Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2007
For the Year Ended March 31

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
1

Financial Highlights

2

Our Feature

3

Message from the President

6

Corporate Governance7

Corporate Social Responsibility (CSR)

8

MEW-IS At a Glance

10

Review of Operations

12

Management's Discussion and Analysis of Operations

16

Financial Section
Corporate Data

Financial Highlights

Four-Year Summary
For the Year Ended March 31, 2007 and 2006, the Four Month Period Ended March 31, 2005, and the Year Ended November 30, 2004
Thousands of
U.S. Dollars

Millions of Yen
March 31,2007

March 31,2006

March 31,2005

November 30,
2004

March 31,2007

¥ 40,226¥ 41,385¥ 13,895¥ 42,109$ 340,898

Cost of sales

32,66634,316

11,82636,230276,830

Selling, general and administrative expenses

2,546

2,459

740

2,161

21,576

Operating income

5,014

4,610

1,329

3,718

42,492

Income before income taxes and minority interests

5,070

4,682

1,309

3,683

42,966

Net income

3,001

2,800

776

2,107

25,432

19,33916,303

13,506

11,589163,890

547

538

401

386

4,636

Total assets

21,307

18,610

16,11914,017

180,568

Current liabilities

7,754

7,246

6,939

5,214

65,712Long-term liabilities

207

366

636

696

1,754

13,346

10,985

8,539

8,105

113,102

Research and development costs

75

13

3

49

636

Depreciation and amortization

615

755

289

1,056

5,212

March 31,2007

March 31,2006

March 31,2005

November 30,
2004

March 31,2007

Basic net income¥ 281.65¥ 260.42¥ 72.04¥ 195.68$ 2.39Cash dividends

55.00

55.00

10.00

45.00

0.47

RESULTS OF OPERATIONS:Net sales

FINANCIAL POSITION:
Current assets
Net property and equipment

EquityOTHER STATISTICS:

Yen

U.S. Dollars

PER SHARE OF COMMON STOCK:

Note: 1. The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and havebeen made at the rate of ¥118 to $1, the approximate rate of exchange at March 31, 2007.
2. Basic net income per share and cash dividends per share are retroactively recalculated as if the stock splits occurred on December 1, 2002.
Effective January 20, 2003, the Company declared a stock split issuing 1 additional share for each outstanding share resulting in 26,640 sharesissued to shareholders of record on January 20, 2003. And effective April 1, 2004, the Company declared a stock split issuing 199 additional
shares for each outstanding share resulting in 10,602,720 shares issued to shareholders of recorded on April 1, 2004.

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2007

1

Our Feature

The Performance, Know-How, and Technical
Capabilities That Have Been Sustaining
Matsushita Electric Works for nearly 50 years
Although MEW-IS itself is a young company established in 1999, we have nearly 50 years of experiencein the development 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 andsale of a wide range of products, this background has nurtured our capabilities in presenting optimal
proposals for the 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 companies have been promoting the implementation of IT, while
the IT movement is expanding in local municipalities. In addition, the priority IT issues that face domestic companies
are the questions of how to reduce operation and management costs and how to respond to technologicalinnovations and changes. It can be said, therefore that our target markets really are entering a period of growth.

Our High-Value Added Solution Business
The competitive advantages in our solutions have been solidified and differentiated from other solutions in thefollowing 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 2007

Message from the President

We achieved record highs in operating
income and operating margin by
aggressively implementing
strategies thatemphasize profits.
Overview
During the fiscal year ended March 31, 2007, theJapanese economy experienced a continuation ofstrong corporate performance and improved
income, and both capital investment andemployment strengthened, resulting in a general
recovery despite some weakness in personal
consumption.
Amidst this business environment, the MEW-IS
Group used its total solution strengths in
IT (Information Technology) business fields to
conduct market proposals to customers, resulting
in an expansion of the outsourcing business. The
business integration of Matsushita ElectricIndustrial Co., Ltd. (MEI) and Matsushita ElectricWorks, Ltd. (MEW) contributed to an increase inusers, and system services sales expanded.
In addition, the installation of supply chain
management (SCM) systems, construction of
proposal systems using Web technologies, andconstruction and installation of system integration
solutions and call center systems in response to
the growing need to comply with the Japaneseversion of the Sarbanes-Oxley Act and of thin-Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 20073

Message from the President

client systems for educational institutions resulted

individual hardware and software products arein substantially higher system solution sales.

expected in the future. At the same time, IT is moreManagement resources have been focused on theessential than ever for corporate business reforms

System Services and System Solutions Divisions,and innovations, as the role of IT increases,

which have high profit rates, but a decline in sales

demand for security and stable operation will alsoof software peripheral-related equipment had an

grow. We also believe that reconstruction of

impact on overall results, and consolidated net sales

systems in preparation for the coming change offor the fiscal year ended March 31, 2007 was 40,226

generation of IT engineers as well as measures tomillion yen, down 2.8% from the previous year.

develop internal control environments inWith respect to profits, the System Services andSystem Solutions Divisions, which have high profit
rates, both performed well, and as a result ofconjunction with changes in legal systems will
accelerate in the future.
Under these circumstances, in the fiscal year

streamlining of system operations and gathering

ending March 31, 2008, we will actively makeand cross-training of outsourcing personnel,

proposals using the MEW Group channel, increase

consolidated operating income was up 8.8% fromadded value through collaboration among related

the previous year to 5,014 million yen andproducts, propose solutions in response to theconsolidated net income was up 7.2% from theJapanese version of the Sarbanes-Oxley Act, andprevious year to 3,001 million yen. Both operating

propose optimal total solutions that address

income and operating margin (12.5%) reached newcustomer issues.

record highs.

We will also implement fundamental structuralreforms. Until now, the system development
divisions and sales divisions dealt with customers

Management Strategies for the Fiscal
Year Ending March 31, 2008 and Later

independently, but currently, both divisions
function as one unit organized along customerlines. This has made possible to propose solutions

The economic outlook is for a moderate but

tailored for specific customers, bolstered business

continuing expansion with a favorable balance

profitability management, and increased the pacebetween exports, capital investment, and personalof management.

consumption over the short term. The U.S.

In addition, we are working to strengthen

economy, however, is showing signs of slowing,

marketing and planning functions within theand there are concerns about future corporate

integrated system development divisions andperformance. In addition, shortages of highlysales divisions. By introducing and employing

skilled workers such as system engineers in IT

SFA*, we are constructing systems for bothfields are becoming more prominent, and there are“pull” sales strategies such as marketing byconcerns that this may act as a brake on businesscustomer and competitor analysis by product,

growth. In the information and communicationsand “push” selling strategies through strong

service industries, demands are increasing formarketing and proposing the optimal solutions

lower total cost of ownership (TCO) and higherthat customers want.

return on investment (ROI) with respect to IT
investment, and additional decreases in prices for* Sales Force Automation. The use of IT to increase the efficiency ofcorporate marketing divisions and information systems for achieving this.

4

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2007

Progress of the 2010 Plan
Medium-Term Strategy

and create value together,” we are creating aunified mindset throughout the entire workforce. I
believe that our social mission is to utilize to the

MEW-IS is formulating the 2010 Plan Medium-

greatest extent possible the IT results andTerm Strategy as a business strategy for theexpertise that the MEW Group has accumulated tomedium-term future. Under this plan, we hope tohelp our customers that seek optimal use of IT

achieve consolidated sales of 70 billion yen, an

within a ubiquitous computing society.

external sales rate of 65%, operating income of 7.5
billion yen, and operating margin of 10.7% by thefiscal year ending March 2011.

To Our Shareholders

To achieve these quantitative goals, we havebeen promoting two strategies since the fiscal year

One of our core management policies is the stableended March 2007: the New Business Creationand continuous return of profits to shareholders,strategy and the Human Resource Recruiting andkeeping in mind the importance of building up

Development strategy.

internal reserves, which will serve as the source ofUnder the New Business Creation strategy, afunds for solidifying our management foundations

New Business Planning Office was created toand expanding business in the future. Based on

create the structures that will generate business as

this policy, in the fiscal year ended March 2007, we

new sources of income. This office performs inter-paid a dividend of 55 yen per share, the same as

departmental functions, linking the new businessthe previous year.

and new product creation functions of each division.
The Human Resource Recruiting andIn the future, we will implement a moreaggressive dividends policy that takes into

Development strategy defines human resources as

consideration consolidated business performance

human assets, and in order to solidify corefrom the perspective of placing even greaterbusinesses and expand business planningemphasis on shareholders. Specifically, in addition

capabilities, periodic and interim hiring is being

to continuation of a stable 55 yen per share

increased and investment in human assets

dividend, as long as business conditions do notincluding training and education programs is beingchange substantially, in the fiscal year ending

boosted to previously unseen levels. MEW-IS is

March 2008, we plan to increase the dividend by 10

implementing comprehensive training programs toyen per share for a total annual dividend of 65 yen.

raise all skills from technical and planning tocommunication skills and is conducting training

I look forward to the continued support andcooperation of our shareholders.

with a focus on younger employees to foster the“Matsushita Spirit,” which serves as a norm whenacting in society and as a person. Through thesemeasures, we are solidifying our businessfoundations and reinforcing business planning.
Our vision for achieving the goals of the 2010
plan is “Value Designer.” Based on the concept of“working with customers to envision their future

Takeyoshi Kawamura
President

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 20075

Corporate GovernanceCorporate Governance
We are positioning corporate governance as one ofmanagement's top priorities and would like to pursue
transparency, fairness, and speed in management,
based on the policy of improvements in management
efficiency and emphasis on the shareholders. In
addition, all the officers and employees of ourcompany at the same time are tackling the thoroughimplementation of compliance on the basis ofcorporate ethics and law-abiding spirit.
Our corporate governance employs an auditing
system. Three auditors, including two outside
auditors, hold monthly auditor's meetings and attend
board meetings to monitor and supervise theexecution of directors' duties.
The board of directors meeting, which consists ofseven directors including two outside directors, is held
regularly every month. At the meeting, directors
report on significant operating policies, decisions on
substantive matters, and the status of the businessand operations of the company, as well as statutory
matters. Three auditors, of whom two are outside
auditors, also attend.
MEW-IS has one outside director and one auditor
appointed by its parent company, but the Board of
Directors is able to make management decisions
independent from the parent company. To enhance
objectivity in management decision making, thecompany has one outside director and one outside
auditor independent of the parent company.
With respect to compliance, we have distributed toall staff members a brochure entitled Our Code of

6

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2007

Ethical Conduct which describes the code of conduct,drawn up a Compliance Program, established a
Corporate Ethics Committee, and are providing
enlightenment education for all employees through an
e-learning program and so on.
Furthermore, we have acquired the Privacy Mark,
which is given to companies that properly undertakethe protection of personal information, and in March
2005 we acquired Information Security Management
System (ISMS) certification, which is granted tocompanies where an organized information security
management system is properly implemented.
MEW-IS places information management as thecrux of management. In this respect, we have set up
an Information Security Management Committee,
which is under the direct control of the President, toplay a central role in promoting and maintaining athorough internal information management setup
within the MEW-IS Group. The committee also
promotes enlightenment, education, and awarenessraising for employees concerning information
management.
Compensation paid to MEW-IS directors (sixdirectors excluding those directors who resigned
during the 8th Regular Meeting of Shareholders on
June 14, 2006) was 87.85 million yen (including 8.40
million yen paid to the two outside directors). Of thistotal amount, 67.85 million yen was for base pay(including 8.40 million yen paid to the two outside
directors) and 20.00 million yen was for bonuses (nobonuses were paid to the two outside directors).

Corporate Social Responsibility(CSR)

Corporate
SocialResponsibility

business management. Among them, since thecompany places special focus on compliance, we are
implementing training for every employee using elearning and promoting the raising of consciousness
toward compliance in a grass-roots manner.
The second objective is contribution to the society.
We will contribute by proposing resource-and energyconserving plans and system designs, and by offering
product services that can significantly assist
customers’ response to corporate social responsibility(CSR) as an IT company.

Environmentally-conscious management is tied to thecompetitiveness of a company and ultimately to the

In concrete terms, we are offering sales of usedtransparency of management and the clarification of

PC application software, industrial waste management

responsibility. Transparency of management and the

ASP services, sales of thin-client terminals, andclarification of responsibility are tied to the credibility

vehicle traffic control services, while workingof the company in society, which in turn enhances its

internally on promoting recycling and resource-andcorporate value. Based on this idea, we have set out

energy-conservation.

to achieve two objectives on the theme of becoming acompany with social significance. The first objective

In addition, as disaster countermeasures, we are

relates to undertaking environmental, social, andcontributing to society by enhancing our disaster recovery

economic initiatives within the company with the aim

system and through such services as the “Mimamoriof becoming a sustainable company that can help

Net,” which provides regular information about therealize a sustainable society through a well-balanced

condition of elderly people living alone via e-mail.

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

DeskWave for PC•Industrial waste management

Industrial waste management system (electronic manifestation)

Promotion of energy conservation•Thin client

DeskWave

Security measures•Network security•Location•Remote facility surveillance service

IC card solution

ONMITSUManaged fire wall

Security diagnosis

LoketanPush e-mailDisaster prevention measures•Disaster recovery

IDC service

METRONET

Backup center

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2007

7

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
1. Solution proposal
2. Consulting
3. Package software development and sales
Proposal of
Systems
Proposal of
Solutions

Solution
Sales

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

Equipment
Sales andInstallation

8

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2007

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)
21,255

2004
7,328 Four-month period

2005

22,672

2006

23,519

2007
0

5,000

10,00015,00020,00025,000

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, originallydeveloped software packages, system introduction consulting,and made-to-order system development.

Sales (Millions of Yen)
3,939

2004
2005

1,200 Four-month period
6,301

2006

7,828

2007
0

2,000

4,000

6,000

8,000

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

Sales (Millions of Yen)
16,9142004
2005

5,366 Four-month period
12,412

2006
8,879

2007
0

5,000

10,00015,00020,000

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2007

9

Review of Operations

Review of Operations
MEW-IS engages in the business of
information services including provision ofService Solutions Business
System Services Divisionsystem operation and communications
New orders for outsourcing services as well as sales

services, system development, and sales offor system operation and maintenance services grewsystem equipment. Since MEW-IS engages inat a brisk pace and the number of application service

a single business entity, the company does notrobust sales of 23,519 million yen (up 3.7% from thedisclose segment information by individual
business areas, but summaries of businessprovider (ASP) customers increased, resulting inprevious year).
As its main activities, the System Services
Division utilizes the technology skills and businesssolution capabilities that it has developed throughresults for the Service Solutions Business andmany years of developing various systems andthe System and Communications Equipment

undertaking system operation to construct systemfamilies and provide operating services. The

Business are provided. Data for the Service
Solutions Business is indicated separatelyfrom that for the System Services Division and
the System Solutions Division.

division's main activities are operation of businessapplication systems that play central roles incorporate operation such as production, sales, andinventory management systems, personnel andaccounting systems, and technology information
systems. The division also provides electriccommerce/electric data interchange (EC/EDI)

10

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2007

services, network services, outsourcing services,

to 8,879 million yen (down 28.5% from the previous

and ASP services.

year).
The main business activities in this division are

System Solutions Division

optimal selection of hardware and third-party softwarethat will meet customer specifications from among

Orders for system construction from Matsushita

the highly varied products available, providing them toElectric Works, Ltd. (MEW) expanded at a strong

customers, and performing construction work using

pace, while orders for system construction from other

those products. Specific activities include sale of

MEW Group companies grew rapidly. In addition,system equipments such as personal computers andorders for enterprise application integration (EAI)

network-related communications equipment, provisionsystems and sales of packaged software such asof related services, and performance of telephone and

MetaForce and Otegaru Call Center were robust,

LAN construction as well as sale of personal

resulting in sales of 7,828 million yen (up 24.2% fromcomputers, servers, printers, communications

the previous year).

equipment, and purchased software, and provision of

The System Solutions Division's main activities are

discount telephone services.

proposing new solutions and undertaking
development in accordance with customer needs andbased on its system services experience as well as
providing originally developed packaged software.

System and Communications
Equipment BusinessAs a result of focusing management resources into
the highly profitable System Services and System
Solutions Divisions, the System and Communications
Equipment Business experienced a significant decline
in sales of software-related peripherals, and sales fell

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 200711

Management's Discussion andAnalysis of Operations

Management's
Discussion
and Analysisof Operations

thin-client systems for educational institutions.
Sales of network-related construction andsystem installation support in relation to systemand communications equipment were strong,but the focus of business has shifted to the
System Services and System Solutions
Divisions, which have high profit rates, and salesof system-related hardware declined. As a resultof these developments, consolidated net sales
for the fiscal year ended March 31, 2007 was
40,226 million yen, down 2.8% from theprevious year.
The cost of sales declined by 4.8% from theOperations

previous year to 32,666 million yen, which
accounted for 81.2% of net sales, which is 1.7
points decline from the previous year. Selling,

During the fiscal year ended March 31, 2007, thegeneral and administrative expenses increased

Japanese economy saw a continuation of strongby 3.5% to 2,546 million yen, which accounted

corporate results and improved income, andfor 6.3% of net sales, which is 0.4 points

both capital investment and employment

increase from the previous year. As a result,improved, resulting in a general recovery despite

operating income grew by 8.8% from thesome weakness in personal consumption.

previous year to 5,014 million yen, which

Under these circumstances, the MEW-IS

accounted for 12.5% of net sales, which is 1.4

Group engaged in proposal marketing using its

points increase from the previous year. Bothtotal solution capabilities in IT business fields,

operating income and operating margin reachedexpanded its outsourcing business, andnew record highs. This was the result of

expanded users in conjunction with the merger

reducing sales with low profit margins andof business with Matsushita Electric Industrial

focusing management resources on businessCo., Ltd. (MEI) and Matsushita Electric Works,

fields with high profit margins.

Ltd. (MEW), contributing to an increase insystem services sales.
In addition, the installation of supply chain

12

Net other income decreased by 22.0% fromthe previous year to 56 million yen. Althoughinterest income increased and interest expense

management (SCM) system, proposal andand impairment losses decreased substantially, amarketing of systems using Web technologies,

large fall in gains on the sale of investment

and growing need to comply with the Japanese

securities compared to the previous year was

version of the Sarbanes-Oxley Act resulted in

the main factor behind the decline in net othersubstantially higher system solution sales forincome. As a result, income before income taxes

system integration solutions, call-centerand minority interests increased by 8.3% fromsystems, and construction and installation of

the previous year to 5,070 million yen.

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2007

As a result of the above developments, net(b) System Solutions Division

income for the fiscal year ended March 31, 2007

Orders for system construction from Matsushita

grew to 3,001 million yen, which is 7.2% increase

Electric Works, Ltd. (MEW) expanded at a strong

from the previous year. The ratio of net income topace, while orders for system construction fromnet sales increased by 0.7 points to 7.5%.

other MEW Group companies grew rapidly. In

Basic net income per share grew to 281.65

addition, sales of enterprise application

yen, which is 8.2% increase from the previous

integration (EAI) systems and our packaged

year. Return on equity decreased by 4 points

software such as MetaForce and Otegaru Callfrom the previous year to 24.7% as a result of anCenter were robust, resulting in sales of 7,828

increase in shareholders' equity.

million yen (up 24.2% from the previous year).

Business review
System and Communications Equipment BusinessAs a result of focusing management resources
The MEW-IS Group (MEW-IS and its subsidiaries)

into the highly profitable System Services andengages in the business of information services

System Solutions Divisions, the System andincluding system development, system operation,

Communications Equipment Businessprovision of communications services, and sales

experienced a significant decline in sales ofof system equipment. MEW-IS engages in asoftware peripheral-related equipment, and sales

single business, and therefore segment

fell to 8,879 million yen (down 28.5% from theinformation concerning individual business areas

previous year).

has been omitted.
Business results for each service product

Financial position 2007

area during the fiscal year ended March 31, 2007
are as follows.
As of the end of the fiscal year ended March 31,
2007, total assets increased by 2,697 million yen
Service Solutions Businessfrom the end of the previous fiscal year to(a) System Services Division

21,307 million yen. The increase was largely the

The system services division acquired new

result of a growth in current assets.

orders for outsourcing services and sales for

Current assets increased by 3,036 million yen

system operation and maintenance services

from the end of the previous fiscal year towere strong. Combined with an increase in

19,339 million yen. Although cash and deposits

application service provider (ASP) customers,

declined in conjunction with the decrease in net

sales were robust at 23,519 million yen (up 3.7%

sales, deposits paid increased substantially,

from the previous year).

resulting in the higher current assets.
Fixed assets decreased by 338 million yen
form the end of the previous fiscal year to 1,968
million yen. The decline was primarily the result

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 200713

Management's Discussion andAnalysis of Operationsof decreases in deferred tax assets andtaxes paid and a 225 million yen increase inintangible fixed assets.

inventory assets, the increase in funds was due

Total liabilities as of the end of the fiscal year

to the recording of income before income taxes

ended March 31, 2007 increased by 350 million

and minority interests of 5,070 million yen, as

yen from the end of the previous fiscal year towell as the recording of depreciation and

7,962 million yen. The increase was primarily theamortization of 615 million yen.

result of higher current liabilities.
Current liabilities increased by 508 million yen
from the end of the previous fiscal year to 7,754

Cash flows from investing activities

million yen. Although accounts payable - trade

Funds used in investing activities amounted todecreased as a result of lower net sales, higher

3,337 million yen. This decrease was due toincome taxes payable and accounts payable -expenses of 3,000 million yen for group deposits

other led to the increase.

paid and 170 million yen for the purchases ofLong-term liabilities declined by 159 million
yen to 207 million yen as a result of a substantial

software, as well as expenses of 170 million yen
for the purchases of property and equipment.

decrease in liability for retirement benefits.
Total equity as of the end of the fiscal year
ended March 31, 2007 increased by 2,361

Cash flows from financing activities

million yen from the end of the previous fiscal

Funds used in financing activities amounted toyear to 13,346 million yen. The increase was the639 million yen. This figure is comprised of theresult of a 2,337 million yen increase in retained

payment of dividends.

earnings generated from higher net income. As aresult, the equity ratio increased by 3.5 points

Risk Management 2007

to 62.5%.

Cash Flows(1) Recruiting Human Resources
The MEW-IS Group is aware that for recruiting
highly-skilled human resources with technology

Cash and cash equivalents (hereinafter referredand management abilities is essential for theto as “funds”) at the end of the year ended

success of its future business activities.

March 31, 2007 decreased by 234 million yen

The Group conducts periodic and interimfrom the end of the previous year to 4,391

hiring and engages in dynamic and varied

million yen (down 5.1%).

recruiting activities such as holding briefing
sessions via the Internet, but this type ofoutstanding personnel is limited in the

Cash flows from operating activities

information service and other industries, andFunds generated from operating activities

competition to hire the best personnel isamounted to 3,742 million yen. Although we had

intensifying.

such expenses as 1,662 million yen for income

14

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2007

In addition, much system development andother work rely on outsourcing, and we arecompany. The ratio of the sales to MEW in theworking closely with outsourcing companies tofiscal year ended March 31, 2007 was 50.3%.

secure outsourcing personnel.

While we are expanding sales outside the MEW

Under these circumstances, if we are unable

Group, any significant changes in businessto prevent current employees from leaving, tostrategy in our business relationship with MEW

recruit new employees, or to secure outsourcing

could exert an impact upon our businesspersonnel, there is a risk that there will be a

performance.

substantial impact on the future businessactivities of the MEW-IS Group.

In addition, Matsushita Electric Industrial Co.,
Ltd. (MEI) is the parent company of MEW andalso the parent company of our company.

(2) Information Security
If information systems should break down or(4) System for Software Development

leaks of a customer's or an individual's

MEW-IS is engaged in the development of

information should occur during the course ofsoftware in collaboration with domestic partner

our group's involvement in providing systemcompanies. If any problems in businessservices, any claims for damages fromperformance or deterioration of financial

customers or collapse of credit resulting from

confidence should occur for any of the partner

this could have an adverse impact on ourcompanies that has large-scale transactions withbusiness results. For this reason, our groupus, it could affect our business results.

regards information control as a matter ofWith the goal of providing state-of-the-art

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

respect, we have set up an Information Security

keeping an eye on trends in the evolution andManagement Committee, which is under the

standardization of information technology. It is,direct control of the President, to play a central

however, impossible to keep pace with all ofrole in promoting and maintaining thoroughthese rapid and diversely varied technologicalinternal information management within the

movements, and any delay in responding to a

MEW-IS Group. The committee also promotes

potential advanced technology could have an

enlightenment, education, and awareness raising

effect on business performance. At MEW-IS, we

for employees concerning information

are leveraging partnerships with outside

management.

developers, with a focus on the Corporate
Technology Development Division / R&D Center,to ensure our response to a broad range of(3) Transactions with the Parent Company

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

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 200715

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

Consolidated Balance Sheets
March 31, 2007 and 2006

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

ASSETS

2007

2006

2007

CURRENT ASSETS:
Cash and deposits (Note 3)
Accounts receivable - Trade (Note 11)
Inventories (Note 4)
Deposits paid (Note 11)
Deferred tax assets (Note 8)
Other current assets (Note 11)¥ 1,216
9,577
535
7,388
390
233

¥ 1,560
9,376
311
4,281
310
465

$ 10,305
81,161
4,534
62,6103,305
1,975

19,33916,303

163,890

235
943
18
1,196
(649)

227
788
4
1,019
(481)

1,992
7,992
152
10,136(5,500)

547

538

4,636

315
1
510
440
150
26
(21)

315
1
746
528
148
51
(20)

2,669
8
4,322
3,729
1,271
221
(178)

1,421

1,769

12,042¥ 21,307¥ 18,610$ 180,568

Total current assets
PROPERTY AND EQUIPMENT:
Buildings
Tools, furniture and fixtures
Construction in progress
Total
Accumulated depreciation
Net property and equipment
INVESTMENTS AND OTHER ASSETS:
Investment securities
Long-term loans
SoftwareDeferred tax assets (Note 8)
Deposits paid
Other assets
Allowance for doubtful receivables
Total investments and other assets
TOTAL
See notes to consolidated financial statements.

16

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2007

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

LIABILITIES AND EQUITY

2007

2006

2007

CURRENT LIABILITIES:
Accounts payable - Trade (Note 11)
Accounts payable - Other (Note 11)
Income taxes payable
Consumption taxes payable
Deposits received (Note 5)
Other current liabilities¥ 3,600
2,221
1,211
92
2
628

¥ 3,819
1,789
769
252
59
558

$ 30,508
18,822
10,263
780
17
5,322

7,754

7,246

65,712

113
42
52

333
33

958
356
440

207

366

1,754

Total current liabilities
LONG-TERM LIABILITIES:
Liability for retirement benefits (Note 6)
Deposits received (Note 5)
Other
Total long-term liabilities
MINORITY INTERESTS

13COMMITMENTS (Note 10)
EQUITY (Notes 7 and 12):
Common stock
authorized - 40,000,000 shares;
issued 10,656,000 shares
Capital surplus
Retained earnings
Total
Minority interests
Total equity
TOTAL

1,040
871
11,411
13,322
24

1,040
871
9,074
10,9858,814
7,381
96,703112,898
204

13,346

10,985

113,102¥ 21,307¥ 18,610$ 180,568

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 200717

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

Consolidated Statements of Income
Years Ended March 31, 2007 and 2006

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

2007

2006

2007

¥ 40,226¥ 41,385$ 340,898

COST OF SALES (Notes 9 and 11)

32,66634,316

276,830

Gross profit

7,560

7,069

64,068SELLING, GENERAL AND ADMINISTRATIVE EXPENSES(Notes 9 and 11)

2,546

2,459

21,576

5,014

4,610

42,492

25
(3)
30

4
(6)

212
(25)
254

NET SALES (Note 11)

Operating income
OTHER INCOME (EXPENSES):Interest income
Interest expense
Receipt of cancellation fee of operating system (Note 11)
Gain on sales of investment in associated company
Gain on donated assets (Note 11)
Equity in losses of associated company
Write-down of investment securities
Other - net

4

44
39
(7)
(3)
1

33

Other income - net

56

72

474

INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS

5,070

4,682

42,966

INCOME TAXES (Note 8):
Current
Deferred

2,050
8

1,756
117

17,373
68

2,058

1,873

17,44111

993¥ 3,001¥ 2,800$ 25,432

Total income taxes
MINORITY INTERESTS IN NET INCOME
NET INCOMEYen

PER SHARE OF COMMON STOCK (Notes 2.o and 12):
Basic net income
Cash dividends
See notes to consolidated financial statements.

18

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2007

¥ 281.65
55.00

U.S. Dollars¥ 260.42
55.00

$

2.39
0.47

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

Consolidated Statements of Changes in Equity
Years Ended March 31, 2007 and 2006

Millions of Yen
IssuedNumber of
Shares ofCommon Stock

CommonStock

10,656,000¥ 1,040

Retained
Earnings

Total¥ 6,628¥ 8,539¥ 8,539

Net income

2,800

2,800

2,800

Cash dividends, ¥32.5 per share

(346)

(346)

(346)

(8)

(8)

(8)

9,074

10,985

10,985BALANCE, APRIL 1, 2005

CapitalSurplus¥871

Bonuses to directors
BALANCE, MARCH 31, 2006

10,656,000

871

1,040

Minority
Interests

Total Equity

Reclassified balance as of¥March 31, 2006 (Note 2.i)

13

13

Net income

3,001

3,001

3,001

Cash dividends, ¥60 per share

(639)

(639)

(639)

Bonuses to directors

(25)

(25)

(25)
11

11

24

¥ 13,346

Minority
Interests

Total Equity

Net changes in the year
BALANCE, MARCH 31, 2007

BALANCE, MARCH 31, 2006

10,656,000¥ 1,040¥871

CommonStockCapitalSurplus$ 8,814$ 7,381¥ 11,411¥ 13,322¥

Thousands of U.S. Dollars (Note 1)
Retained
Earnings
Total$ 76,898$ 93,093$ 93,093

Reclassified balance as of$March 31, 2006 (Note 2.i)

111

111

Net income

25,43225,43225,432

Cash dividends, $0.51 per share(5,415)(5,415)(5,415)

(212)

(212)

(212)

Bonuses to directors

93

Net changes in the year
BALANCE, MARCH 31, 2007

$ 8,814$ 7,381$ 96,703 $ 112,898$93

204 $ 113,102

See notes to consolidated financial statements.

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 200719

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

Consolidated Statements of Cash Flows
Years Ended March 31, 2007 and 2006

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

OPERATING ACTIVITIES:
Income before income taxes and minority interests
Adjustments for:
Depreciation and amortization
Increase (decrease) in allowance for doubtful receivables
Decrease in liability for retirement benefits
Gain on sales of investment in associated company
Interest income
Interest expense
Write-down of investment securities
Equity in losses of associated company
Changes in assets and liabilities:
Increase in accounts receivable
Decrease (increase) in inventories
Decrease (increase) in other current assets
Decrease in accounts payable
Increase in other current liabilities
Increase (decrease) in other long-term liabilities
Other - net
Total adjustments
Interest received
Interest paid
Income taxes paid
Net cash provided by operating activities
INVESTING ACTIVITIES:
Increase in deposits paid
Decrease in deposits paid
Increase in time deposits
Purchases of securities
Proceeds from sales of securities
Purchases of property and equipment
Purchases of software
Proceeds from sales of investment in associated company
Other - net

2006

2007

¥ 5,070¥ 4,682$ 42,966

615
1
(220)

755
(1)
(231)
(44)
(4)
6
3
7

5,212
8
(1,864)

(202)
(225)
249
(219)
316
61
(29)
325
12
(3)
(1,662)(1,636)
714
(281)
(694)
1,021
(39)
(64)
(488)
4
(6)
(1,724)(1,712)(1,907)2,110(1,856)
2,678
517
(245)
2,754
102
(25)
(14,085)

3,742

2,468

31,712(4,200)1,200(1,200)1,200(10)(35,593)
10,169(25)
3(3,010)
3,011
(170)
(170)

(212)
25

(25,508)
25,517(1,441)(1,441)

2

(277)
(350)
59
2

(3,337)(576)(28,280)

FINANCING ACTIVITIES - Dividends paid

(639)

(347)

(5,415)NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

(234)

1,545

(1,983)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

4,625

3,080

39,195

CASH AND CASH EQUIVALENTS, END OF YEAR (Note 3)¥ 4,391¥ 4,625$ 37,212

Net cash used in investing activities

See notes to consolidated financial statements.

20

2007

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 200717

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

Notes to Consolidated Financial Statements
Years Ended March 31, 2007 and 2006

1. BASIS OF PRESENTING CONSOLIDATEDFINANCIAL STATEMENTS

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 the Group
has the ability to exercise significant influence over aninvestee, the investment is accounted for using theequity method.

Matsushita Electric Works Information Systems Co., Ltd(the "Company") was incorporated on February 22, 1999 asa subsidiary of Matsushita Electric Works, Ltd. (the"Parent"). The Company is 64% owned by the Parent at
March 31, 2007 and 2006, 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 equipment.
The accompanying consolidated financial statements havebeen prepared in accordance with the provisions set forthin the Japanese Securities and Exchange Law and its
related accounting regulations, and in conformity withaccounting principles generally accepted in Japan("Japanese GAAP"), which are different in certain respects
as to application and disclosure requirements ofInternational Financial Reporting Standards.
On December 27, 2005, the Accounting Standard Board ofJapan (ASBJ) published a new accounting standard for thestatement of changes in equity, which is effective for fiscal
years ending on or after May 1, 2006. The consolidated
statement of shareholders' equity, which was previously
voluntarily prepared in line with the international accounting
practices, is now required under Japanese GAAP and has
been renamed "the consolidated statement of changes inequity" from the current fiscal year.
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. In addition, certain
reclassifications have been made in the 2006 financial
statements to conform to the classifications used in 2007.
The consolidated financial statements are stated inJapanese yen, the currency of the country in which theCompany is incorporated and operates. The translations ofJapanese yen amounts into U.S. dollar amounts areincluded solely for the convenience of readers outside
Japan and have been made at the rate of ¥118 to $1, theapproximate rate of exchange at March 31, 2007. Suchtranslations 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 accompanying consolidated
financial statements include the accounts of the

All significant intercompany balances and transactions
have been eliminated in consolidation. All material
unrealized profit included in assets resulting fromtransactions within the Group is eliminated.
During the year ended March 31, 2006, MintWave
Co., Ltd. was excluded from the equity method as aresult of the sale of its shares.

b.

Cash Equivalents - Cash equivalents are shortterm investments that are readily convertible into cash
and that are exposed to insignificant risk of changes
in value. Cash equivalents include deposits paid, allof which mature or become due within three monthsof the date of acquisition.

c.

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

d.

Investment Securities - Investment securities are
non-marketable available-for-sale securities and arestated at cost determined by the moving-averagemethod. For other than temporary declines in fairvalue, investment securities are reduced to net
realizable value by a charge to income.

e.

Property and Equipment - Property andequipment are stated at cost. Depreciation ofproperty and equipment of the Company is computed
substantially by the declining-balance method at rates
based on the estimated useful lives of the assets,
while the straight-line method is applied to buildings.
The range of useful lives is from 8 to 15 years forbuildings and from 3 to 10 years for tools, furnitureand fixtures.

f.

Long-lived Assets - In August 2002, the BusinessAccounting Council (BAC) issued a Statement of
Opinion, "Accounting for Impairment of Fixed Assets",
and in October 2003 the ASBJ issued ASBJ Guidance
No. 6, "Guidance for Accounting Standard for
Impairment of Fixed Assets". These newpronouncements were effective for fiscal years
beginning on or after April 1, 2005 with early adoption
permitted for fiscal years ending on or after March 31,
Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2007

21

2004. The Group adopted the new accounting
standard for impairment of fixed assets as of April 1,
2005.

appropriation of retained earnings.
The ASBJ replaced the above accounting
pronouncement by issuing a new accounting standard
for bonuses to directors and corporate auditors on
November 29, 2005. Under the new accounting
standard, bonuses to directors and corporate auditors
must be expensed and are no longer allowed to be
directly charged to retained earnings. This accounting
standard is effective for fiscal years ending on or after
May 1, 2006. The companies must accrue bonuses todirectors and corporate auditors at the year end towhich such bonuses are attributable.

The Group reviews its long-lived assets for
impairment whenever events or changes incircumstance 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 the sumof the undiscounted future cash flows expected toresult from the continued use and eventual dispositionof the asset or asset group. The impairment loss
would be measured as the amount by which thecarrying amount of the asset exceeds its recoverable
amount, which is the higher of the discounted cash
flows from the continued use and eventual dispositionof the asset or the net selling price at disposition.

g.

Software - Software to be sold is amortized by thestraight-line method over the estimated economic lifeof the software, 3 years. Software for internal use isamortized by the straight-line method over its usefullife, 5 years.

h.

j.

k.

Presentation of Equity - On December 9, 2005,
the ASBJ published a new accounting standard forpresentation of equity. Under this accounting
standard, certain items which were previously
presented as liabilities are now presented ascomponents of equity. Such items include minority
interests. This standard is effective for fiscal years
ending on or after May 1, 2006. The consolidatedbalance sheet as of March 31, 2007 is presented inline with this new accounting standard.
Leases - All leases are accounted for as operatingleases. Under Japanese accounting standards forleases, finance leases that deem to transfer ownershipof the leased property to the lessee are to becapitalized, while other finance leases are permitted tobe accounted for as operating lease transactions if
certain "as if capitalized" information is disclosed in
the notes to the lessee's financial statements.
Bonuses to Directors and Corporate
Auditors - Prior to the fiscal year ended March 31,
2005, bonuses to directors and corporate auditors
were accounted for as a reduction of retained
earnings in the fiscal year following approval at thegeneral shareholders meeting. The ASBJ issued
ASBJ Practical Issues Task Force ("PITF") No. 13,"Accounting treatment for bonuses to directors andcorporate auditors", which encouraged companies torecord bonuses to directors and corporate auditors on
the accrual basis with a related charge to income, but
still permitted the direct reduction of such bonuses
from retained earnings after approval of the22l.

Retirement Benefits - The Company has a
non-contributory funded pension plan together with
the Parent and certain 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
and plan assets at the balance sheet date.

i.

The Company adopted the new accounting standard
for bonuses to directors and corporate auditors in theyear ended March 31, 2007. The effect of adoption ofthis accounting standard was to decrease income
before income taxes and minority interests for theyear ended March 31, 2007 by ¥16 million ($136
thousand).

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2007

Software Revenue Recognition - On March 30,
2006, the ASBJ issued PITF No. 17, "Practical
Solution on Revenue Recognition of Software". The
Group adopted this task force in the year ended
March 31, 2007. The adoption this task force had
immaterial impact on the results of operations of theGroup.

m. Income Taxes - The provision for income taxes iscomputed 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 andliabilities. Deferred taxes are measured by applying
currently enacted tax laws to the temporary
differences.

n.

Appropriations of Retained Earnings Appropriations of retained earnings are reflected in
the consolidated financial statements for the following
year upon shareholders' approval.

o.

Per Share Information - Basic net income pershare is computed by dividing net income available tocommon shareholders by the weighted-average
number of common shares 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 theaccompanying 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 sharesused in the computation was 10,656,000 shares for2007 and 2006.

p.

New Accounting Pronouncements

Lease Accounting - On March 30, 2007, the
ASBJ issued ASBJ Statement No. 13, "AccountingStandard for Lease Transactions", which revised theexisting accounting standard for lease transactions
issued on June 17, 1993.

Measurement of Inventories - Under Japanese
GAAP, inventories are currently measured either by
the cost method, or at the lower of cost or market.
On July 5, 2006, the ASBJ issued ASBJ Statement
No. 9, "Accounting Standard for Measurement of
Inventories", which is effective for fiscal years
beginning on or after April 1, 2008 with early adoption
permitted. This standard requires that inventories
held for sale in the ordinary course of business bemeasured at the lower of cost or net selling value,
which is defined as the selling price less additional
estimated manufacturing costs and estimated direct
selling expenses. The replacement cost may be usedin place of the net selling value, if appropriate. The
standard also requires that inventories held for trading
purposes be measured at the market price.

Under the existing accounting standard, financeleases that deem to transfer ownership of the leased
property to the lessee are to be capitalized, however,other finance leases are permitted to be accounted for
as operating lease transactions if certain "as if
capitalized" information is disclosed in the note to thelessee's financial statements.
The revised accounting standard requires that all
finance lease transactions should be capitalized. The
revised accounting standard for lease transactions iseffective for fiscal years beginning on or after April 1,2008 with early adoption permitted for fiscal years
beginning on or after April 1, 2007.

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, 2007 and 2006 were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2007

2006

2007

Cash and deposits
Deposits paid with original maturities of within 3 months
Time deposits over 3 months¥ 1,2163,185(10)¥ 1,560
3,075(10)$ 10,305
26,992(85)

Cash and cash equivalents¥ 4,391¥ 4,625$ 37,212

4. INVENTORIESInventories at March 31, 2007 and 2006 consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2007

2006

2007

MerchandiseWork in process
Supplies

¥ 201
331
3

¥ 183
125
3

$ 1,703
2,805
26

Total

¥ 535

¥ 311

$ 4,534

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 200723

5. DEPOSITS RECEIVED
Deposits received at March 31, 2007 and 2006 consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2007¥

Welfare pension
Saving for house
Other

¥

36
56

2
44
(2)

Total
Less current portionLong-term debt, less current portion

42

2006

¥

42

2007
$

356
17
373
(17)

92
(59)
¥

33

$

356

Interest rates applicable to the welfare pension were 6.5% at March 31, 2007 and 2006.
Annual maturities of deposits received at March 31, 2007, were as follows:
Millionsof YenYear Ending March 31
2008
2009
2010
2011
2012
2013 and thereafter
Total

24

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2007

¥

2
1
2
2
2
35

¥ 44

Thousands of
U.S. Dollars

$

17
8
17
17
17
297

$ 373

6. RETIREMENT BENEFITSThe Company has severance payment plans for employees.
Under most circumstances, employees terminating their employment are entitled to retirement benefits determinedbased on principally accumulated points allocated to them each year according to their age and job evaluation andinterest points over the accumulated points. Such retirement benefits are made in the form of annuity payments fromthe non-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 specificages prior to the mandatory retirement age.
The liability for employees' retirement benefits at March 31, 2007 and 2006 consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2007

2006

2007

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

¥ 3,013(2,461)
552
(642)
203

¥ 2,906(2,220)
686
(574)
221

$ 25,534(20,856)
4,678(5,441)
1,721

Net liability

¥

¥

$

113

333

958

The components of net periodic benefit costs for the years ended March 31, 2007 and 2006 are as follows:
Thousands of
U.S. Dollars

Millions of Yen

2007

2006

2007

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

¥

184
72
(66)
(18)
48

¥

164
67
(49)
(18)
53

$

1,559
610
(559)
(153)
407

Net periodic benefit costs

¥

220

¥

217

$

1,864

Assumptions used for the years ended March 31, 2007 and 2006 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

2007

2006

2.5%
3.0%
7years15years

2.5%
3.0%
7years15years

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 200725

7. EQUITY
On and after May 1, 2006, Japanese companies are subject to a new corporate law of Japan (the "Corporate Law"),
which reformed and replaced the Commercial Code of Japan (the "Code") with various revisions that are, for the mostpart, applicable to events or transactions which occur on or after May 1, 2006 and for the fiscal years ending on or after
May 1, 2006. The significant changes in the Corporate Law that affect financial and accounting matters are
summarized below:(a) Dividends
Under the Corporate Law, 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 theBoard of Directors, (2) having independent auditors, (3) having the Board of Corporate Auditors, and (4) the term ofservice 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 thecompany has prescribed so in its articles of incorporation.
The Corporate Law permits companies to distribute dividends-in-kind (non-cash assets) to shareholders subject to acertain limitation and additional requirements.
Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if the articles ofincorporation of the company so stipulate. The Corporate Law provides certain limitations on the amounts available fordividends or the purchase of treasury stock. The limitation is defined as the amount available for distribution to theshareholders, 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 Corporate Law requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (acomponent of retained earnings) or as additional paid-in capital (a component of capital surplus) depending on theequity account charged upon the payment of such dividends until the total of aggregate amount of legal reserve andadditional paid-in capital equals 25% of the common stock. Under the Corporate Law, the total amount of additional
paid-in capital and legal reserve may be reversed without limitation. The Corporate Law 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.
(c) Treasury stock and treasury stock acquisition rights
The Corporate Law also provides for companies to purchase treasury stock and dispose of such treasury stock byresolution of the Board of Directors. The amount of treasury stock purchased cannot exceed the amount available for
distribution to the shareholders which is determined by specific formula. Under the Corporate Law, stock acquisitionrights, which were previously presented as a liability, are now presented as a separate component of equity. The
Corporate Law also provides that companies can purchase both treasury stock acquisition rights and treasury stock.
Such treasury stock acquisition rights are presented as a separate component of equity or deducted directly from stockacquisition rights.

26

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2007

8. INCOME TAXESThe Company is 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, 2007 and 2006.
The tax effects of significant temporary differences, which resulted in deferred tax assets and liabilities at March 31,
2007 and 2006, are as follows:
Thousands of
U.S. Dollars

Millions of Yen

2007
Deferred tax assets:
Accrued enterprise taxes
Depreciation
Retirement benefits
Accrued bonus to employees
OthersTotal deferred tax assets

2006

2007

¥

92
360
46
171
161

¥

59
394
115
146
124

$

780
3,051
390
1,449
1,364

¥

830

¥

838

$

7,034

For the years ended March 31, 2007 and 2006, 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.

9. RESEARCH AND DEVELOPMENT COSTS
Research and development costs included in cost of sales and selling, general and administrative expenses were ¥75
million ($636 thousand) and ¥13 million for the years ended March 31, 2007 and 2006, respectively.

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 200727

10. LEASESThe Group leases certain computer equipment and other assets.
Total lease payments under finance leases for the years ended March 31, 2007 and 2006 were ¥2,432 million ($20,610
thousand) and ¥2,509 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 March 31, 2007 and 2006 was as follows:
Millions of Yen

2007
Tools,
Furniture
andFixtures

SoftwareAcquisition cost
Accumulated depreciation¥ 7,146(3,423)Net leased property¥ 3,723

2006

Total

Tools,
Furniture
andFixtures

SoftwareTotal¥ 1,210(683)¥ 8,356(4,106)¥ 7,748(4,205)¥ 1,212(450)¥ 8,960(4,655)¥¥ 4,250¥ 3,543¥¥ 4,305

527

762

Thousands of U.S. Dollars

2007
Tools,
Furniture
andFixtures

SoftwareTotal

Acquisition cost
Accumulated depreciation$ 60,559(29,008)$ 10,254(5,788)$ 70,813(34,796)

Net leased property$ 31,551$ 4,466$ 36,017

Obligations under finance leases:
Thousands of
U.S. Dollars

Millions of Yen

2007

2006

2007

Due within one year
Due after one year

¥ 1,955
2,336¥ 2,108
2,510$ 16,568
19,796Total¥ 4,291¥ 4,618$ 36,364

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

Millions of Yen

2007

2006

2007

Depreciation expense
Interest expense¥ 2,33073¥ 2,39780$ 19,746
618

Total

¥ 2,403¥ 2,477$ 20,364

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.

28

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2007

11. RELATED PARTY TRANSACTIONS
Balances at March 31, 2007 and 2006 and transactions for the years ended March 31, 2007 and 2006 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 expense
Receipt of cancellation fee of operating system
Gain on donated assets

2007

2006

2007

¥ 25,885
305
863
30

¥ 24,468
272
838$ 219,364
2,585
7,314
254

39
Thousands of
U.S. Dollars

Millions of Yen

2007
Accounts receivable
Other current assets
Accounts payable
Deposits paid

¥

5,729
15
195
7,383

2006
¥

4,829
2
278
4,267

2007
$ 48,551
127
1,653
62,568

12. SUBSEQUENT EVENT
Appropriation
The following appropriations of retained earnings at March 31, 2007 were approved at the Company's shareholders
meeting held on June 14, 2007:

Year-end cash dividends, ¥27.50 ($0.23) per share

Millionsof YenThousands of
U.S. Dollars¥ 293$ 2,483

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 200729

Deloitte.

Deloitte Touche Tohmatsu
Nakanoshima Central Tower
2-2-7, Nakanoshima, Kita-ku
Osaka-shi, Osaka 530-0005
Japan
Tel: +81 6 4560 6000
Fax: +81 6 4560 6001
www.deloitte.com/jp

INDEPENDENT AUDITORS' REPORTTo the Board of Directors of Matsushita Electric Works Information Systems Co., Ltd.:We have audited the accompanying consolidated balance sheets of Matsushita Electric Works
Information Systems Co., Ltd. and subsidiary as of March 31, 2007 and 2006, and the related
consolidated statements of income, changes in equity, and cash flows for the years then ended,
all expressed in Japanese yen. These consolidated financial statements are the responsibility of theCompany's management. Our responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan. Thosestandards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Matsushita Electric Works Information Systems Co.,
Ltd. and subsidiary as of March 31, 2007 and 2006, and the consolidated results of their operations
and their cash flows for the years then ended in conformity with accounting principles generally
accepted in Japan.
Our audits also comprehended the translation of Japanese yen amounts into U.S. dollar amounts
and, in our opinion, such translation has been made in conformity with the basis stated in Note 1.
Such U.S. dollar amounts are presented solely for the convenience of readers outside Japan.

June 14, 2007

Member of
Deloitte Touche Tohmatsu

30

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2007

Corporate Data
Matsushita Electric Works Information Systems and Consolidated Subsidiaries
As of March 31, 2007

Matsushita Electric Works Information Systems Co., Ltd.
Head office:

Board of Directors,
Auditors and Officers
As of June14,2007

19-19, Chayamachi, Kita-ku,
Osaka 530-0013, JAPANPresident:
Takeyoshi Kawamura

Telephone: +81-6-6906-2801
Facsimile: +81-6-6377-0833

Senior Managing Directors:
Yasuhiko Nose
Mitsuo Mizuno

URL: http://www.naisis.co.jp/english/
Establishment:

February 22, 1999

Paid-in capital:

1,040 million yen

Number of employees:

509

Stock listing:Tokyo Stock Exchange, First Section

Managing Directors:
Suehiro Kanaya
Tsutomu Toda

Shares of common stock
issued and outstanding: 10,656,000 shares**Effective April 1, 2004, a 200-for-one share split was implemented.

Number of shareholders: 5,027

Directors:
Toshihiro Ono *1
Shinichiro Satani *1
Auditors:
Tatsuji Shinkai *2
Kuniaki Watanabe *2
Makoto Ishii

Major Shareholders

Managing Executive Officer:
Shareholder

Number ofsharesPercentage ofvoting rights (%)

Matsushita Electric Works, Ltd.
Japan Trustee Services Bank, Ltd. (Trust Account)
MEW-IS Employee Stock Ownership Association
The Master Trust Bank of Japan, Ltd. (Trust Account)

6,787,200
588,600
219,000
199,400

63.69
5.52
2.06
1.87

95,7000.90

84,00068,6000.79
0.64

60,80036,00036,00036,000

0.57
0.34
0.34
0.34

Trust & Custody Services Bank, Ltd.
(Securities Investment Fund Account)
Trust & Custody Services Bank, Ltd.
(Pension Special Account)
Japan Trustee Services Bank, Ltd. (Trust Account 4).

Mikio Okuda
Executive Officers:
Akira Hisano
Hisashi Kurono
Hiroyuki Maruoka*1 outside director*2 external auditor

United Nations, for the United Nations Joint Staff
Pension Fund a UN Organ
FUJITSU LIMITEDIBM Japan, Ltd.
Oki Electric Industry Co., Ltd.

Disclaimer
Annual Report 2007 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 in this document that are not historical or current facts are forward-looking statements based on current assumptions and beliefs ofmanagement. Many factors that the Company is unable to predict with accuracy could cause the Company’s actual results, performance, achievements
or financial position to be materially different from those expressed or implied by such forward-looking statements. The Company undertakes noobligation to update any forward-looking statements to reflect facts, circumstances or events that have occurred or changed after such statements
have been made, and shall in no event be liable for any damages arising out of the use or interpretation of this material.

Matsushita 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://www.naisis.co.jp/english/

This annual report was printed on 100% recycled paper.
Printed in Japan