- Year ended March 31, 2016 -

Summary of Consolidated Financial Results

Summary of Consolidated Financial Results - Year Ended March 31, 2016 -- Year Ended March 31, 2016 -

In the FY 2017, the Japanese economy will show the uncertain prospects due to the concerns about the economic downturn in developing coun-tries and resource-rich countries and the progressive appreciation of the yen. However, in the information service industry, the business environ-ment will keep improving due to the IT investment promoted by accelerating of 3rd platform technologies and regulatory compliance. In these circumstances, we advance the reform of our business structure and improve our corporate value in order to build pillars of income as a goal of the mid-term management plan. We are going to strengthen furthermore the Contract Based Software Development business which is our core business, as well as enhancing distribution of in-house services and solutions to achieve such purposes. In the FY 2016 which is the first year of midterm management plan, we have achieved the final year target indices of net sales, operating income, and ordinary income. Therefore, we have reviewed and revised up 2nd and 3rd year forecasts of midterm management plan. In the FY 2017, we anticipate that cost of sales and SG&A expense will increase by 300 million yen due to the expansion of pro forma standard taxation and the increase in the retirement benefit cost affected by the decline in long-term interest rates by negative interest-rate policy of Bank of Japan. As the result, profit growth of operating income and ordinary income will slightly increase compared to sales growth of net sales. On the other hand, profit growth of net income attribut-able to owners of the parent will increase largely because temporary extra ordinary losses was recorded in financial results for FY 2016 while we do not anticipate such losses in the FY 2017.

In the FY2016, the Japanese economy demonstrated a steady recovery trend despite the concerns about the economic downturn in developing countries and resource-rich countries due to the slowdown in the Chinese economy. In particular, Japanese corporations posted strong earnings due to JPY depreciation, the Japanese government’s economic policy, and the monetary policy of the Bank of Japan. The private consumption also showed steady performance due to the improvement in the employment situation. In the information service industry, the business environ-ment has been on track to improve due to the aggressive IT investment promoted by the improvement in corporate profitability. NSD has made the three years mid-term management plan “Change for Innovation 2018” started at April 2015. In this management plan, we have advanced the reform of business structure. We think it is important to enhance distinct and unique services and solutions and gain the Non-Contract Based Software Development business to a new pillar of income, as well as to strengthen furthermore the Contract Based Software Development busi-ness which is our core business. Given such circumstances, NSD group has been taking on sales promotion aggressively as well as quality en-hancement and project management. Net sales increased by 20.0% compared to the same period of the previous year due to the good perform-ance of our core business, System Solution Services. Operating income and ordinary income also increased by more than 20.0% compared to the same period of the previous year due to the profit growth and the promotion of cost cutting efforts. Net income attributable to owners of the parent increased by 4.6% compared to the same period of the previous year due to the recording of the impairment loss of unamortized goodwill and software assets of the subsidiary in the U.S. and the impairment of investment securities affected by stock market decline.

in $ Thousand

Net sales 42,990 51,585 $457,809Growth Rate[%] 6.7 20.0 20.0 System Solution Services Division 42,680 51,219 454,558

% of Total Net Sales 99.3 99.3 99.3System Development 34,149 41,858 371,481

% of Total Net Sales 79.4 81.2 81.2System Services 6,950 7,703 68,363

% of Total Net Sales 16.2 14.9 14.9System Products 1,579 1,657 14,713

% of Total Net Sales 3.7 3.2 3.2Real Estate Services Division 310 366 3,250

% of Total Net Sales 0.7 0.7 0.7Operating income 5,144 6,378 56,609

% of Sales 12.0 12.4 12.4Ordinary income 5,326 6,456 57,295

% of Sales 12.4 12.5 12.5Income attributable to owners of parent 2,973 3,110 27,603

% of Sales 6.9 6.0 6.0

Per share ( , $Net income(EPS) 72.04 70.98 0.63Dividend(DPS) 78.00 37.00 0.33

Payout ratio (%) 108.3 52.1 52.1Research & Development cost 239 263 2,342Capital expenditure 998 532 4,727Depreciation & Amortization 297 413 3,669

Total assets 49,797 48,193 427,699Current assets 34,887 34,543 306,564Noncurrent assets 14,910 13,649 121,134

Total liabilities 7,090 6,631 58,850Current liabilities 6,345 6,171 54,773Noncurrent liabilities 744 459 4,077

Shareholder equity 42,229 40,999 363,860Shareholder equity ratio [%] 84.8 85.1 85.1Current ratio [%] 549.8 559.7 559.7Fixed ratio [%] 35.3 33.3 33.3BPS( , $) 946.34 942.33 8.36

ROA (%)(Ordinary Income / Total Assets) 10.9 13.2 13.2ROE (%) 6.9 7.5 7.5PER(times) 24.58 23.44 23.44Number of Shares outstanding ( in thousands) 48,172 48,172 48,172

Cash flows from operating activities 4,512 2,304 20,451Cash flows from investing activities 285 263 2,342Cash flows from financing activities (4,937) (3,463) (30,738)Free cash flow 2 4,798 2,568 22,794Cash and cash equivalents at end of period 21,930 20,942 185,860

Number of Employees 3,602 3,522 3,522

in Thousand in $ Thousand

AssetsCurrent assets

Cash and deposits 20,510,494 23,022,776 $ 204,319Notes and accounts receivable-trade 9,102,352 10,754,970 95,447Lease receivables and investment assets 66,661 75,159 667Securities 4,497,475Merchandise and finished goods 133,601 103,044 914Raw materials and supplies 8,444 7,105 63Deferred tax assets 332,897 316,562 2,809Other 256,128 288,532 2,560Allowance for doubtful accounts (20,991) (24,494) (217)

Total current assets 34,887,062 34,543,656 306,564Noncurrent assets

Property, plant and equipmentBuildings and structures, net 3,731,122 3,600,436 31,952Land 4,770,645 4,770,389 42,335Other, net 378,730 363,170 3,223Total property, plant and equipment 8,880,498 8,733,996 77,511

Intangible assetsSoftware 637,281 743,938 6,602Goodwill 802,451 628,015 5,573Other 21,597 21,333 189Total intangible assets 1,461,330 1,393,287 12,364

Investments and other assetsInvestment securities 2,177,794 1,727,021 15,326Net defined benefit asset 903,823Deferred tax assets 509,763 802,080 7,118Other 978,791 993,858 8,820Allowance for doubtful accounts (1,708) (760) (6)Total investments and other assets 4,568,463 3,522,200 31,258Total noncurrent assets 14,910,292 13,649,484 121,134

Total assets 49,797,355 48,193,141 427,699

LiabilitiesCurrent liabilities

Accounts payable-trade 1,426,970 1,857,736 16,486Income taxes payable 1,730,757 1,348,651 11,968Provision for bonuses 380,605 409,504 3,634Provision for directors' bonuses 51,300Provision for shareholders' benefits 48,890 54,699 485Other 2,707,221 2,501,241 22,197

Total current liabilities 6,345,745 6,171,832 54,773Noncurrent liabilities

Net defined benefit liability 668,603 376,300 3,339Other 75,677 83,186 738

Total noncurrent liabilities 744,280 459,486 4,077Total liabilities 7,090,025 6,631,318 58,850

Net assetsShareholders' equity

Capital stock 7,205,864 7,205,864 63,949Capital surplus 6,892,184 6,892,421 61,168Retained earnings 33,275,464 34,913,265 309,844Treasury shares (4,088,307) (5,975,221) (53,028)

Total shareholders' equity 43,285,206 43,036,330 381,934Accumulated other comprehensive income

244,558 299,504 2,658Revaluation reserve for land (1,005,325) (1,005,325) (8,921)Foreign currency translation adjustment 396,448 245,875 2,182Remeasurements of defined benefit plans (691,796) (1,576,594) (13,991)

Total accumulated other comprehensive income (1,056,115) (2,036,539) (18,073)Noncontrolling interests 478,237 562,031 4,987

Total net assets 42,707,329 41,561,822 368,848Total liabilities and net assets 49,797,355 48,193,141 427,699

Valuation difference on available-for-sale securitiesValuation difference on available-for-sale securities

in in $ Thousand

Net sales 42,990,903 51,585,970 $ 457,809Cost of sales 33,777,385 40,674,685 360,975Gross profit 9,213,518 10,911,285 96,834Selling, general and administrative expenses

Salaries and allowances 1,649,988 1,818,845 16,141Provision for bonuses 21,498 19,273 171Provision for directors' bonuses 51,300 54,100 480Retirement benefit expenses 81,501 78,543 697Welfare expenses 545,132 464,350 4,120Rent expenses 365,681 356,196 3,161Depreciation 89,365 128,644 1,141Research and development expenses 239,454 263,932 2,342Provision of allowance for shareholders' benefits 23,691 28,937 256Provision of allowance for doubtful accounts 2,932 3,502 31Other 998,473 1,316,192 11,680

Total selling, general and administrative expenses 4,069,017 4,532,518 40,224Operating income 5,144,500 6,378,766 56,609Non-operating income

Interest income 15,675 13,516 119Dividends income 39,573 38,895 345Foreign exchange gains 27,267Dividend income of insurance 84,613 71,701 636Other 44,333 32,314 286

Total non-operating income 211,463 156,427 1,388Non-operating expenses

Office transfer expenses 18,872 167Settlement package 13,459Foreign exchange losses 41,445 367Taxes and dues 9,741 12,115 107Other 6,317 6,697 59

Total non-operating expenses 29,518 79,130 702

Ordinary income 5,326,446 6,456,063 57,295Extraordinary income

Gain on sales of investment securities 60,422 80,723 716Other 7,638 42 0

Total extraordinary income 68,061 80,765 716Extraordinary losses

Loss on valuation of investment securities 341,791 3,033Impairment loss 387 593,916 5,270Other 51

Total extraordinary losses 387 935,758 8,304Income before income taxes 5,394,119 5,601,070 49,707Income taxes-current 2,289,607 2,313,727 20,533Income taxes-deferred 98,434 76,937 682Total income taxes 2,388,042 2,390,665 21,216Net income 3,006,077 3,210,405 28,491Income attributable to noncontrolling interests 32,585 100,032 887Income attributable to owners of parent 2,973,491 3,110,372 27,603

Net income 3,006,077 3,210,405 28,491Other comprehensive income

Valuation difference on available-for-sale securities 148,663 54,946 487Foreign currency translation adjustment 229,850 (151,545) (1,344)Remeasurements of defined benefit plans, net of tax 4,762 (884,798) (7,852)

Total other comprehensive income 383,276 (981,397) (8,709)Comprehensive income 3,389,353 2,229,007 19,781

Comprehensive income attributable to owners of the parent 3,355,129 2,129,948 18,902Comprehensive income attributable to noncontrolling interests 34,224 99,059 879

7,205 6,892 37,015 (6,960) 44,152 95 (1,005) 168 (696) (1,437) 8 307 43,030

891 891 891

7,205 6,892 37,906 (6,960) 45,043 95 (1,005) 168 (696) (1,437) 8 307 43,922

(3,169) (3,169) (3,169)

2,973 2,973 2,973

(1,627) (1,627) (1,627)

(4,435) 4,499 64 64

148 228 4 381 (8) 170 544

(4,631) 2,872 (1,758) 148 228 4 381 (8) 170 (1,214)7,205 6,892 33,275 (4,088) 43,285 244 (1,005) 396 (691) (1,056) 478 42,707

7,205 6,892 33,275 (4,088) 43,285 244 (1,005) 396 (691) (1,056) 478 42,707

(1,472) (1,472) (1,472)

3,110 3,110 3,110

(1,887) (1,887) (1,887)

0 0 0 0

54 (150) (884) (980) 83 (896)

0 1,637 (1,886) (248) 54 (150) (884) (980) 83 (1,145)7,205 6,892 34,913 (5,975) 43,036 299 (1,005) 245 (1,576) (2,036) 562 41,561

The previous consolidated fiscal year (from April 1, 2014 to March 31, 2015)

Capitalstock

Capitalsurplus

Retainedearnings

Treasuryshares

Totalshareholders'

equity

Valuationdifference onavailable-for-sale securities

Revaluationreservefor land

Foreigncurrencytranslationadjustment

Remeasurements of definedbenefit plans

Totalaccumulated

othercomprehensiv e

income

SubscriptionRights ToShares

Noncontrollinginterests

Totalnet

assets

Balance as of April 1, 2014 7,205 6,892 37,015 (6,960) 44,152 95 (1,005) 168 (696) (1,437) 307 43,030Cumulative effects of changes inaccounting policies 891 891 891

Restated balance 7,205 6,892 37,906 (6,960) 45,043 95 (1,005) 168 (696) (1,437) 8 307 43,922

Dividends from surplus (3,169) (3,169) (3,169)Income attributable to owners of parent 2,973 2,973 2,973

Purchase of treasury shares (1,627) (1,627) (1,627)

Disposal of treasury shares (4,435) 4,499 64 64Net changes of items other thanshareholders' equity 148 228 4 381 (8) 170 544

Total changes of items during the period (4,631) 2,872 (1,758) 148 228 4 381 (8) 170 (1,214)

Balance as of March 31, 2015 7,205 6,892 33,275 (4,088) 43,285 244 (1,005) 396 (691) (1,056) 478 42,707

The current consolidated fiscal year (from April 1, 2015 to March 31, 2016)

Capitalstock

Capitalsurplus

Retainedearnings

Treasuryshares

Totalshareholders'

equity

Valuationdifference onavailable-for-sale securities

Revaluationreservefor land

Foreigncurrencytranslationadjustment

Remeasurements of definedbenefit plans

Totalaccumulated

othercomprehensiv e

income

SubscriptionRights ToShares

Noncontrollinginterests

Totalnet

assets

Balance as of April 1, 2015 7,205 6,892 33,275 (4,088) 43,285 244 (1,005) 396 (691) (1,056) 478 42,707Cumulative effects of changes inaccounting policies

Restated balance

Dividends from surplus (1,472) (1,472) (1,472)Income attributable to owners of parent 3,110 3,110 3,110

Purchase of treasury shares (1,887) (1,887) (1,887)

Disposal of treasury shares 0 0 0 0Net changes of items other thanshareholders' equity 54 (150) (884) (980) 83 (896)

Total changes of items during the period 0 1,637 (1,886) (248) 54 (150) (884) (980) 83 (1,145)

Balance as of March 31, 2016 7,205 6,892 34,913 (5,975) 43,036 299 (1,005) 245 (1,576) (2,036) 562 41,561

Item Name

Shareholders' equity Accumulated other comprehensive income

Item Name

Shareholders' equity Accumulated other comprehensive income

in $ Thousand

Cash flows from operating activitiesIncome before income taxes 5,394,119 5,601,070 $ 49,707Depreciation 297,066 413,442 3,669Impairment loss 387 593,916 5,270Amortization of goodwill 65,679 112,108 994Increase (decrease) in provision for bonuses (3,565) 28,952 256Increase (decrease) in provision for directors' bonuses 4,100 (51,300) (455)Increase (decrease) in allowance for doubtful accounts 2,932 3,502 31Increase(decrease) in provision for shareholder benefits program 1,477 5,809 51Increase (decrease) in net defined benefit liability 87,080 (639,267) (5,673)Interest and dividend income (55,248) (52,411) (465)Loss (gain) on valuation of investment securities 341,791 3,033Net decrease (increase) in lease receivables andinvestment assets 12,742 85,944 762Decrease (increase) in notes and accounts receivable-trade (1,461,867) (1,662,888) (14,757)Decrease (increase) in inventories 60,621 27,278 242Decrease (increase) in other current assets 114,361 (38,873) (344)Decrease(increase) in other investments (170,531) 2,418 21Increase (decrease) in notes and accounts payable-trade 463,687 432,261 3,836Increase (decrease) in accrued consumption taxes 842,621 (451,363) (4,005)Increase (decrease) in other current liabilities 92,310 362,250 3,214Other, net (53,605) (87,580) (777)

Subtotal 5,694,368 5,027,060 44,613Interest and dividend income received 52,666 50,893 451Income taxes refund 38 6,435 57Income taxes paid (1,234,688) (2,779,924) (24,670)

Net cash provided by (used in) operating activities 4,512,384 2,304,465 20,451

Cash flows from investing activities

Payments into time deposits (4,080,000) (4,080,000) (36,208)

Proceeds from withdrawal of time deposits 5,580,000 4,080,000 36,208

Proceeds from redemption of securities 1,000,000 8,874

Purchase of property, plant and equipment (509,506) (120,061) (1,065)

Purchase of intangible assets (437,462) (438,398) (3,890)

Payments for transfer of business (416,916) (3,700)

Purchase of investment securities (200,000)

Proceeds from sales of investment securities 199,492 259,279 2,301Purchase of shares of subsidiaries resulting in change in scopeof consolidation (300,062)

Payment for lease and guarantee deposits (2,904) (64,721) (574)

Proceeds from collection of lease and guarantee deposits 22,701 52,202 463

Other, net 13,587 (7,405) (65)

Net cash provided by (used in) investing activities 285,845 263,979 2,342

Cash flows from financing activities

Repayment of long-term loans payable (170,000)

Cash dividends paid (3,169,598) (1,472,571) (13,068)

Purchase of treasury shares (1,627,131) (1,887,576) (16,751)

Proceeds from sales of treasury shares 55,292 898 7Other, net (25,753) (104,325) (925)

Net cash provided by (used in) financing activities (4,937,190) (3,463,574) (30,738)

Effect of exchange rate change on cash and cashequivalents 82,564 (92,587) (821)

Net increase (decrease) in cash and cash equivalents (56,396) (987,717) (8,765)Cash and cash equivalents at beginning of period 21,986,890 21,930,494 194,626Cash and cash equivalents at end of period 21,930,494 20,942,776 185,860

w w w . n s d . c o . j pDisclaimer:

This Fact Book is intended to provide information about the business performance of NSD CO., LTD. and the NSD Group. It is not intended and should not be construed as an induce-ment to purchase or sell stock in NSD or NSD Group companies. NSD shall in no event be liable for any damages arising out of the use or interpretation of this material. Please refrain from copying, disseminating or distributing this material without the prior consent of NSD.

As of March 31, 2016 (unless otherwise noted)

Name of Company : NSD CO., LTD.

Head Office : 2-101, Kanda-awajicho, Chiyoda-ku, Tokyo JAPAN(Head office relocated as of Sep. 2013)

Branch Offices: Osaka Branch, Nagoya Branch

Other Offices: Fukuoka Office

Foundation : April 8, 1969

Capital : 7,205,864,914 yen

Directors, Auditors President & CEO Yoshikazu Imajoand Executive Officers*

Senior Managing Director Hideshi Maekawa* As of June 24, 2016, current Managing Director Akio Shinno

Managing Director Osamu Yamoto

Director & Senior Executive Officer Tatsuo Kawauchi

Director & Senior Executive Officer Satoshi Kiyota

Director & Senior Executive Officer Atsuo Tomura

Director & Senior Executive Officer Takashi Matsui

Outside Director Shoichi Ogawa

Outside Director Kazuhiko Tokita

Audit & Supervisory Board Member Kiyoshi KondoAudit & Superv isory Board Member(Outside) Isao Ono

Audit & Superv isory Board Member(Outside) Takashi Kawashima

Senior Executive Officer Masataka Komatsu

Executive Officer Akihiko Anai

Executive Officer Yutaka Itsuji

Executive Officer Kyoko Gondo

Executive Officer Kiyoshi Sasaki

Executive Officer Hajime Shinagawa

Executive Officer Toshiya ShimuraExecutive Officer Shinji Suzuki

Executive Officer Masahiko Suzuki

Executive Officer Umon Takahashi

Executive Officer Yoshimitsu Matsunaga

Executive Officer Kiyokimi Yagi

Number of Shares : Authorized : 200,000,000

Outstanding : 48,172,160

Treasury stocks: 4,663,302

Major Shareholders:

KD Associates, Ltd.

Number of Shareholders : 21,658 (As of March 31, 2015 21,633)

Stock Listing : Tokyo Stock Exchange, 1st Section

Number of Employees : Consolidated 3,522 (As of March 31, 2015 3,602)

Non-Consolidated 3,100 (As of March 31, 2015 3,235)

Affiliated Companies*: FSK CO., LTD.

D.ACCESS CO., LTD.

NI CONSULTING CO., LTD.

Shareholders Relation �Service, Inc.

NRS CO., LTD.

Business Innovation Co., Ltd.

NMsystems CO., LTD.

NSD International, Inc.

Viterion Corporation

NSD Technologies LLC

Renbenxindong Technology Ltd.

RX Technology Japan Ltd.

Chengdu Renbenxindong Technology Ltd.

IPC Co., Ltd.* Treasury stocks and Employee Stock Ow nership Association are excluded.

The Nomura Trust and Banking Co., Ltd.(Retirement benefits trust account at The Bank of Tokyo-Mitsubishi UFJ, Ltd.)

The Master Trust Bank of Japan, Ltd.(Trust Account)

BBH FOR MATTHEWS JAPAN FUND