MEW-IS AR0620 05.6.20 17:09 ページ 2

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2004

MEW-IS AR0620 05.6.20 17:09 ページ 3

For the creationof new IT values
with enhanced
usability.
We strive towards the creation of new values by pursuing user-friendlinessand reinforcing a high-tech mindset with a challenging spirit and agility.

Contents
Financial Highlights

1

Our Feature

2

Message from the President

3

Corporate Governance

6

Corporate Social Responsibility (CSR)

7

MEW-IS At a Glance

8

Review of Operations

10

Management Discussion and Analysis of Operations

12

Financial Section

16

Corporate Data

30

FinanciMEW-IS AR0620 05.6.20 17:09 ページ 4

Financial Highlights

Three-Year Summary
For the Years Ended November 30
Thousands of
U.S. Dollar

Millions of Yen
2004

2003

2002

2004

¥ 42,109¥ 36,361¥ 31,641$ 408,825

Cost of sales

36,23031,641

27,559351,747

Selling, general and administrative expenses

2,161

1,967

1,600

20,981

Operating income

3,718

2,753

2,482

36,097

Income before income taxes and minority interests

3,683

2,951

2,468

35,757

Net income

2,107

1,673

1,410

20,456

11,589

11,092

8,424

112,515

386

386

177

3,748

Total assets

14,017

14,116

12,554136,087

Current liabilities

5,214

6,736

6,097

50,621Long-term liabilities

696

988

1,360

6,757

Shareholders’ equity

8,105

6,391

5,082

78,689

49

32

58

476

1,056

1,159

894

10,252

2004

2003

2002

2004

¥ 195.68¥ 155.14¥ 130.63$ 1.90

45.00

35.00

25.00

0.44

RESULTS OF OPERATIONS:Net sales

FINANCIAL POSITION:
Current assets
Net property and equipment

OTHER STATISTICS:
R&D costs
Depreciation and amortization

Yen

U.S. Dollars

PER SHARE OF COMMON STOCK:Net income
Cash dividends

Note: 1. The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have beentranslated at the rate of ¥103 to $1, the approximate rate of exchange at November 30, 2004.
2. Net income per share of common stock and cash dividends per share of common stock are retroactively recalculated reflecting stock splits of 1 additional
share for each outstanding share and 199 additional shares for each outstanding share, effective on January 20, 2003 and April 1, 2004, respectively.

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2004

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MEW-IS AR0620 05.6.20 17:09 ページ 5

Our Feature

The Performance, Know-How, and Technical
Capabilities That Have Been Sustaining
Matsushita Electric Works for 40 Years
Although MEW-IS itself is a young company established in 1999, we have over 40 years of experience in thedevelopment of information systems since the time of the Information System Department of Matsushita
Electric Works, Ltd., its predecessor.
In spite of its short history as an independent company, MEW-IS boasts an extensive experience and along history in IT technologies. Because Matsushita Electric Works is engaged in the manufacture and sale ofa wide range of products, this background has nurtured our capabilities in presenting optimal proposals forthe business processes of our customers.

Target Markets
We are targeting small- to medium-sized companies as our core market in the proposing of solutions. We have been
focusing on this particular market because we have become aware that, in spite of the broadening range of IT needs,
there are no experts within these companies who are able to realize these needs, and more often than not, thesecompanies do not possess the necessary technologies.
In the past several years small- to medium-sized enterprises have been promoting the implementation of IT, while the
IT movement is expanding in local municipalities. In addition, the primary IT issue that faces domestic companies is thequestion of how to reduce operation and management costs. We see a period of growth is awaiting our target market.

Our High-Value Added Solution Business
The competitive advantages in our solutions have been solidified and differentiated from other solutions in the following
aspects:• Solution proposals for the business processes used by our customers.
• One-stop solutions which cover all business processes (i.e. planning, design, development, andoperation management) relating to IT services.
• A group of solutions which are based on products and services that we have developed originally.
• Possession of a Gigabit network and an IDC infrastructure which forms the backbone of our solutions
Thin-client solutions give us an edge as a frontrunner, and we already boast a track record with a large number of
introductions. Further expansion of demand is anticipated in the future.

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Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2004

MessagMEW-IS AR0620 05.6.20 17:09 ページ 6

Message from the President

Ratio of sales tocustomers other thanMatsushita ElectricWorks rises to 53.9%.
We have gained
strength as a topnotch IT firm.

Overview of Business Results

growth in the sales of our own sales management
package designed for retailers (MetaForce), andthe increase in thin-client sales through our

The Japanese economy began to lapse into a statemarketing alliance with MintWave Co., Ltd. Inof anxiety since early autumn of 2004 overconjunction with this, the sales for systemescalating crude oil prices and the effects of a

introduction support and software peripheral-

highly-valued yen. Corporate earnings in the fiscal

related equipment businesses also continued on ayear ended November 30, 2004, however,high note.

improved on the whole and continued to show

In the fiscal year ended November 30, 2004,

promise, benefiting from the robust performance inconsolidated net sales were up 15.8% from theexports and digital consumer electronics.

previous fiscal year to 42,109 million yen. In terms

Throughout the IT industry, within which weof profitability, group operating income was 3,718

operate, changes have been observed inmillion yen up 35.1% from the previous fiscal year

companies’ stances on investments in information

due to growth in sales and the effects oftechnology, and a tendency to measure investment

procurement rationalization, while consolidated net

effectiveness by its return on investment (ROI)

income for year rose 25.9% from the previous year

began to spread.

to 2,107 million yen, all of which indicate double-

Under these circumstances, we are providing
the right products and services while offering

digit growth compared to the previous year.
In addition, ratio of the external sales (sales toappropriate and comprehensive solutions to meetcustomers other than Matsushita Electric Works) tothe diverse needs of our customers.

our net sales went up 7.6 points to 53.9% from

As a result, the sales of the Service Solution

46.3% in the previous year. We believe this growthBusiness continued to be strong, thanks to anin net sales, while improving our external sales

increase in sales stemming from SCM system

ratio, proves our competitiveness within the IT

architecture and Webhouse system orders

industry.

received from Matsushita Electric Works, Ltd.,

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2004

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MEW-IS AR0620 05.6.20 17:09 ページ 7

Overview and Progress of Our
Medium-Term Management Plan

Business Strategies for Next Yearand for the Future

We kicked off a medium-term management plan,

Although MEW-IS itself is a young company“NEXT-3”, in November 2003. With “NEXT-3”, weestablished in 1999, we have over 40 years ofhave been developing ambitious operations toexperience in the development of information

become a leading ASP company from an all-roundsystems since the time of the Information System

IT company.

Department of Matsushita Electric Works, Ltd., its

In “NEXT-3” we are pursuing improved

predecessor. Because Matsushita Electric Works,

solution proposals for solutions emphasizing e-Biz

our parent organization, is engaged in the(e-business solutions), e-Office (e-office solutions),

manufacture and sale of a wide range of products,

and e-Infra (e-infra solutions), and we believe

including housing products, non-housing products,

outcomes from this approach will result in true

household electric appliances, electronic materials,

partnerships with small- to medium-sized

and control devices, this background has nurtured

companies who are our major customers.

our capabilities in presenting optimal proposals for

At the same time, we are also promoting
management reform activities, G3 Action Plan. G3

the business processes of our customers.
The core target of our solutions is small- to

Action Plan is made up of three activities:

medium-sized companies. The IT needs of small-

1. Internal reform activities focusing on theto medium-sized companies are high, and it may

improvement of customer satisfaction (CS) to

be said that the market is huge because of theenhance the quality of our products and services

large number of companies involved. The needs in(pursuit of user-friendliness).

this market, however, cover a lot of ground, and it

2. Human resources reform activities for securely

would be next to impossible for a single company

establishing a management foundation that will

to provide coverage for every one of them.

ensure survival in our competition with other

Although we may not believe that we can coverplayers in the industry (reinforcement of high-every one of the companies, we have no doubts

tech mindset).

that we will take on a fairly large market.

3. Organizational reform activities that will flexibly

In the past several years small- to medium-

respond to rapid changes in the businesssized enterprises have been promoting theenvironment (challenging spirit and speedy

implementation of IT, while the IT movement isaction).

expanding in local municipalities. In addition, theWhile the fiscal year ended November 30,

primary IT issue that faces domestic companies is2004 was the first year of our medium-term plan,

the question of how to reduce operation andwe achieved fully adequate results in quantitative

management costs. We see a period of growth lies

terms. In qualitative terms, however, the resultsahead in our target market, and in thesehave not been visible yet, but we expect thecircumstances, we are planning to develop ouroutcome will emerge gradually.

product line-up, promote business alliances, andplace primary focus on the ASP business as ourcore business, to horizontally develop successful
cases in the solution business by aiming at smallto medium-sized companies as our targets.
Specifically, we are first striving to win new
customers using the high-value added solution
business that constitutes our advantage as a4

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2004

MEW-IS AR0620 05.6.20 17:09 ページ 8

Message from the President

trigger. While conducting appropriate consulting

To Our Shareholders

with these new customers and taking on
outsourcing for systems operation for them, we areproactively engaging in making these new

Following the listings on the JASDAQ Securities

customers into our regular customers.

Exchange in July 2001 and on the Second Section

As for entry into new markets, we are gearingof the Tokyo Stock Exchange (TSE) in December

our business activities extensively toward

2003, we listed our shares on the First Section of

educational institutions, companies, and local

the TSE in November 2004. We are deeply

governments with our thin-client products as aappreciative of the results of the support of ourstrategic commodity. We believe a thin-client

shareholders for having achieved the First Section

system, with its superiority in terms of cost andin the short span of five years and eight months

security is believed to be a post-PC system forsince our establishment.

which demand will continue to expand in theAlong with improving the transparency of our

future, and we boast a top-notch sales

management, we will increase our corporate value

performance of the thin-client products in theby demonstrating our unique advantages in thedomestic market.

growing IT-related markets, and will strive forAmong the domestic systems integration
firms, we are also positioned as a high manpower

improvements in shareholder value.
Since our parent company, Matsushita Electriccompany, at fourth in sales volume ranking per

Works, Ltd., became a consolidated subsidiary of

employee and third in operating income ranking

Matsushita Electric Industrial Co., Ltd. as of April 1,(Monthly Computopia, September 2004: Computer

2004, we have changed our fiscal year to start

Age Co., Ltd.). In the industry where solution

from April 1, which is the same as other Matsushitabusiness consulting capabilities are competitive,

Group companies’. The changeover begins with

we have a policy of constantly emphasizing humanthe 2005 fiscal year, with an aim to enhanceresources and developing an individual’s potential.

management efficiency and to accommodate theSince 2003 we have tripled the amount of timegroup’s consolidated financial statements.

spent on new recruit training, and have carried out

We hope that our shareholders will continue toexhaustive IT training ranging from basic

extend their unswerving support for our company

techniques to new technology and field training inin the future.

which senior employees go along to visit
customers as on-the-job training. Recognizing that

April 2005

nurturing human resources is a driving force
behind the growth of the company, we are
securing superior human resources and providing
high quality education.

Masahiro Hamada
President

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2004

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MEW-IS AR0620 05.6.20 17:09 ページ 9

Corporate GovernanceCorporaCorporate Governance
We are positioning corporate governance as one ofand operations of the company, as well as statutory

management’s top priorities and would like to pursue

matters.

transparency, fairness, and speed in management,
based on the policy of improvements in management

In addition, we have distributed to all our staff

efficiency and emphasis on the shareholders. Every

members a brochure entitled Our Code of Ethicalofficer and employee is addressing corporate

Conduct, which describes the code of conduct, andcompliance on the basis of corporate ethics and law-also drawn up a Compliance Program to work on

abiding spirit.

employee education for statutory compliance,
including an e-learning program.

Our corporate governance employs an auditing
system. Three auditors, including two outside auditors,

MEW-IS places information management as thehold monthly auditor’s meetings and attend board

crux of management. In this respect, we have set up

meetings to monitor and supervise the execution of

an Information Security Management Committee,

directors’ duties.

which is under the direct control of the President, toplay a central role in promoting and maintaining

The board of directors meeting, which consists of

MEW-IS Group. The committee also promotes

regularly every month. At the meeting, directors reportenlightenment, education, and awareness raising foron significant operating policies, decisions on

employees concerning information management.

substantive matters, and the status of the business6

thorough internal information management within thenine directors including two outside directors, is held

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2004

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Corporate Social Responsibility (CSR)

Corporate
SocialResponsibility

a sustainable society through a well-balanced
business management. The second objective iscontribution to the society. We will contribute byproposing resource- and energy-conserving plans andsystem designs, and by offering environmentallyfriendly product services that can significantly assist
customers’ response to corporate social responsibility(CSR) as an IT company.
In concrete terms, we are offering sales of used

Environmentally-conscious management is tied to thePC application software, industrial waste managementcompetitiveness of a company and ultimately to the

ASP services, sales of thin-client terminals, and vehicletransparency of management and the clarification of

traffic control services as social action programs in

responsibility. Transparency of management and the

product services, while working internally on promoting

clarification of responsibility are tied to the credibility ofrecycling and resource- and energy-conservation.

the company in society, which in turn enhances its
corporate value. Based on this idea, we have set out

We are providing disaster recovery solutions,to achieve two objectives on the theme of becoming a

remote supervision services, position information ASP

company with social significance. The first objective

services and the like, as social contribution program in

relates to undertaking environmental, social, andproduct services, while working in-house on theeconomic initiatives within the company with the aim ofenhancement of a disaster recovery system and the

becoming a sustainable company that can help realize

promotion of cultural activities.

Corporate Social Responsibility (CSR)
Environmentally-friendly
Recycling of
personal computers

Promotion ofenergy conservation

Security measures

Disasterprevention measuresThin client

Network security

Disaster recovery

DeskWave

IC card solution

IDC service

DeskWave for PC

Industrial waste
management
Industrial waste
management system(electronic
manifestation)

Vehicle operation
management service

ONMITSUMETRONETManaged fire wall

Backup center

Cruise NAVI

Security diagnosis

Location
LoketanRemote facility
surveillance service
Push e-mailMatsushita Electric Works Information Systems Co., Ltd.

Annual Report 2004

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MEW-IS At a Glance

MEW-IS At a Glance
Service solution business — System services

Development ofbusiness around solutions

SystemOperation

1. ASP service
2. Network service
3. Outsourcing service

Service solution business — System solutions

Proposal of
Systems
Proposal of
Solutions

1. Solution proposal
2. Consulting
3. Package software development and sales
Solution
Sales

System and communications equipment business
1. Sales of computers, servers,and communications equipment
2. Network and facility construction

Equipment
Sales andInstallation

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Annual Report 2004

MEW-IS AR0620 05.6.20 17:09 ページ 12

System services division
The division is engaged primarily in the business of providing awide array of information systems, which make full use of ourtechnological capabilities and business solution skills we havenurtured through a variety of system developments over theyears, including consigned system operation.
In specific terms, the core business of the System Services
Division is provision of services such as manufacturing, sales,
inventory control systems, human resources and accounting
systems, and technical information systems. In addition to theseenterprise information systems, it also provides EC/EDI services,
network services, outsourcing services, and ASP services.

Sales (Millions of Yen)

2003

20,777

2004

21,2550

System solutions division
The division’s main businesses include the proposals of new
information system solutions, consigned system developments,
and the provision of originally developed software packages. It
utilizes its own experience in information system services topropose solutions that are best suited to customer specifications.
Specifically, it offers thin-client systems, originally developed
software packages, system introduction consulting, and made-toorder system development.

5,000

10,00015,00020,00025,000

Sales (Millions of Yen)
2,860

2002
2003

3,880

2004

3,939

0

System and communications equipment business
The division is primarily engaged in the business of selecting andproviding items that are best suited to customer specifications
from among a wide variety of hardware and third-party software.
It also undertakes construction works in which those systems are
utilized. Specifically, the focus of its business is on the sales ofsystems equipment in personal computers and network-related
communications equipment, provision of ancillary services, andtelephone/LAN network construction. It is also engaged in thesales of personal computers, servers, printers, communications
equipment, and purchased software as well as telephone
discount services.

19,735

2002

1,000

2,000

3,000

4,000

Sales (Millions of Yen)
9,047

2002

11,705

2003

16,914

2004

0

5,000

10,00015,00020,000

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Annual Report 2004

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MEW-IS AR0620 05.6.20 17:09 ページ 13

Review of Operations

Review of Operations
We are engaged in the information services

Service Solutions Businessbusiness, which includes the provision of

System Services Divisionsystem operation and communications services,
Consolidated sales for the System Services Division insystem development, and the sales of system

the current fiscal year increased by 2.3% from theequipment. Because we are a single businessprevious fiscal year to 21,255 million yen. Althoughsales revenues from outsourcing orders from ourentity, we do not disclose segment information
by business category, but we categorize ourservices into two sectors: the Service Solutions

existing customers were below those of the previous
fiscal year, this result reflects robust sales for new
outsourcing orders for system operations andmaintenances as well as increased number of ASP
customers.

Business and the System and Communications
Equipment Business. The Service Solutions

The division is engaged primarily in the business ofproviding a wide array of information systems, which

Business consists of the System Services
Division and the System Solutions Division.

make full use of our technological capabilities andbusiness solution skills we have nurtured through avariety of system developments over the years,
including consigned system operation.
In specific terms, the core business of the System
Services Division is the development of businessapplication systems, such as manufacturing, sales,

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Annual Report 2004

MEW-IS AR0620 05.6.20 17:09 ページ 14

inventory control systems, human resources andaccounting systems, and technical information
systems. In addition to these enterprise information

System and Communications
Equipment Businesssystems, it also provides EC/EDI services, network

Consolidated sales for the system andservices, outsourcing services, and ASP services.

communications device-related business for thecurrent fiscal year was 16,914 million yen, which

System Solutions Division

showed a substantial increase of 44.5% over theprevious fiscal year. This reflects a synergy effect from

Consolidated sales for the System Solutions Division in

the robust sales of the System Solutions Division, sales

the current fiscal year increased by 1.5% from thefor software peripheral–related equipment forprevious fiscal year to 3,939 million yen. It reflects thecompanies other than Matsushita Electric Works, andsales of our own software packages including

sales related to system installation support.

MetaForce and Harvest, orders related to eprocurement systems, orders for new systems for

The division is primarily engaged in the business of

Kubota Matsushitadenko Exterior Works, Ltd., orders

selecting and providing items that are best suited tofrom Matsushita Electric Works for developing an SCM

customer specifications from among a wide variety ofsystem, and the consigned development of the

hardware and third-party software. It also undertakes

Webhouse estimate system.

construction works in which those systems are
utilized. Specifically, the focus of its business is on the

The division’s main businesses include thesales of systems equipment in personal computers

proposals of new information system solutions,and network-related communications equipment,

consigned system developments, and the provision ofprovision of ancillary services, and telephone/LAN

originally developed software packages. It utilizes its

network construction. It is also engaged in the sales ofown experience in information system services topersonal computers, servers, printers,

propose solutions that are best suited to customer

communications equipment, and purchased software

specifications. Specifically, it offers thin-client systems,

as well as telephone discount services.

originally developed software packages, system
introduction consulting, and made-to-order systemdevelopment.

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Management Discussion and Analysis of Operations

Management
Discussion
and Analysisof Operations

Cost of sales increased by 14.5% from theprevious fiscal year to 36,230 million yen,which accounted for 86.0% of net sales,
which is a 1.0 point decline from the previous
fiscal year. Selling, general and administrative
expenses increased by 9.9% from theprevious fiscal year to 2,161 million yen,which accounted for 5.1% of net sales, which
is a 0.3 point decline from the previous fiscal
year. Operating income grew by 35.1% fromthe previous fiscal year to 3,718 million yen asa result of sales growth in line with the abovebusiness model, a profit contribution fromOperations

high profit margin orders, and cost reductions
in communications expenses. The ratio of

In the current fiscal year, net sales increased

operating income to net sales increased byby 15.8% over the previous fiscal year to

1.2 points to 8.8%.

42,109 million yen. This increase was due tothe growth in all divisions, especially the

Net other expenses was 35 million yen, which

System and Communications Equipment

is a decline from the net other income of 198

Business, as a result of capitalizing on our

million yen recorded on the previous fiscalcollective strengths in the IT business toyear.The principal reasons for this decrease

aggressively propose solutions.

were the reduction in interest income
accompanying the abolishment of theService solutions revenues showed steady

employee housing loan program, the posting

performance because of an increase in ordersof a 14 million yen loss from the write-down offrom Matsushita Electric Works for developing

investment securities, and the fact that wean SCM system and the consigned

reported a 218 million yen gain on transfer todevelopment of the Webhouse estimate

the government of the substitutional portion ofsystem, the MetaForce management

employees’ pension fund plan in the previous

packages designed for retailers, and thin-fiscal year.

client systems, which we offered through asales alliance with MintWave Co., Ltd. In the

As a result, net income for the current fiscal

system and communications device-related

year grew to 2,107 million yen which is 25.9%

business, sales for software

increase over previous year. The ratio of net

peripheral–related equipment increased

income to net sales grew by 0.4 point tosubstantially with the growth in IT

5.0%.

investments, and system installation support
sales also were on the upswing.

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Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2004

Net income per share for the current fiscal

MEW-IS AR0620 05.6.20 17:09 ページ 16

year increased to 195.68 yen from 155.14

Matsushitadenko Exterior Works, Ltd., orders

yen in the previous fiscal year, as calculated

from Matsushita Electric Works for developing

based on the assumption that a 200 for 1

an SCM system and the consigned

stock split, which took place on April 1, 2004,

development of the Webhouse estimate

was made at the beginning of the fiscal year.

system. The ratio of the sales from system

Return on equity decreased by 0.1 point fromsolutions to net sales declined by 1.3 points

the previous year to 29.1%.

from the previous fiscal year to 9.4%.
System and Communications Equipment

Business review

Business
Consolidated sales increased by 44.5% from

Service Solutions Businessthe previous fiscal year to 16,914 million yen,In the current fiscal year the service solutions

thanks to steady sales for software

business reported consolidated sales of

peripheral–related equipment for companies

25,194 million yen, which is an increase ofother than Matsushita Electric Works and2.2% from the previous fiscal year.

sales of system installation support. This
reflects a synergy effect from the robust sales(a) System Services Divisionof system solutions. The ratio of the sales

Even though the number of orders received

from system solutions to net sales increased

from our existing customers, who are

by 8.0 points from the previous fiscal year tooutsourcing providers, dipped below the level

40.2%.

recorded in the previous fiscal year, sales
increased steadily for system operations andmaintenance as a result of a new outsourcing
order, and an increase in the number of ourFinancial position

ASP customers. As a consequence,

Total assets at the end of the current fiscal

consolidated sales increased by 2.3% fromyear stood at 14,017 million yen, which

the previous fiscal year to 21,255 million yen.

represents a decrease of 99 million yen from

The ratio of the sales from system services tothe end of the previous fiscal year.

net sales declined by 6.6 points from theCurrent assets increased by 497 million yen

previous fiscal year to 50.5%.

from the end of the previous fiscal year to
11,589 million yen, while fixed assets(b) System Solutions Division

decreased by 596 million yen to 2,428 million

Consolidated sales increased by 1.5% fromyen.

the previous fiscal year to 3,939 million yen,

The increase in assets was primarily areflecting the sales of our own sales

result of increase in current assets of cash

management package MetaForce andand cash equivalent, and funds held in

Harvest, orders related to e-procurement

custody by Matsushita Electric Works

systems, orders for new systems to Kubota

Finance, Ltd., accompanying a decline in

Matsushita Electric Works Information Systems Co., Ltd.

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MEW-IS AR0620 05.6.20 17:09 ページ 17

accounts receivable and inventories, while

represents an increase of 1,321 million yen

fixed assets declined due to the decline infrom the beginning of the current fiscal year,

software and deferred tax assets.

as a result of an increase in free cash flows,which was the result of the increase in net

Total liabilities at the end of the current fiscal

income for the current year. It is our intent toyear stood at 5,910 million yen, which

use these funds to improve our facilities in

represents a decrease of 1,814 million yenorder to facilitate further growth in the future.

from the end of the previous fiscal year,
mainly as a result of a decrease in accounts

Cash flows from operating activities

payable, deposits received and liabilities forFunds generated from operating activities

retirement benefits.

during the current fiscal year amounted toCurrent liabilities at the end of the current
fiscal year declined by 1,522 million yen from2,272 million yen (an increase of 111 million
yen from the previous fiscal year).

the end of the previous fiscal year to 5,214

Although we had expenses of 1,517

million yen. In addition, long-term liabilities at

million yen for income tax payments and 803

the end of the current fiscal year declined bymillion yen decrease in accounts payable, this292 million yen to 696 million yen.

result reflects an increase in funds due to the

As for the reduction in liabilities, current

allocation of 1,056 million yen for depreciation

liabilities are primarily accounted for by

expenses, in addition to having recorded an

decreases in accounts payable and deposits

income before income taxes and minority

received (employees’ savings and the savings

interests of 3,683 million yen.

for house), and long-term liabilities decreased
mainly for the decrease in liabilities for

Cash flows from investing activities

retirement benefits.

Funds used in investing activities during thecurrent fiscal year amounted to 580 million

Shareholders’ equity at the end of the current

yen (a decrease of 254 million yen from thefiscal year increased by 1,714 million yen fromprevious fiscal year). This figure is mainly thethe end of the previous year to 8,105 million

result of 488 million yen used for the

yen as a result of a 1,714 million yen increasepurchases of software.

in retained earnings to 6,194 million yen
reflecting the substantial increase in net income

Cash flows from financing activities

that occurred for the current fiscal year.

Funds used in financing activities during thecurrent fiscal year amounted to 371 million
yen (an increase of 25 million yen from theLiquidity and capital resources
At the end of current fiscal year cash andcash equivalents (hereinafter referred to as“funds”) stood at 4,480 million yen, which

14

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2004

previous fiscal year). This figure is comprisedof the payment of dividends of 371 millionyen.

MEW-IS AR0620 05.6.20 17:09 ページ 18

Management Discussion and Analysis of Operations

Risk Management

affiliate of that company.

(1) Information Security(3) System for Software Development

If information systems should break down or

MEW-IS is engaged in the development ofleaks of a customer’s or an individual’s

software in collaboration with domestic

information should occur during the course ofpartner companies. If any problems in

our group’s involvement in providing systembusiness performance or deterioration ofservices, any claims for damages fromfinancial confidence should occur for any ofcustomers or collapses of credit resulting

the partner companies that has large-scalefrom this could have an adverse impact ontransactions with us, it could affect ourour business results. For this reason, ourbusiness results.

group regards information control as a matterWith the goal of providing state-of-the-art

of utmost importance to management. In thissystems to our customers, we are constantly

respect, we have set up an Information

keeping an eye on trends in the evolution and

Security Management Committee, which isstandardization of information technology. It

under the direct control of the President, tois, however, impossible to keep pace with allplay a central role in promoting andof these rapid and diversely varied

maintaining thorough internal information

technological movements, and any delay inmanagement within the MEW-IS Group. The

responding to a potential advanced

committee also promotes enlightenment,

technology could have an effect on businesseducation, and awareness raising for

performance. At MEW-IS, we are leveraging

employees concerning information

partnerships with outside developers, with amanagement.

focus on the Technology Headquarters
Development Center, to ensure our response(2) Transactions with the Parent Company

to a broad range of technology trends.

MEW-IS is a consolidated subsidiary of
Matsushita Electric Works, Ltd. (MEW), whichowns 63.86% of the voting rights, including
indirect ownership, and is fully contracted for
information system operations for the parent
company. The ratio of the sales to MEW in
the current fiscal year is 46.1%. While we are
expanding sales outside the MEW Group, any
significant changes in business strategy in ourbusiness relationship with MEW could exert
an impact upon our business performance.
In addition, as of April 1, 2004, Matsushita
Electric Industrial Co., Ltd. became our parent
company when MEW was restructured as an

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 200415

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Matsushita Electric Works Information Systems Co., Ltd. and Subsidiary

Consolidated Balance Sheets
November 30, 2004 and 2003

Thousands of
U.S. Dollars(Note 1)Millions of Yen

ASSETS

2004

2003

2004

CURRENT ASSETS:
Cash and deposits (Note 3)¥

Accounts receivable - Trade (Note 11)
Inventories (Note 4)

3,263
5,047

¥

2,796
5,639

$

31,68049,000

470

784

4,563

2,423

1,563

23,524

Deferred tax assets (Note 8)

135

129

1,311

Other current assets

251

181

2,437

11,589

11,092

112,515

Buildings

166

126

1,612

Tools, furniture and fixtures

560

556

5,437

Construction in progress

1

－

10

Total

727

682

7,059

(341)

(296)

(3,311)

386

386

3,748

Investment in associated company

57

82

553

Long-term loans

1

－

10

1,107

1,673

10,748Deferred tax assets (Note 8)

676

784

6,563

Other assets

212

99

2,057

Allowance for doubtful receivables

(11)

－

(107)

2,042

2,638

19,824

Deposits paid (Note 11)

Total current assets
PROPERTY AND EQUIPMENT:

Accumulated depreciation
Net property and equipment
INVESTMENTS AND OTHER ASSETS:

SoftwareTotal investments and other assets

TOTAL
See notes to consolidated financial statements.

16

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2004¥

14,017¥

14,116$

136,087

ak2946-00_松下電工ｲﾝﾌｫﾒｰｼｮﾝｼｽﾃﾑｽﾞ様ｱﾆｭｱﾙﾚﾎﾟｰﾄ 1.doc

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Thousands of
U.S. Dollars(Note 1)Millions of Yen

LIABILITIES AND SHAREHOLDERS' EQUITY

2004

2003

2004

CURRENT LIABILITIES:
Accounts payable - Trade (Note 11)

¥

2,598

¥

3,401

$

25,223

Accounts payable - Other (Note 11)

964

917

9,359

Income taxes payable

780

823

7,573

Consumption taxes payable

187

121

1,815

Deposits received (Note 5)

69

882

670

Other current liabilities

616

592

5,981

5,214

6,736

50,621

Liability for retirement benefits (Note 6)

632

883

6,136

Deposits received (Note 5)

64

105

621

696

988

6,757

2

1

20

1,040

1,040

10,097

Capital surplus

871

871

8,456

Retained earnings

6,194

4,480

60,136

8,105

6,391

78,689Total current liabilities
LONG-TERM LIABILITIES:

Total long-term liabilities
MINORITY INTERESTSCOMMITMENTS (Note 10)
SHAREHOLDERS' EQUITY (Notes 7 and 12):
Common stock
authorized - 40,000,000 shares;
issued 10,656,000 shares in 2004 and 53,280 shares in 2003

Total shareholders' equity

TOTAL

¥

14,017¥

14,116$

136,087

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 200417

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Matsushita Electric Works Information Systems Co., Ltd. and Subsidiary

Consolidated Statements of Income
Years Ended November 30, 2004 and 2003

Thousands of
U.S. Dollars(Note 1)Millions of Yen

2004
NET SALES (Note 11)

¥

2003

42,109¥2004

36,361$COST OF SALES (Notes 9 and 11)

36,23031,641

351,747

Gross profit

5,879

4,720

57,078

2,161

1,967

20,981

3,718

2,753

36,097

3
(19)
19
(26)
(14)

29
(34)
－
(27)
－

29
(184)
184
(252)
(136)

－
－
2

218
9
3

－
－
19

(35)

198

(340)

INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS

3,683

2,951

35,757

INCOME TAXES (Note 8):
Current
Deferred
Total income taxes

1,474
102
1,576

1,427
(136)
1,291

14,311990
15,301MINORITY INTERESTS IN NET LOSS

－

13

－

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Notes 9 and 11)
Operating income
OTHER INCOME (EXPENSES):Interest income
Interest expense
Gain on sales of software
Equity in losses of associated company
Write-down of investment securities
Gain on transfer to the government of the substitutional portion of
employees' pension fund plan (Notes 2.g and 6)
Gain on change of interest in a subsidiary
Other - net
Other income (expenses) - net

NET INCOME

¥

2,107

¥

1,673

$

Yen

PER SHARE OF COMMON STOCK (Notes 2.k and 12):Net income
Cash dividends

18

408,825

See notes to consolidated financial statements.
Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2004¥

195.6845.00

20,456
U.S. Dollars¥

155.14
35.00

$

1.90
0.44

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Matsushita Electric Works Information Systems Co., Ltd. and Subsidiary

Consolidated Statements of Shareholders' Equity
Years Ended November 30, 2004 and 2003

Millions of Yen
IssuedNumber of
Shares ofCommon Stock

BALANCE, DECEMBER 1, 2002

26,640Common
Stock

¥

1,040

CapitalSurplus¥871

Retained
Earnings¥

3,171

Net income

1,673

Cash dividends, ¥32.5 per share(346)

Bonuses to directors(18)

Shares issued upon stock split (Note 7)
BALANCE, NOVEMBER 30, 2003

26,64053,280

1,040

871

4,480

Net income

2,107Cash dividends, ¥35 per share(373)

Bonuses to directors(20)

Shares issued upon stock split (Note 7)
BALANCE, NOVEMBER 30, 2004

10,602,720
10,656,000

¥

1,040

¥

871

¥

6,194

Thousands of U.S. Dollars (Note 1)
CommonCapitalRetained
Stock
Surplus
Earnings

BALANCE, NOVEMBER 30, 2003

$ 10,097$

8,456$ 43,495

Net income

20,456

Cash dividends, $0.34 per share(3,621)

Bonuses to directors
BALANCE, NOVEMBER 30, 2004

(194)
$ 10,097$

8,456$ 60,136

See notes to consolidated financial statements.

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 200419

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Matsushita Electric Works Information Systems Co., Ltd. and Subsidiary

Consolidated Statements of Cash Flows
Years Ended November 30, 2004 and 2003

Thousands of
U.S. Dollars(Note 1)Millions of Yen

2004
OPERATING ACTIVITIES:
Income before income taxes and minority interests
Adjustments for:
Depreciation and amortization
Increase in allowance for doubtful receivables
Increase in liability for retirement benefits
Gain on sales of software
Gain on transfer to the government of the substitutional portion of
employees' pension fund planInterest income
Interest expense
Write-down of investment securities
Equity in losses of associated company
Gain on change of interests in a subsidiary
Changes in assets and liabilities:
Decrease (increase) in accounts receivable
Decrease (increase) in inventories
Increase in other current assets
Increase (decrease) in accounts payable
Increase (decrease) in other current liabilities
Decrease in other long-term liabilities
Other - net
Total adjustments
Interest received
Interest paid
Income taxes paid

¥

3,683

¥

2004

2,951

1,056
11
(251)
(19)

1,159

－

(218 )(29)
34$

35,757
10,252107(2,437)
(184)

－

20

－

(3)
19
14
26

－
(29)
184
136
252

－

－

27
(9)

570
314
(74)
(803)
(653)
(41)
(44)
122
3
(19)
(1,517)

(523)
(266)
(39)
187
367
(174)
(25)
511
29
(34)
(1,296)

5,534
3,049
(718)
(7,796)(6,340)
(398)
(428)
1,184
29
(184)
(14,728)

2,272

2,161

22,058(1,200)
1,200
(95)
(488)
19
(14)

(1,200)
400
(318)
(805)

－
－

(76)
30

(11,650)
11,650(922)(4,738)
185
(136)

－

(2)

1,136
(1)

(20)

(580)

(834)

(5,631)FINANCING ACTIVITIES - Dividends paid

(371)

(346)

(3,602)NET INCREASE IN CASH AND CASH EQUIVALENTS

1,321

981

12,825

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

3,159

2,178

30,670Net cash provided by operating activities
INVESTING ACTIVITIES:
Increase in deposits paid
Decrease in deposits paid
Purchases of property and equipment
Purchases of software
Proceeds from sales of software
Purchases of investment securities
Increase in long-term loans receivable
Decrease in long-term loans receivable
Proceeds from assignment of long-term loans duefrom employees to a bank
Other - net
Net cash used in investing activities

CASH AND CASH EQUIVALENTS, END OF YEAR (Note 3)
See notes to consolidated financial statements.

20

2003

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2004

¥

4,480

－

－
－

¥

3,159

－
－
－

$

43,495

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Matsushita Electric Works Information Systems Co., Ltd. and Subsidiary

Notes to Consolidated Financial Statements
Years Ended November 30, 2004 and 2003

1. BASIS OF PRESENTING CONSOLIDATEDFINANCIAL STATEMENTS
Matsushita Electric Works Information Systems Co., Ltd.
(the "Company") was incorporated on February 22, 1999
as a subsidiary of Matsushita Electric Works, Ltd. (the"Parent"). The Company is 64% owned by the Parent at
November 30, 2004 and 2003, respectively. The principle
business of the Company is to provide integration service
for information systems; maintenance of computer
systems; design, development, sales, lease, rental ofcomputer software; information network service and salesof related machines.
The accompanying consolidated financial statements
have been prepared in accordance with the provisions set
forth in the Japanese Securities and Exchange Law and its
related accounting regulations, and in conformity withaccounting principles generally accepted in Japan, which
are different in certain respects as to application anddisclosure requirements of International Financial
Reporting Standards.

b.

Cash Equivalents - Cash equivalents arec.

Inventories - Merchandise and supplies are statedat the lower of cost, determined by themoving-average method, or market. Work inprocess inventories are stated at cost determined by
the specific identification method.

d.

Investment Securities - Non-marketablee.

Property and Equipment - Property andf.

Software - Software to be sold is amortized ing.

Retirement Benefits - The Group has ah.

Leases - All leases are accounted for as operating

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 ismore familiar to readers outside Japan.
The consolidated financial statements are stated inJapanese yen, the currency of the country in which theCompany is incorporated and operates. The translationsof Japanese yen amounts into U.S. dollar amounts areincluded solely for the convenience of readers outside
Japan and have been made at the rate of ¥103 to $1, theapproximate rate of exchange at November 30, 2004.
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 ACCOUNTINGPOLICIESa.

Consolidation - The consolidated financial

statements as of November 30, 2004 and 2003
include the accounts of the Company and its
subsidiary (together, the "Group").
Under the control or influence concept, the Company
consolidates entities that it, directly or indirectly, isable to exercise control over operations. If theGroup has the ability to exercise significant influence
over an investee, the investment is accounted forusing the equity method.

All significant intercompany balances andtransactions have been eliminated in consolidation.
All material unrealized profit included in assets
resulting from transactions within the Group iseliminated.

short-term investments that are readily convertible
into cash and that are exposed to insignificant risk ofchanges in value. Cash equivalents include
deposits paid, all of which mature or become due
within three months of the date of acquisition.

available-for-sale securities are stated at cost
determined by the moving-average method. For
other than temporary declines in fair value,
investment securities are reduced to net realizablevalue by a charge to income.

equipment are stated at cost. Depreciation ofproperty and equipment of the Company iscomputed substantially by the declining-balancemethod at rates based on the estimated useful livesof the assets, while the straight-line method isapplied to buildings. The range of useful lives isfrom 8 to 18 years for buildings and from 2 to 20
years for tools, furniture and fixtures.
proportion of the actual sales volume of the software
during the current year to the estimated total sales
volume over the estimated salable years of thesoftware, 3 years. Software for internal use isamortized by the straight-line method over its usefullife, 5 years.

contributory funded pension plan together with the
Parent and certain domestic consolidated
subsidiaries of the Parent and unfunded retirement
benefit plans covering substantially all of theiremployees. The liability for retirement benefits is
accounted for based on projected benefit obligations
and plan assets at the balance sheet date.

leases. Under Japanese accounting standards forleases, finance leases that deem to transfer
ownership of the leased property to the lessee are to
be capitalized, while other finance leases are
permitted to be accounted for as operating leasetransactions if certain "as if capitalized" information isdisclosed in the notes to the lessee's financial
statements.

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 200421

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i.

Income Taxes - Deferred income taxes arej.

Appropriations of Retained Earnings -k.

Per Share Information - Net income per share isl.

recorded to reflect the impact of temporary
differences between assets and liabilities recognized
for financial reporting purposes and such amounts
recognized for tax purposes. These deferred taxes
are measured by applying currently enacted tax laws
to the temporary differences.

New Accounting Pronouncements - In August

2002, the Business Accounting Council issued aStatement of Opinion, "Accounting for Impairment of
Fixed Assets", and in October 2003 the AccountingStandards Board of Japan (ASB) issued ASB
Guidance No. 6 "Guidance for Accounting Standard
for Impairment of Fixed Assets". These newpronouncements are effective for fiscal years
beginning on or after April 1, 2005 with early
adoption permitted for fiscal years ending on or after
March 31, 2004.

Appropriations of retained earnings are reflected in
the consolidated financial statements for thefollowing year upon stockholders' approval.

The new accounting standard requires an entity toreview its long-lived assets for impairment whenever
events or changes in circumstances indicate that thecarrying amount of an asset or asset group may not
be recoverable. An impairment loss would berecognized if the carrying amount of an asset or
asset group exceeds the sum of the undiscounted
future cash flows expected to result from thecontinued use and eventual disposition of the asset
or asset group. The impairment loss would bemeasured as the amount by which the carrying
amount of the asset exceeds its recoverable amount,which is the higher of the discounted cash flows fromthe continued use and eventual disposition of theasset or the net selling price at disposition.

computed by dividing net income available tocommon stockholders by the weighted-average
number of common shares outstanding for the year.
Diluted net income is not presented as no securities
with a dilutive effect have been issued.

Cash dividends per share presented in theaccompanying consolidated statements of income
are dividends applicable to the respective years
including dividends to be paid after the end of theyear.
Net income per share and cash dividends per share
were retroactively recalculated as if the stock splits(see Note 7) occurred on December 1, 2002. The
weighted-average number of common shares usedin the computation was 10,656,000 shares for 2004
and 2003.

The Company is currently in the process ofassessing the effect of adoption of thesepronouncements.

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 November 30, 2004 and 2003, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2004

2003

2004

Cash and deposits
Deposits paid with original maturities of within 3 months

¥

3,263
1,217

¥

2,796
363

$

31,68011,815

Cash and cash equivalents

¥

4,480

¥

3,159

$

43,495

4. INVENTORIESInventories at November 30, 2004 and 2003 consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2004

22

2003

2004

MerchandiseWork in process
Supplies

¥

264
203
3

¥

247
529
8

$

2,563
1,971
29

Total

¥

470

¥

784

$

4,563

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2004

ak2946-00_松下電工ｲﾝﾌｫﾒｰｼｮﾝｼｽﾃﾑｽﾞ様ｱﾆｭｱﾙﾚﾎﾟｰﾄ 1.doc

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5. DEPOSITS RECEIVED
Deposits received at November 30, 2004 and 2003 consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2004

2003

2004

Employees' savings
Savings for house
Other
Total
Less current portion

¥

－
109
24
133
(69)

¥

560
400
27
987
(882)

$

－
1,058
233
1,291
(670)

Long-term debt, less current portion

¥

64

¥

105

$

621

The weighted average interest rate applicable to the employees' savings was 1.5% at November 30, 2003.
Interest rates applicable to the savings for house ranged 6.0% and from 5.2% to 6.0% at November 30, 2004 and2003, respectively.
Annual maturities of deposits received at November 30, 2004, were as follows:Year Ending November 30
2005
2006
2007
2008
2009
2010 and thereafter
Total

Millions of Yen

Thousands of
U.S. Dollars

¥

69
41
1
1
1
20

$

670
398
10
10
10
193

¥

133

$

1,291

6. RETIREMENT BENEFITSThe Group has severance payment plans for employees.
Under most circumstances, employees terminating their employment are entitled to retirement benefits determinedbased on the rate of pay at the time of termination, years of service and certain other factors. Such retirement
benefits are made in the form of a lump-sum severance payment from the Company or from the subsidiary andannuity payments from the contributory funded defined benefit pension plan. Employees are entitled 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.
Effective June 16, 2004, the Group amended its severance payment plans by introducing a "point-based" system,
under which severance benefits are calculated based on accumulated points allocated to employees each year
according to their age and job evaluation and interest points over the accumulated points.

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 200423

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The liability for employees' retirement benefits at November 30, 2004 and 2003 consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2004

2003

2004

Projected benefit obligation
Fair value of plan assets
Unfunded benefit obligations
Unrecognized actuarial loss
Unrecognized prior service cost

¥

2,612
(1,507)
1,105
(716)
243

¥

3,114
(1,594)
1,520
(307)
(330)

$

25,359(14,631)
10,728(6,951)
2,359

Net liability

¥

632

¥

883

$

6,136

The components of net periodic benefit costs for the years ended November 30, 2004 and 2003 are as follows:
Thousands of
U.S. Dollars

Millions of Yen

2004

2003

2004

Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
Recognized actuarial loss

¥

182
70
(48)
22
7

¥

192
86
(45)
61
35

$

1,767
680
(466)
213
68

Net periodic benefit costs

¥

233

¥

329

$

2,262

Assumptions used for the years ended November 30, 2004 and 2003 are set forth as follows:

Discount rate
Expected rate of return on plan assets
Amortization period of prior service cost
Amortization period of actuarial gain/loss

2004

2003

2.5%
3.0%
7 years
15 years

2.5%
4.0%
7 years
15 years

According to the enactment of the Defined Benefit Pension Plan Law in April 2002, the Group applied for an
exemption from obligation to pay benefits for future employee services related to the substitutional portion which
would result in the transfer of the pension obligations and related assets to the government by another subsequent
application. The Group obtained an approval of exemption from future obligation by the Ministry of Health, Labourand Welfare on December 16, 2002.
As a result of this exemption, the Group recognized a gain on exemption from pension obligation of thegovernmental program in the amount of ¥218 million in accordance with a transitional measurement of theaccounting standard for employees' retirement benefits for the year ended November 30, 2003.

24

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2004

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2005/06/07 10:32

7. SHAREHOLDERS' EQUITY
Japanese companies are subject to the Japanese Commercial Code (the "Code") to which certain amendments
became effective from October 1, 2001.
The Code was revised whereby common stock par value was eliminated resulting in all shares being recorded withno par value and at least 50% of the issue price of new shares is required to be recorded as common stock and theremaining net proceeds as additional paid-in capital, which is included in capital surplus. The Code permits
Japanese companies, upon approval of the Board of Directors, to issue shares to existing shareholders without
consideration as a stock split. Such issuance of shares generally does not give rise to changes within theshareholders' accounts.
The revised Code also provides that an amount at least equal to 10% of the aggregate amount of cash dividends
and certain other appropriations of retained earnings associated with cash outlays applicable to each period shallbe appropriated as a legal reserve (a component of retained earnings) until such reserve and additional paid-in
capital equals 25% of common stock. The amount of total additional paid-in capital and legal reserve that exceeds
25% of the common stock may be available for dividends by resolution of the shareholders. In addition, the Codepermits the transfer of a portion of additional paid-in capital and legal reserve to the common stock by resolution of
the Board of Directors.
The revised Code eliminated restrictions on the repurchase and use of treasury stock allowing Japanese companies
to repurchase treasury stock by a resolution of the shareholders at the general shareholders meeting and disposeof such treasury stock by resolution of the Board of Directors beginning April 1, 2002. The repurchased amount oftreasury stock cannot exceed the amount available for future dividend plus amounts of common stock, additional
paid-in capital or legal reserve to be reduced in the case where such reduction was resolved at the generalshareholders meeting.
The amount of retained earnings available for dividends under the Code was ¥6,194 million ($60,136 thousand) asof November 30, 2004, based on the amount recorded in the Company's general books of account. In addition to
the provision that requires an appropriation for a legal reserve in connection with the cash payment, the Codeimposes certain limitations on the amount of retained earnings available for dividends.
Dividends are approved by the shareholders at a meeting held subsequent to the fiscal year to which the dividends
are applicable. Semiannual interim dividends may also be paid upon resolution of the Board of Directors, subject
to certain limitations imposed by the Code.
Effective January 20, 2003, the Company declared a stock split issuing 1 share for each outstanding share resulting
in 26,640 shares issued to shareholders of record on January 20, 2003.
Effective April 1, 2004, the Company declared a stock split issuing 199 additional shares for each outstanding shareresulting in 10,602,720 shares issued to shareholders of record on April 1, 2004.

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 200425

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8. INCOME TAXESThe Company is subject to Japanese national and local income taxes which, in the aggregate, resulted in a normal
effective statutory tax rate of approximately 41.9% for the years ended November 30, 2004 and 2003.
The tax effects of significant temporary differences, which resulted in deferred tax assets and liabilities at November
30, 2004 and 2003, were as follows:

2004
Deferred tax assets:
Accrued enterprise taxes
Depreciation
Retirement benefits
Accrued expenses
Others
Total¥

Millions of Yen

¥

67
447
183
22
96
815

Deferred tax liabilities:
Accrued labor insurance¥

Net deferred tax assets¥¥

Thousands of
U.S. Dollars

2003

2004

$

¥

74
490
253
21
78
916

$

650
4,340
1,777
214
932
7,913

4

¥

3

$

39

811

¥

913

$

7,874

For the years ended November 30, 2004 and 2003, because the differences between the normal effective statutory
tax rates and the actual effective tax rates are not material, the tax reconciliations are not disclosed.
On March 31, 2003, Cabinet Order No. 9 entitled "Reform of a Portion of Local Tax Law" was issued and this reform
will apply to fiscal years beginning after April 1, 2004. As a result of this reform, the statutory income tax rate to be
used for the calculation of deferred income taxes concerning temporary differences, which are expected to berealized or settled after April 1, 2004, will be changed from approximately 41.9% to 40.4%. The effect of thischange was to decrease net deferred tax assets and increase income taxes by ¥28 million for the year ended
November 30, 2003.
9. RESEARCH AND DEVELOPMENT COSTS
Research and development costs included in cost of sales and selling, general and administrative expenses were
¥49 million ($476 thousand) and ¥32 million for the years ended November 30, 2004 and 2003, respectively.

26

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Annual Report 2004

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10. LEASESThe Group leases certain computer equipment and other assets.
Total lease payments under finance leases for the years ended November 30, 2004 and 2003 were ¥2,741 million($26,612 thousand) and ¥2,599 million, respectively.
Pro forma information of leased property under finance leases that do not transfer ownership of the leased property
to the lessee on an "as if capitalized" basis for the years ended November 30, 2004 and 2003 was as follows:
Millions of Yen

Tools,
Furniture
andFixtures2004

Software

Total

2003

Tools,
Furniture
andFixtures

SoftwareTotal

Acquisition cost
Accumulated depreciation¥ 10,013
5,739

¥

883
450

¥ 10,896
6,189

¥

9,180
5,496

¥

784
282

¥

9,964
5,778

Net leased property

¥

¥

433

¥

¥

3,684

¥

502

¥

4,186

4,274

4,707

Thousands of U.S. Dollars

2004

Tools,
Furniture
andFixtures

SoftwareAcquisition cost
Accumulated depreciation$

97,21355,718

$

8,573
4,369

$ 105,786
60,087Net leased property$

41,495

$

4,204

$

Total

45,699Obligations under finance leases:
Thousands of
U.S. Dollars

Millions of Yen

2004

2003

2004

Due within one year
Due after one year

¥

2,270
2,664

¥

2,021
2,429

$

22,03925,864

Total

¥

4,934

¥

4,450

$

47,903

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Annual Report 200427

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Depreciation expense and interest expense under finance leases:
Thousands of
U.S. Dollars

Millions of Yen

2004

2003

2004

Depreciation expense
Interest expense

¥

2,646
111

¥

2,507
126

$

25,689
1,078

Total

¥

2,757

¥

2,633

$

26,767

Depreciation expense and interest expense, which are not reflected in the accompanying statements of income, arecomputed by the straight-line method and the interest method, respectively.
11.

RELATED PARTY TRANSACTIONS
Balances at November 30, 2004 and 2003 and transactions for the years ended November 30, 2004 and 2003 with
the Parent, its consolidated subsidiaries and its associated company were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2004
Sales
Purchases
Rental expense

¥

2003

22,242
248
855

¥

2004

18,878415
753$

Thousands of
U.S. Dollars

Millions of Yen

2004
Accounts receivable
Accounts payable
Deposit paid

12.

¥

2003

3,135
142
2,416

¥

215,942
2,408
8,301

2004

2,189
192
1,562

$

30,437
1,379
23,456SUBSEQUENT EVENT
Appropriation
The following appropriations of retained earnings at November 30, 2004 were approved at the Company's
shareholders meeting held on February 16, 2005:

Year-end cash dividends, ¥30 ($0.29) per share
Bonuses to directors

28

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2004

Millions of Yen

Thousands of
U.S. Dollars

¥

$

320
22

3,107
214

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29

MEW-IS AR0620 05.6.20 17:09 ページ 19

Corporate Data
Matsushita Electric Works Information Systems
and Consolidated Subsidiaries
As of November 30, 2004

Matsushita Electric Works Information Systems Co., Ltd.

Board of Directors

Head office:President:
Masahiro Hamada

16th Fl., Applause Tower
19-19, Chayamachi, Kita-ku,
Osaka 530-0013, JAPANManaging Directors / Members of the Board:
Yasuhiko Nose
Mitsuo Mizuno
Suehiro Kanaya

Telephone: +81-6-6906-2801
Facsimile: +81-6-6377-0833
URL: http://www.naisis.co.jp/english/
Establishment:

February 22, 1999

Paid-in capital:

1,040 million yen

Number of employees:

424

Stock listing:Tokyo Stock Exchange, First Section

Directors / Members of the Board:
Kazuo Kodama
Takashi Yamamura
Tsutomu Toda
Kunihiko Ishikawa
Makoto Ishii

Shares of common stock
issued and outstanding: 10,656,000 shares*

Statutory Auditors:
Yoichiro Otake
Kuniaki Watanabe
Masayoshi Hikoso*Effective April 1, 2004, a 200-for-one share split
was implemented.

Number of shareholders: 6,850

Major Shareholders
Number ofsharesPercentage ofvoting rights (%)

6,787,200

63.70

MEW-IS Employee Stock Ownership Association

289,200

2.71

Japan Securities Finance Co., Ltd.

147,900

1.38

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

122,600

1.15

Japan Trustee Services Bank, Ltd. (Trust Account)

56,2000.52

Shareholder

Matsushita Electric Works, Ltd.

30

Nomura Securities Co., Ltd.

48,6000.45

Trust & Custody Services Bank, Ltd. (Trust Account B)

41,2000.38

Mizuho Trust & Banking Co., Ltd. (Trust Account Z)

40,9000.38

FUJITSU LIMITED

36,0000.33

IBM Japan, Ltd.

36,0000.33

Oki Electric Industry Co., Ltd.

36,0000.33

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2004

MEW-IS AR0620 05.6.20 17:09 ページ 20

Disclaimer
Annual Report 2004 is intended to provide information about the business performance and strategy of Matsushita Electric Works Information Systems Co.,
Ltd. and its affiliate. It is not intended and should not be construed as an inducement to purchase or sell stock in the Company or its affiliate. Statements inthis document that are not historical or current facts are forward-looking statements based on current assumptions and beliefs of management. Many factorsthat the Company is unable to predict with accuracy could cause the Company’s actual results, performance, achievements or financial position to bematerially different from those expressed or implied by such forward-looking statements. The Company undertakes no obligation to update any forwardlooking statements to reflect facts, circumstances or events that have occurred or changed after such statements have been made, and shall in no event beliable for any damages arising out of the use or interpretation of this material.

MEW-IS AR0620 05.6.20 17:09 ページ 1

Matsushita Electric Works Information Systems Co., Ltd.
16th Fl., Applause Tower 19-19, Chayamachi, Kita-ku, Osaka 530-0013, JAPAN
Telephone: +81-6-6906-2801 Facsimile: +81-6-6377-0833
URL: http://www.naisis.co.jp/english/