TIDMNPN
RNS Number : 8980P
Nippon Telegraph and Telephone Corp
26 July 2010
Annual Financial Report
On June 30, 2010, Nippon Telegraph and Telephone Corporation ("NTT") filed its
Form 20-F with the U.S. Securities and Exchange Commission for the fiscal
yearended March 31, 2010. Please access the following link for the Form 20-F,
which includes NTT's and its subsidiaries' (the "NTT Group") consolidated
financial results for the fiscal year ended March 31, 2010:
http://www.sec.gov/Archives/edgar/data/769594/000119312510150583/d20f.htm
Condensed Financial Information
+--------------------------------------------------------------------------------------+------------------------+---------------+-------------+--------------+
| | As at/for the years ended |
| | March 31, |
+ +---------------------------------------------------------------------+
| | 2009 | 2010 |
+--------------------------------------------------------------------------------------+------------------------+--------------------------------------------+
| Statement of Income | (in millions of yen) |
| Data: | |
+--------------------------------------------------------------------------------------+---------------------------------------------------------------------+
| Operating | JPY10,416,305 | JPY 10,181,376 |
| revenues.......................................................... | | |
+--------------------------------------------------------------------------------------+------------------------+--------------------------------------------+
| Operating | 9,306,553 | 9,063,683 |
| expenses......................................................... | | |
+--------------------------------------------------------------------------------------+------------------------+--------------------------------------------+
| Operating income | 1,109,752 | 1,117,693 |
| (loss).................................................. | | |
+--------------------------------------------------------------------------------------+------------------------+--------------------------------------------+
| Other income | (4,589) | 2,378 |
| (expenses)................................................ | | |
+--------------------------------------------------------------------------------------+------------------------+--------------------------------------------+
| Income (loss) before | 1,105,163 | 1,120,071 |
| income taxes and | | |
| equity in earnings | | |
| (losses) of affiliated | | |
| companies................... | | |
+--------------------------------------------------------------------------------------+------------------------+--------------------------------------------+
| Income tax expenses | 370,083 | 447,001 |
| (benefit)........................................ | | |
+--------------------------------------------------------------------------------------+------------------------+--------------------------------------------+
| Income (loss) before | 735,080 | 673,070 |
| equity in earnings | | |
| (losses) of affiliated | | |
| companies......................................................... | | |
+--------------------------------------------------------------------------------------+------------------------+--------------------------------------------+
| Equity in earnings | (1,916) | 8,794 |
| (losses) of affiliated | | |
| companies... | | |
+--------------------------------------------------------------------------------------+------------------------+--------------------------------------------+
| Net income | 733,164 | 681,864 |
| (loss)........................................................... | | |
+--------------------------------------------------------------------------------------+------------------------+--------------------------------------------+
| Less - Net income | 194,485 | 189,598 |
| attributable to | | |
| non-controlling | | |
| interests......................................................................... | | |
+--------------------------------------------------------------------------------------+------------------------+--------------------------------------------+
| Net income (loss) | 538,679 | 492,266 |
| attributable to | | |
| NTT......................... | | |
+--------------------------------------------------------------------------------------+------------------------+--------------------------------------------+
| Net income (loss) | 400.41 | 372.01 |
| attributable to NTT | | |
| per share of common | | |
| stock(i) ............................................................. | | |
+--------------------------------------------------------------------------------------+------------------------+--------------------------------------------+
| Balance Sheet Data | |
+--------------------------------------------------------------------------------------+---------------------------------------------------------------------+
| Total current | JPY4,068,051 | JPY4,245,699 |
| assets.......................................................... | | |
+--------------------------------------------------------------------------------------+----------------------------------------+----------------------------+
| Property, plant and | 10,201,519 | 10,057,546 |
| equipment | | |
| (net).............................. | | |
+--------------------------------------------------------------------------------------+----------------------------------------+----------------------------+
| Total investments and | 4,526,818 | 4,635,810 |
| other | | |
| assets.............................. | | |
+--------------------------------------------------------------------------------------+----------------------------------------+----------------------------+
| Total | 18,796,388 | 18,939,055 |
| assets........................................................................ | | |
+--------------------------------------------------------------------------------------+----------------------------------------+----------------------------+
| Total current | 3,694,199 | 3,588,310 |
| liabilities...................................................... | | |
+--------------------------------------------------------------------------------------+----------------------------------------+----------------------------+
| Total long-term | 5,956,559 | 5,579,866 |
| liabilities................................................. | | |
+--------------------------------------------------------------------------------------+----------------------------------------+----------------------------+
| Total NTT | 7,298,110 | 7,788,153 |
| shareholders' | | |
| equity...................................... | | |
+--------------------------------------------------------------------------------------+----------------------------------------+----------------------------+
| Non-controlling | 1,847,520 | 1,982,726 |
| interest.................................................... | | |
+--------------------------------------------------------------------------------------+----------------------------------------+----------------------------+
| Total | 9,145,630 | 9,770,879 |
| equity.......................................................................... | | |
+--------------------------------------------------------------------------------------+----------------------------------------+----------------------------+
| Shareholders' equity | 5,515.18 | 5,885.86 |
| per | | |
| share(2)..................................................... | | |
+--------------------------------------------------------------------------------------+----------------------------------------+----------------------------+
| Statement of Cash | |
| Flows: | |
+--------------------------------------------------------------------------------------+---------------------------------------------------------------------+
| Net cash provided by | JPY2,514,100 | JPY2,817,836 |
| (used in) operating | | |
| activities.... | | |
+--------------------------------------------------------------------------------------+------------------------------------------------------+--------------+
| Net cash provided by | (2,269,658) | (2,308,908) |
| (used in) investing | | |
| activities..... | | |
+--------------------------------------------------------------------------------------+------------------------------------------------------+--------------+
| Net cash provided by | (353,339) | (651,297) |
| (used in) financing | | |
| activities..... | | |
+--------------------------------------------------------------------------------------+------------------------------------------------------+--------------+
| Effect of exchange | (7,892) | 654 |
| rate changes on cash | | |
| and cash | | |
| equivalents......................................................................... | | |
+--------------------------------------------------------------------------------------+------------------------------------------------------+--------------+
| Net increase | (116,789) | (141,715) |
| (decrease) in cash and | | |
| cash | | |
| equivalents......................................................................... | | |
+--------------------------------------------------------------------------------------+------------------------------------------------------+--------------+
| Cash and cash | 1,169,566 | 1,052,777 |
| equivalents at | | |
| beginning of | | |
| year........ | | |
+--------------------------------------------------------------------------------------+------------------------------------------------------+--------------+
| Cash and cash | 1,052,777 | 911,062 |
| equivalents at end of | | |
| year................... | | |
+--------------------------------------------------------------------------------------+------------------------------------------------------+--------------+
| | | | | |
+--------------------------------------------------------------------------------------+------------------------+---------------+-------------+--------------+
Shareholders' Equity
+-----------------------+------------+--------------+--------------+---------------+----------------+--------------+-----------------+--------------+--------------------+
| | (in millions of yen) |
+ +------------------------------------------------------------------------------------------------------------------------------------------------+
| | Common | Additional | Retained | Accumulated | Treasury | Total | Non-controlling | Total | |
| | Stock | paid-in | earnings | Other | stock, | | interests | equity | |
| | | capital | | Comprehensive | at cost | | | | |
| | | | | Income (loss) | | | | | |
+-----------------------+------------+--------------+--------------+---------------+----------------+--------------+-----------------+--------------+--------------------+
| Balance | JPY937,950 | JPY2,841,079 | JPY5,066,637 | JPY(341,917) | JPY(1,205,597) | JPY7,298,110 | JPY1,847,520 | JPY9,145,630 | |
| at | | | | | | | | | |
| March | | | | | | | | | |
| 31, | | | | | | | | | |
| 2009............. | | | | | | | | | |
+-----------------------+------------+--------------+--------------+---------------+----------------+--------------+-----------------+--------------+--------------------+
| Total | | | | | | | | | |
| comprehensive | | | | | | 644,577 | 201,505 | 846,082 | |
| income............... | | | | | | | | | |
+-----------------------+------------+--------------+--------------+---------------+----------------+--------------+-----------------+--------------+--------------------+
| Cash | | | (152,177) | | | (152,177) | (81,864) | (234,041) | |
| dividends | | | | | | | | | |
| . | | | | | | | | | |
+-----------------------+------------+--------------+--------------+---------------+----------------+--------------+-----------------+--------------+--------------------+
| Changes | | | | | | | | | |
| in | | | | | | | | | |
| NTTs | | (2,061) | | | | (2,061) | 15,565 | 13,504 | |
| ownership | | | | | | | | | |
| interest | | | | | | | | | |
| in | | | | | | | | | |
| subsidiaries....... | | | | | | | | | |
+-----------------------+------------+--------------+--------------+---------------+----------------+--------------+-----------------+--------------+--------------------+
| Acquisition | | | | | (491) | (491) | | (491) | |
| of treasury | | | | | | | | | |
| stocks. | | | | | | | | | |
+-----------------------+------------+--------------+--------------+---------------+----------------+--------------+-----------------+--------------+--------------------+
| Resale | | (49) | | | 244 | 195 | | 195 | |
| of | | | | | | | | | |
| treasury | | | | | | | | | |
| stocks. | | | | | | | | | |
+-----------------------+------------+--------------+--------------+---------------+----------------+--------------+-----------------+--------------+--------------------+
| Balance | JPY937,950 | JPY2,838,927 | JPY5,406,726 | JPY(189,606) | JPY(1,205,844) | JPY7,788,153 | JPY1,982,726 | JPY9,770,879 | |
| at | | | | | | | | | |
| March | | | | | | | | | |
| 31, | | | | | | | | | |
| 2010............. | | | | | | | | | |
+-----------------------+------------+--------------+--------------+---------------+----------------+--------------+-----------------+--------------+--------------------+
+--------+-------------------------------------------------+
| Notes: | |
+--------+-------------------------------------------------+
| (1) "Net income (loss) attributable to NTT |
| per share of common stock" is calculated based on the |
| average number of shares outstanding during the fiscal |
| year. |
+----------------------------------------------------------+
| (2) "Shareholders' equity per share" is |
| calculated based on the number of shares outstanding |
| at the end of the fiscal year. |
+----------------------------------------------------------+
| (3) Certain items in the financial |
| statements for the fiscal year ended March 31, 2009 |
| have been reclassified to conform to the presentation |
| as of March 31, 2010. |
+--------+-------------------------------------------------+
Management Report
(1) Outline of Business of NTT Group
During the consolidated fiscal year ended March 31, 2010, against the backdrop
of an improvement in the global economy, particularly in Asia, and the effect of
major economic stimulus programs, the Japanese economy showed signs of recovery
in exports and production. However, the economic climate remained difficult,
with capital investments decreasing substantially and the job market rapidly
worsening due to deteriorations in corporate earnings.
In the information and telecommunications market, as the rollout of broadband
and ubiquitous services rapidly progressed, optical access services were
increasing in the fixed-line communications field and conventional fixed-line
telephony was transitioning to optical IP telephone services. In the mobile
communications field, services and handsets were becoming more diverse and
advanced, and rates were being repeatedly reduced, giving rise to increasingly
fierce competition. Many other dramatic changes and developments were occurring
in conjunction with the increased use of IP, including convergence between
fixed-line communications and mobile communications and between communications
and broadcasting services, and the creation of diverse new network-based
businesses.
Under these difficult circumstances, NTT Group worked to expand broadband and
ubiquitous services pursuant to its Medium-Term Strategy, adopted in May 2008,
entitled "Road to Service Creation Business Group."
· Fixed-Line Communications
NTT Group further expanded the coverage area for "FLET'S Hikari Next", the
next-generation network ("NGN") commercial service, and enhanced services,
including a high-speed service with a maximum download speed of 200Mbps
introduced in Eastern Japan. NTT Group also pursued initiatives in collaboration
with other companies to expand sales. In addition, NTT Group took steps to
enhance the quality of customer service by, among other things, reducing the
lead time between a customer's application and the start of FLET'S Hikari
service, strengthening support services and expanding benefits offered to
customers under its membership programs. As a result of these efforts, the
number of FLET'S Hikari subscriptions reached 13.25 million.
· Mobile Communications
NTT Group introduced new services to support its customers' lifestyles through
mobile phones, including a new function for the "i-concier" activity support
service, which distributes information linked to the user's location, and DOCOMO
Keitai Sokin (mobile payment), a new mobile phone payment method. In addition,
as part of its efforts to achieve further growth by increasing use of data
communications, NTT Group revised billing plans and worked to enhance the
content offerings for video and other services. As a result of these efforts,
the number of mobile phone subscriptions reached 56.08 million, of which 53.20
million are FOMA service subscriptions (95% of all subscriptions).
· Solutions
NTT Group worked to provide high value-added solutions according to customer
industries and business categories by expanding its service line-up to include
outsourcing and information security, complementing its construction and
provision of customer systems. NTT Group also reorganized some of its business
structures and sought to strengthen its sales capabilities, mainly through
acquisitions of other service providers, to proactively meet the needs of
customers and society.
· Upper Layer Services
NTT Group took steps to enhance its services by among other things, expanding
the high-definition content available on "Hikari TV", an IP Television ("IPTV")
service distributed over FLET'S Hikari. NTT Group also expanded the line-up of
video services that are designed to take advantage of the capabilities of the
NGN, including the launch of Digital Cinema, a service for the distribution of
films to theaters using the NGN. NTT Group also worked to develop a new market
for cloud computing services, which provides services through a network,
including the launch of a full range of services covering everything from
infrastructure to applications. Furthermore, through investments by the venture
fund, NTT Investment Partners Fund, L.P., NTT Group sought to promote
collaborations with business partners in a wide range of fields, particularly
education.
· Global Businesses
NTT Group moved forward with the expansion of overseas data centers and the
acquisition of businesses, including a security service provider, in an effort
to improve its line-up of solutions services and support services. In order to
enhance the convenience and reliability of its networks, NTT Group strengthened
its network through the acquisition of a submarine cable business and the
expansion of the service area for international mobile phone roaming services.
NTT Group also directed efforts toward the global expansion of its content
distribution and other application services.
· Research and Development
To expand the range of services that take advantage of the capabilities of the
NGN, NTT Group engaged in R&D directed at the technical advancement of IPTV,
Digital Signage, Digital Cinema and other video services, as well as cloud
computing services. Furthermore, NTT Group engaged in R&D for commercialization
of Home Information and Communication Technologies ("Home ICT") and made efforts
to develop technologies for mobile communication using LTE, the next-generation
standard, which is scheduled for launch in December 2010. NTT Group also moved
forward with R&D on advanced technologies that will support future businesses,
including new encryption technologies, high-capacity optical transmission
technologies, and quantum information processing.
· CSR
NTT Group is working in concert to undertake corporate social responsibility
("CSR") activities aimed at contributing to the sustainable development of
society. In particular, as part of its "Green NTT" program, an environmental
policy initiative encouraging the use of natural energy, NTT Group set up solar
systems at three Group owned facilities via NTT Green LLP, which was established
through investments by individual NTT group companies. This became the first
environmental program in Japan established in the form of a corporate group
limited liability partnership.
As a result of these efforts, due to such factors as a decrease in mobile
handset sales revenues and mobile voice-related revenues arising from
penetration of new handset sales models in the mobile communications business
and a decrease in voice-related revenues arising from the decline in the number
of subscriptions for fixed-line telephone services, NTT Group's consolidated
operating revenues for the fiscal year ended March 31, 2010 were 10,181.4
billion yen (a decrease of 2.3% from the previous fiscal year). Consolidated
operating expenses were 9,063.7 billion yen (a decrease of 2.6% from the
previous fiscal year) due to a decrease in expenses for purchase of goods and
services and other expenses and amortization costs. As a result, consolidated
operating income was 1,117.7 billion yen (an increase of 0.7% from the previous
fiscal year), consolidated income before income taxes was 1,120.1 billion yen
(an increase of 1.3% from the previous fiscal year), and consolidated net income
attributable to NTT was 492.3 billion yen (a decrease of 8.6% from the previous
fiscal year).
(2) Risk Factors
In addition to the other information contained in the Form 20-F, prospective
investors should carefully consider the risks described below. These have been
summarized after a comprehensive assessment of the risks related to NTT Group's
business environment and its business strategy and operations and risks related
to regulations and NTT's relationship with the Government. Additional risks not
currently known to NTT or that NTT now deems immaterial may also impair NTT
Group's business operations. The Form 20-F also contains forward-looking
statements that involve risks and uncertainties. NTT Group's actual results
could differ materially from those anticipated in these forward-looking
statements as a result of a number of factors, including the risks NTT Group
faces as described below and in the Form 20-F as a whole.
(a) NTT Group's business may be adversely affected by the economic
situation in Japan.
(b) NTT Group's market share and revenues may suffer from competition.
(c) Growth of new businesses and migration from existing businesses
accompanying the expansion of IP, broadband and ubiquitous services and other
market developments may not progress as anticipated.
(d) NTT Group's international and domestic investments, alliances and
collaborations and investments directed at new fields of business may not
produce the returns or provide the opportunities NTT Group expects.
(e) NTT Group may not achieve anticipated cost savings.
(f) Other mobile service providers in the world may not adopt or
continue to use technologies that are compatible with those used by NTT DOCOMO's
mobile communications system, which could affect NTT Group's ability to offer
international services.
(g) If NTT Group is unable to obtain licenses or other rights to use the
intellectual properties of third parties that are necessary for NTT Group to
conduct its business, NTT Group may not be able to offer certain technologies,
products, or services. In addition, NTT Group may be liable for damages due to
infringement of the intellectual property rights of other companies.
(h) System disruptions, network disruptions and issues with system
architecture may affect NTT Group's financial condition and operating results.
(i) NTT's reputation and credibility may be affected by an
inappropriate use or leak of confidential business information and personal
information.
(j) Misuse of products and services offered by NTT Group may have an
adverse impact on the credibility and corporate image of NTT Group.
(k) Changes or decisions regarding telecommunications regulations may
affect NTT Group's business.
(l) NTT Group may not be able to secure the necessary frequency
spectrum for operation and may not be able to expand its facilities due to
restrictions imposed on NTT DOCOMO.
(m) NTT Group may be impacted by laws, regulations and systems relating
to the reduction of greenhouse gas emissions.
(n) The Government owns enough NTT Shares to give it considerable
influence over whether resolutions at NTT shareholder meetings are adopted.
(o) The issuance or sale of additional NTT Shares or concerns regarding
additional supply of NTT Shares in the stock market may affect the trading price
of NTT Shares and ADSs.
(p) Investors may have difficulty enforcing judgments under the laws of
foreign countries, including the U.S. securities laws regarding the civil
liabilities of NTT.
(3) Related Party Transactions
NTT and its subsidiaries have entered into a number of different types of
transactions with other affiliated companies, the most significant of which are
sales of telecommunications terminal equipment, purchases of terminal equipment
and materials and the receipt of certain services.
Transactions with affiliated companies and the related balances at the end of
each of the periods ended March 31, 2008, 2009 and 2010 were as follows:
+------------------------------------------------------------------------------------------------------------------------+------------+----------+----------+------------+----------+----------+--------+----------+
| | Year ended March 31, |
| | |
+------------------------------------------------------------------------------------------------------------------------+-----------------------------------------------------------------------------------------+
| | 2008 | 2009 | 2010 |
| | | | |
+------------------------------------------------------------------------------------------------------------------------+-----------------------+----------------------------------+------------------------------+
| | (millions of yen) |
+------------------------------------------------------------------------------------------------------------------------+-----------------------------------------------------------------------------------------+
| Sales......................................................................................................... | JPY 12,489 | | JPY 14,929 | | JPY | |
| | | | | | 18,767 | |
+------------------------------------------------------------------------------------------------------------------------+------------+---------------------+------------+---------------------+--------+----------+
| Purchases................................................................................................ | JPY 85,740 | | JPY 98,661 | | JPY | |
| | | | | | 96,048 | |
+------------------------------------------------------------------------------------------------------------------------+------------+---------------------+------------+---------------------+--------+----------+
| Receivables............................................................................................. | JPY 7,634 | | JPY 9,478 | | JPY | |
| | | | | | 11,668 | |
+------------------------------------------------------------------------------------------------------------------------+------------+---------------------+------------+---------------------+--------+----------+
| Payables................................................................................................... | JPY 27,612 | | JPY 76,987 | | JPY | |
| | | | | | 66,844 | |
+------------------------------------------------------------------------------------------------------------------------+------------+---------------------+------------+---------------------+--------+----------+
| | | | | | | | | |
+------------------------------------------------------------------------------------------------------------------------+------------+----------+----------+------------+----------+----------+--------+----------+
Statement of Corporate Governance Policy
NTT, as a holding company of the NTT Group, believes that raising the
effectiveness of corporate governance is important for meeting the expectations
of various stakeholders, including shareholders and other investors, as well as
customers, business partners, and employees, and for maximizing corporate value.
Accordingly, NTT Group is working to strengthen corporate governance based on
its fundamental policies of (1) ensuring sound management, (2) conducting
appropriate decision-making and business performance, (3) defining
accountability and (4) maintaining compliance at the highest level.
Laws and Regulations regarding Corporate Governance
NTT is required to comply with the corporate governance provisions of the
Corporation Law of Japan (available on the website of the Japanese Government)
and the Financial Instruments and Exchange Law of Japan (available on the
website of the Financial Services Agency of Japan) as well as the regulations of
the domestic stock exchanges on which its stock is listed (e.g. the Tokyo Stock
Exchange's Securities Listing Regulations (available on the website of the Tokyo
Stock Exchange)). In addition, as a company listed on the Tokyo Stock Exchange,
NTT is carrying out its business with due consideration to the Tokyo Stock
Exchange's Principles of Corporate Governance for Listed Companies (available on
the website of the Tokyo Stock Exchange).
NTT complies with the NTT Group Corporate Ethics Charter (available on the NTT
website), the Regulations of the Board of Directors (Exhibit 1.3 to the Form
20-F for the fiscal year ended March 31, 2010) and other internal regulations,
and the basic policy for establishment and maintenance of internal control
systems (discussed below).
Due to its standard listing on the London Stock Exchange, NTT is required to
comply with the U.K. rules concerning corporategovernance; Financial Services
Authority's Listing Rules and Disclosure and Transparency Rules (available on
the website of the FSA.)
Pursuant to New York Stock Exchange's ("NYSE") Listed Company Manual Rule
303A.00 and Securities Exchange Act Rule 10A-3(c), NTT is exempted from most of
the corporate governance standards applicable to U.S. domestic companies and is
permitted to follow home country corporate governance practices instead. As a
foreign issuer with American Depositary Shares listed on the NYSE, however, NTT
remains subject to Rules 303A.06, 303A.11 and 303A.12(b) and (c) of the
corporate governance rules of the NYSE (available on the website of the NYSE),
as well as to certain U.S. securities laws and rules of the U.S. Securities and
Exchange Commission (the "SEC") relating to corporate governance (available on
the website of the SEC), including Rules 10A-3, 13a-14 and 15d-14. Pursuant to
Rule 303A.11 of the NYSE's Listed Company Manual and Item 16G of the SEC's Form
20-F, NTT is obliged to disclose any significant ways in which its corporate
governance practices differ from (1) those stipulated in the corporate
governance listing standards of the NYSE and (2) those followed by U.S. domestic
companies. NTT accordingly describes the differences between Japanese corporate
governance standards and the NYSE corporate governance rules, U.S. securities
laws and rules of the SEC in Items 6, 16A, 16D and 16G of its annual report on
Form 20-F.
NTT's Corporate Governance Structure
NTT maintains a Board of Corporate Auditors. NTT employs a Corporate Audit
system based on its judgment that having a Boardof Corporate Auditors with
auditors, including those from outside, provides an effective managerial
oversight function.
Board of Directors
NTT maintains a Board of Directors with 12 members, including two outside
directors. In principle, the regular Board of Directors meetings are held once
per month or so and extraordinary meetings are held as necessary to make
decisions regarding matters stipulated by law and, as the holding company
responsible for overseeing and coordinating NTT Group, important matters
relating to corporate and group management. The Board of Directors also receives
regular reports from directors regarding the execution of work duties and
thereby monitors the execution of duties by directors.
For the purpose of greater objectivity and transparency, personnel and
compensation-related matters regarding directors are first deliberated by a
Personnel and Compensation Committee comprising four directors, including two
outside directors, and then decided by the Board of Directors.
Board of Corporate Auditors
NTT also maintains a Board of Corporate Auditor with five members, including
three outside auditors. Each corporate auditor attends Board of Directors
meetings and other important meetings, and carries out audits as necessary
regarding the execution of business by directors. NTT's Board of Corporate
Auditors carries out audits in collaboration with the corporate auditors of its
group companies.
Execution of Business
The business of NTT is executed in compliance with the Organizational
Regulations which stipulate the work responsibilities of each department, and
decisions are made under the supervision of the Board of Directors and in
accordance with the Responsibility Regulations, which set out the
responsibilities of the President, Senior Executive Vice Presidents and the
heads of each department. In addition, in order to make appropriate decisions
for managing the group, NTT establishes various meetings and committees that
deliberate important matters relating to corporate and group management as
necessary. From 2003, an Advisory Board was established for the purpose of
gathering information to be used as a reference for making managerial decisions
regarding the development of international businesses.
Important corporate decisions are, in principle, made after the deliberation at
NTT's Executive Officers Meeting. The ExecutiveOfficers Meeting comprises the
President, Senior Executive Vice Presidents, Executive Vice President and the
heads of departments. The meetings are held, in principle, around once a week,
totalling 25 meetings in the fiscal year ended March 31, 2010. For greater
transparency in its decision making, the Executive Officers' Meeting is also
attended by one corporate auditor.
Executive Officers Meeting and Other Committees
In addition, committees have been created under the Executive Officers Meeting
to discuss specific issues related to the management strategies of NTT and NTT
Group. Key committees include the Technology Strategy Committee, which considers
the group's R&D vision and technology development strategy; the Investment
Strategy Committee, which considers investments over a certain size; and the
Finance Strategy Committee, which considers basic financial policy and various
financial issues. These committees are in principle chaired by the President or
a Senior Executive Vice President, and meetings are attended by relevant
directors and other personnel and are held throughout the year as necessary.
The chart of NTT's corporate governance structure is annexed to this report.
Please see link below:-
http://www.rns-pdf.londonstockexchange.com/rns/8980P_-2010-7-26.pdf
NTT's Internal Control Systems and Risk Management System
NTT has established and maintains an internal control system for its financial
reporting based on the U.S. Sarbanes-OxleyAct Section 404 and the Financial
Instruments and Exchange Law of Japan.
In terms of ensuring the reliability of the internal control over its financial
reporting based on the two acts, NTT Group has conducted tests and evaluations
of its internal control system, and has found no outstanding issues and
confirmed its effectiveness.
NTT endeavors to reinforce the group's internal control systems by verifying the
effectiveness of internal controls across the group as a whole through such
measures as conducting audits individually at each group company and the parent
company and by checking the status of progress of internal auditors in each
group company, as well as conducting a standardized audit over high-risk issues
commonly shared across the group.
NTT is well aware that in addition to compliance with laws and regulations, it
is essential to operate with high ethical standards, and thus NTT endeavors to
ensure that corporate ethics are maintained at the highest level. Specifically,
NTT drew up the NTT Group Corporate Ethics Charter, and has established not only
internal channels for reporting and consultation, but also external channels for
reporting and consultation involving outside attorneys. Through such measures,
NTT is endeavoring to foster an open corporate culture, and is continuously
striving to enhance and strengthen both educational activities and internal
checks.
In addition, NTT is taking initiatives to employ appropriate business risk
management in a managerial environmentthat is undergoing drastic change.
Specifically, to prepare against large-scale risks that could have an impact on
NTT Group as a whole, including natural disasters and accidents, NTT is
implementing risk prevention measures and preparing in advance. NTT has also
established structures for responding appropriately and rapidly to the onset of
risk.
NTT has established a basic policy for installment and maintenance of the
internal control system through a resolution at itsBoard of Directors meeting.
The basic thinking behind this policy is as follows.
(a) In establishment and maintenance of a system for internal controls,
NTT shall take measures for the prevention and minimization of losses and to
ensure compliance with applicable laws, appropriate risk management and proper
and efficient business operations.
(b) To establish and maintain the internal control system outlined above,
NTT shall establish an Internal Controls Office to oversee the establishment and
maintenance of rules and structures. This body also evaluates the effectiveness
of the internal control system and implements necessary improvements on the
system by conducting audit reviews and coordinating audits of high-risk issues
commonly shared across the group.
(c) NTT shall take appropriate measures to ensure the reliability of its
internal control system for its financial reporting based on the U.S.
Sarbanes-Oxley Act and the Financial Instruments and Exchange Act of Japan.
(d) As the chief executive officer, the President shall be responsible
for ensuring the establishment, maintenance and operation of the system of
internal controls.
Defining Accountability
NTT strives to maintain appropriate, timely and fair information disclosure and
is aware that obtaining appropriate corporate valuations in the market through
such disclosure is essential. Accordingly, NTT implements a quarterly financial
reporting schedule. To fulfill NTT Group's accountability responsibilities, the
President and other officers conduct briefings, NTT Group management strategies
are disclosed through press conferences and announcements and information is
also promptly disclosed on the NTT website.
Maintenance of Compliance at the Highest Level
Recognizing that it is imperative to conduct business in compliance with laws
and regulations and maintain high ethical standards in order to promote sound
corporate activities, NTT drew up the NTT Group Corporate Ethics Charter in
November 2002.
The Charter, which applies to all officers and employees of NTT Group, lays out
the basic principles of corporate ethics and provides specific guidelines for
ethical behavior. The stipulations in the guidelines are intended to remind
everyone of their duty as members of a communications group company, which bears
significant responsibility to society in terms of preventing dishonesty,
misconduct, and the disclosure of corporate secrets, as well as refraining from
exchanging excessive favors with customers and suppliers, and ensuring that they
conduct themselves in accordance with the highest ethical standards in both
private and public activities.
Responsibility Statement
I, Satoshi Miura, President and Chief Executive Officer, confirm that, to the
best of my knowledge:
· the Consolidated Financial Statements for the NTT Group contained
within the Form 20-F, prepared in accordance with accounting principles
generally accepted in the United States, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the NTT Group
taken as a whole; and
· the Form 20-F includes a fair review of the development and
performance of the business and the position of the NTT Group taken as a whole,
together with a description of the principal risks and uncertainties that it
faces.
Certain statements made in this announcement and in the Form 20-F are
forward-looking statements. Such statements are based on expectations at the
time that such statements were made and are subject to risks and uncertainties
that could cause actual events or results to differ materially from any expected
future events or results referred to in these forward looking statements. Unless
otherwise required by applicable law, regulation or accounting standards, NTT
undertakes no obligation to update or revise any forward-looking statements,
whether due to any change in its expectations, to reflect events or
circumstances after the date such statements were made, or otherwise.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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