Annual Report 2006
For the Year Ended March 31

Matsushita Electric Works Information Systems Co., Ltd.

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

Financial Highlights

Four-Year Summary
For the Year Ended March 31, 2006, the Four Month Period Ended March 31, 2005 and the Year Ended November 30, 2004 and 2003
Thousands of
U.S. Dollars

Millions of Yen
March 31,2006

March 31,2005

November 30,
2004

November 30,
2003

March 31,2006

¥ 41,385¥ 13,895¥ 42,109¥ 36,361$ 353,718

Cost of sales

34,316

11,82636,23031,641

293,299

Selling, general and administrative expenses

2,459

740

2,161

1,967

21,017

Operating income

4,610

1,329

3,718

2,753

39,402

Income before income taxes and minority interests

4,682

1,309

3,683

2,951

40,017

Net income

2,800

776

2,107

1,673

23,932

16,303

13,506

11,589

11,092

139,342

538

401

386

386

4,598

Total assets

18,610

16,11914,017

14,116

159,060

Current liabilities

7,246

6,939

5,214

6,736

61,932Long-term liabilities

366

636

696

988

3,128

Shareholders’ equity

10,985

8,539

8,105

6,391

93,889Research and development costs

13

3

49

32

111

Depreciation and amortization

755

289

1,056

1,159

6,453

March 31,2006

March 31,2005

November 30,
2004

November 30,
2003

March 31,2006

¥ 260.42¥ 72.04¥ 195.68¥ 155.14$ 2.23

55.00

10.00

45.00

35.00

0.47

RESULTS OF OPERATIONS:Net sales

FINANCIAL POSITION:
Current assets
Net property and equipment

OTHER STATISTICS:

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 ¥117 to $1, the approximate rate of exchange at March 31, 2006.
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 2006

1

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 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 technological innovations
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.

2

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2006

Message from the President

Proposals for Security and
System Integration Solutions
Support Solid Performanceby the Thin-Client andEnterprise Application
Integration Businesses
Overview
During the fiscal year ended March 31, 2006, the global
economy showed signs of steady recovery, particularlyin the United States and China, and in Japan there wereclear signs of economic expansion including abroadening of improvement in corporate profits andrecoveries in personal consumption and employment.
In the IT industry, MEW-IS’s primary area of activity,
IT investment being conducted not in the sense of
rationalization and higher efficiency throughinfrastructure development as usual, but as a part ofcorporate management strategies.
At the same time, the Act on the Protection of
Personal Information, which came into effect in April of
2005, has raised awareness of security among thegeneral population and has boosted demand for our
thin-client solutions.
With the retirement of baby-boom generation
system engineers, the “Year 2007 Problem” indicatedby unstable operation of legacy systems has arisen, andinterest in shifting from legacy systems to new systems
is rising. This has resulted in greater demand for
integration between new and legacy systems.
It is under these circumstances that MEW-IS is
engaging in solution proposal services that maximize theMatsushita Electric Works Information Systems Co., Ltd.

Annual Report 2006

3

Message from the President

collective strength of our IT business. We increased

overcoming the unique disadvantages of multi-vendersales of service solutions to Matsushita Electric Works,systems.

Ltd. (MEW) with the construction of a system in

Our technological capabilities and flexible ideas

conjunction with business reorganization withhave gained the strong support of small- to medium-

Matsushita Electric Industrial Co., Ltd. (MEI) and thesized companies that do not have full-time IT personnel,

construction of a supply chain management (SCM)

and most of our unrelated customers are such firms.

system.

MEW accounted for approximately 49% of our sales in

In addition, sales of service solutions to customers

the current fiscal year, but we will work to increase theother than MEW were strong with increased proposals

percentage of sales to unrelated small- to medium-sized

for thin clients against a backdrop of greater security

companies to support further growth.

needs and higher sales of the Metaforce sales
management packages for the distribution industry.
As a result of the above developments,

During the current fiscal year, measures to reinforce
sales capabilities in the Tokyo metropolitan region
included opening of the Yaesu Office and Solution Plaza

consolidated net sales for the fiscal year ended Marchas well as forming ties with other manufacturers

31, 2006 were 41,385 million yen, consolidated

including Dell Computer and Hewlett-Packard Japan tooperating income was 4,610 million yen, andexpand our multi-vender options.

consolidated net income was 2,800 million yen.

As a result of these efforts, sales of thin-client* Last fiscal year, the accounting period was changed to the year ended

solutions and EAI solutions to unrelated customers

March 31, and therefore, year-on-year comparisons are not provided.

increased substantially.

Management Strategies for the Fiscal
Year Ending March 31, 2007 and Later

will launch a new sales strategy that focuses on

During the fiscal year ending March 31, 2007, we
proposals that combine solutions and enhancing
marketing capabilities. We will also work to increase
At just seven years old, MEW-IS is still a young

profitability by increasing the added value of ourcompany, but prior to its establishment in 1999 it was

products.

the information system division of MEW and had morecentered on thin-client solutions, EAI solutions, andengineers. MEW, our primary customer and one ofengineering chain management (ECM) solutions. We

Japan’s leading IT firms, regularly requests high-end

provide a broad range of solutions rather high added-

solutions from us, and consequently, we havevalue solutions that combine core products with otheraccumulated extensive information system expertise bysolutions than individual products. One thin-client

responding to these requests. Thus, we have the ability

solution, for example, combines call center services, thin

to propose high-level solutions.

clients, and security products.

MEW-IS has long used a multi-vender approach,4

The solutions that we provide to customers arethan 40 years of experience as an organization of

In addition, we reorganized our sales structures toand we strive to propose better solutions to customers,

enhance marketing capabilities. By raising sales

thereby raising customer satisfaction. We adopt acapabilities through this reorganization, we will expand

neutral stance without excessive commitment to any

sales to unrelated companies and reinforce our ability toparticular manufacturer or model and propose systems

respond through the MEW sales route, one of our corewith high cost performance. Our accumulated expertise

strengths. Specifically, the Sales Headquarters was

has proven extremely useful in resolving problems of

divided into the East Japan Solution Sales Department,interconnection among the devices of different

the West Japan Solution Sales Department, and the

manufacturers under open environments and inDistribution Solution Sales Department, enabling us to

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2006

develop closer ties with existing customers, makestable dividends, we will implement a more aggressive

locally-oriented, high-quality IT proposals, and engage in

dividends policy that takes into consideration

effective collaboration with partner companies.

consolidated business performance from theperspective of placing even greater emphasis on

The 2010 Plan Medium-Term Strategy

shareholders.

MEW-IS adopted the 2010 Plan as a business strategyemphasizes corporate social responsibility (CSR)

for the medium-term future. The 2010 Plan sets goals of

including individualized compliance training forreaching consolidated net sales of 70 billion yen, an

employees using e-learning as one means of fulfilling our

external sales rate of 65%, operating income of 7.5

responsibilities as a corporate citizen.

We are also implementing management thatbillion yen, and an operating income margin of 10.7% by
2010.

As a part of our investor relations activities, in thecurrent fiscal year ended March 31, 2006,we began

In order to reach these quantitative goals, we willholding individual and group shareholder meetingscarry out two key strategies during the next fiscal year:

including visits to institutional investors, and we will

the New Business Creation strategy and the Humancontinue our effort for the formation of a proper share

Resource Recruiting and Development strategy.

price.

Under the New Business Creation strategy, a New
Business Planning Office was created under the direct

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

authority of the president to create the structures thatwill generate business as new sources of income. This
office will perform inter-departmental functions, linking
the new business and new product creation functions ofeach division.
The Human Resource Recruiting and Development
strategy defines human resources as human assets,

Takeyoshi Kawamura
President

and in order to solidify core businesses and expand
business planning capabilities, periodic and interim
hiring will be increased and investment in human assets
including training and education programs will beboosted to previously unseen levels.
These measures are no more than the preliminary
stages of the 2010 Plan, but they are beginning to
produce significant results.

To Our Shareholders
One of our core management policies is the stable andcontinuous return of profits to shareholders, keeping in
mind the importance of building up the internal reserves,which will serve as the source of funds for solidifying ourmanagement foundations and expanding business inthe future. Based on this policy, in addition to paying

5

Corporate GovernanceCorporate Governance
We are positioning corporate governance as one of

In addition, we have distributed to all our staff

management’s top priorities and would like to pursue

members a brochure entitled Our Code of Ethicaltransparency, fairness, and speed in management,

Conduct, which describes the code of conduct, drawn

based on the policy of improvements in management

up a Compliance Program, established a Corporate

efficiency and emphasis on the shareholders. In

Ethics Committee, and are providing enlightenment

addition, all the officers and employees of our company

education for all employees through an e-learningat the same time are tackling the thoroughprogram and so on.

implementation of compliance on the basis of corporate
ethics and law-abiding spirit.

Furthermore, we have acquired the Privacy Mark,
which is given to companies that properly undertake theprotection of personal information, and in March 2005

Our corporate governance employs an auditing

we acquired Information Security Management Systemsystem. Three auditors, including two outside auditors,(ISMS) certification, which is granted to companies

hold monthly auditor’s meetings and attend board

where an organized information security management

meetings to monitor and supervise the execution ofsystem is properly implemented.

directors’ duties.
MEW-IS places information management as the crux
The board of directors meeting, which consists of6of management. In this respect, we have set up annine directors including two outside directors, is held

Information Security Management Committee, which isregularly every month. At the meeting, directors reportunder the direct control of the President, to play aon significant operating policies, decisions on

central role in promoting and maintaining a thoroughsubstantive matters, and the status of the business andinternal information management setup within the MEW-

operations of the company, as well as statutory matters.

IS Group. The committee also promotes enlightenment,

Three auditors, of whom two are outside auditors, also

education, and awareness raising for employees

attend.

concerning information management.

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2006

Corporate Social Responsibility (CSR)

Corporate
SocialResponsibility

management. Among them, since the company places
special focus on compliance, we are implementing
training for every employee using e-learning andpromoting 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 used PC

transparency of management and the clarification of

application software, industrial waste management ASP

responsibility. Transparency of management and theservices, sales of thin-client terminals, and vehicle trafficclarification of responsibility are tied to the credibility ofcontrol services, while working internally on promoting

the company in society, which in turn enhances its

recycling and resource-and energy-conservation.

corporate value. Based on this idea, we have set out toachieve two objectives on the theme of becoming a

In addition, as disaster countermeasures, we arecompany with social significance. The first objective

contributing to society by enhancing our disaster recovery

relates to undertaking environmental, social, andsystem and through such services as the “Mimamori

economic initiatives within the company with the aim ofNet,” which provides regular information about the

becoming a sustainable company that can help realize a

condition of elderly people living alone via e-mail.

sustainable society through a well-balanced businessCorporate Social Responsibility (CSR)
Environmentally-friendly
onmentally-friendly•Recycling of personal computers

DeskWave for PC•Industrial waste management

Industrial waste management system (electronic manifestation)

Promotion
omotion of energy conservation•Thin client

DeskWave•Vehicle operation management service

Cruise NAVI

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

IC card solution

ONMITSUManaged fire wall

Security diagnosis

LoketanPush e-mailDisaster prevention
evention measures
measur•Disaster recovery

IDC service

METRONET

Backup center

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2006

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

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

8

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2006

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

21,255
7,328 Four-month period

2005

22,672

2006
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, originally developed
software packages, system introduction consulting, and made-toorder system development.

Sales (Millions of Yen)
2003

3,880

2004

3,939

2005

1,200 Four-month period
6,301

2006
0

2,000

4,000

6,000

8,000

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.

Sales (Millions of Yen)
11,705

2003

16,9142004
2005

5,366 Four-month period
12,412

2006
0

5,000

10,00015,00020,000

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2006

9

Review of Operations

Review of Operations
We are engaged in the information services

Service Solutions Businessbusiness, including the provision of system

System Services Division

operation and communications services, system
In the fiscal year ended March 31, 2006, the Systemdevelopment, and the sales of system

Services Division registered sales of 22,672 million yen.

equipment. Because we are a single businessAlthough there were rationalization returns to existingoutsourcing companies, the sales of system operations

entity, we do not disclose segment information
by business category, but we categorize ourservices into two sectors: the Service Solutions

and maintenance services were favorable as a result of
increased sales for new outsourcing orders received,
strengthened business through the discovery of new
customers, increased sales of system integration
projects, such as thin-client systems, and other factors,

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

as well as an increased number of ASP customers.
The division is engaged primarily in the systemservices business, providing a wide array of information

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

systems constructed using the technological capabilities
and business solution skills that we have cultivated overmany years in the development of various systems,
including consigned system operation.

(Note: Last fiscal year, the accounting period was changed to the year

10

Specifically, the core business of the System

ended March 31, and therefore, year-on-year comparisons are notServices Division is the operation of business application

provided.)systems, such as manufacturing, sales, and inventory

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2006

control systems; human resources and accounting
systems; and technical information systems. In addition,it also provides EC/EDI services, network services,

System and Communications
Equipment Businessoutsourcing services, ASP services, and others.
In the fiscal year ended March 31, 2006, the System

System Solutions Division

and Communications Equipment Business registeredsales of 12,411 million yen. Although sales of system

In the fiscal year ended March 31, 2006, the Systemequipment, information-related construction work, andSolutions Division registered sales of 6,301 million yen.

system installation work, relating to the service solutions

This was the result of bullish sales of our company’sbusiness’ system integration projects, such as thin-

own software packages for the distribution industry,client systems were steady, sales of software

such as MetaForce and Easy Call Center, and EAI-

peripheral-related equipment were sluggish.

related order system building, as well as, in relation to
Matsushita Electric Works, Ltd., sales from system

The division is primarily engaged in selecting andbuilding, SCM system building, and so on as aproviding items that are best suited to customer

consequence of its business reorganization withspecifications from among a wide variety of hardware

Matsushita Electric Industrial Co., Ltd.

and third-party software, as well as construction works

The division’s main businesses include the proposalsof new information system solutions to meet the needs

utilizing those systems.
Specifically, the focus of its business is the sale ofof customers on the basis of its experience insystems equipment such as personal computers,

information system services, consigned system

network-related communications equipment, thedevelopments, and the provision of originally developed

provision of ancillary services, and telephone/LAN

software packages. Specifically, among other things, it

network construction. It is also engaged in the sales of

proposes solutions through system equipment and so

personal computers, servers, printers, communications

on, sells originally developed software packages,

equipment, and purchased software, as well as

provides consulting for the introduction of systems, andtelephone discount services.

undertakes individual consigned system development
projects.

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2006

11

Management Discussion and Analysis of Operations

Management
Discussion
and Analysisof Operations

sales of software peripheral-related equipment
were stagnant.
Cost of sales declined by 5.3% from the fiscal
2004 to 34,316 million yen, which accounted for
82.9% of net sales, which is 3.1 points decline
from the fiscal 2004. Selling, general andadministrative expenses increased by 13.8% to2,459 million yen, which accounted for 5.9% of
net sales, which is a 0.8 point increase from thefiscal 2004. Furthermore, operating income grewby 24.0% from the fiscal 2004 to 4,610 million
yen. This was due to the fact that the completions

Operationsof orders received for system solutions businesswere better than initially expected and the fact thatthe sales share of system equipment with a low

In the current fiscal year, net sales declined byprofit ratio relatively decreased. The ratio of

1.7% from the year ended November 30, 2004

operating income to net sales increased by 2.3(fiscal 2004) to 41,385 million yen. This decrease

points to 11.1%.

was due to the fact that although there was alarge increase in net sales for system solutions

Net other income amounted to 72 million yen,business (up 60.0% from the fiscal 2004), thewhich is an increase from the net other expenses

decline in the sales of system equipment (downof 35 million yen registered in fiscal 2004. The

26.6%) had a major impact.

principal reasons for this were the gain of 44

Net sales to Matsushita Electric Works, Ltd.

million yen on sales of investment in associatedrose as a result of sales of system building andcompany and 39 million yen from the gain on

SCM system building in conjunction with its

donated assets such as the “Mimamori Net”.

business reorganization with Matsushita ElectricIndustrial Co., Ltd. Against the background of an

As a result, net income for the current fiscal year

increased need for information security as a result

grew to 2.8 billion yen, which is 32.9% increaseof the Act on the Protection of Personalfrom the fiscal 2004. The ratio of net income to net

Information, sales for service solutions business tosales grew by 1.8 points to 6.8%.

other customers rose favorably due to an increaseof sales for thin-client systems and expanded

increased to 260.42 yen from 195.68 yen in thesales of MetaForce management packages

fiscal 2004. Return on equity decreased by 0.4

designed for distributors. In addition, in the system

point from the fiscal 2004 to 28.7%.

and communications equipment business, sales
from information-related construction work andsystem installation support steadily improved, but

12

Net income per share for the current fiscal year

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2006

Business review

System and Communications Equipment
Business
The system and communications equipment

Service Solutions Businessbusiness registered consolidated sales of 12,411

In the current fiscal year the service solutions

million yen. Although sales of system equipment

business reported consolidated sales of 28,974

for system integration projects, such as thin-client

million yen, which is an increase of 15.0% from thesystems, and sales resulting from the multiplierfiscal 2004.

effect of solution orders, such as informationrelated construction work and system installation(a) System Services Division

support, were steady, sales for software

Although there were rationalization returns to ourperipheral-related equipment were sluggish. The

clients to which we provide outsourcing services,ratio of sales from system and communications

system operations and maintenance services sales

equipment business to net sales declined by 10.2

performed well due to such factors as an increase

points from the fiscal 2004 to 30.0%.

in outsourcing orders received, enhancement ofsales force to get new customers, increased salesof system integration project such as thin-clientsystems. As a result also of a firm increase in ASP

Financial position 2006

customers, consolidated sales increased by 6.7%
from the fiscal 2004 to 22,672 million yen. The

Total assets increased by 2,491 million yen fromratio of the sales from system services to net sales

the end of the previous fiscal year (March 31,

increased by 4.3 points from the fiscal 2004 to2005) to reach 18,610 million yen, as a result

54.8%.

mainly of increased accounts receivable anddeposits and other factors.

(b) System Solutions Division

Current assets increased by 2,797 million yen

Consolidated sales increased by 60.0% from thefrom March 31, 2005 to 16,303 million yen, while

fiscal 2004 to 6,301 million yen, reflecting sales of

fixed assets declined by 306 million yen to 2,307

our own software, such as the MetaForcemillion yen.

distribution management package and the Easy

The increase in assets was primarily due to theCall Center, and lively EAI-related orders. In

increase in current assets of accounts receivable

addition, with regard to orders from Matsushita

and deposits (funds held in custody by Matsushita

Electric Works, Ltd., there were strong sales ofElectric Works Finance, Ltd.). The decrease insystem development in conjunction with its

fixed assets was caused by the advanced

business reorganization with Matsushita Electric

depreciation of intangible fixed assets and theIndustrial Co., Ltd., SCM system development,

decline of deferred tax assets.

and so on. The ratio of sales from systemsolutions to net sales increased by 5.9 points fromTotal liabilities rose 37 million yen from the end of

the fiscal 2004 to 15.2%.

the previous fiscal year to 7,612 million yen, mainly
due to an increase in accounts payable-other.

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2006

13

Management Discussion and Analysis of Operations

Current liabilities at the end of the current fiscal

Cash flows from operating activities

year increased by 307 million yen from the end ofFunds generated from operating activities during

the previous fiscal year to 7,246 million yen; long-the current fiscal year amounted to 2,469 million

term liabilities declined by 270 million yen to 366

yen (an increase of 197 million yen from the fiscal

million yen.

2004).

The primary reasons for the increase in

Although we had such expenses as 1,724

liabilities were the fact that, for current liabilities,

million yen for income taxes paid, a 1,636 million

although accounts payable-trade declined,

yen increase in accounts receivable, and a 694

accounts payable-other, consumption taxes

million yen decrease in accounts payable, thepayable, expenses payable and income taxes

increase in funds was due to the recording of

payable increased. Also, for long-term liabilities,

income before income taxes and minority interests

deposits received which centered on liability forof 4,682 million yen, as well as the recording of

retirement benefits and employees’ savings forincreased current liabilities of 1,021 million yen andhouse declined.

depreciation and amortizationof 755 million yen.

Shareholders’ equity at the end of the current
fiscal year increased by 2,446 million yen from theCash flows from investing activities

end of the previous fiscal year to 10,985 million

Funds used in investing activities during the

yen as a result of a 2,446 million yen increase incurrent fiscal year amounted to 576 million yen (aretained earnings to 9,074 million yen reflecting

decrease of 4 million yen from the fiscal 2004).

substantial increase in net income that occurredThis decrease was due to expenses of 350

for the current fiscal year.

million yen for the purchases of software, as well
as expenses of 277 million yen for the purchasesof property and equipment.

Liquidity andcapital resources 2006

Cash flows from financing activities
Funds used in financing activities during thecurrent fiscal year amounted to 347 million yen (aAt the end of the current fiscal year cash and cash
equivalents (hereinafter referred to as “funds”)
increased by 1,545 million yen from the beginningof the current fiscal year to 4,625 million yen as aresult of the increase in free cash flows, which was
the result of the increase in net income for thecurrent fiscal year. It is our intent to use thesefunds to improve our facilities in order to facilitate
further growth in the future.

14

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2006

decrease of 23 million yen from the fiscal 2004).
This figure is comprised of the payment ofdividends of 347 million yen.

Risk Management 2006

(3) System for Software Development
MEW-IS is engaged in the development ofsoftware in collaboration with domestic partner(1) Information Security

companies. If any problems in business

If information systems should break down or leaks

performance or deterioration of financialof a customer’s or an individual’s information

confidence should occur for any of the partner

should occur during the course of our group’s

companies that has large-scale transactions withinvolvement in providing system services, any

us, it could affect our business results.

claims for damages from customers or collapse ofWith the goal of providing state-of-the-art

credit resulting from this could have an adverse

systems to our customers, we are constantly

impact on our business results. For this reason,

keeping an eye on trends in the evolution andour group regards information control as a matterstandardization of information technology. It is,of utmost importance to management. In thishowever, impossible to keep pace with all of theserespect, we have set up an Information Security

rapid and diversely varied technologicalManagement Committee, which is under the direct

movements, and any delay in responding to acontrol of the President, to play a central role inpotential advanced technology could have an

promoting and maintaining thorough internal

effect on business performance. At MEW-IS, we

information management within the MEW-IS

are leveraging partnerships with outside

Group. The committee also promotes

developers, with a focus on the Corporate

enlightenment, education, and awareness raisingTechnology Development Division / R&D Center,

for employees concerning information

to ensure our response to a broad range ofmanagement.

technology trends.

(2) Transactions with the Parent Company
MEW-IS is a consolidated subsidiary of Matsushita
Electric Works, Ltd. (MEW), which owns 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
49.2%. While we are expanding sales outside the
MEW Group, any significant changes in businessstrategy in our business relationship with MEW
could exert an impact upon our businessperformance.
In addition, Matsushita Electric Industrial Co.,
Ltd. is the parent company of MEW and also theparent company of our company.

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2006

15

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

Consolidated Balance Sheets
March 31, 2006 and 2005

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

ASSETS

2006

2005

2006

1,560

¥ 1,958$ 13,333

9,376

7,739

80,137CURRENT ASSETS:
Cash and deposits (Note 3)
Accounts receivable - Trade (Note 11)
Inventories (Note 4)

¥

311

1,024

2,658

4,281

2,328

36,590

Deferred tax assets (Note 8)

310

272

2,650

Other current assets

465

185

3,974

16,303

13,506

139,342

227
788

173

1,940

593

6,735

Deposits paid (Note 11)

Total current assets
PROPERTY AND EQUIPMENT:
Buildings
Tools, furniture and fixtures
Construction in progress

4

6

34

Total
Accumulated depreciation

1,019

772

8,709

(481 )(371 )(4,111 )

538

401

4,598

315

318

2,692

Net property and equipment
INVESTMENTS AND OTHER ASSETS:
Investment securities
Investment in associated company
Long-term loans

1

1

9

Software

746

962

6,376

Deferred tax assets (Note 8)

528

683

4,513

Other assets

199

248

1,701

Allowance for doubtful receivables

(20 )

(22 )

(171 )

1,769

2,212

15,120¥ 18,610¥ 16,119$ 159,060

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

16

22

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2006

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2006/08/07

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

LIABILITIES AND SHAREHOLDERS' EQUITY

2006

2005

2006

4,513

$ 32,641

1,108

15,291CURRENT LIABILITIES:
Accounts payable - Trade (Note 11)
Accounts payable - Other (Note 11)¥ 3,819
1,789¥

Income taxes payable

769

688

6,573

Consumption taxes payable

252

35

2,154

Deposits received (Note 5)

59

86

504

Other current liabilities

558

509

4,769

7,246

6,939

61,932

Liability for retirement benefits (Note 6)

333

564

2,846

Deposits received (Note 5)

33

72

282

366

636

3,128

13

5

111

1,040

1,040

8,889

Capital surplus

871

871

7,444

Retained earnings

9,074

6,628

77,556

10,9858,539

93,889¥ 18,610¥ 16,119$ 159,060

Total 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

Total shareholders' equity
TOTAL

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2006

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

Consolidated Statements of Income
The Year Ended March 31, 2006, the Four Month Period Ended March 31, 2005 and the Year Ended November 30, 2004

November 30,

Thousands of
U.S. Dollars(Note 1)March 31,

2006

2005

2004

2006

¥ 41,385¥ 13,895¥ 42,109$ 353,718

COST OF SALES (Notes 9 and 11)

34,316

11,82636,230293,299

Gross profit

7,069

2,069

5,879

60,419SELLING, GENERAL AND ADMINISTRATIVE EXPENSES(Notes 9 and 11)

2,459

740

2,161

21,017

4,610

1,329

3,718

39,402

4
(6 )
44

1
(3)

3
(19 )

34
(51 )
376

Millions of Yen
March 31,

NET SALES (Note 11)

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

19
39
(7 )
(3 )
1

16

(26 )
(14 )
2

333
(60 )
(26 )
9

72

(20)

(35 )

615

INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS

4,682

1,309

3,683

40,017

INCOME TAXES (Note 8):
Current
Deferred

1,756
117

674
(143)

1,474
102

15,009
1,000

1,873

531

1,576

16,0099

2

Other income (expenses) - net

Total income taxes
MINORITY INTERESTSNET INCOME

¥

2,800

(34)

¥

776

76
¥

2,107

Yen

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

18

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2006

¥ 260.42
55.00

¥

72.04
10.00

$ 23,932
U.S. Dollars¥ 195.68
45.00

$

2.23
0.47

AL8814-00_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 1-1.doc

2006/08/07

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

Consolidated Statements of Shareholders' Equity
The Year Ended March 31, 2006, the Four Month Period Ended March 31, 2005 and the Year Ended November 30, 2004

Millions of Yen

BALANCE, DECEMBER 1, 2003

IssuedNumber of
Shares ofCommon Stock

CommonStockCapitalSurplusRetained
Earnings

53,280¥ 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

Net income

776

Cash dividends, ¥30 per share(320)

Bonuses to directors(22)

BALANCE, MARCH 31, 2005

10,656,000

1,040

871

6,628

Net income

2,800

Cash dividends, ¥32.5 per share(346)

Bonuses to directors
BALANCE, MARCH 31, 2006

(8)
10,656,000¥ 1,040¥ 871¥ 9,074

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

BALANCE, MARCH 31, 2005

$ 8,889$ 7,444$ 56,649

Net income

23,932

Cash dividends, $0.28 per share(2,957)

Bonuses to directors
BALANCE, MARCH 31, 2006

(68)
$ 8,889$ 7,444$ 77,556

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

Annual Report 2006

19

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

Consolidated Statements of Cash FlowsThe Year Ended March 31, 2006, the Four Month Period Ended March 31, 2005 and the Year Ended November 30, 2004

November 30,

Thousands of
U.S. Dollars(Note 1)March 31,

2006

2005

2004

2006

¥ 4,682¥ 1,309¥ 3,683$ 40,017

755
(1)
(231)
(44)

289
11
(68 )

1,056
11
(251 )

(4)
6
3
7

(1 )
3
34

(19 )
(3 )
19
14
26

6,453
(9 )
(1,974 )(376 )(1,636)
714
(281)
(694)
1,021
(39)
(64)
(488)
4
(6)
(1,724)(2,692 )(554 )
67
1,915(158 )
8(22 )(1,168 )1(3 )(782 )

570
314
(74 )
(803 )(653 )
(41 )
(44 )
122
3
(19 )
(1,517 )(13,983 )6,103(2,402 )(5,932 )8,726(333 )(547 )(4,171 )34(51 )(14,735 )2,468(643 )

2,272

21,094(1,200 )1,200(10,256 )
10,256(85 )(2,368 )(2,991 )Millions of Yen
March 31,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
Gain on sales of software
Interest income
Interest expense
Write-down of investment securities
Equity in losses of associated company
Changes in assets and liabilities:
Decrease (increase) in accounts receivable
Decrease (increase) in inventories
Decrease (increase) in other current assets
Increase (decrease) in accounts payable
Increase (decrease) 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 (used in) operating activities
INVESTING ACTIVITIES:
Increase in deposits paid
Decrease in deposits paid
Increase in time deposits
Purchases of property and equipment
Purchases of software
Proceeds from sales of software
Purchases of investment securities
Proceeds from sales of investment in associated company
Other - net

59
2

(39 )
(101 )(300 )(95 )(488 )
19
(14 )
(2 )

504
17

(576)

(440 )(580 )(4,923 )FINANCING ACTIVITIES - Dividends paid

(347)

(317 )(371 )(2,966 )NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

1,545(1,400 )1,321

13,205

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

3,080

4,480

3,159

26,325

CASH AND CASH EQUIVALENTS, END OF PERIOD (Note 3)¥ 4,625¥ 3,080¥ 4,480$ 39,530

Net cash used in investing activities

See notes to consolidated financial statements.

20(1,200)
1,200
(10)
(277)
(350)

(34 )
51
26
60

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2006

AL8814-00_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 1-2.doc

2006/09/28

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

Notes to Consolidated Financial Statements
The Year Ended March 31, 2006, the Four Month Period Ended March 31, 2005 and the Year Ended November 30, 2004

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
March 31, 2006 and 2005, 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
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.
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 ¥117 to $1, theapproximate rate of exchange at March 31, 2006. 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.
The Company changed its fiscal year end from November
30 to March 31 in accordance with the resolution at thegeneral shareholders' meeting held on February 16, 2005.
The change conforms the Company's fiscal year to thefiscal year end of the Parent and Matsushita ElectricIndustrial Co., Ltd. (MEI) so that the Company can comply
with the Parent's and MEI's consolidation requirements.
Accordingly, fiscal 2005 included only four months ofoperations whereas fiscal 2006 and 2004 included twelve
months.

2. SUMMARY OF SIGNIFICANT ACCOUNTINGPOLICIESa.

Consolidation - The accompanying consolidated
financial statements include the accounts of theCompany 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.
During the year ended March 31, 2006, MintWave
Co., Ltd. has been excluded from the equity method
as a result of the sale of its shares.

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 - Investment securities aree.

Property and Equipment - Property andf.

Long-lived Assets - In August 2002, the Businessshort-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.

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.

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 15 years for buildings and from 3 to 10
years for tools, furniture and fixtures.
Accounting Council (BAC) issued a Statement of
Opinion, Accounting for Impairment of Fixed Assets,
and in October 2003 the Accounting Standards
Board of Japan (ASBJ) issued ASBJ Guidance No. 6,
Guidance for Accounting Standard for Impairment of
Fixed Assets. These new pronouncements wereeffective for fiscal years beginning on or after April 1,2005 with early adoption permitted for fiscal years
ending on or after March 31, 2004.
The Group adopted the new accounting standard for
impairment of fixed assets as of April 1, 2005. The
adoption of the new accounting standard for
impairment of fixed assets did not have an impact on
the financial position or results of operations of theGroup.
The Group reviews its long-lived assets for
impairment whenever events or changes incircumstance indicate the carrying amount of anasset or asset group may not be recoverable. An
impairment loss would be recognized if the carrying
Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2006

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amount of an asset or asset group exceeds the sumof the undiscounted future cash flows expected toresult from the continued use and eventual
disposition of the asset or asset group. The
impairment loss would be measured as the amountby which the carrying amount of the asset exceeds
its recoverable amount, which is the higher of the
discounted cash flows from the continued use andeventual disposition of the asset or the net selling
price at disposition.

g.

h.

i.

j.

k.

l.

Per Share Information - Net income per share iscomputed 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.

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.

Net income per share and cash dividends per share
were retroactively recalculated as if the stock split(see Note 7) occurred on December 1, 2003. The
weighted-average number of common shares usedin the computation was 10,656,000 shares for 2006,
2005 and 2004.

Retirement Benefits - The Group 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.

m. New Accounting Pronouncements
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 auditorson the accrual basis with a related charge to income,but still permitted the direct reduction of suchbonuses from retained earnings after approval of theappropriation of retained earnings.

Leases - All leases are accounted for as operatingleases. 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.

Income Taxes - Deferred income taxes arerecorded 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.

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 andcorporate auditors must be expensed and are nolonger allowed to be directly charged to retained
earnings. This accounting standard is effective forfiscal years ending on or after May 1, 2006. The
companies must accrue bonuses to directors andcorporate auditors at the year end to which suchbonuses are attributable.

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

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, 2006 and 2005 were as follows:
Thousands of
U.S. Dollars(Note 1)Millions of Yen

22

2006

2005

2006

Cash and deposits
Deposits paid with original maturities of within 3 months
Time deposits over 3 months¥ 1,560
3,075(10)¥ 1,958
1,122$ 13,333
26,282(85)

Cash and cash equivalents¥ 4,625¥ 3,080$ 39,530

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2006

AL8814-00_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 1-2.doc

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4. INVENTORIESInventories at March 31, 2006 and 2005 consisted of the following:Thousands of
U.S. Dollars(Note 1)Millions of Yen

2006

2005

2006

MerchandiseWork in process
Supplies

¥

183
125
3

¥ 377
644
3

$ 1,564
1,068
26

Total

¥

311

¥ 1,024$ 2,658

5. DEPOSITS RECEIVED
Deposits received at March 31, 2006 and 2005 consisted of the following:Thousands of
U.S. Dollars(Note 1)Millions of Yen

2006
Savings for house
Other

2006

¥

56
36
92
(59 )

¥

120
38
158
(86 )

$

479
307
786
(504 )

¥

33

¥

72

$

282

Total
Less current portionLong-term debt, less current portion

2005

Interest rates applicable to the savings for house were 6.0% at March 31, 2006 and 2005.
Annual maturities of deposits received at March 31, 2006, were as follows:
Millionsof YenThousands of
U.S. Dollars

Year Ending March 31
2007
2008
2009
2010
2011 and thereafter

¥ 59
1
1
1
30

$ 504
9
9
9
255

Total

¥ 92

$ 786

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2006

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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 annuity payments from the non-contributory funded defined benefit pension plan.
Employees are entitled to larger payments if the termination is involuntary, by retirement at the mandatory retirementage, 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 "points-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.
The liability for employees' retirement benefits at March 31, 2006 and 2005 consisted of the following:Thousands of
U.S. Dollars(Note 1)Millions of Yen

2006

2005

2006

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

¥ 2,906(2,220 )686(574 )
221¥ 2,676(1,636)
1,040
(713)
237

$ 24,838(18,975 )
5,863(4,906 )1,889

Net liability

¥

¥

$

333

564

2,846

The components of net periodic benefit costs for the year ended March 31, 2006, the four month period ended
March 31, 2005 and the year ended November 30, 2004 are as follows:
Thousands of
U.S. Dollars(Note 1)Millions of Yen

March 31,
2005
2006

November 30,
2004

March 31,2006

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

¥ 164
67
(49 )
(18 )
53

¥

54
22
(15 )
(6 )
17

¥

182
70
(48 )
22
7

$

1,402
573
(419 )(154 )
453

Net periodic benefit costs

¥ 217

¥

72

¥

233

$

1,855

Assumptions used for the year ended March 31, 2006, the four month period ended March 31, 2005 and the year
ended November 30, 2004 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

24

Matsushita Electric Works Information Systems Co., Ltd.

Annual Report 2006

2006

2005

2004

2.5%
3.0%
7years15years

2.5%
3.0%
7years15years

2.5%
3.0%
7years15years

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7. SHAREHOLDERS' EQUITY
Through May 1, 2006, Japanese companies are subject to the Commercial Code of Japan (the "Code").
The Code requires that all shares of common stock be issued with no par value and at least 50% of the issue priceof new shares is required to be recorded as common stock and the remaining net proceeds are required to bepresented as additional paid-in capital, which is included in capital surplus. The Code permits Japanesecompanies, upon approval of the Board of Directors, to issue shares to existing shareholders without consideration
by way of a stock split.
accounts.

Such issuance of shares generally does not give rise to changes within the shareholders'

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.
The Code also provides that an amount of 10% or more of the aggregate amount of cash dividends and certain
other appropriations of retained earnings associated with cash outlays applicable to each period (such as bonuses
to directors) shall be appropriated as a legal reserve (a component of retained earnings) until the total of suchreserve and additional paid-in capital equals 25% of common stock. The amount of total legal reserve andadditional paid-in capital that exceeds 25% of the common stock may be available for dividends by resolution of theshareholders after transferring such excess in accordance with the Code. In addition, the Code permits thetransfer of a portion of additional paid-in capital and legal reserve to the common stock by resolution of the Board of
Directors.
The Code allows Japanese companies to purchase treasury stock and dispose of such treasury stock upon
resolution of the Board of Directors. The aggregate purchased amount of treasury stock cannot exceed theamount available for future dividends plus the amount of common stock, additional paid-in capital or legal reservethat could be transferred to retained earnings or other capital surplus other than additional paid-in capital upon
approval of such transfer at the annual general meeting of shareholders.
In addition to the provision that requires an appropriation for a legal reserve in connection with the cash outlays, theCode also imposes certain limitations on the amount of capital surplus and retained earnings available for dividends.
The amount of capital surplus and retained earnings available for dividends under the Code was ¥9,080 million($77,607 thousand) as of March 31, 2006, based on the amount recorded in the parent company's general books ofaccount.
Dividends are approved by the shareholders at a meeting held subsequent to the end of the fiscal year to which thedividends are applicable. Semiannual interim dividends may also be paid upon resolution of the Board of
Directors, subject to certain limitations imposed by the Code.
On May 1, 2006, a new corporate law (the "Corporate Law") became effective, which reformed and replaced theCode with various revisions that would, for the most part, be applicable to events or transactions which occur on orafter May 1, 2006 and for the fiscal years ending on or after May 1, 2006.
Law that affect financial and accounting matters are summarized below;

The significant changes in the Corporate(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
the Board of Directors, (2) having independent auditors, (3) having the Board of Corporate Auditors, and (4) the
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term of service of the directors is prescribed as one year rather than two years of normal term by its articles ofincorporation, the Board of Directors may declare dividends (except for dividends in kind) if the company hasprescribed so in its articles of incorporation.
The Corporate Law permits companies to distribute dividends-in-kind (non-cash assets) to shareholders subject toa certain limitation and additional requirements.
Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if the articles
of incorporation of the company so stipulate. Under the Code, certain limitations were imposed on the amount of
capital surplus and retained earnings available for dividends. The Corporate Law also provides certain limitations
on the amounts available for dividends or the purchase of treasury stock. The limitation is defined as the amountavailable for distribution to the shareholders, but the amount of net assets after dividends must be maintained at noless 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
and additional paid-in capital equals 25% of the common stock. Under the Code, the aggregate amount ofadditional paid-in capital and legal reserve that exceeds 25% of the common stock may be made available fordividends by resolution of the shareholders. Under the Corporate Law, the total amount of additional paid-in
capital and legal reserve may be reversed without limitation of such threshold. The Corporate Law also provides
that common stock, legal reserve, additional paid-in capital, other capital surplus and retained earnings can betransferred among the accounts 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 acquisition rights, which were previously presented as a liability, are now presented
as a separate component of shareholders' 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 shareholders' equity or
deducted directly from stock acquisition rights.
On December 9, 2005, the Accounting Standards Board of Japan (ASBJ) published a new accounting standard forpresentation of shareholders' equity. Under this accounting standard, certain items which were previously
presented as liabilities are now presented as components of shareholders' equity. Such items include stockacquisition rights, minority interest, and any deferred gain or loss on derivatives accounted for under hedge
accounting. This standard is effective for fiscal years ending on or after May 1, 2006.

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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 year ended March 31, 2006 and the four month period
ended March 31, 2005, and 41.9% for the year ended November 30, 2004, respectively.
The tax effects of significant temporary differences, which resulted in deferred tax assets and liabilities at March 31,
2006 and 2005, were as follows:

2006

Millions of Yen

2005

Thousands of
U.S. Dollars(Note 1)

2006

Deferred tax assets:
Accrued enterprise taxes
Depreciation
Retirement benefits
Accrued bonus to employees
Others

¥ 59
394
115
146
124

¥ 53
454
178
155
115

$ 504
3,368
983
1,248
1,060

Net deferred tax assets

¥ 838

¥ 955

$ 7,163

For the year ended March 31, 2006, the four month period ended March 31, 2005 and the year ended November 30,
2004, 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
¥13 million ($111 thousand), ¥3 million and ¥49 million for the year ended March 31, 2006, the four month period
ended March 31, 2005 and the year ended November 30, 2004, respectively.

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10. LEASESThe Group leases certain computer equipment and other assets.
Total lease payments under finance leases for the year ended March 31, 2006, the four month period ended March
31, 2005 and the year ended November 30, 2004 were ¥2,509 million ($21,444 thousand), ¥1,013 million and¥2,741 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 year ended March 31, 2006, the four month period ended March
31, 2005 and the year ended November 30, 2004 was as follows:
Millions of Yen

2006

Tools,
Furniture
andFixtures

SoftwareAcquisition cost
Accumulated depreciation¥ 7,748(4,205 )Net leased property¥ 3,543

2005

Total

Tools,
Furniture
andFixtures

SoftwareTotal¥ 1,212(450)¥ 8,960(4,655)¥ 9,106(4,467)

¥ 850
(435)

¥ 9,956(4,902)¥ 762¥ 4,305¥ 4,639¥ 415¥ 5,054

Thousands of U.S. Dollars

2006

Tools,
Furniture
andFixtures

SoftwareTotal

Acquisition cost
Accumulated depreciation$ 66,222(35,940 )$ 10,359(3,846)$ 76,581(39,786 )Net leased property$ 30,282$ 6,513$ 36,795

Obligations under finance leases:
Thousands of
U.S. Dollars(Note 1)Millions of Yen

28

2006

2005

2006

Due within one year
Due after one year

¥ 2,108
2,510¥ 2,366
2,944$ 18,017
21,453Total¥ 4,618¥ 5,310$ 39,470

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Depreciation expense and interest expense under finance leases:
Thousands of
U.S. Dollars(Note 1)Millions of Yen

March 312006
2005

November 30,
2004

March 31,2006

Depreciation expense
Interest expense¥ 2,39780¥ 1,000
37

¥

2,646
111

$

20,487684

Total¥ 2,477¥ 1,037

¥

2,757

$

21,171

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 March 31, 2006 and 2005 and transactions for the year ended March 31, 2006, the four month period
ended March 31, 2005 and the year ended November 30, 2004 with the Parent, its consolidated subsidiaries and its
associated companies and the entity over which the Company has the ability to exercise significant influence wereas follows:
Thousands of
U.S. Dollars(Note 1)Millions of Yen

March 31,
2006
2005
Sales
Purchases
Lease and rental expense
Gain on donated assets¥ 24,468
272
838
39

¥ 7,825
995
458

Millions of Yen

Accounts receivable
Accounts payable
Deposit paid

2006

2005

¥ 4,831278
4,267¥ 3,451907
2,321

November 30,
2004¥

22,242248
855

March 31,2006$

209,128
2,325
7,162
333

Thousands of
U.S. Dollars(Note 1)

2006$

41,291
2,376
36,47012. SUBSEQUENT EVENT
Appropriation
The following appropriations of retained earnings at March 31, 2006 were approved at the Company's shareholders
meeting held on June 14, 2006:

Year-end cash dividends, ¥32.50 ($0.28) per share
Bonuses to directors

Millionsof YenThousands of
U.S. Dollars

¥ 346
25

$ 2,957
214

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Corporate Data
Matsushita Electric Works Information Systems and Consolidated Subsidiaries
As of March 31, 2006

Matsushita Electric Works Information Systems Co., Ltd.

Board of Directors

Head office:President:
Takeyoshi Kawamura

16th Fl., Applause Tower
19-19, Chayamachi, Kita-ku,
Osaka 530-0013, JAPANSenior Managing Directors,
Member of the Board:
Yasuhiko Nose
Mitsuo Mizuno

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:

482

Stock listing:Tokyo Stock Exchange, First Section

Managing Director,
Member of the Board:
Suehiro Kanaya
Directors, Member of the Board:
Toshihiro Ono *1
Shinichiro Satani *1

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

Standing Statutory Auditor:

Number of shareholders: 5,754

Tatsuji Shinkai *2
Statutory Auditors:
Kuniaki Watanabe *2

Major Shareholders

Makoto Ishii

Shareholder

Number ofsharesPercentage ofvoting rights (%)

Matsushita Electric Works, Ltd.

6,787,200

63.70

Tsutomu Toda

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

243,600

2.28

Kazuhiro Tanetani

MEW-IS Employee Stock Ownership Association

222,700

2.09

Japan Trustee Services Bank, Ltd. (Trust Account)

219,900

2.06

Mitsubishi UFJ Trust andBanking Corporation (Trust Account)

82,0000.76

Morgan Stanley & Co. Inc.

56,8000.53

Japan Securities Finance Co., Ltd.

53,7000.50

The Dai-ichi Mutual Life Insurance Company(Pension Special Account)

48,6000.45

Goldman Sachs International

47,2000.44

Trust & Custody Services Bank, Ltd.
(Securities Investment Fund Account)

46,5000.43Managing Executive Officers:
Takashi Yamamura

Executive Officers:
Mikio Okuda
Shinji Ariga*1 outside director*2 external auditor

Disclaimer
Annual Report 2006 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.

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/

This annual report was printed on 100% recycled paper.

Printed in Japan