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Wireless Broadband Business Growth Strategy

January 20, 2011

Shunichiro TEJIMA
Associate SVP and Executive General Manager Network Platform Operations Unit NEC Corporation

To be a leading global company leveraging the power of innovation to realize an information society friendly to humans and the earth

NEC Group Vision 2017


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NEC Corporation 2011

1. Business Overview 2. Key Business Strategy 2.1 LTE Business Strategy 2.2 Mobile Backhaul Business Strategy 3. Toward Achieving V2012

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NEC Corporation 2011

Business Domain
To provide products/systems/services which are necessary for transformation of carrier service as a business partner
Transport
Submarine Cable system

Services & Management


Mobile Core SIP Server IMS

OSS/BSS

Land Terminal Equipment

Core Network

Carrier/ISP Data Centers Service Platform SDP

Wireless Base station

Access
Mobile (3G,LTE), Femtocell, WiMAX

PASOLINK

Metro Network

Router/ Switch

Mobile backhaul (MBH)

FTTH, ADSL etc FTTH, Home


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NEC Corporation 2011

Enterprise

Wireless Broadband (WBB) Business


Carrier Network Business Mid Term Strategy: Carrier Network Business Mid Term Strategy:
Strengthen position in the global market and recover growth and profitability Strengthen position in the global market and recover growth and profitability FY2012 Target: Sales: JPY900B, OP Margin: 9% FY2012 Target: Sales: JPY900B, OP Margin: 9% Key Business Areas 1. Wireless Broadband Access 3. Submarine Cable System Key Business Areas 1. Wireless Broadband Access 3. Submarine Cable System
2. Mobile Backhaul 2. Mobile Backhaul 4. Service & Management 4. Service & Management

Wireless Broadband Business: Sales Target JPY 250B (FY2012) Wireless Broadband Business: Sales Target JPY 250B (FY2012)
IT System
Server Server XaaS XaaS 0 0 0

C&C Cloud C&C Cloud

Service & Management $c Service & Management $c Service & Management


OSS/BSS OSS/BSS Service Platform Service Platform

IT and NW Convergence
Service

Network Infrastructure $bSubmarine cable System $b Submarine cable System $aMobile Backhaul $aMobile Backhaul
LTE/Femotocell/WiMAX LTE/Femotocell/WiMAX
PASOLINK PASOLINK

IT/NW Platform

$` Wireless Broadband Access $` Wireless Broadband Access Terminal


Thin Client Thin Client
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Terminal/ Sensor

Mobile Terminal Smartphone // Data card 0 0 Mobile Terminal Smartphone Data card

NEC Corporation 2011

Wireless Broadband Access Business Environment


Rapid increase of data traffic, including rich content, due to the Rapid increase of data traffic, including rich content, due to the increase of Smart Phones (e.g. iPhone) increase of Smart Phones (e.g. iPhone) Increase in Wireless Broadband business opportunities Increase in Wireless Broadband business opportunities Rapid increase in rich content traffic
Global Mobile Devices Market Trend
1,405 (M units) Smart Phone / +

Business Opportunities
Provide High Speed Wireless Access/ High Quality Radio Access Area

Traffic increase from Smart Phones


Ratio of traffic measured by AdMob NW
Feb. = 100

<LTE> <LTE
Improve usability High-speed, Real time Expansion of rich content services

200

Mobile Internet Devices ;

Smart Phone

100
Mobile Phone
High end Mobile Phone
Feb. 2009
2009 2010 2011 2012 2013

Enhanced capability and capacity expansion of Mobile Backhaul

<iPASOLINK>
Applicable to 3G/LTE Transition to packet base NW Rapid increase in Mobile data traffic

Feb. 2010

source:AdMob,Inc

source:Ovum

2014 (year)

iPod touch, Sony PSP, Nintendo DSi etc.

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NEC Corporation 2011

What is LTE?
High speed data communication service High speed data communication service (10 times faster and 1 tenth less delay than HSDPA) (10 times faster and 1 tenth less delay than HSDPA) Improve spectrum efficiency (3-4 times efficient than HSPA) Improve spectrum efficiency (3-4 times efficient than HSPA) Support high speed mobility (up to 350km/h) Support high speed mobility (up to 350km/h)
LTE
Access Method Modulation Method Antenna (MIMO) Delay Bandwidth Transmission Speed (DL) Speed of mobility
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3G (HSPA)
CDMA QPSK/16QAM SISO < 100 ms FDD 5 MHz 14.4Mbps@5 MHz < 120km/h

Points of Improvement
Improved spectrum efficiency Improved transmission speed Improved transmission quality

Downlink: OFDMA Uplink: SC- FDMA QPSK/16QAM/64QAM 2x2 to 4x4 < 10 ms FDD 1.4, 3, 5, 10, 15, 20MHz 75Mbps@10MHz MIMO:2 2 < 350km/h

Improved transfer speed Allow introduction of LTE using the existing spectrum Improved transmission speed Support high speed mobility

NEC Corporation 2011

New LTE Business Opportunities


Shorter download time and quicker responses reduces users stress Shorter download time and quicker responses reduces users stress Creation of variety of service/applications and increase ARPU for carrier Creation of variety of service/applications and increase ARPU for carrier

S = Seconds

HSDPA 78s
Positive Cycle Station Grounds

75s

Download Speed
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21s 16s 11s 5s

22s 17s 12s 5.2s 0.5s 5MB


Music (MP3) 1 song

LTE zone

1.1s 10MB
News (MP3) 20 minutes

1.6s 15MB
Video Clip 3 minutes

2.1s 20MB
Video Podcast 5 minutes

LTE 7.5s

70MB
Music CD (MP3) 1 CD

*Download conditions = LTE: 75Mbps @ 10MHz, MIMO 2x2 / HSDPA: 7.2Mbps @ 5MHz
NEC Corporation 2011

1. Business Overview 2. Key Business Strategy


2.1 LTE Business Strategy 2.2 Mobile Backhaul Business Strategy

3. Toward Achieving V2012

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NEC Corporation 2011

2.1 LTE Business Strategy

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NEC Corporation 2011

Operator Trends on LTE Deployment


Status of LTE deployment by operators Status of LTE deployment by operators
180 operators in 70 countries are investing in LTE 180 operators in 70 countries are investing in LTE 128 LTE network commitment in 52 countries 128 LTE network commitment in 52 countries At least 64 LTE networks are anticipated to be At least 64 LTE networks are anticipated to be in commercial service by end of 2012 in commercial service by end of 2012 Launch of Commercial LTE Networks
2010 2011 2012
NTT DoCoMo, TeliaSonera, MTS, Ucell, Verizon, MetroPCS, Telenor, Tele2, CSL, Vodafone, EMT, Elisa, A1 Telekom (17 Companies) Telefonica, T-Mobile, China Mobile, Orange, AT&T, Zain, Yota, TMN, KDDI, KDDI T-Mobile, CTC,
Source: List compiled by NEC based on press announcements and research firm data

Global Market Size of LTE Equipment


(Billions of yen)

500 400 300 200 100 0

210% CAGR 2009-2012

450

200

60 15

2009

2010

2011

2012

Source: NEC estimates based on research firm data

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NEC Corporation 2011

LTE Business Strategy


Successfully complete projects for leading domestic carriers and expand globally Successfully complete projects for leading domestic carriers and expand globally Capitalize on the Femtocell footprint and Small Cell Solution which manifest Capitalize on the Femtocell footprint and Small Cell Solution which manifest high speed of LTE high speed of LTE Expand LTE business by entering the TD-LTE market segment Expand LTE business by entering the TD-LTE market segment

Europe
17 Co.
Successful Trial Denmark TDC

Successful Trial

Network Norway

First IMS based Femtocell solution Commercial Service

, 4%

Femtocell
Femtocell Commercial & Trial
Delivery of Wireless Base Stations, Core Network Systems, MBH switches Commercial Service

SBM

France SFR
Commercial Service Successful Field Trial

NTT DOCOMO KDDI

Successful Trial

Selected as base station vendor

SingTel

Asia
8 Co.

Americas
5 Co.

Telefonica

Africa / Mid. East


3 Co.
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NEC Corporation 2011

Only projects publicly announced are indicated (as of December 2010)

Target Market Segments for LTE


Cultivate enhancement market segment for mobile Broadband service providers and market segment providing high-speed WiFi / fixed Broadband services

Mobile BB Service
High-speed data services for 2G/3G/cdma networks 3G ! LTE migration GSM ! LTE migration cdma ! LTE migration High-speed data services for emerging networks with LTE (TD-LTE) markets

Market Scale: JPY400 billion in 2012

High-speed WiFi BB Service


Wireless backhaul for public WiFi service access points Wireless access for mobile WiFi routers

Cloud Service Cloud Service

Fixed BB

Fixed BB Service
FBWA (Fixed Broadband Wireless Access) Broadband wireless access for SOHO

Market (Femtocell) Scale: JPY50 billion in 2012

Residential

Network Network

Service Service Network Network

Mobile BB

High-speed WiFi

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NEC Corporation 2011

Strategy for Mobile BB Service


Small Cell Solution
Provide Small Cell Solutions that manifest high speed of LTE, in addition to Provide Small Cell Solutions that manifest high speed of LTE, in addition to macro cell deployment macro cell deployment Applicable to zone deployment in urban areas // data dense regions Applicable to zone deployment in urban areas data dense regions Enter market with small, lightweight and easy to install base stations Enter market with small, lightweight and easy to install base stations Macro Cell
500m^ several km in radius

deployment

Small Cell deployment

Less than 200 meter radius (Urban, data density area)

(1)Improve data speed


Total throughput is independent of the cell size. Less number of devices in the cell means higher throughput for each device.

(2)Improve spectrum usage


More repetitive use of the spectrum

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NEC Corporation 2011

TD-LTE Market Strategy


TD-LTE Market Expansion
TD-LTE is strategically promoted by Chinese government In India, winner of BWA spectrum in 2010 proactive to deploy TD-LTE TD-LTE adoption planned by Clearwire (USA), Yota (Russia), FarEasTone (Taiwan), etc. 33% of 18 companies surveyed by GSA plans to deploy TD-LTE

Chinese Market Joint LTE product development by business collaboration with WRI
Capitalize on NECs LTE development assets in combination with WRIs TD-LTE technologies to optimize development (Develop TD-LTE base stations with common FD/TD LTE platform) Leverage WRIs sales channels Enter Chinese market utilizing WRIs sales channel and 3G footprint

Other Oversea Market


Cultivate PASOLINK market footprint with products developed in China following the success in Chinese TD-LTE market
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NEC Corporation 2011

Summary of press release (for Reference)


NEC and WRI Collaborate on LTE Infrastructure Business
Cooperation with WRI on development, manufacturing, sales and field support Collaborative target: LTE base stations, maintenance and operation systems, and Self Organizing Network (SON) These systems support both the TD-LTE and FD-LTE for Chinese market. Commercialization is planned for the second half of 2011. Entry into Chinas TD and FD-LTE market by leveraging WRIs sales channel and 3G footprint . Leverage the TD-LTE success in the Chinese market to expand globally

WRI operates under Chinas State-owned Assets Supervision and Administration Commission (SASAC) as one of the top manufacturer in Chinas communications Infrastructure field. Wuhan Fiberhome Mobile Communications Inc. is a joint venture between NEC and WRI established in 2005 that will market jointly developed products, mostly in the Chinese market, while NEC will mainly target other global markets.

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NEC Corporation 2011

Strategy on High-speed WiFi / Fixed BB Services


Propose high-speed WiFi BB service / fixed BB service that utilize LTE to fixed-line operators and expand business (capitalize on the existing business footprint)
High-speed WiFi BB Service
Smart Phone

7 I&I Area MBH Carrier Network

LTE-WiFi Router
(Pocket terminal) PC

iPASOLINK

Wi-Fi
Tablet (PAD) Tabl

LTE

eNB

Fixed BB Service
Wi-Fi WiPC
STB

( OM E

Home GW

Last one-mile by wireless fiber (LTE)

IPTV

Fixed Telephone

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NEC Corporation 2011

Commercial LTE Systems

LTE Base Station Equipment (eNB)

Ethernet Transmission Equipment (ERP-SW)

Core Network Equipment (EPC)

C2800/23 X 0
RRH BBU

-- % 0 ' 7 3 ' 7

C2800/22 X 0 C2800/21 X 0

All in one eNodeB (BBU+RRH)

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NEC Corporation 2011

2.2 Mobile Backhaul Business Strategy

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NEC Corporation 2011

The Status and Role of Mobile Backhaul


Mobile backhaul is an access network for mobile communications systems that transmits data traffic from mobile terminals to mobile core networks by inter-connecting several base stations scattered in wide area

Mobile Backhaul
Access
2G 3G 2G 3G LTE Transmission mode 2G 3G LTE
Wireless TDM Wired TDM Wireless Ethernet Wired Ethernet

Aggregation

Metro

Core
BSC/RNC % 0 #

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NEC Corporation 2011

Trends to Improve Mobile Backhaul Network


Moving towards next generation mobile backhaul aiming to reduce OPEX and CAPEX while coping with rapid increase in mobile data traffic. Demand for TDM based legacy transport such as SONET / SDH decreases Demand increase for hybrid TDM & packet based transport such as ether-net

Trend of Mobile Services


Traffic increase with wireless access system evolution

Global Market Size for Mobile Backhaul Equipment


Packet based network migration
(B$)
10 10% CAGR 2010-2013

Traffic Volume (Mbps)

Packet-based Mobile Services Circuit-based Mobile Services

Packet / TDM hybrid equipment


3G (IP) / HSPA / LTE
0
2009 2010 2011 2012 2013 2014

2G, 3G (ATM) / HSDPA

2008
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2010
NEC Corporation 2011

2015

Others Microwave TDM Ethernet cell site gateways

SONET/SDH and WDM Microwave Ethernet & Dual TDM/Ethernet Ethernet cell site routers

Source Infonetics , Mobile Backhaul Equipment and Services

Mobile Backhaul Requirements (Needs of Operators)

Supports rapid growth of mobile data traffic Smooth migration from existing networks to next generation networks Power saving / space saving New management system to reduce operating costs

Further expand NECs business opportunity by introducing iPASOLINK series which meets market requirements

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NEC Corporation 2011

Meeting Next Generation Mobile Backhaul Requirements


Converge NECs wireless / optical / IP and OSS technologies
A mobile backhaul solution that uniformly and economically handle the migration from 2G ! 3G ! 3.9G (LTE) The coordination of integrated NMS with OSS enables the provision of E2E / multilayer pass management and provide high reliability and scalability Access Aggregation Metro Core

iPASOLINK 200

iPASOLINK 400

LTE
BSC/RNC aGW

3G 2G 3G 2G

Existing PASOLINK application area


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NEC Corporation 2011

Wireless TDM Wired TDM

Wireless Ethernet Wired Ethernet

Exp applic and ation area

iPASOLINK application area

Launch of iPASOLINK 400


All-in-One Model in 1U (44mm in height) iPASOLINK 400

iPASOLINK 200

2-way branch (repeater function) Internal high capacity packet switch Compact design, high reliability
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NEC Corporation 2011

Up to 4-way branch configuration in 1U Universal slot enables flexible expansion (transport interface and/or functionality) Internal high capacity packet switch Compact design, high reliability

Orders for the iPASOLINK 200


Since its commercial release on September 1, 2010 orders for 23,000 units in 18 countries has been received Europe
Poland Germany Hungary Serbia Italy Turkey Bangladesh Montenegro Sri Lanka Malaysia India Thailand Brazil Moldova

Asia

Central / S. America
Guatemala

Africa

Typical Usage of iPASOLINK 200 by Customers


Communication line between mobile network base stations Deployment of new 3G (HSPA / HSPA+) and LTE networks Replacement of existing equipments (capacity expansion of existing access backhaul

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NEC Corporation 2011

Total PASOLINK Shipments (Over 1.5 Million)


Major Shipment Milestone:
1.5 million shipments: achieved in26 year (1984^ 2010) 1.0 million shipments: achieved in 24 year (2008.9) 1.0! 1.5 million: achieved in 1 year 11 months (2010.8)
} / zM

New Series

1.5 mil.
2010.8

Countries: 145 (as of Dec. 2010)


Europe Asia Oceana

iPASOLINK200/400 iPASOLINK200/400
PASOLINK High Performance (HP)

Total 1.52 mil. 1.52

N./S. America

PASOLINK NEO (Standard) PASOLINK NEO/c

1.0 mil.
2008.9

Mid.East Africa

PASOLINK V4 Overseas Ver. PASOLINK

PASOLINK Mx

(joint dev. with overseas operators)


PASOLINK V2 Overseas Ver. PASOLINK50

PASOLINK V3 PASOLINK-S PASOLINK+

500 thou.
Shipment growth to mobile operator.
total shipment ratio to mobile operator. 2000 2009 40% ! 80%+
2007.2

100 thou.
2002.10

' 84 ' 85 ' 86 ' 87 ' 88 ' 89 ' 90 ' 91 ' 92 ' 93 ' 94 ' 9 5 ' 96 ' 97 ' 98 ' 99 ' 00 ' 01 ' 02 ' 03 ' 04 ' 05 ' 0 6 ' 07 ' 08 ' 09 ' 10 (year)

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NEC Corporation 2011

1. Business Overview 2. Key Business Strategy


2.1 LTE Business Strategy 2.2 Mobile Backhaul Business Strategy

3. Toward Achieving V2012

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NEC Corporation 2011

Toward Achieving V2012


Sales of 900 billion yen in FY2012 (9% operating profit margin)
FY2009
Overseas Sales Ratio Key Business Ratio Operating Income Margin

FY2012 40% 50% 9%

28% 34% 5%

Sales (Billions of yen) Sales

900.0
CAGR +13% 09! 12

WBB Business 250 billion yen


Overseas Key Business

627.4
Overseas

WBB Business Key Business 100 billion yen

Japan

Existing Business

Japan

Existing Business

FY2009
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NEC Corporation 2011

FY2012 (planned)

forecast as of July 8, 2010

Abbreviations
Average Revenue Per User "" Broadband "" 5 Base Band Unit " $ % Base station Digital processing Equipment " 2 % Base station Radio processing Equipment "3 # Base Station Controller "33 Business Support Systems/Billing Support Systems " 7 ! Broadband Wireless Access # ! ' 2 Compound Annual Growth Rate E. " evolutional Node B % % End to End %0 # Evolved Packet Core % 0 -3 7 Ethernet Ring Protection Switch 2 &" 7 ! Fixed Broadband Wireless Access &$$ Frequency Division Duplex ' 7 Gateway '3 - Global System for Mobile communications ( 3 $ 0 ! High Speed Downlink Packet Access ( 3 0 ! High Speed Packet Access )- 3 IP Multimedia Subsystem , 2 % Low power Radio processing Equipment , 4 % Long Term Evolution - " ( Mobile Backhaul -)- / Multiple Input Multiple Output
!2 0 5

-- % Management Entity Mobility


. - 3 Network Management System . 7 Network / 33 Operational Support Systems 0 0 Peer to Peer 0 & Platform 0 -' 7 PDN Gateway 2 . # Radio Network Controller 22 % Optical Remote Radio processing Equipment 22 ( Remote Radio Head 3 $ ( Synchronous Digital Hierarchy 3 -' 7 Serving Gateway 3 / ( / Small Office / Home Office 3 /. Self Organizing Network 3 /. % Synchronous Optical Network 4 3 4 " Set Top Box 4 $$ Time Division Duplex 4 $- Time Division Multiplexing 7 "" Wireless Broadband 7 $- Wavelength Division Multiplexing 7 I&I Wireless Fidelity 7 I- ! 8 Worldwide Interoperability for Microwave Access 7 2 ) Wuhan Research Institute of Post and Telecommunications 8 AA3 X as a Service

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NEC Corporation 2011

CAUTIONARY STATEMENTS: This material contains forward-looking statements pertaining to strategies, financial targets, technology, products and services, and business performance of NEC Corporation and its consolidated subsidiaries (collectively "NEC"). Written forward-looking statements may appear in other documents that NEC files with stock exchanges or regulatory authorities, such as the Director of the Kanto Finance Bureau, and in reports to shareholders and other communications. NEC is relying on certain safeharbors for forward-looking statements in making these disclosures. Some of the forward-looking statements can be identified by the use of forward-looking words such as "believes," "expects," "may," "will," "should," "seeks," "intends," "plans," "estimates," "targets," "aims," or "anticipates," or the negative of those words, or other comparable words or phrases. You can also identify forward-looking statements by discussions of strategy, beliefs, plans, targets, or intentions. Forward-looking statements necessarily depend on currently available assumptions, data, or methods that may be incorrect or imprecise and NEC may not be able to realize the results expected by them. You should not place undue reliance on forward-looking statements, which reflect NECs analysis and expectations only. Forward-looking statements are not guarantees of future performance and involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those in the forward-looking statements. Among the factors that could cause actual results to differ materially from such statements include (i) global economic conditions and general economic conditions in NECs markets, (ii) fluctuating demand for, and competitive pricing pressure on, NECs products and services, (iii) NECs ability to continue to win acceptance of NECs products and services in highly competitive markets, (iv) NECs ability to expand into foreign markets, such as China, (v) regulatory change and uncertainty and potential legal liability relating to NECs business and operations, (vi) NECs ability to restructure, or otherwise adjust, its operations to reflect changing market conditions, (vii) movement of currency exchange rates, particularly the rate between the yen and the U.S. dollar, (viii) the impact of unfavorable conditions or developments, including share price declines, in the equity markets which may result in losses from devaluation of listed securities held by NEC, and (iv) impact of any regulatory action or legal proceeding against NEC. Any forward-looking statements speak only as of the date on which they are made. New risks and uncertainties come up from time to time, and it is impossible for NEC to predict these events or how they may affect NEC. NEC does not undertake any obligation to update or revise any of the forward-looking statements, whether as a result of new information, future events, or otherwise. The management targets included in this material are not projections, and do not represent managements current estimates of future performance. Rather, they represent targets that management will strive to achieve through the successful implementation of NECs business strategies. Finally, NEC cautions you that the statements made in this material are not an offer of securities for sale. Securities may not be offered or sold in any jurisdiction in which required registration is absent or an exemption from registration under the applicable securities laws is not granted.