paper 67,000 125,000 712,690 0.12%Total ¥80,256 ¥149,356 $853,700 –
Long-term debt at March 31, 2013 and 2012 consisted of the following:
Millions of YenThousands of U.S. Dollars
Weighted-average interest
rate
2013 2012 2013 2013Long-term loans, principally from banks ¥511,909 ¥480,905 $5,445,268 0.78%
Payables under securitized lease receivables 5,937 2,873 63,155 0.96%
Unsecured bonds 15,000 25,000 159,558 1.18%Total 532,846 508,778 5,667,981 –Less current portion 142,834 145,855 1,519,354 –
¥390,012 ¥362,923 $4,148,627 –
The aggregate annual maturities of long-term debt subsequent to March 31, 2013 are summarized as follows:
Year ending March 31, Millions of YenThousands of U.S. Dollars
2014 ¥142,834 $1,519,3542015 91,871 977,2502016 197,693 2,102,8942017 65,637 698,1962018 29,189 310,4862019 and thereafter 5,622 59,801
¥532,846 $5,667,981
3130
011_7014401372509.indd 30-31 2013/09/12 10:47:03
At March 31, 2013, the Company had overdraft facilities or line-of-credit agreements with 63 financial institutions that were set up in order to procure working capital efficiently. The unused committed lines of credit under such agreements at March 31, 2013, totaled ¥248,751 million ($2,646,007 thousand). At March 31, 2012, the Company had overdraft facilities or line-of-credit agreements with 64 financial institutions that were set up in order to procure working capital efficiently. The unused committed lines of credit under such agreements at March 31, 2012, totaled ¥237,499 million.
6. Commitment and Others(1) Loan commitment as lenderAs of March 31, 2013 and 2012, the Company had the following balances:
Millions of YenThousands of U.S. Dollars
2013 2012 2013Loan commitment agreements ¥14,854 ¥9,119 $158,001The loans provided under these credit facilities 5,101 3,037 54,261
Aggregated balance of loan commitments available for customers of the Company ¥ 9,753 ¥6,082 $103,740
(2) Sale-and-leaseback transactionsThe Company sold its leased assets and has leased back those assets from a buyer-lessor. The Company accounts for the sale-and-leaseback transactions as a financing transaction. The year-end balances of sold-and-leasedback assets and relevant unpaid liabilities as of March 31, 2013 and 2012 were as follows:
Millions of YenThousands of U.S. Dollars
2013 2012 2013Current assets:
Lease receivables and investment in leases ¥2,547 ¥4,635 $27,091
Current liabilities:
Current portion of long-term debt 11 28 121
Long-term liabilities:
Long-term debt – 12 –
7. Income TaxesThe Company is subject to Japanese national and local income taxes that, in the aggregate, resulted in a statutory tax rate of approximately 38.0% for the year ended March 31, 2013 and 40.5% for the year ended March 31, 2012. The tax effects of significant temporary differences that resulted in deferred tax assets and liabilities at March 31, 2013 and 2012 were as follows:
Millions of YenThousands of U.S. Dollars
2013 2012 2013Deferred tax assets:
Net operating loss carryforwards ¥ 8,601 ¥ 5,863 $ 91,487Allowance for doubtful accounts 6,636 6,320 70,591Loss on valuation of real estate for sale 1,451 3,645 15,432Loss on valuation of investment securities 694 1,726 7,379
Accrued retirement benefits for employees 569 540 6,056Property and equipment 386 2,413 4,108Elimination of unrealized profit by intercompany transactions among consolidated companies 370 289 3,937
Accrued bonuses 206 216 2,187Other 892 1,926 9,492
Subtotal 19,805 22,938 210,669Valuation allowance (10,207) (11,400) (108,569)
Total deferred tax assets ¥ 9,598 ¥ 11,538 $ 102,100
Deferred tax liabilities:
Net unrealized gain on marketable securities (59) (259) (623)
Other (220) (189) (2,341)Total deferred tax liabilities (279) (448) (2,964)Net deferred tax assets ¥ 9,319 ¥ 11,090 $ 99,136
The reconciliation between the statutory income tax rate and the effective income tax rate for the years ended March 31, 2013 and 2012 were as follows:
2013 2012Statutory tax rate 38.01% 40.49%
(Reconciliation)Effect of tax rate reduction – 9.38%Amortization of goodwill 4.44% 4.49%Increase in valuation allowance 2.48% 2.40%Adjustment related to distribution of net income of anonymous partnerships attributable to minority interest (5.30)% –
Other 1.42% (4.35)%Effective tax rate 41.06% 52.42%
Following the promulgation on December 2, 2011 of the Act for Partial Revision of the Income Tax Act, etc. for the Purpose of Creating a Taxation System Responding to Changes in Economic and Social Structures and the Act on Special Measures for Securing Financial Resources Necessary to Implement Measures for Reconstruction following the Great East Japan Earthquake, the effective statutory tax rate used to measure deferred tax assets and liabilities was changed from 40.49% to 38.01% for temporary differences expected to be realized in the fiscal years beginning between April 1, 2012 and March 31, 2015. The rate was also changed to 35.64% for temporary differences expected to be realized in the fiscal years beginning on or after April 1, 2015. As a result of this change, net deferred tax assets (net of deferred tax liabilities) decreased by ¥827 million, while deferred income taxes and net unrealized gain on marketable securities increased by ¥854 million and ¥26 million, respectively in the fiscal year ended March 31, 2012.
Additionally, the tax loss carry forwards have been limited to 80% of taxable income before deducting tax loss carryforwards. As a result of this change, deferred tax assets decreased by ¥292 million and deferred income taxes increased by the same amount.
8. Accrued Retirement BenefitsThe Company has a defined-benefit corporate pension plan, a defined-benefit plan with guaranteed benefits and a defined-contribution pension plan, as well as a severance indemnity plan covering virtually all employees other than directors and corporate auditors. The defined-benefit corporate pension plan is a cash balance pension plan sponsored by NEC Group and established since December 2003. Under the terms of these plans, eligible employees are entitled to lump-sum payments or annuity payments based on their level of compensation upon termination and their years of service with the Company.
Accrued retirement benefits for employees at March 31, 2013 and 2012 consisted of the following:
Millions of YenThousands of U.S. Dollars
2013 2012 2013Reconciliation:
Projected benefit obligation ¥(3,094) ¥(2,994) $(32,910)Fair value of pension plan assets 1,711 1,496 18,205Unfunded retirement benefit obligation (1,383) (1,498) (14,705)
Unrecognized actuarial (gain) loss (188) 22 (2,004)Accrued retirement benefits ¥(1,571) ¥(1,476) $(16,709)
The components of net periodic retirement benefit expense for the years ended March 31, 2013 and 2012 were as follows:
Millions of YenThousands of U.S. Dollars
2013 2012 2013Components of net periodic retirement benefit expense:
Service cost ¥208 ¥169 $2,215Interest cost 75 72 796Expected return on pension plan assets (30) (36) (318)
Amortization of actuarial loss 22 89 232Other 37 35 390Net periodic retirement benefit expense ¥312 ¥329 $3,315
The major assumptions used in the calculation of the projected benefit obligation were as follows:
2013 2012Method of attributing projected benefits to years of service
Point basis and straight-line method
P o i n t b a s i s and straight-line method
Discount rate at end of year 2.5% 2.5%Expected rate of return on pension plan assets 2.0% 2.5%
Amortization of prior service cost Charged to income for the year
Charged to income for the year
Amortization of actuarial gain (loss) C h a r g e d t o income for the following year
C h a r g e d t o income for the following year
9. Lease TransactionsInformation relating to finance leases of the Company as lessor for the year ended March 31, 2013 and 2012 is summarized as follows:(1) Components of investment in leases
Millions of YenThousands of U.S. Dollars
2013 2012 2013Lease payments receivables ¥333,956 ¥381,333 $3,552,341Estimation of residual value 12,349 13,337 131,361Unearned interest income (14,526) (17,122) (154,519)Investment in leases ¥331,779 ¥377,548 $3,529,183
(2) Collecting schedule of lease payments receivables after the fiscal year-end
Millions of YenThousands of U.S. Dollars
2013 2012 2013Lease receivables
Due within 1 year ¥ 20,144 ¥ 15,075 $ 214,276Due after 1 year through 2 years 14,430 10,706 153,499Due after 2 years through 3 years 11,278 6,170 119,966Due after 3 years through 4 years 8,686 3,949 92,392Due after 4 years through 5 years 3,875 3,134 41,222Due after 5 years 404 316 4,302
Investment in leases
Due within 1 year ¥120,958 ¥137,504 $1,286,654Due after 1 year through 2 years 87,607 102,226 931,895Due after 2 years through 3 years 61,344 69,175 652,526Due after 3 years through 4 years 38,733 42,416 412,013Due after 4 years through 5 years 17,085 20,299 181,732Due after 5 years 8,228 9,713 87,521
(3) Finance leases that do not transfer ownership to the lessees
Compared with the results that would have been recorded had the Company applied the lease accounting standard retroactively to the starting date of these lease transactions, the income before income taxes increased by ¥2,043 million ($21,734 thousand) and ¥2,434 million for the years ended March 31, 2013 and 2012, respectively.
(4) Future lease receivables under non-cancelable operating leases
Millions of YenThousands of U.S. Dollars
2013 2012 2013Due within 1 year ¥ 2,448 ¥ 1,873 $ 26,045Due after 1 year 12,184 12,008 129,598Total ¥14,632 ¥13,881 $155,643
Information relating to finance leases of the Company as lessee that do not transfer ownership to the lessee for the years ended March 31, 2013 and 2012 is summarized as follows:
Millions of YenThousands of U.S. Dollars
2013 2012 2013Lease payments during the year ¥– ¥2 $–Depreciation expense – 2 –Lease payments attributable to interest expense – 0 –
With respect to the finance lease transactions without transfer of ownership that commenced before March 31, 2008, the Company continues to account for those transactions in a manner similar to the accounting of ordinary rental transactions.
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Future lease payments under non-cancelable operating leases are summarized as follows:
Millions of YenThousands of U.S. Dollars
2013 2012 2013Due within 1 year ¥ 466 ¥ 405 $ 4,959Due after 1 year 4,102 3,041 43,634Total ¥4,568 ¥3,446 $48,593
10. Pledged AssetsAssets pledged as collateral as of March 31, 2013 and 2012 were as follows:
Millions of YenThousands of U.S. Dollars
2013 2012 2013Cash and cash equivalents ¥ 53 ¥ 525 $ 566Operational investment securities 2,979 – 31,688Real estate for sale – 24,043 –Purchased receivables – 13,676 –Investment securities – 4,000 –Total ¥3,032 ¥42,244 $32,254
Liabilities secured by the assets pledged as collateral as of March 31, 2013 and 2012 were as follows:
Millions of YenThousands of U.S. Dollars
2013 2012 2013Short-term borrowings ¥ – ¥20,752 $ –Current portion of long-term debt – 1,056 –Long-term debt 483 3,044 5,138Other (Long-term liabilities) 53 – 566Total ¥536 ¥24,852 $5,704
11. Financial InstrumentsThe year ended March 31, 2013:1. Financial instruments(1) Policies for financial instrumentsThe NEC Capital Solutions Group provides financial services, such as leases, installment sales, and corporate loans, to a wide range of customers, including public offices, local governments, large companies, and small and medium enterprises. The Group also offers services, such as factoring, settlement and collection agency services, and securitization, meeting the financial needs of a diverse array of customers. Certain consolidated subsidiaries also make investments in corporate equities, loans receivable and real estate directly or indirectly through funds. With a basic policy of maintaining the consistency of funding with its operating assets, the Group manages its funding based on the changes in operating and other assets. Specifically, taking into account the market conditions and the balance of short-term and long-term products or direct and indirect products, the Group raises funds using a range of methods, including bank borrowings as the main funding source, issuance of corporate bonds and commercial paper, and securitized receivables. The Group’s operating assets are comprised principally of those with fixed interest rates such as investment in leases. However, the Company primarily utilizes variable-rate debt obligations to raise funds. The variable-rate debt obligations expose the Company to fluctuations in cash flows as well as profit margin due to change in interest rates. Therefore, the Company strives to properly manage risks associated with fluctuations in interest rates and liquidity risks by carrying out appropriate operating assets and liabilities management (ALM). With respect to the risks from the fluctuations of interest rates, the Group uses interest rate swaps to hedge the risks of fluctuations in both the present and future profit margin of the Group. The Group does not hold or issue derivative instruments for trading or speculative purposes.
(2) Details and the risks of financial instrumentsOperating receivables mainly consist of installment sales receivable, lease receivables and investment in leases, accounts receivable, loans receivable and purchased receivables, and are exposed to the customers’ credit risk. Repayments of these operating receivables are made over a long term from the commencement to the termination of transactions. Consequently, obligations may not be fulfilled in accordance with contracts due to delinquency or bankruptcy, etc., as a result of changes in the economic environment and other factors. The Company is also engaged in lump sum factoring transactions, mainly for NEC Group companies. The year-end balance for lump sum factoring for the NEC Group companies accounted for 18.3% of the loans receivable outstanding as of March 31, 2013. Operational investment securities, securities and investment securities mainly comprise stocks, bonds, trust beneficiary rights, and investments in anonymous partnerships, excluding short-term financial assets. These securities are exposed to credit risks associated with the issuers of the securities, risks associated with fluctuations of interest rates, and risks associated with fluctuations in market prices. The Group enters into derivative transactions including interest rate swaps associated with its financing activities. The Group’s derivative instruments are exposed to market risks. Moreover, because the NEC Capital Solutions Group borrows funds mainly based on variable rates, the Group is exposed to the risks of interest rate fluctuations. The Group manages these risks by entering into interest rate swap transactions. The Group primarily uses pay-fixed, receive-variable interest rate swaps to effectively change variable-rate debt obligations to fixed-rate debt obligations to the extent that there are fixed rate operating assets. Therefore, market risks of the hedging derivative instruments are offset by those of the fixed rate operating assets. To manage the fluctuations in cash flows caused by interest rate changes, the Group enters into interest rate swaps as a hedging instrument. The Group accounts for the interest rate swaps by using hedge accounting. If the criteria for hedge accounting are not met, the Group’s profit or loss may be affected. For the interest rate swaps held by certain consolidated subsidiaries, which qualify for hedge accounting and meet certain hedging criteria, the swaps are not recorded at fair value, instead, the net amount to be paid or received under the interest rate swap contract is added to or deducted from the interest on assets or liabilities for which the swap contract was executed. The hedge accounting method, hedging instruments and hedged items, hedging policy, and assessment method of the effectiveness of hedging are discussed in Note 2. l). The Group is exposed to liquidity risks arising from its borrowings, corporate bonds and commercial paper. That is, if the Group cannot raise funds through the markets for these instruments under certain circumstances, the Group may not be able to make payments on the relevant due dates.
(3) Risk management(i) Credit risk managementThe Group mitigates credit risks for business transactions through monitoring each customer periodically, managing due dates and outstanding balances, and monitoring the difficulty of collection caused by the deterioration of customers’ financial positions in accordance with the internal rules.
a) Leases, installment sales and corporate loansThe Credit Department and the Credit Management Department as well as the relevant sales departments are responsible for the management of credit risks of leases, installment sales and corporate loans. Moreover, at the Management Conference and meetings of the Board of Directors held on a regular basis, the credit status is reported and examined. In connection with each credit transaction, the Company performs a customer credit evaluation based on the relevant customer’s business performance, financial position, projected cash flow, and others. After the evaluation,
the Company sets credit limits, internal credit ratings, collateral or guarantees, and terms and conditions of the transaction. After the transaction has been made, the Company regularly monitors business performance, collateral and progress of repayment by each customer, and revises credit limits when necessary. In the event of a default due to delinquency, bankruptcy, or others, the Company seeks to protect its claims in accordance with its operating manuals. With respect to the credit risks of large borrowers, the Management Conference examines credit limits of those borrowers. Moreover, at meeting of the Board of Directors held on a regular basis, the outstanding balances of claims, internal credit ratings, terms and conditions of the transactions are reported.
b) Securities and purchased receivablesWith respect to securities that are held for operational purposes, market prices are periodically assessed for marketable securities and financial conditions of issuers are regularly monitored for the other securities. With respect to purchased receivables, operational investment securities, and investment securities held by certain consolidated subsidiaries, credit risks of customers or issuers are monitored in accordance with the internal rules and operating manuals. The results of the monitoring are periodically reported to their presidents.
c) Derivative transactionsIn dealing with counterparty risks in derivative transactions, the Company’s Finance Department monitors the credit risks of financial institutions to avoid losses that arise if the relevant financial institution fails to meet its obligations.
(ii) Market risk managementa) Risks of interest rate fluctuationsAs part of ALM, the Group manages the risks of interest rate fluctuations, mainly by using interest rate derivatives. The Group has internal policies of risk management that stipulate risk hedging policies, hedging plan and reporting process. The Board of Directors must approve the hedging plan before the transaction is made. The Finance Department comprehensively monitors the interest rates and terms of financial assets and liabilities on a continuous basis, and manages risks by utilizing value at risk (VaR). At least once a month, the department reports the status of transactions and current operational strategies to the President of the Company. With respect to the operation and management of derivative transactions conducted by certain consolidated subsidiaries, the transaction policies and authorization rules are established and derivative transactions are approved through a decision-making process based on a request for approval.
b) Risks of price fluctuationsThe Group invests in securities for the purpose of customer intimacy in addition to operational investments. The Finance Department regularly monitors market information to manage risks of these securities. This information is reported to the Management Conference on a regular basis.
c) Derivative transactionsThe Company enters into derivative transactions in accordance with its internal policies. The policies include the objectives for derivative instruments, risk management policies and procedures (including authorization, responsibilities and reporting). In addition, the Company maintains segregation of duties between those with the authority to enter into derivative transactions (front office) and those responsible for bookkeeping (back office) by assigning different employees in the Finance Department.
d) Quantitative information about market risks The financial instruments affected by the risks of interest rate fluctuations are installment sales receivable, lease receivables and investment in leases, loans receivable, investment securities, long-term loans, bonds and interest rate swaps of derivative transactions. The risks of interest rate fluctuations of long-term fixed rate assets and liabilities are measured by VaR. The Company calculates VaR using a variance-covariance method (holding period of one year, confidence level of 99%, observation period of one year) and periodically performs back-testing to confirm and verify its effectiveness. As of March 31, 2013, the total market risk quantity (estimated amount of losses) of long-term fixed rate assets and liabilities was ¥200 million ($2,125 thousand).
(iii) Liquidity risk managementThe Group mitigates the liquidity risks for funding (risks that the Company will be unable to repay on a repayment date) by using procedures such as: • Appropriately maintain the relationship between cash flows
from operating assets and those for operating liabilities on ALM,
• Prepare and update the cash flow plan on a timely basis, • Seek diversification of funding sources, and • Maintain an appropriate level of liquidity on hand
(4) Supplementary explanation about fair value of financial instruments
Fair values of financial instruments are based on market prices and, in cases where market prices are not available, reasonably calculated prices. Such prices have been calculated based on certain assumptions, and may differ if calculated based on different assumptions. With respect to the notional amount of derivative transactions in Note 12 “Derivatives”, they do not present the Company’s exposure to market risks of such derivative transactions.
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2. Fair value of financial instrumentsThe amounts presented in the consolidated balance sheet as of March 31, 2013, fair values and the differences were as follows. Financial instruments, whose fair values are considered difficult to estimate, are not included in the following table.
Millions of Yen Thousands of U.S. Dollars
Amount recorded in the consolidated
balance sheet Fair Value Difference
Amount recorded in the consolidated
balance sheet Fair Value Difference
(1) Cash and cash equivalents ¥ 35,239 ¥ 35,239 ¥ – $ 374,840 $ 374,840 $ – (2) Lease receivables and investment in leases 390,223 4,150,864
Allowance for doubtful accounts (*1) (5,928) (63,061)(*2) 384,295 388,337 4,042 4,087,803 4,130,805 43,002
(3) Installment sales receivable 13,755 146,315Allowance for doubtful accounts (*1) (1,217) (12,944)
12,538 12,901 363 133,371 137,229 3,858 (4) Loans receivable 164,950 1,754,599
Allowance for doubtful accounts (*1) (5,210) (55,420)159,740 160,373 633 1,699,179 1,705,912 6,733
(5) Accounts receivable-leases 17,721 188,496Allowance for doubtful accounts (*1) (910) (9,676)
16,811 16,811 – 178,820 178,820 – (6) Purchased receivables 17,429 185,398
Allowance for doubtful accounts (*1) (1,732) (18,422)15,697 15,697 – 166,976 166,976 –
(7) Income taxes receivable (*4) 595 595 – 6,331 6,331 – (8) Investment securities 3,982 3,982 – 42,359 42,359 – (9) Receivables from companies in bankruptcy and
reorganization (*5) 16,082 171,073Allowance for doubtful accounts (*1) (4,730) (50,317)
11,352 11,352 – 120,756 120,756 –Total assets ¥640,249 ¥645,287 ¥5,038 $6,810,435 $6,864,028 $53,593(10) Short-term borrowings ¥ 80,256 ¥ 80,256 ¥ – $ 853,700 $ 853,700 $ –(11) Notes and accounts payable-trade 13,429 13,429 – 142,845 142,845 –(12) Accrued income taxes 43 43 – 459 459 –(13) Deposits received 5,972 5,972 – 63,529 63,529 –(14) Other payable (*6) 338 338 – 3,591 3,591 –
Current portion of long-term debt and long-term debt
(15) Bonds
Unsecured bonds 15,000 15,127 127 159,558 160,914 1,356(16) Long-term loans
Current portion of long-term loans 141,485 1,505,002Long-term loans 370,425 3,940,266
511,910 511,744 (166) 5,445,268 5,443,506 (1,762)(17) Payables under securitized lease receivables
Current 1,349 14,352Non-current 4,588 48,803
5,937 5,922 (15) 63,155 62,991 (164)Total liabilities ¥632,885 ¥632,831 ¥ (54) $6,732,105 $6,731,535 $ (570)Derivatives (*3) ¥ (383) ¥ (383) ¥ – $ (4,075) $ (4,075) $ –
Methods used for determining the fair values of financial instruments, and matters related to securities and derivative transactions are as follows:
Assets(1) Cash and cash equivalents, (5) Accounts receivable-leases and
(7) Income taxes receivableSince these items are settled in a short period, the book values are deemed to approximate the fair values.
(2) Lease receivables and investment in leases and (3) Installment sales receivable
The present values of these items are presented as the fair values. The present values are calculated by discounting the estimated future cash flows of each contract at interest rates estimated to be applied to similar transactions. The fair values of doubtful receivables are calculated by discounting estimated future cash flows of each contract at risk-free rates.
(4) Loans receivableLoans receivable with variable interest rates reflect the market rate in the short term. Consequently, unless the credit conditions of debtors significantly change after the execution of loans, the book values of such loans are deemed to approximate fair values. With respect to short-term loans receivable with fixed interest rates, unless the credit conditions of debtors significantly change after the execution of loans, the book values are presented as the fair values because the book values are deemed to approximate the fair values. With respect to long-term loans receivable with fixed interest rates, the fair value is estimated based on the present value that is calculated by discounting the estimated future cash flows of each contract at interest rates estimated to be applied to similar transactions. The fair values of doubtful receivables are calculated by discounting estimated future cash flows of each contract at risk-free rates.
(6) Purchased receivablesWith respect to purchased receivables, the related allowance for doubtful receivables is estimated based on the amount expected to be collected through collateral and repayments. Consequently, the book value of those receivables less the estimated allowance for doubtful receivables is deemed to approximate the fair value.
(8) Investment securitiesThe fair values of stocks are measured at quoted market prices of the stock exchange. The fair values of bonds and certain certificates of trust beneficiary rights are based on either the prices quoted on the exchange market or prices obtained from financial institutions. For private placement bonds and certificates of trust beneficiary rights, fair values are determined based on reasonably estimated amounts. The fair values of partnership investments are determined based on the net asset value of the partnership after adjusting the carrying value of assets of the corresponding partnership at fair value if possible.
(9) Receivables from companies in bankruptcy and reorganization
With respect to receivables from companies in bankruptcy and reorganization, allowance for bad debts is estimated based on the amount expected to be collected through collateral and guarantees. Consequently, the book values of those receivables less the estimated allowance for bad debts are deemed to approximate the fair values.
Liabilities(10) Short-term borrowings, (11) Notes and accounts payable-
trade, (12) Accrued income taxes, (13) Deposits received and (14) Other payable
Since these items are settled in a short period, the book values are deemed to approximate the fair values.
(15) BondsThe fair values of bonds are determined based on their market prices.
(16) Long-term loansSince long-term loans with variable rates reflect the market interest rate in a short period, the book values are deemed to approximate fair values. The fair values of long-term loans with fixed rates are calculated by discounting the estimated future cash flows at the refinancing rates estimated to be applied to similar transactions.
(17) Payables under securitized lease receivablesThe fair values of payables under securitized lease receivables are calculated by discounting the estimated future cash flows at the refinancing rates estimated to be applied to similar transactions.
Derivative transactionsThe fair values are determined based on quoted prices provided by dealers and other financial institutions.
Financial instruments whose fair values cannot be reasonably estimated as of March 31, 2013 were as follows:
Amount presented in the consolidated balance sheet Millions of YenThousands of U.S. Dollars
Unlisted stocks ¥13,242 $140,854Investments in partnerships, etc. 10,101 107,444
These instruments are not included in (8) Investment securities, because they do not have quoted market prices and their future cash flows cannot be reasonably estimated.
(*1) An allowance for doubtful accounts that has been provided for installment sales receivable, lease receivables and investment in leases, loans receivable, accounts receivable-leases, purchased receivables and receivables from companies in bankruptcy and reorganization has been deducted.
(*2) The amounts presented in the consolidated balance sheet and the fair value provided for include the estimated residual value.(*3) The amount of assets and liabilities incurred from derivative transactions is presented on a net basis. Items that fall into net liabilities are
presented in ( ).(*4) Income taxes receivable is included in current assets-other on the accompanying consolidated balance sheet.(*5) Receivables from companies in bankruptcy and reorganization are included in investments and other assets-other on the accompanying
consolidated balance sheet.(*6) Other payable is included in current liabilities-other on the accompanying consolidated balance sheet.
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The following table shows the scheduled maturity payments of monetary claims and securities with maturity dates after March 31, 2013.Millions of Yen
Due within 1 yearDue after 1 year through 2 years
Due after 2 years through 3 years
Due after 3 years through 4 years
Due after 4 years through 5 years Due after 5 years
Cash and cash equivalents ¥ 35,239 ¥ – ¥ – ¥ – ¥ – ¥ –Lease receivables and investment in leases (*1) (*2) 141,102 102,038 72,622 47,419 20,960 8,632Installment sales receivables (*1) (*2) 5,076 4,120 2,512 1,656 908 333Loans receivables (*2) 94,708 16,710 21,881 13,207 6,847 11,629Accounts receivables-leases (*2) 17,721 – – – – –Purchased receivables (*3) 911 653 904 584 99 –Income taxes receivable 595 – – – – –Securities and investment securities
Available-for-sale securities
(1) Debt/bond – 1,000 600 – – –Total ¥295,352 ¥124,521 ¥98,519 ¥62,866 ¥28,814 ¥20,594
Thousands of U.S. Dollars
Due within 1 yearDue after 1 year through 2 years
Due after 2 years through 3 years
Due after 3 years through 4 years
Due after 4 years through 5 years Due after 5 years
Cash and cash equivalents $ 374,840 $ – $ – $ – $ – $ –Lease receivables and investment in leases (*1) (*2) 1,500,929 1,085,395 772,492 504,405 222,954 91,822Installment sales receivable (*1) (*2) 53,997 43,826 26,722 17,613 9,657 3,546Loans receivables (*2) 1,007,424 177,747 232,755 140,487 72,835 123,697Accounts receivable-leases (*2) 188,496 – – – – –Purchased receivables (*3) 9,686 6,943 9,613 6,214 1,053 –Income taxes receivable 6,331 – – – – –Securities and investment securities
Available-for-sale securities
(1) Debt/bond – 10,637 6,382 – – –Total $3,141,703 $1,324,548 $1,047,964 $668,719 $306,499 $219,065
(*1) The amount of interest income is included in the maturity table above.(*2) Receivables from companies in bankruptcy and reorganization of ¥16,802 million ($171,073 thousand) are not included in the table
above, because payments are not expected to be collected on schedule.(*3) Purchased receivables of ¥15,866 million ($168,770 thousand) are not included in the table above, because payments are not expected
to be collected on schedule.
The following table shows the scheduled maturity payments of unsecured bonds, long-term loans and other interest-bearing liabilities subsequent to March 31, 2013.
Millions of Yen
Due within 1 yearDue after 1 year through 2 years
Due after 2 years through 3 years
Due after 3 years through 4 years
Due after 4 years through 5 years Due after 5 years
Short-term borrowings ¥ 80,256 ¥ – ¥ – ¥ – ¥ – ¥ –Unsecured bonds – – 15,000 – – –Long-term loans 141,485 90,470 181,311 64,434 28,620 5,589Payables under securitized lease receivables 1,349 1,401 1,382 1,203 569 33Total ¥223,090 ¥91,871 ¥197,693 ¥65,637 ¥29,189 ¥5,622
Thousands of U.S. Dollars
Due within 1 yearDue after 1 year through 2 years
Due after 2 years through 3 years
Due after 3 years through 4 years
Due after 4 years through 5 years Due after 5 years
Short-term borrowings $ 853,700 $ – $ – $ – $ – $ –Unsecured bonds – – 159,557 – – –Long-term loans 1,505,002 962,350 1,928,639 685,394 304,431 59,452Payables under securitized lease receivables 14,352 14,899 14,698 12,802 6,054 350Total $2,373,054 $977,249 $2,102,894 $698,196 $310,485 $59,802
The year ended March 31, 2012:1. Financial instruments(1) Policies for financial instrumentsThe NEC Capital Solutions Group provides financial services, such as leases, installment sales, and corporate loans, to a wide range of customers, including public offices, local governments, large companies, and small and medium enterprises. The Group also offers services, such as factoring, settlement and collection agency services, and securitization, meeting the financial needs of a diverse array of customers. Certain consolidated subsidiaries also make investments in corporate equities, loans receivable and real estate directly or indirectly through funds. With a basic policy of maintaining the consistency of funding with its operating assets, the Group manages its funding based on the changes in operating and other assets. Specifically, taking into account the market conditions and the balance of short-term and long-term products or direct and indirect products, the Group raises funds using a range of methods, including bank borrowings as the main funding source, issuance of corporate bonds and commercial paper, and securitized receivables. The Group’s operating assets are comprised principally of those with fixed interest rates such as investment in leases. However, the Company primarily utilizes variable-rate debt obligations to raise funds. The variable-rate debt obligations expose the Company to fluctuations in cash flows as well as profit margin due to change in interest rates. Therefore, the Company strives to properly manage risks associated with fluctuations in interest rates and liquidity risks by carrying out appropriate operating assets and liabilities management (ALM). With respect to the risks from the fluctuations of interest rates, the Group uses interest rate swaps to hedge the risks of fluctuations in both the present and future profit margin of the Group. The Group does not hold or issue derivative instruments for trading or speculative purposes. The Company invests in some hybrid financial instruments that contain embedded derivatives such as credit default swaps, as its medium or long-term investments and for one of its operating activities. The Company makes these investments taking into consideration collectability and profitability, etc.
(2) Details and the risks of financial instrumentsOperating receivables mainly consist of installment sales receivable, lease receivables and investment in leases, accounts receivable, loans receivable and purchased receivables, and are exposed to the customers’ credit risk. Repayments of these operating receivables are made over a long term from the commencement to the termination of transactions. Consequently, obligations may not be fulfilled in accordance with contracts due to delinquency or bankruptcy, etc., as a result of changes in the economic environment and other factors. The Company is also engaged in lump sum factoring transactions, mainly for NEC Group companies. The year-end balance for lump sum factoring for the NEC Group companies accounted for 16.6% of the loans receivable outstanding as of March 31, 2012. Operational investment securities, securities and investment securities mainly comprise stocks, bonds, trust beneficiary rights, and investments in anonymous partnerships. These securities are exposed to credit risks associated with the issuers of the securities, risks associated with fluctuations of interest rates, and risks associated with fluctuations in market prices. The Group enters into derivative transactions including interest rate swaps associated with its financing activities, and credit default swaps that are embedded in structured bonds associated with its investing activities. The Group’s derivative instruments are exposed to market and credit risks generally. Moreover, because the NEC Capital Solutions Group borrows funds mainly based on variable rates, the Group is exposed to the risks of interest rate fluctuations. The Group manages these risks by entering into interest rate swap transactions.
The Group primarily uses pay-fixed, receive-variable interest rate swaps to effectively change variable-rate debt obligations to fixed-rate debt obligations to the extent that there are fixed rate operating assets. Therefore, market risks of the hedging derivative instruments are offset by those of the fixed rate operating assets. To manage the fluctuations in cash flows caused by interest rate changes, the Group enters into interest rate swaps as a hedging instrument. The Group accounts for the interest rate swaps by using hedge accounting. If the criteria for hedge accounting are not met, the Group’s profit or loss may be affected. For the interest rate swaps held by certain consolidated subsidiaries, which qualify for hedge accounting and meet certain hedging criteria, the swaps are not recorded at fair value, instead, the net amount to be paid or received under the interest rate swap contract is added to or deducted from the interest on assets or liabilities for which the swap contract was executed. The hedge accounting method, hedging instruments and hedged items, hedging policy, and assessment method of the effectiveness of hedging are discussed in Note 2. l). The Group is exposed to liquidity risks arising from its borrowings, corporate bonds and commercial paper. That is, if the Group cannot raise funds through the markets for these instruments under certain circumstances, the Group may not be able to make payments on the relevant due dates.
(3) Risk management(i) Credit risk managementThe Group mitigates credit risks for business transactions through monitoring each customer periodically, managing due dates and outstanding balances, and monitoring the difficulty of collection caused by the deterioration of customers’ financial positions in accordance with the internal rules.
a) Leases, installment sales and corporate loansThe Credit Department and the Servicing Department as well as the relevant sales departments are responsible for the management of credit risks of leases, installment sales and corporate loans. Moreover, at the Management Conference and meetings of the Board of Directors held on a regular basis, the credit status is reported and examined. In connection with each credit transaction, the Company performs a customer credit evaluation based on the relevant customer’s business performance, financial position, projected cash flow, and others. After the evaluation, the Company sets credit limits, internal credit ratings, collateral or guarantees, and terms and conditions of the transaction. After the transaction has been made, the Company regularly monitors business performance, collateral and progress of repayment by each customer, and revises credit limits when necessary. In the event of a default due to delinquency, bankruptcy, or others, the Company seeks to protect its claims in accordance with its operating manuals. With respect to the credit risks of large borrowers, the Management Conference examines credit limits of those borrowers. Moreover, at meeting of the Board of Directors held on a regular basis, the outstanding balances of claims, internal credit ratings, terms and conditions of the transactions are reported.
b) Securities and purchased receivablesWith respect to securities that are held for operational purposes, market prices are periodically assessed for marketable securities and financial conditions of issuers are regularly monitored for the other securities. With respect to purchased receivables, operational investment securities, and investment securities held by certain consolidated subsidiaries, credit risks of customers or issuers are monitored in accordance with the internal rules and operating manuals. The results of the monitoring are periodically reported to their presidents.
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c) Derivative transactionsIn dealing with counterparty risks in derivative transactions, the Company’s Finance Department monitors the credit risks of financial institutions to avoid losses that arise if the relevant financial institution fails to meet its obligations. Since the Company invests in some hybrid financial instruments that contain embedded derivatives such as credit default swaps as its medium to long-term investments, the Finance Department monitors spreads for the credit default swaps, credit ratings and market information of reference entities in the relevant embedded derivative products, to assess and evaluate the likelihood of credit events. The Finance Department regularly reports the result of assessment and evaluation of the hybrid instruments to the Board of Directors.
(ii) Market risk managementa) Risks of interest rate fluctuationsAs part of ALM, the Group manages the risks of interest rate fluctuations, mainly by using interest rate derivatives. The Group has internal policies of risk management that stipulate risk hedging policies, hedging plan and reporting process. The Board of Directors must approve the hedging plan before the transaction is made. In addition, the Executive Officer in charge of the Finance Department reports the financial positions, operating results of fund procurement, investments and derivatives investments at the Business Strategy Conference. The Finance Department comprehensively monitors the interest rates and terms of financial assets and liabilities on a continuous basis, and manages risks by utilizing value at risk (VaR). At least once a month, the department reports the status of transactions and current operational strategies to the President of the Company. With respect to the operation and management of derivative transactions conducted by certain consolidated subsidiaries, the transaction policies and authorization rules are established and derivative transactions are approved through a decision-making process based on a request for approval.
b) Risks of price fluctuationsThe Group invests in securities for the purpose of customer intimacy in addition to operational investments. The Finance Department regularly monitors market information to manage risks of these securities. This information is reported to the Management Conference on a regular basis.
c) Derivative transactionsThe Company enters into derivative transactions in accordance with its internal policies. The policies include the objectives for derivative instruments, risk management policies and procedures (including authorization, responsibilities and reporting). In addition, the Company maintains segregation of duties between those with the authority to enter into derivative transactions (front office) and those responsible for bookkeeping (back office) by assigning different employees in the Finance Department.
d) Quantitative information about market risks The financial instruments affected by the risks of interest rate fluctuations are installment sales receivable, lease receivables and investment in leases, loans receivable, investment securities, long-term loans, bonds and interest rate swaps of derivative transactions. The risks of interest rate fluctuations of long-term fixed rate assets and liabilities are measured by VaR. The Company calculates VaR using a variance-covariance method (holding period of one year, confidence level of 99%, observation period of one year) and periodically performs back-testing to confirm and verify its effectiveness. As of March 31, 2012, the total market risk quantity (estimated amount of losses) of long-term fixed rate assets and liabilities was ¥393 million.
(iii) Liquidity risk managementThe Group mitigates the liquidity risks for funding (risks that the Company will be unable to repay on a repayment date) by using procedures such as: • Appropriately maintain the relationship between cash flows
from operating assets and those for operating liabilities on ALM,
• Prepare and update the cash flow plan on a timely basis, • Seek diversification of funding sources, and • Maintain an appropriate level of liquidity on hand
(4) Supplementary explanation about fair value of financial instruments
Fair values of financial instruments are based on market prices and, in cases where market prices are not available, reasonably calculated prices. Such prices have been calculated based on certain assumptions, and may differ if calculated based on different assumptions. With respect to the notional amount of derivative transactions in Note 12 “Derivatives,” they do not present the Company’s exposure to market risks of such derivative transactions.
2. Fair value of financial instrumentsThe amounts presented in the consolidated balance sheet as of March 31, 2012, fair values and the differences were as follows. Financial instruments, whose fair values are considered difficult to estimate, are not included in the following table.
Millions of Yen
Amount recorded in the consolidated
balance sheet Fair Value Difference
(1) Cash and cash equivalents ¥ 40,304 ¥ 40,304 ¥ – (2) Lease receivables and investment in leases 412,203
Allowance for doubtful accounts (*1) (7,586) (*2) 404,617 409,672 5,055
(3) Installment sales receivable 16,245Allowance for doubtful accounts (*1) (1,861)
14,384 14,752 368 (4) Loans receivable (*3) 172,715
Allowance for doubtful accounts (*1) (4,551)168,164 168,457 293
(5) Accounts receivable-leases 18,118Allowance for doubtful accounts (*1) (1,060)
17,058 17,058 – (6) Purchased receivables 16,405
Allowance for doubtful accounts (*1) (803)15,602 15,602 –
(7) Operational investment securities 850 850 – (8) Securities 1,992 1,992 – (9) Income taxes receivable (*5) 423 423 –(10) Investment securities 10,825 10,825 –(11) Receivables from companies in bankruptcy and reorganization (*6) 10,098
Allowance for doubtful accounts (*1) (6,714)3,384 3,384 –
Total assets ¥677,603 ¥683,319 ¥5,716(12) Short-term borrowings ¥149,356 ¥149,356 ¥ –(13) Notes and accounts payable-trade 16,081 16,081 –(14) Accrued income taxes 4,562 4,562 –(15) Deposits received 5,949 5,949 –(16) Other payable (*7) 1,759 1,759 –
Current portion of long-term debt and long-term debt
(17) Bonds
Current portion of bond 10,000Unsecured bonds 15,000
25,000 25,172 172(18) Long-term loans
Current portion of long-term loans 135,241Long-term loans 345,663
480,904 480,801 (103)(19) Payables under securitized lease receivables
Current 614Non-current 2,260
2,874 2,847 (27)Total liabilities ¥686,485 ¥686,527 ¥ 42Derivatives (*3) (*4) ¥ 24 ¥ 24 ¥ –
(*1) An allowance for doubtful accounts that has been provided for installment sales receivable, lease receivables and investment in leases, loans receivable, accounts receivable-leases, purchased receivables and receivables from companies in bankruptcy and reorganization has been deducted.
(*2) The amounts presented in the consolidated balance sheet and the fair value provided for include the estimated residual value.(*3) The carrying value of loans receivable of ¥172,715 million in the above table is the amount computed after directly deducting derivative
liabilities of ¥8 million associated with derivative transactions involving certain hybrid financial instruments. The fair value of loans receivable of ¥168,457 million includes negative fair value of ¥8 million, which is the sum of fair values of the embedded derivative transactions relating to the hybrid financial instruments mentioned above.
(*4) The amount of assets and liabilities incurred from derivative transactions is presented on a net basis. Items that fall into net liabilities are presented in ( ).
(*5) Income taxes receivable is included in current assets-other on the accompanying consolidated balance sheet.(*6) Receivables from companies in bankruptcy and reorganization are included in investments and other assets-other on the accompanying
consolidated balance sheet.(*7) Other payable is included in current liabilities-other on the accompanying consolidated balance sheet.
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The following table shows the scheduled maturity payments of monetary claims and securities with maturity dates after March 31, 2012. Millions of Yen
Due within 1 yearDue after 1 year through 2 years
Due after 2 years through 3 years
Due after 3 years through 4 years
Due after 4 years through 5 years Due after 5 years
Cash and cash equivalents ¥ 40,304 ¥ – ¥ – ¥ – ¥ – ¥ –Lease receivables and investment in leases (*1) (*2) 152,580 112,931 75,345 46,365 23,433 10,029Installment sales receivables (*1) (*2) 8,094 4,489 2,345 1,208 542 142Loans receivables (*2) 92,899 24,018 15,074 18,921 5,435 16,408Accounts receivables-leases (*2) 18,118 – – – – –Purchased receivables(*3) 1,031 284 227 212 1,032 –Income taxes receivable 423 – – – – –Securities and investment securities
Available-for-sale securities
(1) Debt/bond 2,000 – 2,000 600 – –(2) Other – 5 – – – –
Total ¥315,449 ¥141,727 ¥94,991 ¥67,306 ¥30,442 ¥26,579
(*1) The amount of interest income is included in the maturity table above.(*2) Receivables from companies in bankruptcy and reorganization of ¥10,098 million are not included in the table above, because
payments are not expected to be collected on schedule.(*3) Purchased receivables of ¥15,483 million are not included in the table above, because payments are not expected to be collected on
schedule.
The following table shows the scheduled maturity payments of unsecured bonds, long-term loans and other interest-bearing liabilities subsequent to March 31, 2012.
Millions of Yen
Due within 1 yearDue after 1 year through 2 years
Due after 2 years through 3 years
Due after 3 years through 4 years
Due after 4 years through 5 years Due after 5 years
Short-term borrowings ¥149,356 ¥ – ¥ – ¥ – ¥ – ¥ –Unsecured bonds 10,000 – – 15,000 – –Long-term loans 135,241 145,160 84,803 49,768 58,810 7,138Payables under securitized lease receivables 614 622 629 599 409 –Total ¥295,211 ¥145,782 ¥85,432 ¥65,367 ¥59,219 ¥7,138
Methods used for determining the fair values of financial instruments, and matters related to securities and derivative transactions are as follows:
Assets(1) Cash and cash equivalents, (5) Accounts receivable-leases and
(9) Income taxes receivableSince these items are settled in a short period, the book values are deemed to approximate the fair values.
(2) Lease receivables and investment in leases and (3) Installment sales receivable
The present values of these items are presented as the fair values. The present values are calculated by discounting the estimated future cash flows of each contract at interest rates estimated to be applied to similar transactions. The fair values of doubtful receivables are calculated by discounting estimated future cash flows of each contract at risk-free rates.
(4) Loans receivableLoans receivable with variable interest rates reflect the market rate in the short term. Consequently, unless the credit conditions of debtors significantly change after the execution of loans, the book values of such loans are deemed to approximate fair values. With respect to short-term loans receivable with fixed interest rates, unless the credit conditions of debtors significantly change after the execution of loans, the book values are presented as the fair values because the book values are deemed to approximate the fair values. With respect to long-term loans receivable with fixed interest rates, the fair value is estimated based on the present value that is calculated by discounting the estimated future cash flows of each contract at interest rates estimated to be applied to similar transactions. The values obtained from financial institutions are presented as the fair values for certain loans receivable. The fair values of doubtful receivables are calculated by discounting estimated future cash flows of each contract at risk-free rates.
(6) Purchased receivablesWith respect to purchased receivables, the related allowance for doubtful receivables is estimated based on the amount expected to be collected through collateral and repayments. Consequently, the book value of those receivables less the estimated allowance for doubtful receivables is deemed to approximate the fair value.
(7) Operational investment securities, (8) Securities and (10) Investment securities
The fair values of stocks are measured at quoted market prices of the stock exchange. The fair values of bonds are based on either the prices quoted on the exchange market or prices obtained from financial institutions. For private placement bonds and certificates of trust beneficiary rights, fair values are determined based on reasonably estimated amounts. The fair values of partnership investments are determined based on the net asset value of the partnership after adjusting the carrying value of assets of the corresponding partnership at fair value if possible.
(11) Receivables from companies in bankruptcy and reorganization
With respect to receivables from companies in bankruptcy and reorganization, allowance for bad debts is estimated based on the amount expected to be collected through collateral and guarantees. Consequently, the book values of those receivables less the estimated allowance for bad debts are deemed to approximate the fair values.
Liabilities(12) Short-term borrowings, (13) Notes and accounts payable-
trade, (14) Accrued income taxes, (15) Deposits received and (16) Other payable
Since these items are settled in a short period, the book values are deemed to approximate the fair values.
(17) BondsThe fair values of bonds are determined based on their market prices.
(18) Long-term loansSince long-term loans with variable rates reflect the market interest rate in a short period, the book values are deemed to approximate fair values. The fair values of long-term loans with fixed rates are calculated by discounting the estimated future cash flows at the refinancing rates estimated to be applied to similar transactions.
(19) Payables under securitized lease receivablesThe fair values of payables under securitized lease receivables are calculated by discounting the estimated future cash flows at the refinancing rates estimated to be applied to similar transactions.
Derivative transactionsThe fair values are determined based on quoted prices provided by dealers and other financial institutions.
Financial instruments whose fair values cannot be reasonably estimated as of March 31, 2012 were as follows:
Amount presented in the consolidated balance sheet Millions of Yen
Unlisted stocks ¥24,699Investments in partnerships, etc. 6,797
These instruments are not included in (7) Operational investment securities or (10) Investment securities, because they do not have quoted market prices and their future cash flows cannot be reasonably estimated.
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13. Stock OptionsThe year ended March 31, 2013 Not applicable
The year ended March 31, 2012(1) Amount of gains from expired stock options without exercise and account nameExtraordinary income (Gain on reversal of subscription rights to shares) ¥70 million
(2) Nature, extent and movement of stock option plan(i) Nature of stock option planIn the following table, number of options granted is translated into number of shares.
Company Name RISA Partners, Inc. RISA Partners, Inc. RISA Partners, Inc.
March 30, 2005Stock Options
March 30, 2006Stock Options
April 11, 2008Stock Options
Position and Number of Grantees 34 employees of RISA Partners, Inc. (1) 55 employees of RISA Partners, Inc. 167 employees of RISA Partners, Inc.
(2) 1 director of the subsidiary of RISA Partners, Inc.
(3) 11 employees of the subsidiary of RISA Partners, Inc.
Number of Options Granted Common stock 800 shares (*1) Common stock 1,228 shares (*1) Common stock 1,552 shares
Grant Date April 1, 2005 April 3, 2006 April 28, 2008
Vesting Condition Continuous employment from the date of grant (April 1, 2005) to the vesting date (March 30, 2008)
Continuous employment from the date of grant (April 3, 2006) to the vesting date (March 30, 2009)
Continuous employment from the date of grant (April 28, 2008) to the vesting date (April 12, 2010)
Service Period No provisions No provisions No provisions
Exercise Period Within 3 years after the vesting date Within 3 years after the vesting date Within 2 years after the vesting date
(*1) The number of options granted was adjusted from one share to four shares and one share to two shares due to the stock splits on August 20, 2004 and April 1, 2007, respectively.
(ii) Extent and movement of stock option planIn the following table, number of options granted outstanding as of March 31, 2012 is translated into number of shares.a) Number of Options Granted
Company Name RISA Partners, Inc. RISA Partners, Inc. RISA Partners, Inc.
March 30, 2005Stock Options
March 30, 2006Stock Options
April 11, 2008Stock Options
Non–vested (Shares)
March 31, 2011 – – –
Granted – – –
Expired – – –
Vested – – –
March 31, 2012 – – –
Vested (Shares)
March 31, 2011 172 478 983
Vested – – –
Increased by consolidation – – –
Exercised – – –
Expired 172 478 983
March 31, 2012 – – –
b) Price Information (Yen)
Company Name RISA Partners, Inc. RISA Partners, Inc. RISA Partners, Inc.
March 30, 2005Stock Options
March 30, 2006Stock Options
April 11, 2008Stock Options
Exercise Price ¥192,955 ¥317,000 ¥210,368
Average stock price at exercise – – –
Fair value price (at grant date) – – 70,892
(3) Method to estimate the fair value of the stock option (at grant date)Not applicable
(4) Method to estimate the vested numberBecause it is difficult to reasonably estimate the number that will expire, the vested number reflects the actual number expired.
12. DerivativesThe year ended March 31, 2013(1) Derivatives for which hedge accounting is not
appliedNot applicable
(2) Derivatives for which hedge accounting is applied
Interest rate related transactions at March 31, 2013 were as follows: Interest rate swaps that are accounted for using deferral hedge accounting
March 31, 2013
Hedged item Notional amount
Notional amount expiring on April 1,
2014 or after Fair value (*1)
Millions of Yen
Interest rate swap transactions pay fixed, receive variable Borrowings ¥203,167 ¥115,880 ¥(383)
March 31, 2013
Hedged item Notional amount
Notional amount expiring on April 1,
2014 or after Fair value (*1)
Thousands of U.S. Dollars
Interest rate swap transactions pay fixed, receive variable Borrowings $2,161,120 $1,232,635 $(4,075)
(*1) The fair value is determined based on quoted prices provided by dealers and other financial institutions.
Interest rate swaps that qualify for hedge accounting and meet certain hedging criteria
March 31, 2013
Hedged item Notional amount
Notional amount expiring on April 1,
2014 or after Fair value (*2)
Millions of Yen
Interest rate swap transactions pay fixed, receive variable Borrowings ¥25 ¥– ¥–
March 31, 2013
Hedged item Notional amount
Notional amount expiring on April 1,
2014 or after Fair value (*2)
Thousands of U.S. Dollars
Interest rate swap transactions pay fixed, receive variable Borrowings $266 $– $–
(*2) For the interest rate swaps that qualify for hedge accounting and meet certain hedging criteria, the swaps and the hedged long-term loans are accounted for as a unit. Accordingly, the fair value of the swaps is included in that of the hedged loans.
The year ended March 31, 2012(1) Derivatives for which hedge accounting is not
appliedDerivatives related to hybrid financial instruments at March 31, 2012 were as follows:
March 31, 2012
Amount of contract Gain Loss Fair value
Millions of Yen
Credit default swaps ¥2,000 ¥– ¥18 ¥1,982
• The fair value is determined based on quoted prices provided by dealers and other financial institutions.
• Credit default swaps are derivatives embedded in structured debt.
• The structured debt is carried at fair value, and any unrealized gains and losses are included in net income.
(2) Derivatives for which hedge accounting is applied
Interest rate related transactions at March 31, 2012 were as follows: Interest rate swaps that are accounted for using deferral hedge accounting
March 31, 2012
Hedged item Notional amount
Notional amount expiring on April 1,
2013 or after Fair value (*1)
Millions of Yen
Interest rate swap transactions pay fixed, receive variable Borrowings ¥214,263 ¥107,176 ¥24
(*1) The fair value is determined based on quoted prices provided by dealers and other financial institutions.
Interest rate swaps that qualify for hedge accounting and meet certain hedging criteria
March 31, 2012
Hedged item Notional amount
Notional amount expiring on April 1,
2013 or after Fair value (*2)
Millions of Yen
Interest rate swap transactions pay fixed, receive variable Borrowings ¥170 ¥25 ¥–
(*2) For the interest rate swaps that qualify for hedge accounting and meet certain hedging criteria, the swaps and the hedged long-term loans are accounted for as a unit. Accordingly, the fair value of the swaps is included in that of the hedged loans.
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14. Segment InformationThe year ended March 31, 2013 and 2012(1) Overview of reportable segments(i) Methods of identification of reportable segmentThe reportable segment of the Company is a component of the Company for which discrete financial information is available and whose operating results are regularly reviewed by the management to make decisions about resources to be allocated to the segment and assess its performance. The Company provides financial services such as leases, installment sales and corporate loans for a wide range of customers, such as public offices, local governments, large companies, and small and medium enterprises. Additionally, Risa Partners, which is one of its consolidated subsidiaries, provides investment and advisory services. The reportable segments of the Group are Leasing and Installment Sales Business, Loan Business, Risa Business and Other Business that are determined based on the nature of their respective services.
(ii) Products and services by reportable segmentLeasing and Installment Sales Business includes leasing and rental of information devices and office equipment, industrial and construction machinery, installment sales etc. Loan Business
includes loans, factoring, etc. Risa Business includes principal investment business, fund business, investment banking business, etc. Other Business includes sales of equipment, sales of used equipment of off-leased or terminated leasing contracts and collection of maintenance service fees, etc.
(2) Method of calculating revenues, profit or loss, assets, liabilities, and other items by reportable segment
The accounting policies for the reportable segments presented are the same as described in Note 2 “Summary of Significant Accounting Policies”. As mentioned in Note 3 “Change in Accounting Policies”, the Company and its domestic consolidated subsidiaries have changed the method of depreciation based on the revised Corporation Tax Act for property and equipment acquired on or after April 1, 2012. Accordingly, the method of depreciation for reportable segments has been changed based on the revised Corporation Tax Act. The impact of this change on segment income in each segment for the fiscal year ended March 31, 2013 was minimal.
• Adjustment of ¥(2,203) million ($(23,425) thousand) in segment income is an amount of difference between segment income and operating income on the consolidated statement of income, which is mainly general administrative expenses not attributable to each reportable segment.
• Adjustment of ¥39,196 million ($416,938 thousand) in segment assets is corporate assets not allocated to each reportable segment.• Adjustment of ¥30 million ($322 thousand) in increase in tangible and intangible assets is an investment in corporate assets.
2012
Reportable segments
Adjustment
Amount recorded in the consolidated
financial statementsLeasing and
Installment Sales Loan Risa Other Total
Millions of Yen
Revenues
Revenues from customers ¥187,195 ¥ 4,393 ¥ 25,953 ¥15,219 ¥232,760 ¥ – ¥232,760Intersegment revenues – 123 24 1 148 (148) –
Total ¥187,195 ¥ 4,516 ¥ 25,977 ¥15,220 ¥232,908 ¥ (148) ¥232,760
Segment income 11,453 (1,320) (1,253) 763 9,643 (1,547) 8,096Segment assets 465,681 169,877 106,371 11,900 753,829 39,512 793,341
Others
Depreciation 3,314 96 220 154 3,784 137 3,921Amortization of goodwill – – 1,009 – 1,009 – 1,009Increase in tangible and intangible assets 10,101 516 – 92 10,709 151 10,860
• Adjustment of ¥(1,547) million in segment income is an amount of difference between segment income and operating income on the consolidated statement of income, which is mainly general administrative expenses not attributable to each reportable segment.
• Adjustment of ¥39,512 million in segment assets is corporate assets not allocated to each reportable segment.• Adjustment of ¥151 million in increase in tangible and intangible assets is an investment in corporate assets.
(3) Information about revenues, profit or loss, assets, liabilities, and other items by reportable segment as of March 31, 2013 and 2012 was as follows:
2013
Reportable segments
Adjustment
Amount recorded in the consolidated
financial statementsLeasing and
Installment Sales Loan Risa Other Total
Millions of Yen
Revenues
Revenues from customers ¥182,790 ¥ 4,200 ¥24,580 ¥17,635 ¥229,205 ¥ – ¥229,205Intersegment revenues – 53 2,999 1 3,053 (3,053) –
Total ¥182,790 ¥ 4,253 ¥27,579 ¥17,636 ¥232,258 ¥ (3,053) ¥229,205
Segment income (loss) ¥ 10,747 ¥ 1,244 ¥ 143 ¥ (799) ¥ 11,335 ¥ (2,203) ¥ 9,132Segment assets 453,668 160,746 70,282 8,081 692,777 39,196 731,973
Others
Depreciation ¥ 4,330 ¥ 129 ¥ 179 ¥ 193 ¥ 4,831 ¥ 104 ¥ 4,935Amortization of goodwill – – 1,077 12 1,089 – 1,089Investment in affiliated companies 31 – – – 31 – 31Increase in tangible and intangible assets 7,173 37 – 56 7,266 30 7,296
2013
Reportable segments
Adjustment
Amount recorded in the consolidated
financial statementsLeasing and
Installment Sales Loan Risa Other Total
Thousands of U.S. Dollars
Revenues
Revenues from customers $1,944,366 $ 44,676 $261,457 $187,590 $2,438,089 $ – $2,438,089Intersegment revenues – 561 31,905 8 32,474 (32,474) –
Total $1,944,366 $ 45,237 $293,362 $187,598 $2,470,563 $ (32,474) $2,438,089
Segment income (loss) $ 114,315 $ 13,229 $ 1,520 $ (8,495) $ 120,569 $ (23,425) $ 97,144Segment assets 4,825,738 1,709,877 747,596 85,972 7,369,183 416,938 7,786,121
Others
Depreciation $ 46,055 $ 1,368 $ 1,903 $ 2,054 $ 51,380 $ 1,105 $ 52,485Amortization of goodwill – – 11,459 127 11,586 – 11,586Investment in affiliated companies 331 – – – 331 – 331Increase in tangible and intangible assets 76,296 398 – 598 77,292 322 77,614
(4) Related Information(i) Information by geographical areasa) RevenuesDisclosure of revenues by geographical areas is omitted because the amount of domestic revenues is more than 90% of the amount of the consolidated revenues.
b) Tangible Assets
Millions of YenThousands of U.S. Dollars
2013 2012 2013Japan ¥21,798 ¥17,897 $231,873China 3,221 2,964 34,262Central and South America 592 149 6,297Total ¥25,611 ¥21,010 $272,432
(ii) Information by major customersInformation by major customers is not disclosed because there are no customers whose revenues are more than 10% of the amount of the consolidated revenues.
(5) Information about impairment losses of tangible and intangible assets by reportable segment for the year ended March 31, 2013 and 2012 was as follows:
2013
Reportable Segments
Corporate or Elimination Total
Leasing and Installment Sales Loan Risa Other Total
Millions of Yen
Impairment losses ¥31 ¥8 ¥28 ¥13 ¥80 ¥7 ¥87
2013
Reportable Segments
Corporate or Elimination Total
Leasing and Installment Sales Loan Risa Other Total
Thousands of U.S. Dollars
Impairment losses $334 $89 $301 $134 $858 $72 $930
• Corporate or elimination mainly comprises impairment losses on corporate assets that are not attributable to any reportable segment.
Information about impairment losses of tangible and intangible assets by reportable segment at March 31, 2012 was not applicable.
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15. Net AssetsUnder the Law and regulations, the entire amount paid for new shares is required to be designated as common stock. However, a company may, by a resolution of the Board of Directors, designate an amount not exceeding one-half of the price of the new shares as additional paid-in capital, which is included in capital surplus in the accompanying consolidated balance sheets. The Law provides that earnings in an amount equal to at least 10 percent of appropriations of retained earnings to be paid as dividends should be appropriated as a capital surplus or a legal reserve until the total of capital surplus and legal reserve equals 25 percent of stated common stock. Legal reserve is included in retained earnings in the accompanying consolidated balance sheets. In addition to transfer from capital surplus to stated common stock, either capital surplus or legal reserve may be available for dividends by resolution of the general meeting of shareholders. Under the Law, all additional paid-in capital and all legal reserve may be transferred to other capital surplus and retained earnings, respectively, which are potentially available for dividends. The maximum amount that the Company can distribute as dividends is calculated based on the non-consolidated financial statements of the Company in accordance with the Law.
At the meeting of the Board of Directors of the Company held on May 21, 2013, cash dividends amounting to ¥473 million ($5,039 thousand) were approved. This appropriation has not been reflected in the accompanying consolidated financial statements for the year ended March 31, 2013.
16. Related Party TransactionsThe year ended March 31, 2013:The Company procured equipment for lease transactions from NEC Corporation that has a 37.7% ownership share in the Company at a transaction amount of ¥56,393 million ($599,859 thousand) for the year, and the outstanding balance of ¥6,956 million ($73,994 thousand) at the year-end has been included in “Notes and accounts payable – trade.” The Company entered into factoring contracts with NEC Corporation at a transaction amount of ¥14,784 million ($157,262 thousand) and the outstanding balance of ¥4,153 million ($44,175 thousand) at the year-end has been included in “Accounts receivable – Loans.” The Company also entered into factoring contracts with NEC CASIO Mobile Communications, Ltd.
at a transaction amount of ¥11,581 million ($123,186 thousand) and the outstanding balance of ¥5,591 million ($59,477 thousand) at the year-end has been included in “Accounts receivable – Loans.”
The year ended March 31, 2012:The Company procured equipment for lease transactions from NEC Corporation that has a 37.7% ownership share in the Company at a transaction amount of ¥53,936 million for the year, and the outstanding balance of ¥8,021 million at the year-end has been included in “Notes and accounts payable – trade.” The Company entered into factoring contracts with NEC Corporation at a transaction amount of ¥14,227 million and the outstanding balance of ¥3,251 million at the year-end has been included in “Accounts receivable – Loans.” The Company also entered into factoring contracts with NEC Network Products, Ltd. at a transaction amount of ¥8,435 million and the outstanding balance of ¥1,968 million at the year-end has been included in “Accounts receivable – Loans.”
17. Subsequent EventThe Company issued unsecured corporate bonds on July 17, 2013 as follows: • Name: The 3rd unsecured corporate bonds • Issuance date: July 17, 2013 • Total value of issue: ¥10,000 million ($106,372 thousand) • Issued price: ¥100 ($1.06) per face value ¥100 ($1.06) • Interest rate: 0.69% per annum • Redemption date: July 15, 2016 • Redemption conditions: Redemption in full at maturity • Use of proceeds: Investments in property and equipment
(including purchase of leased assets)
(6) Information about amortization of goodwill and unamortized balances by reportable segment at March 31, 2013 and 2012 was as follows:
2013
Reportable Segments
Corporate or Elimination Total
Leasing and Installment Sales Loan Risa Other Total
Millions of Yen
Amortization for the current fiscal year ¥– ¥– ¥1,077 ¥12 ¥1,089 ¥– ¥1,089Balance at March 31, 2013 – – 8,687 – 8,687 – 8,687
2012
Reportable Segments
Corporate or Elimination Total
Leasing and Installment Sales Loan Risa Other Total
Millions of Yen
Amortization for the current fiscal year ¥– ¥– ¥1,009 ¥– ¥1,009 ¥– ¥1,009Balance at March 31, 2012 – – 9,764 – 9,764 – 9,764
2013
Reportable Segments
Corporate or Elimination Total
Leasing and Installment Sales Loan Risa Other Total
Thousands of U.S. Dollars
Amortization for the current fiscal year $– $– $11,459 $127 $11,586 $– $11,586Balance at March 31, 2013 – – 92,402 – 92,402 – 92,402
(7) Information about negative goodwill by reportable segmentNot applicable
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50
▶ Operation Started November 30, 1978
▶ Paid-in Capital ¥3,776 million
▶ Representative Masahiro Annaka, President
▶ Employees 513
▶ Main Business • Leasing of information and commu-nication equipment, office equipment, industrial equipment and various other equipment
• Installment sales and factoring, business loans, collection agency services, and others
▶ Main Banks Sumitomo Mitsui Banking Corporation
Sumitomo Mitsui Trust Bank, Limited
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Mizuho Corporate Bank, Ltd.
Development Bank of Japan Inc.
IR information
http://www.necap.co.jp/english/index.htmlThe Company offers ample IR information to itsshareholders and investors through the Company’s website.
The website discloses useful information such as the Company’s management policies, financial results, share information and other information so that shareholders and investors can deepen their understanding of the Company.
Number of shares authorized 86,000,000 shares
Number of shares issued 21,533,400 shares
Number of shares of one unit 100 shares
Number of shareholders 13,135
Corporate date (as of March 31, 2013) Stock information (as of March 31, 2013)
Share distribution by type of shareholder (as of March 31, 2013)
Principal shareholders (as of March 31, 2013)
Stock price and trading volume (From April 2012 to June 2013)
Business Activity Ownership
RISA Partners, Inc RISA business (refer to page 7) 100%
Capitech Limited Management of ICT-related equipment 100%
Reboot Technology Services Limited Used equipment sales 100%
Denshi Saiken Acceptance Limited Loan business 66%
NEC Capital Solutions Singapore Pte. Limited Leasing business 100%
NEC Capital Solutions Hong Kong Limited Leasing business 100%
Major Affiliated Companies (as of March 31, 2013)
8,000
6,000
4,000
2,000
5,000
0
1,250
2,500
3,750
10 11 12 1 2 5 647 8 90
▶2012 ▶20133
Stock price (Yen)
Trading volume (Thousands of shares)
5 64
Shareholders Number of shares(Thousands)
Voting rights(%)
NEC Corporation 8,110 37.66
Sumitomo Mitsui Finance & Leasing Co., Ltd. 5,390 25.03
Japan Trustee Services Bank, Ltd. 1,366 6.34
The Master Trust Bank of Japan, Ltd. 578 2.68BNY GCM CLIENT ACCOUNT JPRD AC ISG (FE-AC) 472 2.19
The Sumitomo Trust & Banking Co., Ltd. 200 0.92
Mitsui Sumitomo Insurance Company, Limited 200 0.92
SUMITOMO LIFE INSURANCE COMPANY 200 0.92
The Nomura Trust and Banking Co., Ltd. 124 0.58CBNY DFA INTL SMALL CAP VALUE PORTFOLIO 121 0.56
Other corporations
Securities companiesNon-resident investors
Financial institutions
Individuals/private andother investors
62.91％
1.51％
13.29％
12.90％
9.37％
Corporate/Stock Information
The statements in this annual report with respect to the Company’s current plans, strategies and decisions are forward-looking statements. Such forward-looking statements are based on management’s assumptions and decisions in the light of information currently available. Since these forward-looking state-ments involve risks and uncertainties, actual results could differ materially from them. Therefore, we caution that you should not place undue reliance on them.
Network (as of December 31, 2013)
▶ Head Office*
*On November 5, 2013, we relocated to the following address.
Shinagawa Intercity C building, 15-3 Konan 2-chome, Minato-ku, Tokyo, 108-6219, JapanTel. +81(0)3-6720-8400
The Company has also 28 locations in Japan.
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www.necap.co.jp
Printed in Japan
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