RNS Number:8857T
Nippon Telegraph and Telephone Corp
09 November 2005
Consolidated Semi-annual Financial Results Release November 9, 2005
For the Six Months Ended September 30, 2005 (U.S. GAAP)
Name of registrant: Nippon Telegraph and Telephone Corporation
Code No.: 9432
Stock exchanges on which the Company's shares are listed: Tokyo, Osaka, Nagoya,
Fukuoka, and Sapporo
Address of principal executive office: Tokyo, Japan
(URL http://www.ntt.co.jp/ir/)
Representative: Norio Wada, President
Contact: Shigehito Katsuki, Head of IR, Department 4/ TEL(03)5205-5581
Date of meeting of the board of directors for approval of consolidated financial
statements: November 9, 2005
Adoption of U.S. GAAP: Yes
1. Consolidated Financial Results for the Six Months Ended September 30, 2005
(April 1, 2005 - September 30, 2005)
Amounts are rounded off to nearest million yen throughout this report.
(1) Consolidated Results of Operations (Millions of yen, except per share amounts)
-----------------------------------------------------------
Operating Operating Income Income (loss)
Revenues before Income
Taxes
---------------- ----------------- -----------------
Six months ended September 30, 2005 5,231,483 (1.7%) 763,383 (3.1%) 833,642 7.7 %
Six months ended September 30, 2004 5,321,619 (1.7%) 787,827 (5.8%) 774,160 (2.4%)
Year ended March 31, 2005 10,805,868 1,211,201 1,723,312
Net Income (loss) Earnings (loss) Diluted Earnings
per Share per Share
---------------- ---------------- ----------------
Six months ended September 30, 2005 330,733 (4.0%) 22,338.87 (yen ) - (yen)
Six months ended September 30, 2004 344,554 3.1 % 21,889.00 (yen ) - (yen)
Year ended March 31, 2005 710,184 45,891.26 (yen ) - (yen)
Notes: 1. Equity in earnings (losses) of affiliated companies:
For the six months ended September 30, 2005: (19,720) million yen
For the six months ended September 30, 2004: 2,473 million yen
For the year ended March 31, 2005: (8,985) million yen
2. Weighted average number of shares outstanding (consolidated):
For the six months ended September 30, 2005: 14,805,270 shares
For the six months ended September 30, 2004: 15,740,969 shares
For the year ended March 31, 2005: 15,475,366 shares
3. Change in accounting policy: No
4. Percentages above represent changes from the corresponding previous semi-annual period.
(2) Consolidated Financial (Millions of yen, except per share amounts)
Position -----------------------------------------------------------------------------
Total Shareholders' Equity Ratio Shareholders'
Assets Equity Equity
---------- ------------- (Ratio of
Shareholders' per Share
Equity to -------------
Total Assets)
-------------
September 30, 2005 18,649,719 6,586,007 35.3 % 476,472.06 (yen)
September 30, 2004 19,154,597 6,794,450 35.5 % 431,648.30 (yen)
March 31, 2005 19,098,584 6,768,603 35.4 % 453,059.74 (yen)
Note: Number of shares outstanding at end of period (consolidated): September 30, 13,822,441
2005: shares
September 30, 15,740,708
2004: shares
March 31, 2005: 14,939,758
shares
(3) Consolidated Cash Flows (Millions of yen)
-------------------------------------------------------------------
Cash flows Cash flows Cash flows Cash and
from from from Cash
Operating Investing Financing Equivalents
Activities Activities Activities at End of
Period
Six months ended September 30, 2005 1,599,530 (1,210,675 ) (637,897 ) 1,138,281
Six months ended September 30, 2004 1,271,510 (1,034,615 ) (222,791 ) 1,447,958
Year ended March 31, 2005 2,829,813 (1,768,361 ) (1,111,963 ) 1,381,959
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(4) Number of Consolidated Subsidiaries and Affiliated Companies
Accounted for Under the Equity Method
The number of consolidated subsidiaries: 414
The number of unconsolidated subsidiaries accounted for under the equity 4
method:
The number of affiliated companies accounted for under the equity method: 97
(5) Changes of Reporting Entities
The number of consolidated subsidiaries added: 61
The number of consolidated subsidiaries removed: 44
The number of companies accounted for under the equity method added: 5
The number of companies accounted for under the equity method removed 49
2. Consolidated Financial Results Forecasts for the Year Ending March 31, 2006
(April 1, 2005 - March 31, 2006)
(Millions of yen)
----------------------------------------
Operating Income Net
Revenues Income
---------- before -------
Income
Taxes
---------
Year ending March 31, 2006 10,705,000 1,255,000 525,000
(Reference) Expected earnings per share (Fiscal year ending March 31, 2006): 37, 981.71 yen
Note: With regard to the assumptions and other related matters concerning the
above estimated results, please refer to page 20.
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1. STATUS OF THE NTT CORPORATE GROUP
The principal businesses of Nippon Telegraph and Telephone Corporation (NTT) and
its affiliates (NTT Group) cover regional communications, long distance and
international communications, mobile communications, and data communications.
The businesses of the consolidated subsidiaries of NTT and their respective
positions in the NTT Group are as follows:
NTT DoCoMo, Inc. (NTT DoCoMo), NTT DATA Corporation (NTT DATA) and NTT URBAN
DEVELOPMENT CORPORATION (NTTUD), three consolidated subsidiaries of NTT, are
listed on the First Section of the Tokyo Stock Exchange.
(1) Regional Communications Business
The principal elements in this business is intra-prefectural communications
services and related ancillary services pertaining to domestic communications
services.
The consolidated subsidiaries in the regional communications business are NIPPON
TELEGRAPH AND TELEPHONE EAST CORPORATION (NTT East), NIPPON TELEGRAPH AND
TELEPHONE WEST CORPORATION (NTT West), Plala Networks Inc., NTT VIETNAM
CORPORATION, NTT DIRECTORY SERVICES Co., NTT INFRASTRUCTURE NETWORK CORPORATION,
NTT MARKETING ACT CORPORATION, NTT NEOMEIT CORPORATION, NTT BUSINESS INFORMATION
SERVICE, INC, AIREC ENGINEERING CORPORATION, NTT NEOMEIT KANSAI CORPORATION,
NTT-ME CORPORATION, NTT CARD SOLUTION Inc., NTT Solco Corporation, NTT EAST -
TOKYOMINAMI CORPORATION, NTT MARKETING ACT KANSAI CORPORATION, and 88 other
companies.
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(2) Long Distance and International Communications Business
The principal elements in this business are inter-prefectural communications
services, international communications services, and related ancillary services
pertaining to inter-prefectural communications services and international
communications services.
The consolidated subsidiaries in the long distance and international
communications business are NTT COMMUNICATIONS CORPORATION (NTT Communications),
Verio Inc., NTT America, Inc., NTT AUSTRALIA PTY. LTD., NTT Europe Limited,
Milletechno, Inc., HKNet Company Limited, NTT MSC SDN BHD, NTT PC Communications
Incorporated, NTT COM ASIA LIMITED, NTT SINGAPORE PTE. LTD., NTT Communications
(Thailand) Co., Ltd., NTT WORLD ENGINEERING MARINE CORPORATION, PT. NTT
Indonesia, NTT Taiwan Ltd., NTT KOREA Co., Ltd., NTT do Brasil Telecomunicacoes
Ltda., NTT NaviSpace Corporation, and 25 other companies.
(3) Mobile Communications Business
The principal elements in this business are mobile telephone services, PHS
services, and related ancillary services.
The consolidated subsidiaries in the mobile communications business are NTT
DoCoMo, Inc., NTT DoCoMo Hokkaido, Inc., NTT DoCoMo Tohoku, Inc., NTT DoCoMo
Tokai, Inc., NTT DoCoMo Hokuriku, Inc., NTT DoCoMo Kansai, Inc., NTT DoCoMo
Chugoku, Inc., NTT DoCoMo Shikoku, Inc., NTT DoCoMo Kyushu, Inc., DoCoMo Service
Inc., DoCoMo Engineering Inc., DoCoMo Mobile Inc., DoCoMo Support Inc., DoCoMo
Systems, Inc., DoCoMo Sentsu, Inc., DoCoMo Technology, Inc., DoCoMo Businessnet,
Inc., and 82 other companies.
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(4) Data Communications Business
The principal elements in this business are systems integration services and
network system services.
The consolidated subsidiaries in the data communications business are NTT DATA
CORPORATION, NTT DATA SYSTEMS CORPORATION, NTT DATA SYSTEM TECHNOLOGIES INC.,
NTT DATA SYSTEM SERVICE CORPORATION, NTT DATA TECHNOLOGY CORPORATION, NTT DATA
CREATION CORPORATION, NTT DATA FINANCIAL CORPORATION, NTT DATA INSTITUTE OF
MANAGEMENT CONSULTING, INC., NTT DATA MANAGEMENT SERVICE CORPORATION, NTT DATA
TOKYO SMS CORPORATION, NTT DATA CUSTOMER SERVICE CORPORATION, NTT DATA
INTERNATIONAL L.L.C., and 67 other companies.
(5) Other Business
NIPPON TELEGRAPH AND TELEPHONE CORPORATION
Other consolidated subsidiaries of NTT are NTT URBAN DEVELOPMENT CORPORATION,
NTT COMWARE CORPORATION, NTT Resonant Inc., NTT FACILITIES, INC., NTT BUSINESS
ASSOCIE Corporation, NTT LEASING CO., LTD., NTT ADVANCED TECHNOLOGY CORPORATION,
NTT LOGISCO Inc., NTT INTERNET INC., NTT Electronics Corporation, NTT LEARNING
SYSTEMS CORPORATION, NTT Software Corporation, NTT ADVERTISING, INC., NTT
BUSINESS ASSOCIE TOKYO Co. Ltd., and 75 other companies.
Group organizational chart appears on the following page.
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ORGANIZATIONAL CHART OF THE NTT GROUP
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2. BUSINESS OPERATION POLICY
(1) Basic Business Operation Policy
The accelerated growth of the information and communications market has spurred
greater diversity and complexity in customer demands. In order to meet such
customer needs, NTT will undertake to achieve the following three management
objectives.
a) Use the combined strengths of NTT to actively build the ubiquitous broadband
market and help achieve the e-Japan Strategy and the u-Japan Initiative.
b) Build a safe, secure, and convenient communications network environment and
broadband access infrastructure, while achieving a seamless migration from fixed
line to IP telephony services and from metal wire systems to optical fiber.
c) Strive to increase corporate value and achieve sustained growth.
(2) Basic Principle concerning Profit Allocation
NTT believes it is critically important to reinforce its financial standing and
to serve the best interests of its shareholders over the long run. As such, NTT
has adopted as its basic principle the payment of stable dividends with due
regard to overall operating trends and financial situation while acting to
secure necessary levels of internal reserves.
While utilizing its internal reserves for strengthening its financial standing,
NTT intends to repurchase its own shares in order to implement a capital policy
that takes into account the supply and demand conditions of NTT's shares.
(3) Basic Principle and Policies concerning Reduction of Minimum Trading Lots
for Shares
The reduction of minimum trading lots for shares is believed to expand the scope
of investors. NTT will decide on this matter while taking into account such
factors as shareholder composition, liquidity, and the cost of such measures.
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(4) Basic Approach to Corporate Governance and Status of Corporate Governance
Policy Implementation
NTT recognizes corporate governance as an important management issue in its
practical implementation of shareholder-oriented management. NTT is striving to
enhance its corporate governance, centered around its Board of Directors and
Board of Auditors system.
a) Description of corporate organization
NTT has formed a Board of Directors with 12 members, including two outside
directors. In principle, this Board of Directors meets once per month to make
decisions and report on important management issues. The inclusion of outside
directors with independent status as members of the Board of Directors acts to
bolster capabilities for overseeing the fairness of business transactions.
With regard to matters concerning the appointment and compensation of directors,
in order to improve objectiveness and transparency, NTT has established the
Appointment and Compensation Council, a group of four directors, including two
outside directors. The Appointment and Compensation Council deliberates on
matters concerning the appointment and compensation of directors before the
board of directors' meetings in which final determinations of such matters are
made.
NTT applies the corporate auditor scheme and has a Board of Auditors with five
members, including two outside auditors. Members of the Board of Auditors attend
meetings of the Board of Directors and other important management meetings,
implement appropriate auditing of NTT's business transactions, and have a
full-time organization and staff for these purposes. They also conduct audits in
coordination with the corporate auditors of NTT subsidiaries.
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In addiction, NTT institutes various meetings and forms committees as necessary
for the promotion of effective group-level management in keeping with its status
as a holding company with general control and coordination responsibilities for
the NTT Group. To this end, these meetings and committees engage in ad-hoc
discussion of key issues concerning management on both the corporate and group
levels, and thereby assist appropriate decision-making.
b) Preparation of the internal control system and risk management scheme
In accordance with the Internal Control-Integrated Framework advocated by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO), NTT
assesses the preparation and operation of internal controls for the NTT Group as
a whole, executes audit reviews to assure the correctness of these controls, and
performs a supervisory function with respect to high-risk items common to all
Group companies.
Given the huge influence of the NTT Group on Japanese society at large, NTT
recognizes that it must not only strictly observe all laws and regulations, but
also conduct its business with the highest sense of ethics. Accordingly, NTT
adheres to rigorous corporate ethics standards. More specifically, it drafted an
"NTT Group Corporate Ethics Charter" and instituted not only an internal system
for related reporting and consultation but also an external reporting system
utilizing the services of attorneys. While working to create a corporate climate
marked by a high degree of transparency and openness through such steps, NTT is
also making continuous efforts to expand and strengthen educational activities
and internal checks.
In addition, NTT is developing appropriate management of business risks in a
rapidly changing business climate. To this end, NTT is establishing schemes for
provision against natural disasters, accidents, and other large-scale risks that
may adversely affect the entire Group, as well as for risk prevention, advance
preparations for occurrence of risks, and sure and prompt response in the event
that risks materialize.
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c) Status of internal audit and corporate auditors' audit
The Board of Auditors of NTT has four staff members. They audit the execution of
the directors' duties as the need arises, under the instruction of corporate
auditors. The audit staff also strives to enhance NTT's auditing system by
constantly sharing information on audit plans and results with independent
auditors. For the internal auditing process, NTT has implemented the internal
control system and risk management scheme as mentioned above.
In addition, in order to respond to requirements both from Japan and overseas to
further strengthen corporate governance, on May 12, 2005 NTT revised its
organization structure including through the establishment of an "Internal Audit
Office" with a full-time internal audit staff.
d) Status of independent auditor's audit
NTT has contracted with ChuoAoyama PricewaterhouseCoopers and KPMG AZSA & Co. as
independent auditors. The names of the certified public accountants (CPAs) who
conduct the audit services are as follows:
ChuoAoyama PricewaterhouseCoopers:
Akio Okuyama, Toshio Kinoshita, Yasushi Hamada,
KPMG AZSA & Co.:
Masanori Sato, Hideki Amano, Takuji Kanai
* Each of the above CPAs' length of audit services has not exceeded 5 years.
The numbers of staff members who support the audit activities are as follows:
ChuoAoyama PricewaterhouseCoopers:
12 CPAs, 4 assistant CPAs, and other 1 staff member
KPMG AZSA & Co.:
7 CPAs, 2 assistant CPAs, and other 2 staff members
(5) Matters concerning the parent company
NTT has no parent company.
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3. BUSINESS RESULTS AND FINANCIAL CONDITIONS
(1) Business Results
During the half-year ended September 30, 2005, the Japanese economy continued on
a gradual path to recovery with the expansion of capital investment, improvement
of employment conditions on a wider scale, and the gradual personal consumption.
In the telecommunications market, great changes are taking place in the
telecommunications market environment due to such factors as the development of
broadband communications that enable the high-speed transmission of large-volume
data and the advancement of ubiquitous networks - the ability to send and
receive a wide range of information anytime and anywhere. In the rapidly
expanding broadband market, the spread of fiber optics access services
accelerated and the trend of higher growth in the number of subscriptions
compared to ADSL became more prevalent during the period under review. In the
mobile communications market, while growth in the overall number of
subscriptions has slowed, competition for rates and services have become more
severe with the development of the shift from second-generation to
third-generation mobile communications services. In the shrinking conventional
fixed-line market, the full-scale entry of other common carriers providing
direct subscriber telephone services has resulted in even more intense
competition of overall communications charges, including basic monthly charges.
At the same time, there is an ongoing trend toward linking communications
networks with intelligent consumer appliances, fixed-line with mobile
telecommunications, and telecommunications with broadcasting (represented by the
IP (Internet protocol)-based multi-channel TV broadcasting).
Amid these conditions, aiming at the rapid realization of the NTT Group's
Medium-Term Management Strategy, announced in November 2004, the NTT Group has
strengthened its organizational structure by establishing in its holding company
the Corporate Management Strategy Division, which reports directly to the
president, as well as the Next Generation Network Promotion Office and the
Business Process Innovation Office.
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As specific measures to promote its business, the NTT Group made concerted
efforts to increase sales of ultra high-speed fiber optics services, which are
superior in interactivity and stability. The steps that were taken include
expanding its range of IP telephony services that provide the same high voice
quality as fixed-line telephones, conducting active sales campaigns, and further
upgrading video services. To maintain and increase the number of subscribers to
the third-generation FOMA mobile communications service, the NTT Group has
expanded and upgraded its handset services and functions, and proactively
conducted sales promotion campaigns to coincide with the receipt of orders for
new rate discount offers. Furthermore, in an effort to integrate fixed and
mobile communications, the NTT Group augmented its solutions services by
providing wireless LAN-compatible FOMA handsets that can be used in the office
as high-quality IP telephones and outside the office as mobile phones. Regarding
public wireless LAN services, which enable high-speed Internet communications
via access points, the NTT Group has aimed at offering mutual roaming services
by Group companies and integrating base stations for shared use of equipment, in
order to improve customer convenience and operational efficiency.
As a result of these activities, for the half-year ended September 30, 2005, NTT
Group's consolidated operating revenues amounted to 5,231.5 billion yen (a
decrease of 1.7% compared with the same period last year), while income before
income taxes amounted to 833.6 billion yen (an increase of 7.7% compared with
the same period last year). Consolidated net income for the same period was
330.7 billion yen (a decrease of 4.0% compared with the same period last year).
NTT DoCoMo publicly repurchased 1,506,000 of its own shares from NTT during the
period under review at a total cost of 249,996 million yen. As a result, NTT's
ownership ratio of NTT DoCoMo voting shares decreased from 63.0% to 62.0% as of
September 30, 2005.
The business results of Nippon Telegraph and Telephone Corporation (Holding
Company) and the principal companies of the NTT Group during the half-year ended
September 30, 2005 were as follows.
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Nippon Telegraph and Telephone Corporation (Holding Company)
With the active participation of Group companies, NTT has promoted various
measures to realize the NTT Group's Medium-Term Management Strategy. As a
result, it has received total payments of 10.1 billion yen (a decrease of 3.1%
compared with the same period last year) from the Group companies during the
period under review. With regard to R&D, NTT has implemented a "comprehensive
production function" program for planning and promoting the commercialization of
basic technologies, and has been involved in a wide range of R&D projects that
support the Group's efforts toward the achievement of the Medium-Term Management
Strategy. Specific projects include developing fiber-optic cords that can be
bent, folded and tied, and connected to equipment easily. Activities such as
these have enabled the company to earn 63.4 billion yen (a decrease of 8.9%
compared with the same period last year) in basic research and development
revenues. In addition, NTT earned a total of 110.3 billion yen in dividend
income from its Group companies (a decrease of 2.7% compared with the same
period last year).
As a result of these activities, NTT's operating revenues for the half-year
ended September 30, 2005 amounted to 192.3 billion yen (a decrease of 3.9%
compared with the same period last year) and recurring profit amounted to 118.6
billion yen (a decrease of 5.4% compared with the same period last year). Its
net income amounted to 339.6 billion yen (a decrease of 16.9% compared with the
same period last year) due to the registering of revenues from the sale of NTT
DoCoMo shares as special profits of 249.3 billion yen.
Additionally, in accordance with a resolution passed at NTT's 20th General
Shareholders' Meeting held on June 28, 2005 authorizing NTT to repurchase up to
1.25 million shares of its own common stock at a cost of up to 600.0 billion
yen, NTT repurchased 1,116,743 of its own shares at a cost of 539,386.86 million
yen.
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Nippon Telegraph and Telephone East Corporation and Nippon Telegraph and
Telephone West Corporation
During the period under review, NTT East and NTT West continued to improve
managerial efficiency, while working vigorously to expand their broadband
services and build a solid revenue base in order to address tougher competition
in the fixed-line market.
In the field of broadband service, NTT East and NTT West have been actively
engaged in sales promotion efforts. Examples include expanding the range of the
"Hikari Denwa" IP telephony service, which provides the same high voice quality
as fixed telephone lines cost efficiently; promoting sales campaigns oriented
toward apartment dwellers; and offering limited-time discounts. The companies
have also cooperated with content providers to offer a range of attractive video
content in an effort to increase convenience of fiber-optic access services.
With respect to meeting diversified needs of corporate customers, NTT East and
NTT West launched the sale of wireless LAN-compatible mobile IP telephone
handsets that can be used in the "Hikari Denwa Business Type" service.
In an effort to deal with severe competition in the existing fixed telephony
services, NTT East and NTT West offered discounts on basic charges (connection
fees) to subscribers who have multiple telephone lines under a single billing
address.
With regard to further increasing operational efficiency, NTT East and NTT West
have both continued to promote structural reforms and implemented thorough cost
reduction measures. Specifically, NTT East integrated its three outsourcing
subsidiaries (those responsible for sales, facilities and common back-office
functions)* located in each prefecture or region into a single prefectural
outsourcing subsidiary.
Despite these managerial efforts made under difficult business conditions such
as a shrinking fixed-line market and intensified competition, the operating
revenues at NTT East amounted to 1,049.9 billion yen, (a decrease of 2.0%
compared with the same period last year) and the operating revenues at NTT West
amounted to 1,005.0 billion yen (a decrease of 2.4% compared with the same
period last year).
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NTT Communications Corporation
During the period under review, NTT Com has been making vigorous efforts to
achieve its business vision of becoming a "Global IP Solution Company," and
developing its IP services and solutions business to attract as many domestic
and global customers as possible.
For corporate clients, NTT Com has advanced the global development of its IP
services. One of the initiatives taken was the launch of "Global Super Link," a
high-bandwidth VPN service offered over the NTT Com's global IP network.
Designed to meet the needs of multinational corporations fostering global
collaboration in product development and design, this service ensures
high-quality, secure and cost-effective communication among geographically
dispersed locations. NTT Com also began providing the "Customer Connect"
service, which helps corporate clients to easily set up customer centers that
respond to inquiries made by fixed telephone, IP telephone or e-mail, or over
the Internet without requiring them to install large-scale equipment.
For individual clients, NTT Com has worked hard to further increase customer
convenience by offering on a full-scale basis the "OCN Hikari with FLET'S," an
IP telephone service compatible with the "OCN B FLET'S" service, and launched a
new service enabling connection of ".Phone Personal" IP videophones and FOMA
videophones.
For existing fixed-line services, NTT Com has been providing "PL@TINUM LINE" and
other rate discount services to address increased competition.
As a result of these measures, NTT Com's operating revenues for the half-year
ended September 30, 2005, was 547.8 billion yen (an increase of 4.3% compared
with the same period last year).
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NTT DATA Corporation
During the period under review, NTT DATA has set its sights on providing systems
integration services that help raise customer value, in order to become "number
one in customer satisfaction." With that in mind, the company continued to adopt
policies designed to improve its basic organizational fitness and promote
growth.
With regard to improving basic organizational fitness, NTT DATA has taken steps
to boost system-integration competitiveness. Specific measures include enhancing
and stabilizing the R&D process and accumulating business know-how to reduce
costs and improve cost competitiveness, as well as acquiring international
certifications on project management. In an effort to expand its enterprise
systems business and explore potential customers, NTT DATA formed a capital
alliance with companies in the logistics, retail, and food-service industries to
exploit their highly specialized industry know-how.
Concerning strategies for growth, as part of its efforts to develop innovative
solutions and services, NTT DATA, jointly developed with its customers, an
inventory control system for automotive molded products, which allows users to
read data of each product piled up in warehouses using RFID tag technologies.
Other actions taken include concluding an agreement with several IT solutions
companies on joint development of a highly extensive and flexible
next-generation mission-critical system for financial institutions. This
agreement gave NTT DATA an advantage to use its proprietary basic technologies.
In these and other ways, the company has been actively involved in developing
and improving infrastructure for the next-generation mission-critical systems.
As a result of these efforts, NTT DATA's consolidated operating revenues for the
half-year under review amounted to 389.6 billion yen (an increase of 2.0%
compared with the same period last year).
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NTT DoCoMo, Inc.
During the period under review, NTT DoCoMo has focused on increasing the number
of FOMA subscribers by enhancing its lineup of handsets in the "FOMA901iS"
series, compatible with the "i-mode FeliCa" function that enables users to make
electronic payments, as well as of handsets in the "FOMA M1000" series,
compatible with wireless LAN communications and with global roaming services
that allow users to make phone calls and transmit data from abroad. These
efforts were further reinforced by the expansion of FOMA service areas to make
the service more available in the buildings and underground malls.
With respect to the "i-mode" service, NTT DoCoMo has been promoting the
widespread use of the service and formed a business alliance with global mobile
carriers to expand the international "i-mode" services, with a view to
increasing its sources of revenue. During the period under review, the company
initiated the "i-channel" news and information service that allows subscribers
to automatically receive various content delivered to the phone's standby
screen. In Israel and Russia, the mobile phone operators, with which NTT DoCoMo
has formed an alliance, launched "i-mode" services in their respective
countries.
NTT DoCoMo has also worked to provide more convenient services to customers
through such efforts as the introduction of a user-friendly rate plan and the "
New Ichinen Waribiki" yearly discount plan designed to offer preferential
services to long-time users.
Through these and other management initiatives, NTT DoCoMo was able to limit the
effect of a severe economic environment characterized by intensified competition
in rates and services, consolidated operating revenues amounting to 2,373.5
billion yen for the period under review (a decrease of 3.2% compared with the
same period last year).
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(2) Financial Conditions
Cash flows provided by operating activities for the current half-year amounted
to 1,599.5 billion yen (an increase of 328.0 billion yen, or 25.8% compared with
the same period last year) resulting from net income and depreciation and
amortization costs. The increase in cash flows was mainly due to a decrease in
cash paid for income taxes, net.
Cash flows used in investing activities amounted to 1,210.7 billion yen (an
increase of 176.1 billion yen, or 17.0% compared with the same period last year)
due to acquisition of property, plant, and equipment. Some of the factors
causing the increase in cash outflow were an increase in long-term investment
expenditures following the NTT DoCoMo's acquisition of shares in Sumitomo Mitsui
Card Company, Limited, and an increase in short-term investment expenditures
made for efficient fund management.
Cash flows used in financing activities reached 637.9 billion yen resulting from
the repurchase of its own shares (an increase of 415.1 billion yen, or 186.3%
compared with the same period last year). Some of the factors causing the
increase in cash outflow were a decrease in the amount of repayments of
long-term loans and an increase in expenses arising from the repurchase of its
own shares, among other factors. In the previous fiscal year, NTT recorded
expenses of 366.5 billion yen used in the repurchase of its own shares conducted
in the third quarter.
As a result, cash and cash equivalents at the end of the current half-year
decreased by 243.7 billion yen (17.6%), to 1,138.3 billion yen.
(3) Projections for the Full Fiscal Year (Ending March 31, 2006)
While we must keep in mind trends in the global economy and how fluctuations in
crude oil prices can affect the economies of Japan and other countries, it seems
likely that the Japanese economy will continue to recover, driven by private
domestic demand.
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In the telecommunications market, where efforts toward ubiquitous broadband
networking have been accelerating, further development is expected with the
emergence of network-connected intelligent consumer appliances; fixed-mobile
convergence (FMC) services; services integrating telecommunications and
broadcasting; "triple play" services combining the Internet, telephone and
broadcasting services; and "quadruple play" (also known as "grand slam")
services combining mobile services with triple play services. Under such market
circumstances, it is likely that new players will continue to enter into the
telecommunications market while also increasing alliances among companies from
different industries, leading to even more severe competition. Against this
backdrop, NTT considers it far more important to accurately assess diversifying
consumer needs and take appropriate measures.
Amid these conditions, we have put together a roadmap for building the
next-generation network and developing ubiquitous broadband services to
implement the "NTT Group's Medium-Term Management Strategy," which NTT Group
announced in November 2004.
With this roadmap, we will create a network environment that provides a
ubiquitous broadband service that is fast and convenient, safe and secure, and
offers connectivity anytime and anywhere - so that our customers can easily and
conveniently access our various application services. We believe this will help
create a rich communications environment for individuals as well as for
communities, make corporate activities more efficient, and generate new business
opportunities.
Our intention is to build an open next-generation network that a variety of
players outside the NTT Group can use to pioneer and develop a variety of
services and business models. At the same time, we plan to actively move ahead
with alliances with these players in a wide range of forms. Through such
initiatives, we continue to maximize the Group's corporate value by making a
contribution toward achieving the goals of the e-Japan Strategy and u-Japan
Policy, so that Japan may have an energetic aging society in which the social
problems Japan faces today, such as the decreasing birthrate and rapidly aging
population, issues of nursing and medical care, employment mismatch, crime and
disaster prevention, and energy.
-19-
--------------------------------------------------------------------------------
NTT's consolidated projections for the full fiscal year ending March 31, 2006
are as follows. Operating revenues are projected to reach 10,705.0 billion yen
(a decrease of 0.9% compared with the previous year). Consolidated income before
income taxes is projected to amount to 1,255.0 billion yen (a decrease of 27.2%
compared with the previous year), while consolidated net income is expected to
reach 525.0 billion yen (a decrease of 26.1% compared with the previous year).
NTT expects to offer dividends of 6,000 yen per share of common stock for the
full fiscal year ending March 31, 2006.
(NOTE)
The forward-looking statements and projected figures on the future performance
of NTT contained in this financial report are based on the judgments,
evaluations, recognition of facts, and formulation of plans by the current
management of NTT based on the information at their disposal. The projected
figures in this report were derived using certain assumptions that are
indispensable for making projections in addition to historical facts that have
been ascertained and acknowledged accurately. In view of the element of
uncertainty inherent in future projections, the possibility of fluctuations in
its future business operations, the state of the economy in Japan and abroad,
stock markets, and other circumstances, NTT's actual results could differ
materially from the projected figures contained in this report.
-20-
--------------------------------------------------------------------------------
4. Consolidated Balance Sheets
(Millions of yen)
----------------------------------------------
March 31, September Increase
2005 30, 2005 (Decrease)
----------- ----------- ----------
ASSETS
Current assets:
Cash and cash equivalents 1,381,959 1,138,281 (243,678 )
Short-term investments 264,455 313,124 48,669
Notes and accounts receivable, trade 1,846,176 1,613,175 (233,001 )
Allowance for doubtful accounts (35,912 ) (37,561 ) (1,649 )
Inventories 284,826 342,196 57,370
Prepaid expenses and other current assets 453,173 414,311 (38,862 )
Deferred income taxes 321,936 266,295 (55,641 )
Total current assets 4,516,613 4,049,821 (466,792 )
Property, plant and equipment:
Telecommunications equipment 13,945,449 14,208,168 262,719
Telecommunications service lines 12,865,704 12,989,043 123,339
Buildings and structures 5,602,881 5,632,761 29,880
Machinery, vessels and tools 1, 918,728 1,935,152 16,424
Land 837,103 846,711 9,608
Construction in progress 258,455 348,443 89,988
Accumulated depreciation (24,947,768 ) (25,501,395 ) (553,627 )
Total property, plant and equipment 10,480,552 10,458,883 (21,669 )
Investments and other assets:
Investments in affiliated companies 178,033 241,689 63,656
Marketable securities and other investments 438,159 466,270 28,111
Goodwill, net 320,536 333,033 12,497
Other intangibles, net 1,329,631 1, 322,392 (7,239 )
Other assets 707,543 702,146 (5,397 )
Deferred income taxes 1,127,517 1,075,485 (52,032 )
Total investments and other assets 4,101,419 4,141,015 39,596
----------- ----------- ----------
TOTAL ASSETS 19,098,584 18,649,719 (448,865 )
----------- ----------- ----------
-21-
--------------------------------------------------------------------------------
(Millions of yen)
--------------------------------------------
March 31, September Increase
2005 30, 2005 (Decrease)
---------- ---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings 422,886 564,722 141,836
Current portion of long-term debt 779,198 976,305 197,107
Accounts payable, trade 1,465,229 1,030,244 (434,985 )
Account payroll 493,935 384,255 (109,680 )
Accrued interest 18,200 13,486 (4,714 )
Accrued taxes on income 115,084 200,342 85,258
Accrued consumption tax 16,034 33,565 17,531
Advances received 67,389 81,750 14,361
Other 301,624 393,944 92,320
Total current liabilities 3,679,579 3,678,613 (966 )
Long-term liabilities:
Long-term debt 4,323,751 4,087,072 (236,679 )
Obligations under capital leases 187,845 113,833 (74,012 )
Liability for employees' severance payments 1,861,073 1,860,718 (355 )
Other 548,464 531,004 (17,460 )
Total long-term liabilities 6,921, 133 6,592,627 (328,506 )
Minority interest in consolidated subsidiaries 1,729,269 1,792,472 63,203
Shareholders' equity
Common stock 937,950 937,950 -
Additional paid-in capital 2,799,828 2,841,100 41,272
Retained earnings 3,334,866 3,620,780 285,914
Accumulated other comprehensive income (loss) 63,066 92,947 29,881
Treasury stock, at cost (367,107 ) (906,770 ) (539,663 )
Total shareholders' equity 6,768,603 6,586,007 (182,596 )
---------- ---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 19,098,584 18,649,719 (448,865 )
---------- ---------- ----------
-22-
--------------------------------------------------------------------------------
5. Consolidated Statements of Income
(Millions of yen)
-----------------------------------------------------------
Six Six Increase Year ended
months months (Decrease) March 31,
ended ended 2005
September September
30, 2004 30, 2005
--------- --------- ---------- ----------
Operating revenues:
Fixed voice related services 1,800,977 1,701,200 (99,777 ) 3,578,092
Mobile voice related services 1,614,945 1,580,627 (34,318 ) 3,216,107
IP/packet communications services 876,012 947,472 71,460 1,772,737
Sale of telecommunications equipment 353,824 283,721 (70,103 ) 688,083
System integration 388,101 402,884 14,783 910,273
Other 287,760 315,579 27,819 640,576
Total operating revenues 5,321,619 5,231,483 (90,136 ) 10,805,868
Operating expenses:
Cost of services (exclusive of items shown separately 1,092,651 1,063,389 (29,262 ) 2,349,151
below)
Cost of equipment sold (exclusive of items shown 622,036 573,731 (48,305 ) 1,260,252
separately below)
Cost of system integration (exclusive of items shown 241,327 247,553 6,226 592,035
separately below)
Depreciation and amortization 1,052,720 1,023,598 (29,122 ) 2,141,720
Impairment loss - 3,434 3,434 44,310
Selling, general and administrative expenses 1,525,058 1,556,395 31,337 3,207,199
Total operating expenses 4,533,792 4,468,100 (65,692 ) 9,594,667
Operating income 787,827 763,383 (24,444 ) 1,211,201
Other income (expenses):
Interest and amortization of bond discounts and issue (48,889 ) (37,829 ) 11,060 (93,966 )
costs
Interest income 12,535 15,822 3,287 26,288
Gains on sales of subsidiary stocks - - - 26,984
Gains on sales of investments in affiliated company - 61,962 61,962 508,492
Others, net 22,687 30,304 7,617 44,313
Total other income (expenses): (13,667 ) 70,259 83,926 512,111
Income (loss) before income taxes 774,160 833,642 59,482 1,723,312
Income tax expense (benefit): 304,068 334,851 30,783 713,918
Current 201,507 197,480 (4,027 ) 233,060
Deferred 102,561 137,371 34,810 480,858
Income (loss) before minority interest and equity in 470,092 498,791 28,699 1,009,394
earnings (losses) of affiliated companies
Minority interest in consolidated subsidiaries 128,011 148,338 20,327 290,225
Equity in earnings (losses) of affiliated companies 2,473 (19,720 ) (22,193 ) (8,985 )
Net income (loss) 344,554 330,733 (13,821 ) 710,184
-23-
--------------------------------------------------------------------------------
6. Consolidated Statements of Shareholders' Equity
(Millions of yen)
----------------------------------------------------------
Six Six Increase Year
months months (Decrease) ended
ended ended March 31,
September September 2005
30, 2004 30, 2005
--------- --------- ---------- ----------
Common stock:
At beginning of period 937,950 937,950 - 937,950
At end of period 937,950 937,950 - 937,950
Additional paid-in capital:
At beginning of period 2,722,092 2,799,828 77,736 2,722,092
Increase in interest of investee 59,295 41,272 (18,023 ) 77,736
At end of period 2,781,387 2,841,100 59,713 2,799,828
Retained earnings:
At beginning of period 2,710,805 3,334,866 624,061 2,710,805
Appropriations
- Cash dividends (39,354 ) (44,819 ) (5,465 ) (39,353 )
Interim distribution
- Cash dividends - - - (47,222 )
Net income (loss) 344,554 330,733 (13,821 ) 710,184
Other 452 - (452 ) 452
At end of period 3,016,457 3,620,780 604,323 3,334,866
Accumulated other comprehensive income (loss):
At beginning of period 27,129 63,066 35,937 27,129
Other comprehensive income (loss) 31,802 29,881 (1,921 ) 35,937
At end of period 58,931 92,947 34,016 63,066
Treasury stock, at cost
At beginning of period (4 ) (367,107 ) (367,103 ) (4 )
Net change in treasury stock (271 ) (539,663 ) (539,392 ) (367,103 )
At end of period (275 ) (906,770 ) (906,495 ) (367,107 )
Shareholders' equity at end of period 6,794,450 6,586,007 (208,443 ) 6,768,603
Summary of total comprehensive income (loss):
Net income (loss) 344,554 330,733 (13,821 ) 710,184
Other comprehensive income (loss) 31,802 29,881 (1,921 ) 35,937
Comprehensive income (loss) 376,356 360,614 (15,742 ) 746,121
-24-
--------------------------------------------------------------------------------
7. Consolidated Statements of Cash Flows
(Millions of yen)
----------------------------------------------------------
Six months Six months Increase Year ended
ended ended (Decrease) March 31,
September September 2005
30, 2004 30, 2005
---------- ---------- ---------- ----------
I Cash flows from operating activities:
Net income (loss) 344,554 330,733 (13,821 ) 710,184
Adjustments to reconcile net income (loss) to net
cash provided by operating activities-
Depreciation and amortization 1,052,720 1,023,598 (29,122 ) 2,141,720
Impairment loss - 3,434 3,434 44,310
Deferred taxes 102,561 137,371 34,810 480,858
Minority interest in consolidated subsidiaries 128,011 148,838 20,327 290,225
Loss on disposal of property, plant and equipment 72,167 42,817 (29,350 ) 186,674
Gains on sales of subsidiary stocks - - - (26,984 )
Gains on sales of investments in affiliated - (61,962 ) (61,962 ) (508,492 )
company
Equity in (earnings) losses of affiliated (2,473 ) 19,720 22,193 8,985
companies
(Increase) decrease in notes and accounts 187,401 238,197 50,796 (37,130 )
receivable, trade
(Increase) decrease in inventories (67,751 ) (57,288 ) 10,463 (46,771 )
(Increase) decrease in other current assets (24,609 ) 37,894 62,503 (66,897 )
Increase (decrease) in accounts payable, trade (398,277 ) (398,689 ) (412 ) 29,595
and accrued payroll
Increase (decrease) in accrued consumption tax (22,994 ) 17,391 40,385 (35,483 )
Increase (decrease) in accrued interest (2,577 ) (4,997 ) (2,420 ) (782 )
Increase (decrease) in advances received 9,492 13,880 4,388 8,292
Increase (decrease) in accrued taxes on income (107,823 ) 85,222 193,045 (231,037 )
Increase (decrease) in other current liabilities 39,930 55,555 15,625 65,114
Increase (decrease) in liability for employees' 9,434 1,517 (7,917 ) (95,606 )
severance payments, net of deferred pension costs
Increase (decrease) in other long-term (22,069 ) (13,644 ) 8,425 (49,903 )
liabilities
Other (26,187 ) (19,557 ) 6,630 (37,059 )
---------- ---------- ---------- ----------
Net cash provided by operating activities 1,271,510 1,599,530 328,020 2,829,813
II Cash flows from investing activities:
Payments for property, plant and equipment (873,972 ) (909,901 ) (35,929 ) (1,610,991 )
Proceeds from sale of property, plant and 25,046 12,823 (12,223 ) 54,095
equipment
Payments for purchase of non-current investments (5,587 ) (114,940 ) (109,353 ) (195,892 )
Proceeds from sale of non-current investments 32,937 38,130 5,193 776,369
Payments for purchase of short-term investments - (250,344 ) (250,344 ) (361,850 )
Proceeds from redemption of short-term - 201,065 201,065 113,576
investments
Acquisition of intangible and other assets (213,039 ) (187,508 ) 25,531 (543,668 )
---------- ---------- ---------- ----------
Net cash used in investing activities (1,034,615 ) (1,210,675 ) (176,060 ) (1,768,361 )
III Cash flows from financing activities:
Proceeds from issuance of long-term debt 195,200 194,416 (784 ) 343,814
Payments for settlement of long-term debt (342,805 ) (249,382 ) 93,423 (893,682 )
Dividends paid (39,354 ) (44,819 ) (5,465 ) (86,575 )
Payments to acquire treasury stock (271 ) (539,663 ) (539,392 ) (367,103 )
Payments for acquisition of subsidiary stocks (20,804 ) (22,321 ) (1,517 ) (105,363 )
from minority shareholders
Net increase (decrease) in short-term borrowings (14,757 ) 23,872 38,629 (3,054 )
and other
---------- ---------- ---------- ----------
Net cash provided by (used in) financing (222,791 ) (637,897 ) (415,106 ) (1,111,963 )
activities
IV Effect of exchange rate changes on cash and cash 2,433 5,364 2,931 1,049
equivalents
---------- ---------- ---------- ----------
V Net increase (decrease) in cash and cash 16,537 (243,678 ) (260,215 ) (49,462 )
equivalents
VI Cash and cash equivalents at beginning of period 1,431,421 1,381,959 (49,462 ) 1,431,421
VII Cash and cash equivalents at end of period 1,447,958 1,138,281 (309,677 ) 1,381,959
---------- ---------- ---------- ----------
Supplemental information
Cash paid during the period for:
Interest 50,955 42,078 (8,877 ) 94,129
Income taxes, net 294,200 29,193 (265,007 ) 581,940
Noncash investing and financing activities:
Acquisition of shares from sale of an investment 16,711 - (16,711 ) 16,711
Capital lease obligations incurred during the 9,011 7,469 (1,542 ) 18,522
period
-25-
--------------------------------------------------------------------------------
Significant Matters Pertaining to the Preparation of Consolidated Financial
Statements
The consolidated financial statements of NTT have been prepared in conformity
with the accounting principles generally accepted in the United States of
America (Accounting Principles Board Opinions, Statements of Financial
Accounting Standards, etc.)
1. Application of New Accounting Standard
Accounting for Conditional Asset Retirement Obligations
Effective April 1, 2005, NTT Group adopted the Financial Accounting Standards
Board ("FASB") Interpretation No. 47 ("FIN 47") "Accounting for Conditional
Asset Retirement Obligations - an interpretation of FASB Statement No. 143." FIN
47 provides guidance relating to the identification of and financial reporting
for legal obligations to perform an asset retirement activity. The
Interpretation requires recognition of a liability for the fair value of a
conditional asset retirement obligation when incurred if the liability's fair
value can be reasonably estimated. The adoption of FIN 47 did not have an impact
on the results of operations or the financial position of NTT Group.
2. Principal Accounting Policies
(1) Marketable Securities
SFAS 115, "Accounting for Certain Investments in Debt and Equity Securities"
applies.
(2) Inventories
Inventories are stated at cost, not in excess of market value. The cost of
telecommunications equipment to be sold is determined by the first-in first-out
method.
(3) Property, Plant and Equipment and Depreciation
Property, plant, and equipment are stated at cost. Depreciation is computed
principally using the declining-balance method with the exception of buildings
for which the straight-line method is used.
(4) Goodwill and Other Intangible Assets
SFAS 142, "Goodwill and Other Intangible Assets" applies.
(5) Liabilities for Employees' Severance Payments
SFAS 87, "Employers' Accounting for Pensions," and SFAS 88, "Employers'
Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and
for Termination of Benefits" apply.
(6) Derivative Financial Instruments
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities,"
SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activities," and SFAS No. 149, "Amendment of Statement 133 on Derivative
Instruments and Hedging Activities" apply.
(7) Income Taxes
Income taxes are computed based on income (loss) before income taxes in the
consolidated statements of income. According to the asset and liability
approach, the expected future tax consequences of temporary differences between
the carrying amounts and the tax basis of assets and liabilities and of
operating loss carryforward are recognized as deferred tax assets or
liabilities.
-26-
--------------------------------------------------------------------------------
3. Subsequent Events
On October 24, 2005, NTT DoCoMo, Inc. ("NTT DoCoMo"), a consolidated subsidiary
of NTT, dissolved its capital alliance with KPN Mobile N.V. ("KPNM"). The i-mode
license agreement between NTT DoCoMo and KPNM will be maintained.
Under the agreement, NTT DoCoMo transferred all of its 2.16% holding of KPNM
shares to Koninklijke KPN N.V. ("KPN"), the parent company of KPNM. KPN agreed
to cooperate with NTT DoCoMo in the smooth operation of the global i-mode
alliance, through the use of KPN's i-mode-related patents and know how, for
example, and has paid cash of Euro5 million (approximately Y690 million) to NTT
DoCoMo.
As a result of this transaction, NTT expects to record a gain on a sale of
investment securities of Y40.0 billion, including a foreign currency translation
adjustment, as an other income for the year ending March 31, 2006. NTT also
expects to account for the balance between the fair value of the transferred
shares and the amount of cash received, approximately Y14 billion, which NTT
DoCoMo regards as the consideration for the agreement that will enable NTT
DoCoMo to continue the development and expansion of i-mode services, as an
operating expense.
(Reference)
Details of "Operating revenues" classified by the corresponding previous
semi-annual period's service categories
(Millions of yen)
---------------------------
Six Six
months months
ended ended
September September
30, 2004 30, 2005
--------- ---------
Fixed voice transmission services 1,499,607 1,399,495
Mobile voice transmission services 1,584,399 1,565,563
Data transmission services 792,271 830,326
Leased circuit 215,706 233,015
Sales of telecommunications equipment 353,824 283,721
System integration 388,101 402,884
Other 487,711 516,479
--------- ---------
Total 5,321,619 5,231,483
--------- ---------
-27-
--------------------------------------------------------------------------------
8. Business Segments
(Consolidated)
1. Sales and operating revenues (Millions of yen)
-----------------------------------------------------------
Six Six Increase Year ended
months months
ended ended (Decrease) March 31,
2005
September September
30, 2004 30, 2005
--------- --------- ---------- ----------
Regional communications business
Customers 1,921,823 1,869,794 (52,029 ) 3,937,789
Intersegment 314,206 318,315 4,109 651,772
--------- --------- ---------- ----------
Total 2,236,029 2,188,109 (47,920 ) 4,589,561
--------- --------- ---------- ----------
Long distance and international communications
business
Customers 506,653 529,901 23,248 1,045,218
Intersegment 57,652 52,517 (5,135 ) 119,580
--------- --------- ---------- ----------
Total 564,305 582,418 18,113 1,164,798
--------- --------- ---------- ----------
Mobile communications business
Customers 2,440,267 2,347,905 (92,362 ) 4,821,941
Intersegment 11,686 25,550 13,864 22,669
--------- --------- ---------- ----------
Total 2,451,953 2,373,455 (78,498 ) 4,844,610
--------- --------- ---------- ----------
Data communications business
Customers 328,237 329,546 1,309 721,816
Intersegment 43,068 49,507 6,439 110,804
--------- --------- ---------- ----------
Total 371,305 379,053 7,748 832,620
--------- --------- ---------- ----------
Other
Customers 124,639 154,337 29,698 279,104
Intersegment 440,679 444,713 4,034 946,619
--------- --------- ---------- ----------
Total 565,318 599,050 33,732 1,225,723
--------- --------- ---------- ----------
Elimination of intersegment (867,291 ) (890,602 ) (23,311 ) (1,851,444 )
--------- --------- ---------- ----------
Consolidated total 5,321,619 5,231,483 (90,136 ) 10,805,868
--------- --------- ---------- ----------
2. Segment profit or loss (Millions of yen)
-----------------------------------------------------------
Six Six Increase Year ended
months months
ended ended (Decrease) March 31,
2005
September September
30, 2004 30, 2005
--------- --------- ---------- ----------
Operating income
Regional communications business 140,942 118,854 (22,088 ) 246,759
Long distance and international communications 41,128 33,532 (7,596 ) 62,329
business
Mobile communications business 545,432 558,368 12,936 784,166
Data communications business 16,094 12,695 (3,399 ) 36,894
Other 35,299 32,891 (2,408 ) 37,554
--------- --------- ---------- ----------
Total 778,895 756,340 (22,555 ) 1,167,702
--------- --------- ---------- ----------
Elimination of intersegment 8,932 7,043 (1,889 ) 43,499
--------- --------- ---------- ----------
Consolidated total 787,827 763,383 (24,444 ) 1,211,201
--------- --------- ---------- ----------
-28-
--------------------------------------------------------------------------------
9. Leases
(Consolidated)
This information would be disclosed under separate cover of Form 6-K.
10. Securities
(Consolidated)
1. Available-for-sale (Millions of yen)
--------------------------------------
March September Increase
31, 30, 2005
2005 (Decrease)
-------- --------- ----------
Equity securities Carrying amounts 70,352 57,569 (12,783 )
Gross unrealized gains 126,641 175,464 48,823
Gross unrealized losses 534 135 (399 )
Fair value 196,459 232,898 36,439
Debt securities Carrying amounts 151,271 152,272 1,001
Gross unrealized gains 58 2 (56 )
Gross unrealized losses 16 135 119
Fair value 151,313 152,139 826
2. Held-to-maturity (Millions of yen)
---------------------------------------
March September Increase
31, 30, 2005
2005 (Decrease)
-------- --------- ----------
Debt securities Carrying amounts 16,271 6,789 (9,482 )
Gross unrealized gains 61 23 (38 )
Gross unrealized losses 0 - (0 )
Fair value 16,332 6,812 (9,520 )
11. Financial Instruments
(Consolidated)
This information would be disclosed under separate cover of Form 6-K .
-29-
--------------------------------------------------------------------------------
Non-consolidated Semi-annual Financial Results Release November 9, 2005
For the Six Months Ended September 30, 2005 (Japanese GAAP)
Name of registrant: Nippon Telegraph and Telephone Corporation
Code No.: 9432
Stock exchanges on which the Company's shares are listed: Tokyo, Osaka, Nagoya,
Fukuoka, and Sapporo
Address of principal executive office: Tokyo, Japan
(URL http://www.ntt.co.jp/ir/)
Representative: Norio Wada, President
Contact: Shigehito Katsuki, Head of IR, Department 4/ TEL (03) 5205-5581
Date of the meeting of the board of directors for approval of non-consolidated
financial statements: November 9, 2005
Interim dividends plan: Yes
Date of the interim dividend payments: December 13, 2005
Adoption of the Unit Share System: No
1. Non-consolidated Financial Results for the Six Months Ended September 30,
2005 (April 1, 2005 - September 30, 2005)
Amounts are rounded off per 1 million yen throughout this report.
(1) Non-consolidated Results of Operations (Millions of yen, except per share amounts)
----------------------------------------------------
Operating Operating Recurring
Revenues Income Profit
-------------- -------------- --------------
Six months ended September 30, 2005 192,398 (3.9 ) 114,867 (5.2 ) 118,604 (5.4 )
% % %
Six months ended September 30, 2004 200,104 41.3 % 121,118 74.7 % 125,331 71.6 %
Year ended March 31, 2005 323,261 143,709 151,700
Net Income Earnings per
Share
---------------- -----------------
Six months ended September 30, 2005 339,612 (16.9%) 22,938.61 (yen )
Six months ended September 30, 2004 408,904 77.8 % 25,977.09 (yen )
Year ended March 31, 2005 455,660 29,439.71 (yen )
Notes: 1. Weighted average number of shares outstanding (non-consolidated):
For the six months ended September 30, 2005: 14,805,270 shares
For the six months ended September 30, 2004: 15,740,969 shares
For the year ended March 31, 2005: 15,475,366 shares
2. Change in accounting policy No
3. Percentages above represent changes from the corresponding previous semi-annual period.
(2) Dividends
Interim Dividends per Share Yearly
--------------- Dividends
per Share
---------
Six months ended September 30, 2005 3,000.00 (yen) - (yen)
Six months ended September 30, 2004 3,000.00 (yen) - (yen)
Year ended March 31, 2005 - (yen) 6,000.00
(yen)
(3) Non-consolidated Financial Position (Millions of yen, except per share amounts)
----------------------------------------------------------------------------
Total Shareholders' Equity Ratio Shareholders'
Assets Equity Equity
--------- ------------- (Ratio of
Shareholders' per Share
Equity -------------
to Total
Assets)
-------------
September 30, 2005 8,276,392 4,930,040 59.6 % 356,669.28 (yen)
September 30, 2004 9,008,859 5,536,053 61.5 % 351,702.92 (yen)
March 31, 2005 8,401,448 5,170,267 61.5 % 346,069.68 (yen)
Notes: 1. Number of shares outstanding at end of period September 30, 13,822,441 shares
(non-consolidated): 2005:
September 30, 15,740,708 shares
2004:
March 31, 2005: 14,939,758 shares
2. Number of treasury stock: September 30, 1,918,768 shares
2005:
September 30, 501 shares
2004:
March 31, 2005: 801,451 shares
2. Non-consolidated Financial Results Forecasts for the Year Ending March 31,
2006 (April 1, 2005 - March 31, 2006)
(Millions of yen)
-----------------------------------------------------------------------------
Operating Recurring Net Year-End Total
Revenues Profit Income Dividends Dividends
--------- --------- ------- per Share per Share
--------- ---------
Year ending March 31, 2006 337,000 174,000 395,000 3,000.00 (yen) 6,000.00 (yen)
(Reference) Expected Earnings per Share (Year ending March 31, 2006): 28,576.72 yen
With regard to the assumptions and other related matters concerning the above
estimated results, please refer to page 20.
-30-
--------------------------------------------------------------------------------
1. Non-Consolidated Comparative Balance Sheets
(Millions of yen)
----------------------------------------
March 31, September Increase
2005 30, 2005 (Decrease)
--------- --------- ----------
ASSETS
Current assets:
Cash and bank deposits 115,802 6,500 (109,302 )
Accounts receivable, trade 1,567 204 (1,362 )
Supplies 213 267 53
Short-term loan receivable 426,792 470,426 43,633
Other current assets 124,039 78,088 (45,951 )
Total current assets 668,415 555,487 (112,928 )
Fixed assets:
Property, plant and equipment 217,430 211,562 (5,868 )
Intangible fixed assets 20,892 20,863 (29 )
Investments and other assets
Investment securities 4,820,173 4,822,553 2,380
Long-term loan receivable to subsidiaries 2,617,890 2,615,354 (2,535 )
Other investments 55,994 49,843 (6,150 )
Total investments and other assets 7,494,057 7,487,751 (6,305 )
Total fixed assets 7,732,381 7,720,177 (12,203 )
Deferred assets 652 727 75
--------- --------- ---------- -
TOTAL ASSETS 8,401,448 8,276,392 (125,056 )
--------- --------- ---------- -
-31-
--------------------------------------------------------------------------------
(Millions of yen)
------------------------------------------------
March 31, September Increase
2005 30, 2005 (Decrease)
--------- --------- ----------
LIABILITIES
Current liabilities:
Accounts payable, trade 1,135 592 (543 )
Short-term borrowings - 50,000 50,000
Current portion of corporate bonds 162,685 225,528 62,842
Current portion of long-term borrowings 256,244 248,784 (7,460 )
Accrued taxes on income 18,197 7,935 (10,262 )
Other current liabilities 146,807 180,438 33,631
Total current liabilities 585,071 713,279 128,208
Long-term liabilities:
Corporate bonds 1,614,827 1,609,422 (5,405 )
Long-term borrowings 1,001,578 993,561 (8,016 )
Liability for employees' severance payments 29,299 29,695 395
Other long-term liabilities 404 393 (11 )
Total long-term liabilities 2,646,110 2,633,073 (13,036 )
--------- --------- ----------
TOTAL LIABILITIES 3,231,181 3,346,352 115,171
--------- --------- ----------
SHAREHOLDERS' EQUITY
Common stock 937,950 937,950 -
Capital surplus
Additional paid-in capital 2,672,826 2,672,826 -
Total capital surplus 2,672,826 2,672,826 -
Earned surplus
Legal reserve 135,333 135,333 -
Voluntary reserve
Reserve for special depreciation 2,394 530 (1,863 )
Other reserve 1,131,000 1,131,000 -
Unappropriated retained earnings for the period 651,486 948,073 296,586
Total earned surplus 1,920,214 2,214,937 294,722
Net unrealized gains (losses) on securities 6,384 11,097 4,713
Treasury stock (367,107 ) (906,770 ) (539,663 )
--------- --------- ----------
TOTAL SHAREHOLDERS' EQUITY 5,170,267 4,930,040 (240,227 )
--------- --------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 8,401,448 8,276,392 (125,056 )
--------- --------- ----------
-32-
--------------------------------------------------------------------------------
2. Non-Consolidated Comparative Statements of Income
(Millions of yen)
------------------------------------------------------------
Six Six Increase Year
months months ended
ended ended (Decrease)
---------- March
September September 31,
30, 2004 30, 2005 2005
--------- --------- -------
Operating revenues 200,104 192,398 (7,706 ) 323,261
Operating expenses 78,985 77,531 (1,454 ) 179,551
Operating income 121,118 114,867 (6,251 ) 143,709
Non-operating revenues: 35,444 31,827 (3,616 ) 69,483
Interest income 26,171 23,587 (2,584 ) 51,374
Lease income 6,839 6,199 (639 ) 13,636
Miscellaneous income 2,433 2,040 (392 ) 4,472
Non-operating expenses: 31,232 28,090 (3,141 ) 61,492
Interest expenses 9,020 8,855 (164 ) 17,915
Corporate bond interest expenses 18,566 15,063 (3,502 ) 35,794
Lease expenses 2,916 2,767 (148 ) 6,555
Miscellaneous expenses 728 1,402 674 1,226
Recurring profit 125,331 118,604 (6,727 ) 151,700
Special profits 319,173 249,383 (69,789 ) 350,659
Income before Income taxes 444,504 367,987 (76,516 ) 502,360
Corporation, inhabitant, and enterprise taxes 38,300 22,970 (15,329 ) 53,900
Deferred tax expenses (benefits) (2,700 ) 5,405 8,105 (7,200 )
Net income 408,904 339,612 (69,292 ) 455,660
Unappropriated retained earnings brought forward 243,048 608,461 365,412 243,048
Interim dividends - - - 47,222
Unappropriated retained earnings for the period 651,953 948,073 296,120 651,486
-33-
--------------------------------------------------------------------------------
3. Non-Consolidated Comparative Statements of Cash Flows
(Millions of yen)
------------------------------------------------------------
Six Six Increase Year
months months ended
ended ended (Decrease)
September ---------- March
September 30, 2005 31, 2005
30, 2004 --------- --------
---------
I Cash flows from operating activities:
Income before income taxes 444,504 367,987 (76,516 ) 502,360
Depreciation and amortization 17,038 14,746 (2,291 ) 32,823
Loss on disposal of property, plant and equipment 412 219 (193 ) 1,682
Dividends received (113,385 ) (110,325 ) 3,060 (144,067 )
Gains on sales of investments in affiliated company (319,173 ) (249,383 ) 69,789 (350,659 )
Increase (decrease) in liability for employees' (1,623 ) 395 2,019 (194 )
severance payments
(Increase) decrease in accounts receivable 39,333 37,207 (2,126 ) 19,011
Increase (decrease) in accounts payable and accrued (49,324 ) (48,103 ) 1,221 (15,866 )
expenses
Increase (decrease) in accrued consumption tax (279 ) 660 939 (990 )
payable
Other (229 ) (1,575 ) (1,345 ) (2,981 )
--------- --------- ---------- --------
Sub-total 17,272 11,830 (5,442 ) 41,118
Interest and dividends received 140,656 135,492 (5,163 ) 196,270
Interest paid (29,075 ) (25,957 ) 3,118 (55,060 )
Income taxes received (paid) 5,773 (47,034 ) (52,807 ) 3,121
--------- --------- ---------- --------
Net cash provided by (used in) operating activities 134,626 74,331 (60,294 ) 185,449
II Cash flows from investing activities:
Payments for property, plant and equipment (11,724 ) (14,127 ) (2,402 ) (22,357 )
Proceeds from sale of property, plant and equipment 2 - (2 ) 617
Acquisition of investment securities (75 ) (229 ) (154 ) (17,348 )
Proceeds from sale of investment securities 319,884 254,502 (65,381 ) 355,623
Payments for long-term loans (124,593 ) (188,366 ) (63,773 ) (216,733 )
Proceeds from long-term loans receivable 103,002 150,704 47,701 470,058
Other 5,017 (22 ) (5,040 ) 5,011
--------- --------- ---------- --------
Net cash provided by (used in) investing activities 291,514 202,461 (89,052 ) 574,871
III Cash flows from financing activities:
Proceeds from issuance of long-term debt 144,008 188,229 44,221 236,148
Payments for settlement of long-term debt (100,992 ) (149,842 ) (48,850 ) (486,896 )
Net increase (decrease) in short-term borrowings - 160,000 160,000 -
Dividends paid (39,353 ) (44,819 ) (5,466 ) (86,575 )
Payments to acquire treasury stock (270 ) (539,663 ) (539,393 ) (367,102 )
--------- --------- ---------- --------
Net cash provided by (used in) financing activities 3,392 (386,095 ) (389,488 ) (704,426 )
IV Net increase (decrease) in cash and cash 429,533 (109,302 ) (538,835 ) 55,894
equivalents
V Cash and cash equivalents at beginning of 59,907 115,802 55,894 59,907
period
--------- --------- ---------- --------
VI Cash and cash equivalents at end of period 489,441 6,500 (482,940 ) 115,802
--------- --------- ---------- --------
-34-
--------------------------------------------------------------------------------
Significant Matters Pertaining to the Preparation of Non-Consolidated Financial
Statements
1. Valuation of certain assets
(1) Securities
(1) Investments in subsidiaries and affiliated companies
Investments in subsidiaries and affiliated companies are stated at cost, which
are determined by the moving average method.
(2) Other securities
a. Marketable securities
The securities whose fair value are readily determinable are stated at fair
value as of balance sheet date with unrealized gains and losses directly
reported as a separate component of shareholders' equity. The cost of securities
sold is determined by the moving average method.
b. Non-marketable securities
The securities whose fair value are not readily determinable are stated at cost,
which are determined by the moving average method.
(2) Inventories
Supplies are stated at cost, which are determined by the last purchase cost
method.
2. Depreciation and amortization of fixed assets
Property, plant, and equipment are depreciated by using the declining-balance
method with the exception of buildings for which the straight-line method is
used. Intangible assets are amortized on a straight-line basis. Their estimated
useful lives and residual value are determined on the basis provided by the
Corporate Income Tax Laws.
Buildings, after having been depreciated over the depreciable periods based on
the Corporate Income Tax Laws, keep depreciated up to the end of their actual
useful lives.
Internal-use software is amortized on a straight-line basis over their estimated
useful lives within five years.
3. Allowance
(1) Allowance for doubtful accounts
To cover expected losses from bad debts, estimated amounts to be uncollectible
are accrued, for general claims, computing on historical bad-debt ratios, and
for specific claims including doubtful accounts, considering their own
recoverability.
No allowance is accrued as of the end of this six-month period.
(2) Liability for employees' severance payments
To provide for employees' pension benefits, based on estimated benefit
obligations and plan assets as of the end of this fiscal year, a liability is
accrued in the estimated amounts as of the end of this six-month period.
Prior service cost is amortized on a straight-line basis over the average
remaining service periods at the time of recognition.
Actuarial net gain or loss is amortized on a straight-line basis over the
average remaining services periods at the time of recognition.
-35-
--------------------------------------------------------------------------------
4. Leases
Finance leases other than those deemed to transfer the title of leased assets to
lessees are accounted for in a similar manner as operating leases.
5. Hedging Activities
(1) Accounting for Hedging Activities
Hedging activities are principally accounted for under the "deferral hedge
accounting." Designation ("Furiate-shori") is applied to forward exchange
contracts and other foreign exchange contracts, and designated "exceptional
accounting" ("Tokurei-shori") to interest-rate swaps that qualify for "
exceptional accounting" (Footnote 14, Accounting Standards for Financial
Instruments).
(2) Hedging Instruments and Hedged Items
(1) Hedging Instruments
Hedging instruments include forward exchange contracts, currency swaps, coupon
swaps (i.e. currency swap of interest portion only), interest-rate swaps,
interest-rate options, and the combinations of the above.
(2) Hedged Items
Hedged items are assets (securities, loans, receivables, etc.) and liabilities
(corporate bonds, borrowings, payables, etc.) exposed to variability of fair
value or future cash flows derived from fluctuations of the exchange rate,
interest rate, etc.
(3) Hedging Policy
To hedge the foreign exchange risks regarding assets and liabilities exposed to
foreign exchange risks, forward exchange contracts, currency swaps, and other
instruments are employed in compliance with internal rules.
To hedge the interest-rate risks regarding assets and liabilities exposed to
interest-rate risks, interest-rate swaps and other instruments are employed in
compliance with internal rules.
(4) Assessment of Hedge Effectiveness
At the end of each quarter, hedge effectiveness is assessed on each hedging
transaction. This quarterly assessment excludes any transaction where important
terms and conditions such as principal, interest-rate, duration are identical
between hedging instruments and hedged items.
6. Consumption Taxes
Consumption tax is separately accounted for by excluding it from each
transaction amounts.
-36-
--------------------------------------------------------------------------------
7. Accounting standards for impairment of long-lived assets
Effective from the six months ended September 30, 2005, NTT adopted the
accounting standards for impairment of long-lived assets, "Statement of Opinion
on Establishment of Accounting Standards for Impairment of Long-lived Assets"
(issued by Accounting Standards Board of Japan on August 9, 2002) and "
Application Guidance on Accounting Standards for Impairment of Long-lived Assets
" (Accounting Standard Application Guidance No.6, which was issued on October
31, 2003). The adoption of these standards had no impact on income before income
taxes for the six months ended September 30, 2005.
Notes to Non-Consolidated Balance Sheets
1. Accumulated depreciation on property, plant and equipment:
March 31, 2005: 218,677 million yen
September 30, 2005: 225,053 million yen
2. In compliance with the provisions of Article 9 of the Law Concerning Nippon Telegraph and Telephone Corporation,
Etc., the total assets of NTT have been pledged as general collateral for corporate bonds issued. In accordance
with the provisions of Article 9 of the Supplementary Provisions to the Law Concerning Partial Revision to the
Nippon Telegraph and Telephone Corporation Law (law No. 98 of 1997), NTT is jointly responsible with Nippon
Telegraph and Telephone East Corporation, Nippon Telegraph and Telephone West Corporation, and NTT Communications
Corporation for corporate bonds issued prior to June 30, 1999 and the total assets of the four companies above
have been pledged as general collateral for the said bonds.
3. Outstanding guarantees:
March 31, 2005: 87,800 million yen
September 30, 2005: 75,800 million yen
Notes to Non-Consolidated Statements of Income
1. Major components of operating revenues:
(Millions of Yen)
-----------------------------------------
Six Six Year
months months ended
ended ended March
September September 31,
30, 2004 30, 2005 2005
--------- --------- -------
Dividends received 113,385 110,325 144,067
Revenues from Group management 10,465 10,141 20,931
Revenues from basic R&D 69,617 63,438 139,234
2. Research & Development expenses included in operating expenses:
(Millions of Yen)
-----------------------------------------
Six Six Year
months months ended
ended ended March
September September 31,
30, 2004 30, 2005 2005
--------- --------- -------
64,513 62,384 146,979
3. Component of special profits
(Millions of Yen)
Gains on sales of investments in subsidiaries and affiliated companies: 249,383
-37-
--------------------------------------------------------------------------------
4. Leases
In accordance with Tokyo Stock Exchange, Inc.'s Rule, we would disclose this
information via EDINET (Electronic Disclosure for Investors' Network) later.
5. Securities
September 30, 2005
Marketable investments in subsidiaries and affiliated companies
Amounts included Fair value Difference
in the
balance sheet
------------------ ----------------- -----------------
Investments in subsidiaries 41,129 million yen 6,506,844 million 6,465,714 million
yen yen
Investments in affiliated companies 9,603 million yen 21,314 million 11,711 million
yen yen
------------------ ----------------- -----------------
Total 50,733 million yen 6,528,159 million 6,477,426 million
yen yen
March 31, 2005
Marketable investments in subsidiaries and affiliated companies
Amounts included Fair value Difference
in the
balance sheet
------------------ ----------------- -----------------
Investments in subsidiaries 41,742 million yen 6,027,946 million 5,986,204 million
yen yen
Investments in affiliated companies 9,603 million yen 8,012 million yen (1,591) million
yen
------------------ ----------------- -----------------
Total 51,345 million yen 6,035,958 million 5,984,613 million
yen yen
-38-
--------------------------------------------------------------------------------
Attachment
Nippon Telegraph and Telephone Corporation
November 9, 2005
NTT's Shares and Shareholders (as of September 30, 2005)
1. Classification of Shareholders
NTT's Shares and Shareholders
------------------------------------------------------------------------------------------------------
Details Government Financial Securities Other Foreign Corporations, Domestic Total Odd-Lot
and Public Institutions Firms Domestic Not Individuals Individuals Shares
Bodies Corporations Individuals, etc.
---------- --------- -------- --------- --------- -------- ---------- ---------- -------
Total Holders 3 433 92 11,365 876 86 1,284,648 1,297,503
---------- --------- -------- --------- --------- -------- ---------- ---------- -------
Total Shares 5,308,522 2,362,978 32,204 240,035 2,834,056 249 4,925,823 15,703,867 37,342
33.80 15.05 0.20 1.53 18.05 0.00 31.37 100.00
Notes: 1. "Other Domestic Corporations" includes 12,057 shares under the name of Japan Securities Depository
Center, and "Odd-Lot Shares" includes 0.72 shares under the name of Japan Securities Depository Center.
2. "Domestic Individuals, etc." includes 1,918,773 shares of treasury stock, and "Odd-Lot Shares"
includes 0.86 shares of treasury stock. The actual number of treasury stock shares at the end of
September 30, 2005 was 1,918,767.86.
3. The number of shareholders who own only odd-lot shares is 391,485.
2. Classification by Number of Shares
NTT's Shares and Shareholders
------------------------------------------------------------------------------------
Details At Least At At At At At At Least Total Odd-Lot
Least Least Least Least Least 5 1 Shares
1,000 500 100 50 10
Number of Holders 373 152 978 1,414 33,862 80,525 1,180,199 1,297,503
% 0.03 0.01 0.07 0.11 2.61 6.21 90.96 100.00
---------- ------- ------- ------ ------- ------- --------- ---------- -------
Total Shares 12,494,404 105,937 197,670 90,489 517,028 488,811 1,809,528 15,703,867 37,342
% 79.56 0.68 1.26 0.58 3.29 3.11 11.52 100.00
Notes: 1. "At Least 1,000" includes 12,057 shares under the name of the Japan Securities Depository Center, and
"Odd-Lot Shares" includes 0.72 shares under the name of Japan Securities Depository Center.
2. "At Least 1,000" includes 1,918,773 shares of treasury stock, and "Odd-Lot Shares" includes 0. 86
shares of treasury stock.
3. Principal Shareholders
Name Share Percent
--- Holdings of
------------ Total
Shares
Issued
-------
The Minister of Finance 5,308,518.26 33.72
Japan Trustee Services Bank, Ltd. (Trust Account) 670,978.00 4.26
The Master Trust Bank of Japan, Ltd. (Trust Account) 475,315.00 3.02
Moxley and Company 384,439.00 2.44
The Chase Manhattan Bank, N.A. London 241,157.00 1.53
State Street Bank and Trust Company 505103 162,145.00 1.03
NTT Employee Share-Holding Association 137,065.22 0.87
Nippon Life Insurance Company 95,953.68 0.61
The Sumitomo Trust and Banking Company, Ltd. (Trust Account B) 90,917.00 0.58
Trust & Custody Services Bank, Ltd. (Trust Account B) 86,349.00 0.55
------------ -------
Total 7,652,837.16 48.62
------------ -------
Note: The Company's holdings of treasury stock (1,918,767.86 shares) are not
included in the above figures.
Paste the following link into your web browser to download the PDF document
related to this announcement
http://www.rns-pdf.londonstockexchange.com/rns/8857t_-2005-11-9.pdf
This information is provided by RNS
The company news service from the London Stock Exchange
END
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