Annual Report 2010
For the Year Ended March 31, 2010

Panasonic Electric Works Information Systems Co., Ltd.

Corporate Profile

The former Panasonic Electric Works’ information systems
division was established as an independent company, PanasonicElectric Works Information Systems Co., Ltd., in 1999. For nearly
50 years, based on our technical expertise, we have offered totalsolutions for information systems from planning and designing todevelopment, operation and maintenance.
Our strength lies in our on-site capabilities cultivated by staying
closely in tune with site needs, solving problems through trial anderror. We strive to deliver useful solutions from the customer’s
perspective.

Contents
01
02
03
06

Consolidated Financial Highlights
To Our Shareholders
Top Interview
Special Feature: New Medium-Term Management Plan
“Move to Delight—Aiming to Create Delight, not merely Satisfaction”

Review of Operations
Corporate Governance
CSR
Financial Section
14 Management’s Discussion and Analysis
18 Consolidated Balance Sheets
20 Consolidated Statements of Income
21 Consolidated Statements of Changes in Equity
22 Consolidated Statements of Cash Flows
23 Notes to Consolidated Financial Statements
32 Independent Auditors’ Report
33 Corporate Data/
Board of Directors, Corporate Auditors andCorporate Officers/
Stock Information
09
12
13
14

Cautionary Statement with Respect to Forward-Looking Statements
This annual report contains forward-looking statements that reflect Panasonic Electric Works Information Systems Group’s plans, business strategies and targets. These statements
are in accordance with assumptions and beliefs determined by management based on currently available information and involve uncertainties and changes in the businessenvironment at home and abroad. Actual results and business performance may differ materially from these statements.

Consolidated Financial Highlights
Panasonic Electric Works Information Systems Co., Ltd. and Subsidiaries
Years Ended March 31

Thousands of U.S.
Dollars (Note 1)

Millions of Yen

2010

2009

2008

2007

2006

2010

¥36,650¥37,320¥39,066¥40,226¥41,385$394,086

Operating income

4,371

4,632

4,877

5,014

4,610

47,000Net income

2,563

2,783

2,842

3,001

2,800

27,559¥ 4,483¥ 3,864¥ 2,848¥ 3,742¥ 2,468$ 48,204

Net cash used in investing activities(2,829)(3,866)(1,921)(3,337)(576)(30,419)

Net cash used in financing activities

(863)

(710)

(639)

(639)

(347)

(9,280)Cash and cash equivalents

4,759

3,968

4,679

4,391

4,625

51,172

Total assets¥25,146¥23,211¥21,185¥21,307¥18,610$270,387

Equity19,65917,604

15,552

13,346

10,985211,387

Net sales

Net cash provided by operating activities

Yen

Basic net income (Note 2)

U.S. Dollars (Note 1)¥240.51¥261.13¥266.78¥281.65¥260.42

Cash dividends

65.00

75.00

65.00

55.00

55.00

Operating income to net sales

11.9%

12.4%

12.5%

12.5%

11.1%

Return on equity

13.8

16.8

19.7

24.7

28.7

Equity ratio

78.2

75.7

73.3

62.5

59.0

$

2.59
0.70

Notes: 1. Amounts expressed in U.S. dollars are calculated using the exchange rate prevailing on March 31, 2010 of ¥93 to US$1.00.
2. Diluted net income per share is not indicated here, because there are no potentially dilutive shares.

Net Sales

Operating Income
Operating Income to Net Sales

Net Income(Millions of Yen)

(Millions of Yen)(%)

(Millions of Yen)

50,000

6,000

15

3,500

40,00041,385 40,226

39,066 37,320

4,800
36,6504,610

5,014 4,877

14

4,632

2,800

3,600

20,000

2,400

12.5

12.5

(Yen)

300
2,800

3,001

281.65260.422,842 2,783

240

266.78 261.13
240.51

2,563

4,371

30,000

Basic Net Income per Share

13

2,100

180

12

1,400

120

11

700

60

0

0

12.4
11.9

10,000

1,200

11.1

0

0

’06 ’07 ’08 ’09 ’10’06 ’07 ’08 ’09 ’10

0’06 ’07 ’08 ’09 ’10’06 ’07 ’08 ’09 ’1001

To Our Shareholders

In the fiscal year ended March 31, 2010, the Japanese economy showed some signs of recovery,
though some question remains about the sustainability of this rebound. This was a particularly
tough year for the information services industry, with companies curtailing capital expenditures andadopting a cautious stance toward IT investments.
During the year, the Panasonic Electric Works Information Systems Group focused on system
operation services, which are relatively impervious to economic fluctuations. We also worked tooffer products, services and solutions that the Group is particularly well equipped to provide, given
its solid understanding of on-site business requirements. The severe market environment resulted ina fall in sales and profits, but sales to companies outside Panasonic Electric Works Co., Ltd. and its
group companies expanded compared with the preceding period. We believe this will play a majorrole in the future growth and development of the Group.
Our social mission statement attempts to summarize the management philosophy of Panasonic’s
founder, Konosuke Matsushita: “We will devote ourselves to the progress and development ofsociety and the well-being of people through our business activities, thereby enhancing the qualityof life throughout the world.” The Panasonic Group shares an outlook of operations not confined to
manufacturing, and we at Panasonic Electric Works Information Systems Group, catering to the IT
field, embrace this sentiment. We are committed to this mission through information technology andas an IT service company.
We are now seeing dramatic changes in the business environment. Under these circumstances,firms expect no less than a revolution in terms of improved efficiency and productivity, and changes
that give their businesses a competitive advantage. The current environment
certainly does not mean that our customers are looking simply for IT
software and hardware products. As an IT service company, to realize this“revolution” from a customer viewpoint, we will utilize our expertise andexperience garnered through our work on-site. We believe we can achieve
this with speed, and in the process augment Group growth.
Putting form to our conviction, we recently initiated our new mediumterm management plan. Looking to its success, we defined ourmanagement vision for 2012 as “Move to Delight—Aiming to Create
Delight, not merely Satisfaction.” We explain the concept in moredetail in the following pages.

Kazuhiro Maegawa
President

02

Top Interview

Question: 1

Please tell us about the Company’s efforts
and performance in the fiscal year ended
March 31, 2010.
Conditions remained harsh in the year to
March 31, 2010, as companies curbed
their capital investment and postponed
IT investments. Usually, cutbacks in IT
investment have a major impact on areas
such as large-scale system development andmachinery and equipment sales. However,system operations are essential for business
continuity, and this business is thus morestable and less susceptible to swings in theeconomic climate. Accordingly, in the year to
March 31, 2010, we developed our business

I consider our ability to maintain profitability
in a harsh environment impressive.
focusing on system
operation services andworked to secure stableearnings through increased
efficiency. Additionally, theGroup rolled out products,
services and solutions thatare backed by a wealthof on-site experience.
Despite the hard work of all employees
united as one throughout the year, with ourefforts focused on these areas, we weregreatly affected by intense competition amid
tough economic conditions and falling service
prices, and the Group recorded a year-onyear decline in sales and profits. But it was
not all bad; we can also discuss some areasof progress.
One is the favorable trend in expanding
sales outside the Panasonic Electric Works
Group, utilizing our own experience topropose integrated operations and servers,
another is efforts to improve management
constitution through thorough rationalization,
thus ensuring a certain level of profits.
We consider these to be significant
footholds for our future progress.

Question: 2

Due to upheavals in the global economy,
overall IT investment has changed
dramatically. How is Panasonic ElectricWorks Information Systems dealing withthis business environment?
The rapid onset of economic recession in
the wake of the financial turmoil of autumn
2008 prompted many companies to cancel
or postpone system development projects in
2009, and the price of services declined. We
expect negative growth in the IT industry tocontinue in 2010. Since early spring, we haveseen some signs of improvement in domestic
business conditions, but with the anxiety over
Europe starting with the Greek economiccrisis, we are again experiencing instability inthe domestic economy.
On the other hand, we can view thissluggish phase as experience, and seek tooffer corporate IT the prospect of a majorchange from “biggest, highest” to “best,
optimal.” In other words, nowadays clientsare not looking to have better systems thananyone else. Rather, they simply want systems
that produce the desired result. In the context
of cloud computing, a recent buzzword, we
believe such changes are already upon us.
“A system that produces the desired result”
needs an example. In fact, the Group has
earned high marks from customers for its own
experience in integrated server solutions, and03

Top Interview

we are steadily building on this track record.
We believe in enhancing such solutions, in linewith market needs.

Question: 3

Please tell us how you plan to take on thebusiness environment in the year to March
31, 2011.
The business outlook is unstable in many
respects, but in recent communications withcustomers and suppliers we strongly feel that

By maintaining a customer-oriented
perspective as a service-oriented IT
company, we aim to impress customers by
exceeding their expectations.
the Japanese economy isrecovering. We believe
this implies positivechanges ahead.
Moreover, we haverealized that what reallycounts is speed (the paceof change). The keyword in

Realization of Quality (Q)-Cost (C)-Speed (S)Q
QualityC
Cost

S

Sustainability

Speed

A company with strong “on-site capabilities”

04

our strategy for the year to March 31, 2011 is“Q-C-S,” where “Q” means quality, “C” means
cost and “S” means speed.
This phrase is more often seen as “Q-C-D,”
where “D” stands for delivery. But the pace ofchange in our customers’ business is fasterthan ever. To be of use to our customers, thespeed of our business advancement needs
to remain a step ahead of their needs. This is
why we emphasize “S” rather than “D.” Theremay be a trade-off between quality, cost andspeed, but we want to overcome this, andimpress our customers by surpassing their“satisfaction.”

Question: 4

What are your thoughts on the newmedium-term management plan (from theyear to March 31, 2011 through the year to
March 31, 2013) that began in April?
The words of the founder of the PanasonicGroup, Konosuke Matsushita, ”We will devote
ourselves to the progress and development ofsociety and the well-being of people throughour business activities, thereby enhancing
the quality of life throughout the world,” set
the tone for our company’s social mission.
Through IT, the Group strives to fulfill its social
mission as an IT services company. We must
not forget that “service” is at the root of
the business.
We expect to see such challenges as
continued upheaval in the IT industry, the shift
toward larger-scale operations, the shakeoutof firms and intensification of competition.
To remain the company of choice withcustomers, we aim to develop business froma customer perspective. The customer’sneeds are the starting point. We also seek tobuild on a solid foundation as an IT service
company. Based on such thinking, we drew
up our new medium-term management planand defined our management vision for 2012,“Move to Delight—Aiming to Create Delight,
not merely Satisfaction.” This vision underlines
our determination to truly become an IT
service company.
The word “delight” evokes the sense ofhappiness, joy and being moved. In response,
one obvious question might be, “Who do
you aim to delight?” The answer is: ourshareholders, investors, customers, andemployees and their families—we are working
toward the happiness of all our stakeholders.

We aim to expand earnings opportunities
through investment and provide stabledividends.
performance in dividends.
In the year to March 31,
2010, based on our policyof a stable dividend of¥55 plus a performancelinked dividend, we set
total dividends per shareat ¥65. For the year to
March 31, 2011, we plan to pay interim andyear-end dividends of ¥27.5 per share, plus a
performance-linked dividend of ¥5, bringing
total dividends to ¥65 per share.

Question: 5

Please tell us your thoughts on returns toshareholders.

Dividends
Consolidated Payout Ratio
(Yen)

(%)

75

The Company considers the return of profits
to shareholders a priority. While keeping in
mind the need to replenish internal reserves,
reinforcing our management foundation for
long-term growth, our aim is to ensure steady
dividends, taking a proactive stance in linking
dividends to financial performance.
Our Articles of Incorporation state that
dividends from surplus with record dates ofMarch 31, September 30 and other dates
determined by resolution of the Boardof Directors, a decision-making body for
dividends from surplus. For the foreseeable
future we plan to pay stable annual dividendsof ¥55 per share. While taking into overall
consideration the fund-raising environment,
financial conditions and the payout ratio, we
aim to also reflect our consolidated operating

30

75.0
28.7
65.0

60

65.0

24

24.4
55.0

27.0

55.0
21.1
19.5

45

18

30

12

15

6

0

0

’06

’07

’08

’09

’10

05

Special Feature: New Medium-Term Management Plan

Move to Delight
Aiming to Create Delight, not merely Satisfaction

Expand sales
outside thePanasonic ElectricWorks Group【Structural reform】
Combine capabilities
and enhance humanresources training
through reorganization【Rationalization】
Thoroughly pursue further
rationalization【Quality】
Nurturing a “quality-first”
mindsetStrengthen
management
practices(Active investment while
maintaining profit levels)【IT infrastructure】
Initiatives to accelerate
reform of IT structure【Engineering IT】
Cultivate engineering IT

Reinforce
partnerships withkey customers

The fiscal year ending March 31, 2011 is the first year of the Group’s
new three-year medium-term management plan. Based on our
on-site capabilities gained from working assiduously to resolve
issues at customers’ place of business as a user ourselves, weare strengthening our foundations through both selection andconcentration of new and priority businesses. By achieving theplan’s objectives, we seek to pave the way to becoming an IT service
company that goes well beyond merely satisfying the customer
through the full deployment of our strengths.
Under the plan, we will promote the initiatives set out below toachieve the following results for the year ending March 31, 2013:
consolidated net sales of ¥40 billion and consolidated operating
income of ¥4.9 billion (consolidated operating margin of 12.3%).

06【Sales promotion】
Approach large and medium-sized
firms with IT rationalization proposals【New business】
Selection and concentration of new/priority business【Overseas】
Build infrastructure for overseas
development

Net Sales
Operating Income
Operating Income to Net Sales(Millions of Yen)

(%)

12.5

45,000
12.3
12.1

12.2

11.9
40,00011.0

40,00037,50036,650(Millions of Yen)

36,00035,0004,900

30,000

4,400

5,000

4,500

4,500

4,371
2,5000

4,000

0

0

’10

Results

’11
Plan

’12
Plan

’13
Plan

Special Feature: New Medium-Term Management Plan

Expand Sales Outside the Panasonic Electric Works Group by 30% toAchieve an External Sales Ratio of Over 35%
We believe our future depends on making a fullFirst of all, we plan to expand our client base tofledged advance into overseas markets. As an IT
large and medium-sized businesses, schools andsupport company, we will promote the building of
manufacturing wholesalers. Our aim is to double
infrastructure for overseas development.
our customer base in three years. Next, we plan
In April 2010, we appointed international
to focus on the selection and concentration ofbusiness representatives to support companies
new/priority businesses. We must fully leverage
accelerating their overseas development. We
our strengths and pursue new technologies andplan to absorb technologies and expertise in thisproduct strategies that lead to the creation of amanner during the upcoming three years.
new market to achieve our goals of 30% sales
growth and an external sales
ratio of over 35%. We are
Selection and Concentration of New/Priority Businesses
therefore putting every effort
ThemesDescription
into our five key objectives:
Server/storage/network optimization solutions
Infrastructure optimization
Virtualization, integration, BCP implementation
infrastructure optimization,
Drastically reform IT infrastructure with low visibility to managers
design process reform, system
Solutions to support acceleration and better efficiency of
Design process reform
integration for core functions,product development in response to global expansion
Support development in response to globalization/offshoring
IT operations service andBuild integrated system for core functions
System integration for core functions
Support seamless integration of information on supply
cooperation with PanasonicOrder/sales management, production management, accounting
chainElectric Works. In all of these
Make business from structural reforms in IT, such as
IT operations service
areas, the Group will make therevision of IT operations
From management with ownership to management without ownership
Deploy cloud computing businessbest use of its hands-on andCooperation with Panasonic Electric Works Solutions through new integration of system equipment ofon-site operating experience.
Create new added value by utilizing IT in Panasonic Electric Works products

Panasonic Electric Works Group and IT

Reinforce Partnerships with Key Customers

The Group has many customers, including its
largest client, Panasonic Electric Works Co., Ltd.
Our relationship with these important customers
has helped us to strengthen on-site capabilities
in such areas as data center operations andsolutions for server ingegrations. The Group willfurther enhance its on-site capabilities to offer

more advanced products, servers and solutions
the next level up and to build strong, trust-based
partnerships. We believe that by strengthening
the bonds with our customers, the Groupcan preserve a stable and strong
management foundation.

07

Special Feature: New Medium-Term Management Plan

Strengthen Management Practices (Active Investment While Maintaining
Profit Levels)
satisfaction. It goes without saying, therefore, that
The new medium-term management plan regards
nurturing human resources is key to the thoroughresearch and development activities for theprovision of top-flight services.
creation of new businesses and technologies
as important measures, and we plan to invest a
total of ¥300 million in theseareas over a three-year
Make Continuous “Reductions” and Constructive “Expansions”
period. Nevertheless, we aim
to maintain a consolidated(̶) Reductions(+) Expansions
operating margin of around
Simple organization adapted to the market environment
First global year
12%. For this reason, aStrengthen global HR/build global organization
Year to March 31, 2010
Year to March 31, 2011
Year to March 31, 2010
6 headquarters
3 headquarters
variety of effective measures
100 people
10 people
10 business departments
4 business departments
is important. The table on the
Further reduce operational/development costs
Vitalize organization with new people
right outlines these measures.
Applications
Furthermore, since we(400 systems)
Half
30 new hires in April 2010
Servers
are an IT service company,(1,800)enhancing the quality
Reduce costs by relocating the Tokyo officeEnhance sales force in the Tokyo metro areaof human resources isMove completed in June 2010
Large personnel shift
Greatly reduced costs (rent)
inextricably linked with
Expand the Tokyo office 1.5 times
Absolute amount: –¥90 million/3 years
improving customer

Immediate Implementation through the Tokyo Office
We made a new start in the Tokyo metropolitan area by relocating our office from Chuo Ward to Minato
Ward. We consider an office a place to store and showcase our expertise, as well as the command
center from which we seek to master new technology and products. From our new base, we will strive toexpand solutions that satisfy our customers.
Thorough Mastery and Application of ExpertiseVideo conferencing to further enhance expertise
Drawing on our own rich experience with video conferencing
systems, we have installed such systems in all of our meetingrooms. We hope that our customers can also take advantage of ourthorough mastery to enhance their experience in this area.

Technology as a Seed of Success
New security

High-speed wirelessNon-stressful
palm veinauthentication

High-speed,
noiselesswireless LAN

New image technology

New education systems

Precision
range image
sensors

08

Contentproduction
solutions for
smart phones

Review of Operations

Breakdown of Net Sales

System Services
System Solutions
System and Communications
Equipment Business

Net Sales by Sales Category(FY 3/2010)(Millions of Yen)

50,000

System and Communications
Equipment Business

40,00012,411

8,878

18.1%

7,051

30,000

System Solutions
19.0%

5,951

6,647

8,349

20,000

6,301

7,827

22,672

23,51923,664

7,580

6,958

23,78823,045

10,000

System Services
62.9%

0

’06

’07

’08

’09

’10

System Services
Information systems have become indispensible for corporate management. All kindsof business systems are being put in place to enable companies to operate 24 hours
a day, 365 days a year. These operations are playing a crucial role inbusiness continuity.
From two data center locations, the Osaka IDC and Osaka Central Data Center,
the Group is caring for the safety and security of customers’ systems while providing
operation services that match customers’ needs.

System Solutions
We are seeing significant changes in the operating environment, and customers arelooking for nothing short of a revolution in productivity and efficiency enhancements,
as well as renovating their businesses to boost their competitive advantage. We lookto deliver solution strategies applying IT to assist our customers toward this end.

System and Communications Equipment Business
When offering solutions to our customers, the Group also proposes the most suitablesystem equipment for the customer.
We call this a “multi-vendor” approach. We leverage a track record we havecultivated over our long history of operations in Japan and overseas, by testing
every device available on the market for adoption. Based on our own experience, we
confidently propose flexible combinations not tied to specific manufacturers.

09Review of Operations

System Services
Performance in the Year to March 31, 2010
Amid the challenging economic conditions and clear trend of lower prices forservices provided, earnings fell in the year to March 31, 2010.
Nevertheless, the gross margin (the ratio of gross profits to net sales)
improved on the back of cost-cutting efforts.
Future Strategy
Amid growing interest in such areas as cloud computing, companies’
attitudes toward their IT assets are changing from “ownership” to “application.”To this end, we anticipate an increasing desire to get the maximum possible
use out of IT at an appropriate cost. The Group continues to respond to
the needs of its customers by focusing on such services as its virtualized
infrastructure, which it began in February 2010.

Breakdown of Net Sales(FY 3/2010)

62.9%¥23,045 million($248 million)

Net Sales
Gross Margin(Millions of Yen)

(%)

50

25,00022,672

23,51923,66423,78823,04520,00040

15,000

30

24.0

22.6

21.5

10,000

20.3

20.7

20

10

5,000

0

0

’06

’07

’08

’09

’10

System Solutions
Breakdown
Net Sales
Performance in the Year to March
31,of2010(FY 3/2010)
In this segment, web system architecture for major communications companies
and infrastructure architecture for leading securities companies, as well as
data retrieval tools, sales management software and workflow packages,
contributed to increased sales. Sales to the Panasonic Electric Works Group in
62.9%
this category were sluggish throughout the period.
¥23,045 million
Despite our continued effort to achieve cost reductions,profits($248 million) from someprojects decreased due to severer competition to win orders, which resulted ina lower gross margin than the previous year.
Net Sales
Gross Margin

Breakdown of Net Sales(FY 3/2010)

19.0%¥6,958 million($75 million)

Net Sales
Gross Margin(Millions of Yen)(%)

(Millions of Yen)(%)

25,00050

10,000

50

40

8,000

10

22,67220,00023,51923,66423,78823,045
7,827

8,349

40

Breakdown of Net Sales(FY 3/2010)(FY 3/2010)

62.9%¥23,045 million($248 million)

Net Sales
Future Strategy
MarginWhat customers are after is notGrosssystems
or applications per se, but a(Millions of Yen)(%)
50
25,000corporation reform that utilizes
them. Also, to speedily realize sucha23,519 23,664 23,788 23,045
transformation, the keywords for customer
systems are no longer “biggest,
22,672highest,” but “best, optimal.” 20,000
The Group strives to propose solutions
that40
address demands for “best, optimal” systems that offer “speed.”
15,000

24.0

22.6

21.5

10,000

20.3

20.7

19.0%
¥6,958 million($75 million)

Net Sales
Gross Margin(Millions of Yen)(%)

10,000

50

7,827

8,000

8,349

40

7,580
6,958

30

6,000

20

4,000

6,301

30

20

20.2
18.4

18.0

5,000

0

’06

’07

’08

’09

10

2,000

0

0

’10

15.4

13.7

10

0

’06

’07

’08

’09

’10

System and Communications Equipment Businesset SalesBreakdown
Net Sales
Performance in the Year to March
31,of2010(FY 3/2010)
The sales category saw steady sales throughout the fiscal year, owing toefforts to respond to clients’ rationalization requirements by offering Egenera®
BladeFrame ® blade server and video conferencing systems. A large project
to introduce thin client also contributed to the increased revenue.
62.9%
19.0%
The
gross margin remained at a high level during the fiscal year.
million¥23,045

23,664

Breakdown of Net Sales(FY 3/2010)18.1%¥6,647 million($71 million)¥6,958 million($75 million)($248 million)

3,519

07

Breakdown of Net Sales

Future Strategy
Amid the challenging economic conditions, businesses continued tocurtail capital investments, butNet
theirSalesrequirements for more efficient andGrossstreamlined operations have been Margin
growing. We aim to further increase sales(Millions of Yen)(%)(%)
by consistently
addressing thesecustomer requirements, leveraging
our own
50
50
10,00023,78823,045experience
as a user.
40

7,827

8,000

8,349

Net Sales
Gross Margin(Millions of Yen)(%)

15,00050

40

12,000

30

9,000

20

6,000

12,411

40

7,580
6,958

22.6

30

6,000

20

4,000

6,301

30

8,878
7,051

21.5

20.3

20.7

20.2

10

20

17.2

15.4

13.7

2,000

6,647
5,951

18.4

18.0

15.0

16.4
10

10

3,000
9.4
6.1

0

’08

’09

’10

0

0

’06

’07

’08

’09

’10

0

0

’06

’07

’08

’09

’10

11

Corporate Governance

General Meeting of Shareholders
Appointment and Dismissal

Appointment and Dismissal
Audit

Board of Corporate Auditors

Board of Directors

Auditors Room

Assistance

Cooperation

Appointment andDismissal

Cooperation

Accounting Audit

Accounting Auditors

Appointment and Dismissal

President

Instruction

Internal Audit Division (Auditing)

Supervision / Instruction

Executive Directors

Executive Officers

Business Strategy Meeting
Internal Audit
Control

Executive Division

Control

Business Review Meeting
Director in Charge of CSRM and Internal Control
Company-wide Committee
Corporate Ethics Committee
Information Security Management Committee
Other Committee

With regard to the execution of business, to achieve both swift
and appropriate decision making and supervisory and auditing
functions, as well as business controls, we have adopted thefollowing corporate governance structure.
Business Execution and Supervision
The Board of Directors meeting is held regularly once a monthand irregularly as required to report on significant operating
policies, decisions on substantive matters, and the executionof business and duties, as well as statutory matters. Also, toprovide neutral and impartial supervision, two of the sevendirectors are outside directors.
Actual business is executed by executive directors andexecutives under the leadership of the president in accordancewith policies that have been decided by the Board of Directors
to clarify the responsibility and to sufficiently demonstratesupervisory functions. Also, for the purpose of uniting thewhole Company as one through the discussion and sharing of
information necessary for the smooth and rational execution ofbusiness, we have established business strategy meetings andmanagement study groups.
Auditing
The Company’s auditing system is made up of auditors and theBoard of Auditors, an internal audit unit as well as an accounting
auditor, and is conducted as follows: to implement a varied andeffective audit, each carries out the management audit from adifferent point of view together with appropriate coordination.
Board of Auditors and the Auditors’ Inspection
The Board of Auditors is comprised of auditors, audit plans,methods and so forth, and reports on the implementation statusof the audit. The audit is mostly taken from the point of viewof legality and is conducted on operations and the financial
condition by auditors based on plans determined by the Board
of Auditors. Auditors also attend important meetings such asthat of the Board of Directors and give recommendations andadvice from an independent standpoint. To strengthen thefunctions of the auditors, we also established an audit officeto support the auditors’ professional duties, and we consult
with auditors regarding the assessment of the office and its
personnel changes.
Internal Audit
The Company established the division with the aim to execute
fair and efficient business and maintenance of an internal checksystem to preempt and prevent any irregularities. The division
conducts its audit in line with the annual plan, and the results
are reported to the Board of Directors.
Accounting Auditor
Concerning the audit under the Companies Act and Financial
Instruments and Exchange Law, the Company is entered into anaudit contract with Deloitte Touche Tohmatsu LLC.
Controls
We believe developing a sound business and maintaining
customers’ trust in our business are indispensible to the growthof the Company, so with the goal of establishing a regulated
business environment, we have assigned a board member
to take charge of internal controls (CSRM*). We have alsoestablished such groups as corporate ethics and information
security management committees that will deploy concretemeasures companywide based on the content of discussions.
*CSRM: Combining CSR (Corporate Social Responsibility) and Risk Management.

12

CSR

As a Public Body

and are developing a corporate ethics program.

For approximately 50 years since the days of its
predecessor, the information systems division of

All for the Customer

Panasonic Electric Works, we have worked with theContributing to our customers’ business leads tospirit of the words of the founder of the Panasoniccontributing to society.

Group, Konosuke Matsushita: “The company is a
public body” and “All for the customer.”“To be useful to the customer,” we always offer
dedication in our work through IT.

“A company’s mission is not just commercial
pursuits. Aim to improve and develop social life andCoexistence with the Global Environment

contribute to the progress of global culture.” This is theIn parallel with the development of IT, powerbasis of our corporate social responsibility

consumption is increasing, and this is becoming a(CSR) activity.

major problem for the whole of society.
We use data centers that can operate with lower

Activities for Fairness

power consumption than before, and integrated

Based on the Panasonic Group management philoso-

servers that use virtualization technology; we arephy, we try to look beyond just complying with laws,

carrying out business operations that consider theordinances and rules to conduct fair and honest

global environment at the same time as utilizing ourbusiness activities according to conscience and goodexperience with the latest IT. In such ways, we aresense.

supporting our customers’ environmental mitigation

To thoroughly strengthen compliance, we introduced

measures.

13

Financial Section

Management’s Discussion and Analysis

Financial Position
Sales
During the fiscal year ended March 31, 2010 (April 1, 2009 to
March 31, 2010), the Japanese economy continued to show
signs of recovery owing to such factors as a rebound in exports
and progress in inventory adjustments. However, the continuing
issues of overemployment and overcapacity, concerns overrapid appreciation of the yen and deflation created someuncertainty over the attainment of a sustainable economic
recovery. The IT service industry also suffered from continued
severe conditions in which IT investments were postponeddue to curtailed capital expenditure by companies.Under such
tough circumstances, the Group aimed to increase sales tocompanies outside the Panasonic Electric Works Group by
focusing on providing system operation services, which are
relatively impervious to fluctuations in the economy, and by
striving to offer products, services and solutions that only
the Group, with its solid experience in on-site proposals, canprovide. These efforts resulted in favorable trends in operationand server integration projects and workflow packages. On theother hand, owing to our completion of a long-term project torebuild backbone systems for Panasonic Electric Works andsluggish sales to the Group companies during the year, net
sales fell 1.8% from the previous year, to ¥36,650 million.
Gross Profit; Selling, General and Administrative Expenses
In the year ended March 31, 2010, as a result of improved
management practices with the help of thorough rationalization
efforts such as reducing outsourcing costs, we again saw adecline in cost of sales, by 2.1% compared with the previous
fiscal year, to ¥29,445 million. Gross profit fell ¥38 million, or
0.5%, to ¥7,205 million. The cost of sales ratio improved 0.3
percentage point, from 80.6% to 80.3%. Selling, general andadministrative (SG&A) expenses rose 8.6%, to ¥2,834 million.
The ratio of SG&A expenses to net sales was up 0.7 percentage
point from the previous year, to 7.7%. This rise reflected our
medium- to long-term stance on investing in the development of
our human resources.
Operating Income, Non-Operating Income
Consolidated operating income fell 5.6% versus the previous
period, to ¥4,371 million, while the operating margin was down
0.5 percentage point, at 11.9%. Other income fell 71.6%, or ¥72
million, to ¥30 million. This was largely due to additional losseson the disposal of fixed assets. The interest coverage ratio fell
from the previous year’s 641.7 times to 460.4 times.
Net Income
The fiscal year ended March 31, 2010, saw a fall in net income,which dropped 7.9%, to ¥2,563 million. We sought to improve
our management practices via thorough rationalization efforts.
We also worked toward the reduction of outsourcing costsby making such costs more visible, but these efforts were14

overshadowed by higher costs arising from harsher competitionand lower prices on services provided in the face of the severe
economic environment. The opening of a new data center andthe expansion in facilities such as servers, as well as otherfactors, compounded this situation.
Business Results by Product Segment

System Services

System Solutions

System andCommunications
Equipment
Business

Sales

Gross Margin(¥ million)(%)

23,045(down 3.1%
year on year)

20.7

Overview

Despite a

price decline(up 0.4
percentage point in operation
services, grossyear on year)

profit improved

18.4

6,958

(down 1.8
percentage
points year on
year)

Maintained a highgross margin

6,647(up 2.2
percentage
points year on
year)

17.2

Increased grossmargin withexpanded salesof high-valueadded services(down 8.2%
year on year)(up 11.7% year
on year)

Assets, Liabilities and Net Assets
Assets
As of March 31, 2010, total assets were up 8.3%, to ¥25,146
million, from one year earlier. In current assets, cash anddeposits fell ¥127 million, and accounts receivable–trade fell
¥856 million, while accounts receivable increased ¥544 million
on construction contracts, and deposits paid rose ¥1,720
million. In fixed assets, equipment increased by ¥453 million,
while construction in progress rose ¥101 million, investment
securities ¥539 million and prepaid pension cost ¥247 million.
Liabilities
As of March 31, 2010, total liabilities stood at ¥5,487 million,
down 2.1% from the end of the preceding fiscal year, mainly as aresult of a ¥133 million increase in accounts payable–trade anda ¥497 million decrease in accounts payable–other.
Net Assets
Over the same period, net assets increased 11.7%, to ¥19,659
million as a result of a ¥1,764 million rise in retained earnings anda net increase of ¥321 million in unrealized gain on available-forsale securities.
Cash Flows
Cash and cash equivalents at the end of the year ended
March 31, 2010 were up ¥791 million from a year earlier, at¥4,759 million.

Cash Flows from Operating Activities
Net cash provided by operating activities was ¥4,483 million,¥619 million more than in the previous year. Accounts receivable
decreased by ¥723 million from the previous year to ¥312 million.
Decrease in inventories amounted to ¥472 million, compared witha ¥51 million increase in the previous year, up ¥523 million in cash
flow. Accounts payable showed a year-on-year increase of ¥242
million to ¥133 million. Income tax paid fell by ¥123 million to ¥1,715
million. These changes were the main causes of the increased
income.
Cash Flows from Investing Activities
Net cash used in investing activities was ¥2,829 million, ¥1,037 million
less than in the preceding year. Principal causes of the decrease
included an increase in deposits paid in of ¥7,500 million, up ¥800
million, and an increase in deposits paid out of ¥1,600 million fromthe preceding term, to ¥6,700 million.
Cash Flows from Financing Activities
Net cash used in financing activities amounted to ¥863 million,¥152 million more than that used for these activities in the fiscal
year ended March 31, 2009. This change was mainly a result ofa ¥106 million increase in dividends paid, which amounted to¥799 million.
Free Cash FlowsThe aforementioned operating and investing activities resulted inpositive free cash flows of ¥1,654 million, compared with
¥2 million in negative free cash flow in the preceding term.

full-fledged economic recovery. Corporate capital investment isexhibiting some signs that the decline is coming to an end, butbusinesses remain cautious about IT investments.
The business environment is likely to remain tight for sometime, but the Group is striving to provide products, services andsolutions that meet evolving corporate needs by capitalizing on
its on-site capabilities.
Our consolidated forecasts for the fiscal year ending March
31, 2011, are as follows: net sales of ¥36,000 million (down 1.8%
year on year); operating income of ¥4,400 million (up 0.7%); andnet income of ¥2,600 million (up 1.4%).
Research and Development
The Group’s research and development activities are mainly
conducted at its R&D Center. During the fiscal year ended
March 31, 2010, R&D expenditures amounted to ¥1 million,
largely for verifying the functionality of new technologies andcommercial licenses. The new medium-term management plan
regards R&D activities for the creation of new businesses andtechnologies as important measures, and we plan to invest a
total of ¥300 million in these areas over a three-year period.
Capital Investment
Capital investment in the year to March 31, 2010, amounted
to ¥2,015 million. Investments were mainly made in additional
facilities related to the server integration environment andin constructing systems to prevent unauthorized network
connections, as well as for development of the e-Learning
system “actbrain.”

Forecast for the Fiscal Year Ending March 31, 2011
The Japanese economy appears to have bottomed out andbe on a path to recovery. However, the pace of resurgence ismoderate, and we expect it to be some time before we see a

Net Sales
Operating Income
Operating Income to Net Sales

Equity Ratio(Millions of Yen)

(%)

(%)

50,0001480Free Cash Flow

(Millions of Yen)

2,000

1,892

78.2
40,00041,38540,22639,066
12.5

37,32012.5

30,000

13

70

12

60

62.5

11.9
20,000

11.1

10,000
4,610

5,014

4,877

4,632

’07

’08

’09

1,000

927

59.0
11

50

500

10

40

0

0

0

–500

405

–2

4,371

0

’06

1,500

73.3

36,650
12.4

1,654

75.7

’10

’06

’07

’08

’09

’10

’06

’07

’08

’09

’10

15

Risk Factors
Items in this annual report concerning business conditions andfinancial conditions that may strongly affect investor decisions include
the following risks. However, these do not cover all risks with respect
to the Group and there may be other hard-to-predict risks not detailed
in the material. The Group's business, performance and financial
status may be adversely affected by various significant risk factors.
Items regarding the future were determined by the Group as of thefinancial statement filing date (June 17, 2010).
Risks Related to Economic Conditions
Fluctuations in the Economic Environment
Demand for the Group’s products and services may be affectedby general economic trends mainly in Japan. Economic downturns
and resulting declines in demand in the Japanese market may thus
adversely affect the Group’s financial condition, operating results andcash flows.
Interest Rate Fluctuations
Interest rate fluctuations may affect operating expense, interest
expense and interest income, as well as the value of financial assets
and liabilities, and may have an adverse impact on the Group’sbusiness, performance and financial position.
Stock Price Falls
The Group holds Japanese stocks as investment securities, anddecreases in their market value may necessitate the recognition ofvaluation losses. Furthermore, a decline in the valuation difference on
available-for-sale securities may reduce net assets.
Risks Related to the Group’s Business Activities
Competitive Environment
The Group faces different types of competitors in the information
services industry, ranging from large international companies torelatively small, rapidly growing companies. The Group actively makes
investments and takes initiatives in strategic products and services.
However, investments or sales initiatives for a particular product orservice may fail in comparison to competitors in terms of quantity,
quality, and speed. Furthermore, competitors may have greater
financial, technological and marketing resources than the Group.
Price Competition
The Group is subject to intense price competition in the information
services industry, and this may make it difficult for the Group to
determine prices for products and services to secure adequate profits.
This downward pressure on prices may have a serious effect on
securing the Group’s profits, and becomes especially noticeable when
demand for products and services decreases. Prices of many of theGroup’s products and services are expected to continue declining in
the fiscal year ending March 31, 2011.
Competition in New Technologies
The Group may lose the ability to compete in new markets if it fails
to correctly predict and develop the new technologies, products andservices to meet future market needs.

16

Securing Capable Human Resources
The Group’s future success depends largely on its ability to retain
skilled employees in the technical and management fields. The
Group expects that it will be necessary to hire more personnel in theinformation services business field, but industry demand for skilledemployees exceeds the supply, making competition for attracting
and retaining these employees intense. Because of this severe
competition for skilled employees, the Group may be unable toretain existing personnel or attract new talent. If this should happen,
the Group’s business, performance and financial position could be
adversely affected.
Business Alliances with Other Companies, etc.
The Group develops its business by forming alliances with or
strategic investments in other companies, and the strategic
importance of partnering with third parties is increasing. In somecases, such partnerships are crucial to achieving the Group’s goal of
introducing new products and services, but the Group may not beable to successfully collaborate or achieve expected synergies with
its partners. In addition, these partners may change their businessstrategies and it may become difficult for the Group to maintainthese business partnerships. If any of the foregoing should happen,
the Group’s businesses, performance and financial status could be
adversely affected.
Procurement of Raw Materials, etc., and Purchase Price Surges
The Group’s operations depend on obtaining high-quality products
and services in a timely manner and in the necessary quantities, andwe therefore select reliable suppliers. However, it may be difficult
to change or increase suppliers, or switch to other products andservices if the supply is interrupted or industry demand increases.
This may adversely affect the Group’s businesses. Moreover, although
the Group and suppliers decide purchase prices by contract,purchase prices may increase significantly due to changes in demandor for other reasons. Furthermore, some products and services
are only available from a limited number of suppliers. If the Groupis unable to procure such products and services, its businesses,
performance and financial status may be adversely affected.
Capital Status and Financial Conditions of Customers
Some of the Group’s customers purchase products and services
from the Group on payment terms that do not provide for immediatepayment. If customers for whom the Group has substantial accounts
receivable encounter financial difficulties and are unable to makepayments on time, the Group’s businesses, performance andfinancial status may be adversely affected.
Risks Related to Future Plans, etc.
The Group has announced its earnings forecasts and details of key
measures for the fiscal year ending March 31, 2011. However, theGroup may fail to achieve all of the goals announced and/or the
expected results.
Risks Related to Legal Restrictions and Litigation
Direct or Indirect Costs Related to Product Liability or Warranty
Claims Due to Defects in Products or Services
The Group pays due attention to ensuring the quality of its products
and services. However, the occurrence of defects in products orservices could make the Group liable for damages, including indirect
damages, that are not completely covered by liability insurance and
the Group could incur significant expenses. Moreover, negative
publicity concerning these problems could impair the Group’s
corporate image, and the Group’s businesses, performance andfinancial status may be adversely affected.
Intellectual Property Right Protection
The Group works to secure a competitive edge for its businesses
by protecting intellectual property rights (IPRs) related to thetechnologies, products, and services it develops. However, rights
may not be granted to provide adequate protection based on IPRs.
Furthermore, the Group may be unable to use or be forced to use
on disadvantageous terms the technologies, products and servicesof third parties protected by IPRs when needed. As of March 31,
2010, the Group was using the IPRs of third parties under licensefrom third parties for some of its products and services. However,in the future the Group may not be able to obtain the necessary
licenses from third parties or may be able to obtain licenses only
under disadvantageous terms.
Litigation may also be necessary to defend the Group against IPR
infringement claims brought by third parties or to enforce the Group’s
IPRs. The Group may incur significant expenses and use significant
management resources for such lawsuits. Furthermore, if thirdparty claims that the Group infringed on IPRs are upheld, the Groupmay cease to be able to use specific technologies, products and/or
services, or be able to supply specific technologies, products and/or
services, and may be liable for significant damages.
Changes in Account Standards and Tax Systems
The Group’s business, performance and financial status may be
adversely affected by the unforeseen application of new accounting
standards and tax systems. Furthermore, differences in views with
tax authorities on the Group’s tax returns could result in the Group
being liable for more taxes than expected.
Information Leaks
In the normal course of business, the Group obtains information(including personal information) about customers and the like relating
to privacy and creditworthiness. The Group pays due attention
to safeguarding the confidentiality of this information and has
implemented the greatest possible measures to prevent information
leaks. However, the Group cannot rule out the possibility that suchinformation may be leaked due to an accident or other inevitablecause. Such a leakage of information may result in the Group being
held liable for damages to affected parties and may impair theGroup’s corporate image. Moreover, there is a risk that the Group’s
trade secrets may be misused by external parties. In such a case,the Group’s businesses, performance and financial status may be
adversely affected.
Losses Due to Other Legal Restrictions, etc
The Group is subject to governmental regulations in Japan andother countries and regions in which it conducts its business. These
include government approvals required for conducting business andinvestments, laws and regulations governing national security, andexport/import laws and regulations, as well as commercial, antitrust,intellectual property, financial transactions, worker protection,

subcontractor protection, and business taxation laws and regulations.
Tighter laws and regulations or stricter interpretations of them thanin the past by authorities could place restrictions on the Group’sbusinesses or result in increased expenses for complying with them.
The Group has taken measures to ensure that it is prepared to handle
a compliance violation or other emergency through such efforts asestablishing networks of emergency contacts and organizational
bodies responsible for responses. However, the Group’s corporate
image could be impaired and the Group’s businesses, performanceand financial status could be adversely affected if its response
is inadequate.
Risks Related to Disasters or Unpredictable Events
Effects of Disasters or Unpredictable Events
The headquarters and major bases of the Group are located inJapan. The occurrence of a natural disaster such as an earthquake,flood or other unexpected event such as a fire, war or terrorist attack,infectious disease outbreak, industrial accident, malicious computervirus, breakdown or malfunction in the Group’s information systemor communications network as a result of such events may result inserious damage to Group facilities, and the Group may have to stop
operations at certain facilities and delay the provision of products
and services.
The Group may incur considerable expenses for restoringdamaged facilities, which could adversely affect the Group’sbusinesses, performance and financial position.
Other Risks
Pension Liabilities
The Group has contributory, funded benefit pension plans covering
substantially all employees in Japan who meet eligibility requirements.
Revisions to experience assumptions and pension asset performance
could result in an increase in unrecognized actuarial losses, leading toan increase in future net periodic benefit costs of these pension plans.
Fixed Asset Impairment
The Group has many fixed assets, such as property and equipment.
All Group companies periodically review the recorded value of fixed
assets on the balance sheet to determine if future cash flows to be
derived from these assets will be sufficient to recover the residual
values in accordance with accounting standards governing theimpairment of fixed assets. If these assets cannot generate sufficient
cash flows, impairment losses may have to be recognized.
Recognizing Uncertainties in Deferred Tax Assets and Income
Taxes, Etc.
The Group evaluates the likelihood of recognizing the tax benefitsof deferred tax assets, based on taxable income forecasts and theevaluation of uncertainty, in considering the recoverability of deferred
tax assets and evaluation of income tax uncertainties. However,deteriorating economic conditions, tax audits and other factors may
result in temporary variances and net losses being carried forward
beyond the period during which tax benefits can be recognized.
In such a case, the Group would be required to recognize greatertaxable income than had been anticipated, resulting in the possibilityof higher corporate taxes.

17

Consolidated Balance Sheets
Panasonic Electric Works Information Systems Co., Ltd. and Subsidiaries
March 31, 2010 and 2009

Thousands of U.S.
Dollars (Note 1)

Millions of Yen

ASSETS

2009

2010

2010

CURRENT ASSETS:
Cash and deposits (Notes 3 and 13)
Accounts receivable – Trade (Notes 13 and 14)

¥

389

¥

516

$

4,183

6,456

6,769

69,419

143

619

1,538

11,885

10,165

127,796

Deferred tax assets (Note 10)

265

272

2,849

Other current assets (Note 14)

287

295

3,086

(1)

(1)

(11)

19,424

18,635

208,860

885

888

9,516

3,934

2,711

42,301

Lease assets (Note 12)

237

132

2,548

Construction in progress

565

465

6,076

5,621

4,196

60,441(2,444)(1,553)(26,280)

3,177

2,643

34,161

Investment securities (Notes 5 and 13)

791

251

8,505

Goodwill (Note 6)

61

77

656

Software (Note 12)

422

501

4,538

Long-term deposits paid

246

221

2,645

Prepaid pension cost (Note 8)

606

358

6,516

Deferred tax assets (Note 10)

44

345

473

Other assets

402

207

4,323

Allowance for doubtful receivables

(27)

(27)

(290)

2,545

1,933

27,366¥25,146¥23,211$270,387

Inventories (Note 4)
Deposits paid (Notes 3, 13 and 14)

Allowance for doubtful receivables
Total current assets
PROPERTY AND EQUIPMENT:
Buildings
Tools, furniture and fixtures

Total
Accumulated depreciation
Net property and equipment
INVESTMENTS AND OTHER ASSETS:

Total investments and other assets
TOTAL
See notes to consolidated financial statements.

18

Thousands of U.S.
Dollars (Note 1)

Millions of Yen

LIABILITIES AND EQUITY

2010

2009

2010

Accounts payable – Trade (Notes 13 and 14)¥ 2,224¥ 2,091

Accounts payable – Other (Notes 13 and 14)

1,320

1,818

14,194

Income taxes payable (Note 13)

791

842

8,505

Consumption taxes payable

118

21

1,269

Deposits received (Note 7)

3

2

32

739

696

7,946

5,195

5,470

55,860

Deposits received (Note 7)

48

50

516

Deferred tax liabilities (Note 10)

67

—

721

Other

177

87

1,903

292

137

3,140

1,040

1,040

11,183

871

871

9,366

17,46815,704

187,827

280

(42)

3,011

(0)

(0)

(0)

19,65917,573211,387—31—

19,65917,604

211,387¥25,146¥23,211$270,387

CURRENT LIABILITIES:Other current liabilities
Total current liabilities$

23,914

LONG-TERM LIABILITIES:

Total long-term liabilities
EQUITY (Notes 9 and 14):
Common stock – authorized 40,000,000 shares; issued 10,656,000 shares
Capital surplus
Retained earnings
Unrealized gain (loss) on available-for-sale securities
Treasury stock – at cost 127 shares in 2010 and 63 shares in 2009
Total
Minority interests
Total equity
TOTAL

19

Consolidated Statements of Income
Panasonic Electric Works Information Systems Co., Ltd. and Subsidiaries
Years Ended March 31, 2010 and 2009

Thousands of U.S.
Dollars (Note 1)

Millions of Yen

2010

2009

2010

NET SALES (Note 14)¥36,650¥37,320$394,086

COST OF SALES (Notes 11 and 14)

29,44530,077

316,613

7,205

7,243

77,473

2,834

2,611

30,473

4,371

4,632

47,000Interest income

79

93

849

Interest expense

(10)

(6)

(108)

Other - net

(39)

15

(418)

30

102

323

4,401

4,734

47,323Current

1,677

1,755

18,032

Deferred

158

195

1,699

1,835

1,950

19,7313

1

33¥ 2,563¥ 2,783$ 27,559

Gross profit
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Notes 11 and 14)
Operating income
OTHER INCOME (EXPENSES):

Other income (expense) - net
INCOME BEFORE INCOME TAXES AND MINORITY INTERESTSINCOME TAXES (Note 10):

Total income taxes
MINORITY INTERESTS IN NET INCOME
NET INCOME

Yen

U.S. Dollars

PER SHARE OF COMMON STOCK (Notes 2.n and 15):
Basic net income
Cash dividends appricable to the year
See notes to consolidated financial statements.

20		

¥240.51¥261.13

$2.59

65.00

75.00

0.70

Consolidated Statements of Changes in Equity
Panasonic Electric Works Information Systems Co., Ltd. and Subsidiaries
Years Ended March 31, 2010 and 2009

Millions of Yen

Retained
Earnings

Unrealized
Gain (Loss)
Availablefor-sale
Securities¥871¥13,614

¥(3)

¥(0)

¥15,522¥ 30¥15,552

—

—

2,783

—

—

2,783

—

2,783

—

—

—

(693)

—

—

(693)

—

(693)

—

—

—

—

(39)

—

(39)

1

(38)

10,656,000

1,040

871

15,704(42)(0)

17,57331

17,604

Net income

—

—

—

2,563

—

—

2,563

—

2,563

Cash dividends, ¥75 per share

—

—

—

(799)

—

—

(799)

—

(799)

Purchase of treasury stock

—

—

—

—

—

(0)

(0)

—

(0)

Net changes in the year

—

—

—

—

322

—

322

(31)

291

10,656,000¥1,040¥871¥17,468

¥280

¥(0)

¥19,659¥—¥19,659

Number of
Shares ofCommon Stock
IssuedCommonStock

10,656,000¥1,040Net income—

Cash dividends, ¥65 per share
Net changes in the year

BALANCE, APRIL 1, 2008

BALANCE, MARCH 31, 2009

BALANCE, MARCH 31, 2010

CapitalSurplusTreasury
Stock

Minority
Total Equity
Interests

Total

Thousands of U.S. Dollars (Note 1)

CommonStockCapitalSurplusRetained
Earnings

Unrealized
Gain (Loss)on Availablefor-sale
Securities

Treasury
Stock

Total

Minority
Total Equity
Interests$ 333 $189,290$11,183$9,366$168,859$(451)$(0)$188,957

Net income——

27,559——27,559—27,559Cash dividends, $0.81 per share——(8,591)——(8,591)—(8,591)

Purchase of treasury stock

—

—

—

—

(0)

(0)

—

(0)

Net changes in the year

—

—

—

3,462

—

3,462

(333)

3,129

$11,183$9,366$187,827$3,011$(0)$211,387$ —$211,387

BALANCE, MARCH 31, 2009

BALANCE, MARCH 31, 2010									See notes to consolidated financial statements.
														

21Consolidated Statements of Cash Flows
Panasonic Electric Works Information Systems Co., Ltd. and Subsidiaries
Years Ended March 31, 2010 and 2009

Thousands of U.S.
Dollars (Note 1)

Millions of Yen

2010

2009

2010

¥4,401¥ 4,734$ 47,323

1,247

889

13,4091

7

11Interest and dividend income

(84)

(96)

(903)

Interest expense

10

6

108

Decrease in accounts receivable

312

1,035

3,354

Decrease (increase) in inventories

472

(51)

5,075

OPERATING ACTIVITIES:
Income before income taxes and minority interests
Adjustments for:
Depreciation and amortization
Increase in allowance for doubtful receivables

Changes in assets and liabilities:

Decrease (increase) in other current assets
Increase in prepaid pension cost

2

(8)

22

(247)

(233)

(2,656)

Increase (decrease) in accounts payable

133

(109)

1,430

Decrease in other current liabilities

(168)

(563)

(1,807)

Decrease in other long-term liabilities

(5)

(32)

(54)

Other - net

44

23

473

Subtotal

6,118

5,602

65,785

90

106

968

Interest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities

(10)

(6)

(108)

(1,715)(1,838)(18,441)

4,483

3,864

48,204(7,500)(6,700)(80,645)INVESTING ACTIVITIES:
Increase in deposits paid
Decrease in deposits paid

6,700

5,100

72,043Purchases of property and equipment(1,687)(1,577)(18,140)

(284)

(277)

(3,054)

—

(121)

—

Payment for business acquisition

—

(215)

—

Other - net

(58)

(76)

(623)

(2,829)(3,866)(30,419)

Purchases of software
Purchases of investment securities

Net cash used in investing activities
FINANCING ACTIVITIES:
Repayment of lease obligations

(64)

(17)

(689)

Dividends paid

(799)

(693)

(8,591)

(863)

(710)

(9,280)NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

791

(712)

8,505

CASH AND CASH EQUIVALENTS OF NEWLY CONSOLIDATED SUBSIDIARY, BEGINNING OF YEAR

­—

1

—

Net cash used in financing activities

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

3,968

4,679

42,667

CASH AND CASH EQUIVALENTS, END OF YEAR (Note 3)¥4,759¥ 3,968$(51,172

Assets acquired

—

137

—

Liabilities assumed

—

51

—

ADDITIONAL CASH FLOW INFORMATION:
Assets acquired and liabilities assumed in acquisition:

See notes to consolidated financial statements.

22Notes to Consolidated Financial Statements
Panasonic Electric Works Information Systems Co., Ltd. and Subsidiaries
Years Ended March 31, 2010 and 2009

1. BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS
Panasonic Electric Works Information Systems Co., Ltd. (the “Company”) was incorporated on February 22, 1999 as a subsidiary of PanasonicElectric Works Co., Ltd. (the “Parent”). The Company is 64% owned by the Parent at March 31, 2010 and 2009, respectively. The principal
business of the Company is to provide integration service for information systems; maintenance of computer systems; design, development,
sales, lease, rental of computer software; information network service and sales of related equipment.
The accompanying consolidated financial statements have been prepared in accordance with the provisions set forth in the Japanese Financial
Instruments and Exchange Act and its related accounting regulations, and in conformity with accounting principles generally accepted in Japan(“Japanese GAAP”), which are different in certain respects as to application and disclosure requirements of International Financial ReportingStandards.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to the consolidated
financial statements issued domestically in order to present them in a form which is more familiar to readers outside Japan. In addition, certain
reclassifications have been made in the 2009 financial statements of conform to the classifications used in 2010.
The consolidated financial statements are stated in Japanese yen, the currency of the country in which the Company is incorporated andoperates. The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japanand have been made at the rate of ¥93 to $1, the approximate rate of exchange at March 31, 2010. Such translations should not be construed
as representations that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa. Consolidation
The consolidated financial statements as of March 31, 2010 include the accounts of the Company and its 2 subsidiaries (3 subsidiaries in 2009)(together, the “Group”).
Under the control or influence concept, the Company consolidates entities that it, directly or indirectly, is able to exercise control over
operations.
Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets of the acquired subsidiary at the date ofacquisition and is amortized on a straight-line basis over five years.
All significant intercompany balances and transactions are eliminated in consolidation. All material unrealized profit included in assets resulting
from transactions within the Group is eliminated.
b. Cash Equivalents
Cash equivalents are short-term investments that are readily convertible into cash and that are exposed to insignificant risk of changes in value.
Cash equivalents include deposits paid, all of which mature or become due within three months of the date of acquisition.
c. Inventories
Merchandise and supplies are stated at the lower of cost, determined by the moving-average method, or net selling value. Work in process
inventories are stated at the lower of cost, determined by the specific identification method, or net selling value.
d. Investment Securities
Available-for-sale securities, which are not classified as either trading securities or held-to-maturity debt securities, are reported at fair value, withunrealized gains and losses, net of applicable taxes, reported in a separate component of equity.
e. Property and Equipment
Property and equipment are stated at cost. Depreciation of property and equipment of the Group is computed substantially by the decliningbalance method at rates based on the estimated useful lives of the assets, while the straight-line method is applied to buildings and lease assets.
The range of useful lives is from 8 to 15 years for buildings and from 3 to 10 years for tools, furniture and fixtures.
f. Long-lived Assets
The Group reviews its long-lived assets for impairment whenever events or changes in circumstance indicate the carrying amount of an asset
or asset group may not be recoverable. An impairment loss would be recognized if the carrying amount of an asset or asset group exceeds thesum of the undiscounted future cash flows expected to result from the continued use and eventual disposition of the asset or asset group. The
impairment loss would be measured as the amount by which the carrying amount of the asset exceeds its recoverable amount, which is thehigher of the discounted cash flows from the continued use and eventual disposition of the asset or the net selling price at disposition.
g. Software
Software to be sold is amortized by the straight-line method over the estimated economic life of the software, 3 years. Software for internal use isamortized by the straight-line method over its useful life, 5 years.

23

h. Retirement Benefits
The Company has a non-contributory, funded pension plan together with the Parent and certain other domestic consolidated subsidiaries of the
Parent covering substantially all of their employees. The liability for retirement benefits is accounted for based on projected benefit obligations andplan assets at the balance sheet date.
i. Leases
In March 2007, the Accounting Standards Boards of Japan (the “ASBJ”) issued ASBJ Statement No. 13, “Accounting Standard for Lease
Transactions”, which revised the previous accounting standard for lease transactions issued in June 1993. The revised accounting standard forlease transactions is effective for fiscal years beginning on or after April 1, 2008 with early adoption permitted for fiscal years beginning on or after
April 1, 2007.
Under the previous accounting standard, finance leases that deem to transfer ownership of the leased property to the lessee were to becapitalized. However, other finance leases were permitted to be accounted for as operating lease transactions if certain “as if capitalized”
information is disclosed in the note to the lessee’s financial statements. The revised accounting standard requires that all finance leasetransactions should be capitalized to recognize lease assets and lease obligations in the balance sheet. In addition, the revised accounting
standard permits leases which existed at the transition date and do not transfer ownership of the leased property to the lessee to be accounted
for as operating lease transactions with certain “as if capitalized” information disclosed in the notes to the lessee's financial statements.
The Company applied the revised accounting standard effective April 1, 2008. In addition, the Company accounted for leases which existed at
the transition date and do not transfer ownership of the leased property to the lessee as operating lease transactions.
All other leases are accounted for as operating leases.
j. Bonuses to Directors and Corporate Auditors
Bonuses to directors and corporate auditors are accrued at the year end to which such bonuses are attributable.
k. Software Revenue Recognition
On March 30, 2006, the ASBJ issued Practical Issues Task Force (“PITF”) No. 17, “Practical Solution on Revenue Recognition of Software”. The
Group adopted this task force in the year ended March 31, 2007.
l. Construction Contracts
In December 2007, the ASBJ issued ASBJ Statement No. 15 “Accounting Standard for Construction Contracts” and ASBJ Guidance No. 18“Guidance on Accounting Standard for Construction Contracts”. Under the previous Japanese GAAP, either the completed-contract methodor the percentage-of-completion method was permitted to account for construction contracts. Under this new accounting standard, theconstruction revenue and construction costs should be recognized by the percentage-of-completion method, if the outcome of a construction
contract can be estimated reliably. When total construction revenue, total construction costs and the stage of completion of the contract at thebalance sheet date can be reliably measured, the outcome of a construction contract can be estimated reliably. If the outcome of a construction
contract cannot be reliably estimated, the completed-contract method should be applied. When it is probable that the total construction costs will
exceed total construction revenue, an estimated loss on the contract should be immediately recognized by providing for a loss on construction
contracts. This standard is applicable to construction contracts and software development contracts and effective for fiscal years beginningon or after April 1, 2009. The Company applied the new accounting standard effective April 1, 2009. The effect of this change was to increase
operating income by ¥120 million ($1,290 thousand) and income before income taxes and minority interests by ¥120 million ($1,290 thousand),for the year ended March 31, 2010.
m. Income Taxes
The provision for income taxes is computed based on the pretax income included in the consolidated statements of income. The asset andliability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences
between the carrying amounts and the tax bases of assets and liabilities. Deferred taxes are measured by applying currently enacted tax laws to
the temporary differences.
n. Per Share Information
Basic net income per share is computed by dividing net income available to common shareholders by the weighted-average number of commonshares outstanding for the year.
Diluted net income per share is not presented as no securities with a dilutive effect have been issued.
Cash dividends per share presented in the accompanying consolidated statements of income are dividends applicable to the respective years
including dividends to be paid after the end of the year.
The weighted-average number of common shares used in the basis net income per share computation was 10,655,909 shares and
10,655,937 shares for 2010 and 2009, respectively.

24

o. New Accounting Pronouncements
Asset Retirement Obligations - In March 2008, the ASBJ published a new accounting standard for asset retirement obligations, ASBJ
Statement No. 18 “Accounting Standard for Asset Retirement Obligations” and ASBJ Guidance No. 21 “Guidance on Accounting Standard
for Asset Retirement Obligations”. Under this accounting standard, an asset retirement obligation is defined as a legal obligation imposed
either by law or contract that results from the acquisition, construction, development and the normal operation of a tangible fixed asset andis associated with the retirement of such tangible fixed asset.
The asset retirement obligation is recognized as the sum of the discounted cash flows required for the future asset retirement and isrecorded in the period in which the obligation is incurred if a reasonable estimate can be made. If a reasonable estimate of the asset
retirement obligation cannot be made in the period the asset retirement obligation is incurred, the liability should be recognized when areasonable estimate of asset retirement obligation can be made. Upon initial recognition of a liability for an asset retirement obligation, an
asset retirement cost is capitalized by increasing the carrying amount of the related fixed asset by the amount of the liability. The asset
retirement cost is subsequently allocated to expense through depreciation over the remaining useful life of the asset. Over time, the liability
is accreted to its present value each period. Any subsequent revisions to the timing or the amount of the original estimate of undiscounted
cash flows are reflected as an increase or a decrease in the carrying amount of the liability and the capitalized amount of the related asset
retirement cost. This standard is effective for fiscal years beginning on or after April 1, 2010 with early adoption permitted for fiscal years
beginning on or before March 31, 2010.

3. RECONCILIATION TO CASH AND CASH EQUIVALENTS
The reconciliation of cash and deposits in the consolidated balance sheets to cash and cash equivalents in the consolidated statements of cash
flows at March 31, 2010 and 2009 were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Cash and deposits
Deposits paid with original maturities of within 3 months
Time deposits over 3 months
Cash and cash equivalents

2010
¥ 389
4,380
(10)
¥4,759

2009
¥ 516
3,462
(10)
¥3,9682010$ 4,183
47,097(108)$51,172

4. INVENTORIESInventories at March 31, 2010 and 2009 consisted of the following:Thousands of U.S.
Dollars

Millions of Yen

MerchandiseWork in process
Supplies
Total

2010
¥ 69
68
6
¥143

2009
¥160
457
2
¥619

2010
$ 742
731
65
$1,5385. INVESTMENT SECURITIESInvestment securities as of March 31, 2010 and 2009 consisted of the following:Thousands of U.S.
Dollars

Millions of Yen

2010
Non-current:
Marketable equity securities

¥791

2009
¥251

2010
$8,50525

The costs and aggregate fair values of investment securities at March 31, 2010 and 2009 were as follows:
Millions of Yen

Cost

March 31, 2010
Securities classified as:
Available-for-sale:
Equity securities
March 31, 2009
Securities classified as:
Available-for-sale:
Equity securities

Thousands of U.S. Dollars

Unrealized
Gain

Unrealized
LossesFair Value

¥474

¥(4)

¥791

¥(70)

¥251

¥321

¥321

Cost

Unrealized
Gain

Unrealized
LossesFair Value$3,452$5,096$(43)$8,505

6. GOODWILL
Goodwill at March 31, 2010 and 2009 consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

Goodwill on business acquisition
Consolidation goodwill
Total

2010
¥59
2
¥61

2009
¥74
3
¥77

2010
$634
22
$656

Goodwill on business acquisition and consolidation goodwill are amortized on a straight-line basis over five years.

7. DEPOSITS RECEIVED
Deposits received at March 31, 2010 and 2009 consisted of the following:Thousands of U.S.
Dollars

Millions of Yen

Welfare pension
Other
Total
Less current portionLong-term debt, less current portion

2010
¥48
3
51
(3)
¥48

2009
¥50
2
52
(2)
¥50

2010
$516
32
548
(32)
$516

Interest rates applicable to the welfare pension were 6.8% and 6.7% at March 31, 2010 and 2009, respectively.
Annual maturities of deposits received at March 31, 2010, were as follows:Year Ending March 31

2011
2012
2013
2014
2015
2016 and thereafter
Total

Millions of Yen

Thousands of U.S.
Dollars

¥ 3
2
2
2
3
39
¥51

$ 32
22
22
22
32
418
$548

8. RETIREMENT BENEFITSThe Company has severance payment plans for employees.
Under most circumstances, employees terminating their employment are entitled to retirement benefits determined based on principally
accumulated points allocated to them each year according to their age and job evaluation and interest points over the accumulated points. Such26

retirement benefits are made in the form of annuity payments from the non-contributory funded defined benefit pension plan. Employees areentitled to larger payments if the termination is involuntary, by retirement at the mandatory retirement age, by death, or by voluntary retirement at
certain specific ages prior to the mandatory retirement age.
The liability (asset) for employees' retirement benefits at March 31, 2010 and 2009 consisted of the following:
Millions of Yen

Projected benefit obligation
Fair value of plan assets
Unfunded benefit obligations
Unrecognized actuarial loss
Unrecognized prior service cost
Net liability (asset)

2010¥ 3,576(2,828)748(1,446)
92
¥ 606

2009
¥ 3,379(2,336)
1,043(1,568)167¥ (358)

Thousands of U.S.
Dollars

2010$(38,452(30,409)
8,043(15,548)989$3(6,516)

The components of net periodic benefit costs for the years ended March 31, 2010 and 2009 are as follows:
Millions of Yen

Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
Recognized actuarial loss
Net periodic benefit costs

2010
¥207
84
(70)
(74)
126
¥273

2009
¥197
81
(77)
(18)
85
¥268

Thousands of U.S.
Dollars2010$2,226
903
(753)
(796)
1,355
$2,935

Assumptions used for the years ended March 31, 2010 and 2009 are set forth as follows:
Discount rate
Expected rate of return on plan assets
Amortization period of prior service cost
Recognition period of actuarial gain/loss

2010
2.5%
3.0%
7years15years

2009
2.5%
3.0%
7years15years

9. EQUITY
Japanese companies are subject to the Companies Act of Japan (the “Companies Act”). The significant provisions in the Companies Act that
affect financial and accounting matters are summarized below:(a) Dividends
Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to the year-end dividend upon resolution
at the shareholders meeting. For companies that meet certain criteria such as; (1) having the Board of Directors, (2) having independent auditors,(3) having the Board of Corporate Auditors, and (4) the term of service of the directors is prescribed as one year rather than two years of normal
term by its articles of incorporation, the Board of Directors may declare dividends (except for dividends in kind) at any time during the fiscal year if
the company has prescribed so in its articles of incorporation. The Company meets all above criteria.
The Companies Act permits companies to distribute dividends-in-kind (non-cash assets) to shareholders subject to a certain limitation andadditional requirements.
Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if the articles of incorporation of thecompany so stipulate. The Companies Act provides certain limitations on the amounts available for dividends or the purchase of treasury stock.
The limitation is defined as the amount available for distribution to the shareholders, but the amount of net assets after dividends must be
maintained at no less than ¥3 million.
(b) Increases/decreases and transfer of common stock, reserve and surplus
The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (a component of retained
earnings) or as additional paid-in capital (a component of capital surplus) depending on the equity account charged upon the payment ofsuch dividends until the total of aggregate amount of legal reserve and additional paid-in capital equals 25% of the common stock. Under theCompanies Act, the total amount of additional paid-in capital and legal reserve may be reversed without limitation. The Companies Act also
provides that common stock, legal reserve, additional paid-in capital, other capital surplus and retained earnings can be transferred among theaccounts under certain conditions upon resolution of the shareholders.

27(c) Treasury stock and treasury stock acquisition rights
The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stock by resolution of the Board of
Directors. The amount of treasury stock purchased cannot exceed the amount available for distribution to the shareholders which is determinedby specific formula. Under the Companies Act, stock acquisition rights are presented as a separate component of equity. The Companies Act
also provides that companies can purchase both treasury stock acquisition rights and treasury stock. Such treasury stock acquisition rights arepresented as a separate component of equity or deducted directly from stock acquisition rights.

10. INCOME TAXESThe Company and subsidiaries are subject to Japanese national and local income taxes which, in the aggregate, resulted in normal effective
statutory tax rates of approximately 40.4% for the years ended March 31, 2010 and 2009.
The tax effects of significant temporary differences, which resulted in deferred tax assets and liabilities at March 31, 2010 and 2009, are as
follows:
Thousands of U.S.
Dollars

Millions of Yen

2010
Deferred tax assets:
Accrued enterprise taxes
Depreciation
Accrued bonus to employees
Others
Total
Deferred tax liabilities:
Prepaid pension cost
Unrealized gains on available-for-sale securities
Total
Net deferred tax assets

2009

2010

¥ 64
291
81
240
¥676

¥ 64
333
83
282
¥762

$ 688
3,129
871
2,580
$7,268

¥244
190
¥434
¥242

¥145
­—
¥145
¥617

$2,6242,043$4,667$2,601

Because the differences between the normal effective statutory tax rates and the actual effective tax rates for the years ended March 31, 2010
and 2009 are not material, the tax reconciliations are not disclosed.

11. RESEARCH AND DEVELOPMENT COSTS
Research and development costs included in cost of sales and selling, general and administrative expenses were ¥1 million ($11 thousand) and¥21 million for the years ended March 31, 2010 and 2009, respectively.

12. LEASESThe Group leases certain computer equipment and other assets.
Total lease payments under finance leases for the years ended March 31, 2010 and 2009 were ¥734 million ($7,892 thousand) and ¥1,280
million, respectively.
Future minimum payments under noncancelable operating leases were as follows:

Due within one year
Due after one year
Total

Millions of Yen

Thousands of U.S.
Dollars

2010
¥361
408
¥769

2010
$3,882
4,387$8,269Pro forma information of leased property whose lease inception was before March 31, 2008
ASBJ Statement No. 13, “Accounting Standard for Lease Transactions” requires that all finance lease transactions should be capitalized torecognize lease assets and lease obligations in the balance sheet. However, the ASBJ Statement No. 13 permits leases without ownershiptransfer of the leased property to the lessee whose lease inception was before March 31, 2008 to be accounted for as operating leasetransactions if certain “as if capitalized” information is disclosed in the note to the financial statements. The Company applied the ASBJ Statement
No. 13 effective April 1, 2008 and accounted for such leases as operating lease transactions. Pro forma information of leased property whose28

lease inception was before March 31, 2008 such as acquisition cost, accumulated depreciation, accumulated impairment loss, obligations underfinance leases, depreciation expense, interest expense and other information of finance leases that do not transfer ownership of the leased
property to the lessee on an “as if capitalized” basis was as follows:
Millions of Yen

2009

2010
Acquisition cost
Accumulated depreciation
Net leased property

Tools, Furnitureand Fixtures

Software¥ 2,185(1,693)
¥ 492

¥ 17
(15)
¥ 2

Total

Tools, Furnitureand Fixtures

Software¥ 2,202(1,708)¥ 494¥ 3,296(2,128)¥ 1,168

¥ 25
(17)
¥ 8

Total

¥ 3,321(2,145)¥ 1,176

Thousands of U.S. Dollars

2010
Acquisition cost
Accumulated depreciation
Net leased property

Tools, Furnitureand Fixtures

Software$ 23,495(18,205)$ 5,290

$ 182
(160)
$ 22

Total

$ 23,677(18,365)$ 5,312

Obligations under finance leases:
Millions of Yen

Due within one year
Due after one year
Total

2010
¥461
77
¥538

2009
¥722
543
¥1,265

Thousands of U.S.
Dollars

2010$4,957828$5,785

Depreciation expense, interest expense and other information under finance leases:
Millions of Yen

Depreciation expense
Interest expense
Total
Lease payments

2010
¥674
21
¥695
¥734

2009
¥1,18744¥1,231¥1,280Thousands of U.S.
Dollars2010$7,247226$7,473$7,892

Depreciation expense and interest expense, which are not reflected in the accompanying statements of income, are computed by the straightline method and the interest method, respectively.

13. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURESOn March 10, 2008, the ASBJ revised ASBJ Statement No. 10 “Accounting Standard for Financial Instruments” and issued ASBJ GuidanceNo. 19 “Guidance on Accounting Standard for Financial Instruments and Related Disclosures”. This accounting standard and the guidance areapplicable to financial instruments and related disclosures at the end of the fiscal years ending on or after March 31, 2010 with early adoption
permitted from the beginning of the fiscal years ending before March 31, 2010. The Group applied the revised accounting standard and the new
guidance effective March 31, 2010.
(1) Financial Instrument Policies
The Group raises necessary money from its own fund, in light of capital investment plans for development of software and acquisition of data
management facilities and hardware, etc. The Company places surplus funds only in short-term deposits, etc.
(2) Financial Instruments and Risks
Accounts receivable - trade which are operating receivables are exposed to customer credit risks. Investment securities are shares in companies
with which the Company has business relationships or capital alliance, and exposed to market fluctuation risks.
Settlements of most accounts payable - trade which are operating liabilities are within one year. Some of them are in foreign currency due toexports of products, and subject to exchange-rate fluctuation risks. However, they have little impacts because of their small amounts. Leaseobligations relating to finance leases are mainly for procuring the required capital investment. Maturities can be up to five years after
settlement dates.

29

(3) Financial Instrument Risk Management Structure
a. Credit Risk Management (including risks of customers breaching contracts)
In accordance with the receivables management rules, the Company regularly monitors the statuses of key customers' operating receivables
and oversee due dates and balances by customer in cooperation between the accounting department of head office and each businessdivision. Like this, the Company is endeavoring to swiftly identify and ameliorate collection concerns that could stem from deteriorating financial
positions or other factors. Its subsidiaries have implemented the same management system in compliance with the Group's receivables
management policies.
The maximum amount of credit risk as of the end of the fiscal year under review is shown as a balance sheet value of financial assets subject
to credit risks.
b. Market Risk Management (foreign exchange and interest rate risks)
The Company's operating liabilities in foreign currency have little impacts due to their small amounts. Each time transactions are made, theCompany checks out trends in exchange rates.
The Company regularly assesses the prices of marketable investment securities and financial positions of their issuers (business partners)
and constantly reviews the necessity of such holdings in consideration of the relationship with them.
c. Funding-Related Liquidity Risk Management (risk of inability to settle by payment dates)
The Company's accounting department formulates and renews funding plans based on reports from each department in a timely manner. The
Company also has made the agreement for use of Cash Management System (CMS) with Panasonic Electric Works Finance Co., Ltd. so as tocontrol liquidity risks by managing surplus funds and balances constantly.
(4) Fair values of financial instruments
Fair values of financial instruments are based on quoted price in active markets. If quoted price is not available, other rational valuation techniques
are used instead.
Millions of Yen

March 31, 2010

Carrying Amount

Cash and deposits
Accounts receivable - Trade
Investment securities
Deposits paid
Total
Accounts payable - Trade
Income taxes payable
Accounts payable - Other
Total

¥

389
6,456
791
11,885¥19,521¥ 2,224791
1,320¥ 4,335

Fair Value

¥

389
6,456
791
11,885¥19,521¥ 2,224791
1,320¥ 4,335

Unrealized Gain/
Loss

¥–
–
–
–
¥–
¥–
–
–
¥–

Thousands of U.S. Dollars

March 31, 2010

Carrying Amount

Cash and deposits
Accounts receivable - Trade
Investment securities
Deposits paid
Total
Accounts payable - Trade
Income taxes payable
Accounts payable - Other
Total

$

4,183
69,4198,505
127,796$209,903$ 23,914
8,505
14,194$ 46,613

Fair Value

$

4,183
69,4198,505
127,796$209,903$ 23,914
8,505
14,194$ 46,613

Unrealized Gain/
Loss

$–
–
–
–
$–
$–
–
–
$–

Cash and deposits
The carrying values of cash and deposits approximate fair value because of their short maturities.
Investment securities
The fair values of investment securities are measured at the quoted market price of the stock exchange for the equity instruments. The
information of the fair value for the investment securities by classification is included in Note 5.

30

Accounts receivables and accounts payables
The carrying values of accounts receivables and accounts payables approximate fair value because of their short maturities.
Deposits paid
The carrying values of deposits paid approximate fair value because of their short maturities.
Income tax payable
The carrying values of income tax payable approximate fair value because of their short maturities.
(5) Maturity analysis for financial assets and securities with contractual maturities
Millions of Yen

March 31, 2010
Cash and deposits
Accounts receivable - Trade
Deposits paid
Total

Due in One Year or
Less

¥

389
6,456
11,885¥18,730

Due after One Yearthrough Five Years

Due after Five Years
through Ten Years

Due after Ten Years

¥–
–
–
¥–

¥–
–
–
¥–

¥–
–
–
¥–

Thousands of U.S. Dollars

March 31, 2010
Cash and deposits
Accounts receivable - Trade
Deposits paid
Total

Due in One Year or
Less

$

4,183
69,419127,796$201,398

Due after One Yearthrough Five Years

Due after Five Years
through Ten Years

Due after Ten Years

$–
–
–
$–

$–
–
–
$–

$–
–
–
$–

14. RELATED PARTY TRANSACTIONS
Balances at March 31, 2010 and 2009 and transactions for the years ended March 31, 2010 and 2009 with the Parent, its consolidated
subsidiaries and its associated companies were as follows:
Thousands of U.S.
Dollars

Millions of Yen

Sales
Purchases
Lease and rental expense2010¥22,643
103
634

2009
¥24,184101
641

Thousands of U.S.
Dollars

Millions of Yen

Accounts receivable
Other current assets
Accounts payable
Deposits paid2010
¥ 3,678
28
254
11,736

2010$243,473
1,108
6,817

2009
¥ 4,102
34
153
9,991

2010
$ 39,548
301
2,731
126,194

15. SUBSEQUENT EVENT
Appropriation of Retained Earnings
The following appropriation of retained earnings at March 31, 2010 was resolved at the Board of Directors meeting held on May 20, 2010:
Millions of Yen

Year-end cash dividends, ¥32.50 ($0.35) per share¥346

Thousands of U.S.
Dollars$3,72031

32

Corporate Data

Stock Information(As of March 31, 2010)(As of March 31, 2010)

Headquarters
Panasonic Electric Works
Information Systems Co., Ltd.
19-19, Chayamachi, Kita-ku,
Osaka 530-0013, Japan

40,000,000 shares

Securities Code4283

Total Shares Issued
10,656,000 shares

Stock Trading Unit
100 shares

Number of Shareholders
5,532

Regular Shareholders’ Meeting
June of each year

Paid-in Capital¥1,040 million

Stock Exchange Listing
Tokyo Stock Exchange,
First Section

Transfer Agent
Sumitomo Trust and Banking
Corporation

Fiscal Year-End
March 31

Major Shareholders

EstablishedFebruary 22, 1999

Nature of BusinessInformation services
Number of employees
612 (consolidated)

Board of Directors,
Corporate Auditors
and Corporate Officers(As of June 16, 2010)

Total Shares Authorized

Shareholder

Number of
SharesOwnership
Ratio

6,787
260
240
124

63.69
2.43
2.25
1.16

107

1.00

36
36
36
33

0.33
0.33
0.33
0.31

30

0.28

(thousands)

Panasonic Electric Works, Co., Ltd.
BBH FOR FIDELITY LOW-PRICED STOCK FUND
Employees Stock Ownership Association
Japan Trustee Services Bank, Ltd. (Trust Account)
The Master Trust Bank of Japan, Ltd.
(Trust Account)
FUJITSU LIMITEDIBM Japan, Ltd.
Oki Electric Industry Co., Ltd
Japan Trustee Services Bank, Ltd. (Trust Account 1)
The Nomura Trust and Banking Co., Ltd.
(Investment Account)(%)

Note: Treasury shares (127 shares) are excluded from the above table.

President

Kazuhiro Maegawa

Directors

Akira Hisano
Hisashi Kurono
Hiroyuki Maruoka
Shuichi Takazaki
Shinichi Hasegawa
Takahiro Nakagawa

Auditors

Executive Officers

Takayuki Takeda
Tamaki Fujimoto
Makoto Iwahashi

Breakdown of Shareholders
Financial Institutions 4.70%
Financial Instruments Firms 0.49%
Foreign Corporations, Other 4.22%
Individuals, Others 23.40%

Other Corporations 67.19%

Keisuke Tanaka
Hajime Onishi
Takashi Maeda
Mitsuru Maekawa

33

Panasonic Electric Works Information Systems Co., Ltd.
19-19, Chayamachi, Kita-ku, Osaka 530-0013, Japan
Telephone : +81-6-6906-2801 Facsimile : +81-6-6377-0833
URL http://panasonic-denkois.co.jp/english/

Printed in Japan