Annual Report 2011
For the Year Ended March 31, 2011

Panasonic Electric Works Information Systems Co., Ltd.

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

Contents
p.1 Consolidated Financial Highlights
p.2 Business Model and Review of Operations
p.4 To Our Shareholders
p.9 Special Feature: Toward the Next IT Infrastructure
p.12 Main Initiatives during the Past Year
p.14 Corporate Governancep.15 CSR
p.16 Financial Section
p.16 Management’s Discussion and Analysis
p.18 Risk Factors
p.20 Consolidated Balance Sheets
p.22 Consolidated Statements of Income andComprehensive Income

p.23 Consolidated Statements of Changes in Equity
p.24 Consolidated Statements of Cash Flows
p.25 Notes to Consolidated Financial Statements
p.34 Independent Auditors’ Reportp.35 Corporate Data/Stock Information

Consolidated
Financial Highlights

Panasonic Electric Works Information Systems Co., Ltd.

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

Annual Report

Millions of Yen

Thousands of U.S.
Dollars (Note 1)

2011

2010

2009

2008

2007

2011

¥ 34,221¥ 36,650¥ 37,320¥ 39,066¥ 40,226$ 412,301

Operating income

4,205

4,371

4,632

4,877

5,014

50,663

Net income

2,581

2,563

2,783

2,842

3,001

31,096

Net cash provided by operating activities¥ 3,154¥ 4,483¥ 3,864¥ 2,848¥ 3,742$ 38,000

Net cash used in investing activities（2,862）（2,829）（3,866）（1,921）（3,337）（34,482）

Net cash used in financing activities

（821）

（863）

（710）

（639）

（639）

（9,891）

Cash and cash equivalents

4,230

4,759

3,968

4,679

4,391

50,964¥ 27,317¥ 25,146¥ 23,211¥ 21,185¥ 21,307$ 329,120

21,35919,65917,604

15,552

13,346257,337¥ 242.25¥ 240.51¥ 261.13¥ 266.78¥ 281.65

Cash dividends

65.00

65.00

75.00

65.00

55.00

Operating income to net sales

12.3%

11.9%

12.4%

12.5%

12.5%

Return on equity

12.6

13.8

16.8

19.7

24.7

Equity ratio

78.2

78.2

75.7

73.3

62.5

Net sales

Total assets
EquityYen

Basic net income (Note 2)

U.S. Dollars (Note 1)

$

2.92
0.78

Notes: 1. Amounts expressed in U.S. dollars are calculated using the exchange rate prevailing on March 31, 2011 of ¥83 to US$1.00.
2. Diluted net income per share is not indicated here, because there are no potentially dilutive shares.

Net Sales

Operating Income/Operating Income to Net Sales■Operating Income (Millions of Yen)
Operating Income to Net Sales (%)(Millions of Yen)

Net Income

Basic Net Income per Share(Millions of Yen)

(Yen)

281.6540,226 39,066

5,014
37,320 36,650

4,877

3,001
4,632

34,221

12.5

2007 2008 2009 2010 2011

12.5

12.4

4,371

11.9

4,205

2,842 2,783

266.78 261.13
240.51 242.25

2,563 2,581

12.3

2007 2008 2009 2010 20112007 2008 2009 2010 20112007 2008 2009 2010 2011

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

1

Business Model andReview of Operations

System Services● System operation services at data centers● Maintenance and operation of customer systems

Build stronger
relationships

New customers

Breakdown of
Net Sales

64.7%

Information systems have become indispensible forcorporate management. Various business systems arebeing put in place to enable companies to operate 24
hours a day, 365 days a year. These operations play avital role in business continuity. From two data center
locations, the Osaka IDC and Osaka Central Data
Center, the Group maintains the safety and security ofcustomer systems while providing operation services
that meet customer needs.

Enhancing
Stock-Typed Business

System Solutions
New customers
System proposal
Breakdown of
Net Sales

Solution proposal

18.6%
Existing customer

We are seeing significant changes in the operating
environment, and customers are looking for nothing
short of a revolution in productivity and efficiency
enhancements, as they continue to renovate theirbusinesses to enhance their competitive advantage. We
strive to deliver solutions strategies that make use of IT
to assist our customers in these and all their goals.

Offering Multivendor
Services

System and Communications Equipment Business● Sales of computers, servers, andcommunications equipment● Network and facility construction

Breakdown of
Net Sales

16.7%
2

}

● Core system architecture solutions● IT infrastructure architecture solutions● Develop and provide proprietary packaged software

When offering solutions to our customers, the Groupalso proposes the most suitable system equipment forthe customer. We call this a “multi-vendor” approach.
We leverage a track record we have cultivated over
our long history of operations in Japan and overseas,by testing every device available on the market for
adoption. Based on our own experience, we confidently
propose flexible combinations not tied to specificmanufacturers.

Panasonic Electric Works Information Systems Co., Ltd.

Annual Report}

Performance in the Year to March 31, 2011

Net Sales by Business Segment■ System Services■ System Solutions■ System and Communications
Equipment Business(Millions of Yen)

While we were successful at acquiring new customers for our system
operation services at the Osaka Central Data Center, continued downward
pressure on the price of services for existing customers resulted in sales
and gross margins (ratio of gross profits to net sales) that were lower thanin the previous year.

Future Strategy

8,878

7,051

5,951 6,647

7,827 8,349 7,580

5,699

6,958

23,519 23,664 23,788 23,045

6,367
22,155

As interest in cloud computing and other developments grows, we arestarting to see changes at IT companies, which now want to make useof their assets rather than simply hold onto them. Looking ahead, we
expect the need for maximized use of IT at a reasonable cost to continue
to increase. The Panasonic Group will meet ongoing customer needs
primarily through “Nextructure,” our next-generation information systeminfrastructure solution, which was introduced in November 2010.

Performance in the Year to March 31, 2011

2007

2008

2009

2010

2011

Despite the contribution to sales from ERP system orders and work
flow package sales, income fell on the partial postponement of systemdevelopment projects for Panasonic Electric Works, as part of PanasonicGroup business restructuring. The gross margin was much higher than in
the previous year.

Future Strategy

Net Sales by Business Segment(FY 3/2011)

Outside the Panasonic ElectricWorks Group

30.4%

69.6%

We are steadily proceeding with IT system development and otherinitiatives as part of overall Panasonic Group business restructuring efforts
scheduled for completion in January 2012. Furthermore, the demandfor ERP and other packages continues to grow as the need for speed inmanagement increases. We strive to provide customers with more thanjust systems and applications; we aim to supply them with user-friendly
corporate innovation that quickly gives the customer the best and mostappropriate solutions.

Performance in the Year to March 31, 2011
The impact of machinery renewal postponements and purchase restraints
resulted in lower system equipment sales and revenues. We exceeded
the high gross margin of the previous year through sales of high-valueadded services promoting careful business selection and focus.

Future Strategy
Panasonic ElectricWorks GroupIn December 2010, we signed an exclusive agent agreement with
Egenera, Inc. for sales of PAN Manager® Software for the Fujitsu blade
server PRIMERGY BX900 in the Japanese market. Going forward, we will
also focus efforts on incorporating our rich experience and expertise into
the PAN Manager® solutions products we sell.

3

To Our Shareholders

Further Accelerating Our Business to Achieve
Medium-Term Management Plan Targets

Kazuhiro
Ka
K
azu
zuhi
zuh
hiro
ro M
Maegawa
a g
ae
ga
awa
wa
President
Pr
Pre
P
res
re
sid
si
iden
id
ent
e
nt
n
t

Introduction

To begin, I would like to express my deepest condolences to all who
were affected by the Great East Japan Earthquake, which struck
on March 11, 2011. Our thoughts are with the people in the affected
region, and we hope sincerely for the earliest possible recovery.
The fiscal year ended March 31, 2011 was the first year of our
medium-term management plan—a year of steadily implementing all
manner of measures. As we move on to the next steps of the plan
during the fiscal year ending March 31, 2012, we will be placing amajor focus on further accelerating our business.

4

Panasonic Electric Works Information Systems Co., Ltd.

Annual Report

Performance for the Fiscal Year Ended March 31, 2011
Net Sales

Operating Income

Net Income¥ 34,221¥ 4,205¥ 2,581(Fiscal Year Ended March 31, 2010:¥36,650 million)(Fiscal Year Ended March 31, 2010:¥4,371 million)(Fiscal Year Ended March 31, 2010:¥2,563 million)

Year on Year

Year on Year

Year on Year

–6.6%

–3.8%

+0.7%

millionOperating
PerformancemillionmillionThe Year in Review (Market Environment and Business Conditions)
Looking back on the fiscal year ended March 31, 2011, the Japanese economy
was in a phase of gradual recovery. However, the overall situation remained
opaque, owing to the impact of long-term yen appreciation, a slowdown in
the growth of emerging market economies that had propped up the recovery,
anxieties about the future business climate in the United States and China, andthe loss of effectiveness of economic stimulus measures in Japan. Amid thesecircumstances, the Great East Japan Earthquake struck, throwing the economy
into a tailspin and confounding its long-term outlook.
In the IT service industry, conditions remained difficult: although the downturnin corporate capital investment appeared to be ending, companies continued torestrain IT investment.
This was the business environment into which we began introducing
measures put in place for the first year of our management plan, which dovetails
into our management vision for 2012 as “Move to Delight—Aiming to Create

Net Sales/Operating Income/Operating Income to Net Sales■ Net Sales (Millions of Yen)
■ Operating Income (Millions of Yen)
Operating Income to Net Sales (%)

12.5

12.5

40,226 39,066

12.4

11.9

Delight, not merely Satisfaction.” Based on the medium-term management
plan, we pursued initiatives according to three themes: expand sales outside
the Panasonic Electric Works Group to achieve an external sales ratio of 35%;

12.3

reinforce partnerships with key customers; and strengthen management
practices, maintaining a consolidated operating margin of around 12% while

37,320 36,650

5,014 4,877

investing in the cultivation of new business and new technologies.
34,221

4,632 4,371
4,205

Medium-Term Management Plan: First-Year Results,
State of Progress
During the fiscal year ended March 31, 2011, keeping in mind the businessenvironment plagued by a drop in prices for our services, we forged ahead
toward the objectives of our medium-term business plan, building infrastructure to2007 2008 2009 2010 2011

reinforce our sales capabilities and working to expand our development structure.
Specifically, we relocated and expanded our office in Tokyo in June 2010 and
expanded our sales and development structure within the metropolitan area.
5

To Our Shareholders

In October 2010, we began to offer a series of products, services and solutions
that achieve “best” and “optimal” results for customers considering the use of cloudcomputing. As a result of these efforts, during the fiscal year ended March 31, 2011,
we expanded sales outside the Panasonic Electric Works Group to achieve an
external sales ratio of 30.4%, up 1.1 percentage points from the 29.3% recorded in
the preceding fiscal year.
The medium-term management plan introduces five growing business areas:
infrastructure optimization, design process reform, system integration for corefunctions, IT operations service and collaboration with Panasonic Electric Works Co.,
Ltd. Of these, we proposed “Nextructure” as a systematic solution for infrastructure
optimization and IT operations service, and under the cooperation with PanasonicElectric Works Co., Ltd., we started to make IT-based solution proposals for thecompany’s “comprehensive solution business.”
Under the theme of reinforcing partnerships with key customers, we proactively
proposed IT innovations to support the growth strategies of our largest customer,
Panasonic Electric Works Co., Ltd. During the year, Panasonic Corporation
announced the conversion of Panasonic Electric Works Co., Ltd. and Sanyo ElectricCo., Ltd. to wholly owned subsidiaries. As a result, some of the orders for systemdevelopment projects that we expected to receive during the year were postponed.
At the same time, however, this change represents an opportunity for us toparticipate in new Group business restructuring on the IT front.
To strengthen management practices, while working on the one hand to rationalize
and boost the efficiency of our operations, on the other hand we strove to cultivate
new businesses and technologies and made a proactive effort to develop businessin new markets. As a result, we maintained the profit level that meets our target, as
our consolidated operating margin reached 12.3%. We believe that we responded tocustomers’ needs with flexibility and promptness by introducing project teams in the“Nextructure” and thin client businesses.

Medium-Term Management Plan (FY 3/2011 - FY 3/2013) ̶ Four Major Strategies ̶

1.

Expand sales outside thePanasonic Electric Works Group■ Approach large/mid-sized companies with IT

rationalization proposals■ Selection and concentration of
new/priority business■ Build infrastructure for overseas development2.

Reinforce partnerships withkey customers■ Initiatives to accelerate reform of IT structure■ Cultivate engineering IT

New Theme

4.

Business reorganization of
the Panasonic Group■ Participation in network and

IT infrastructure development

63.

Strengthen management
practices■ Structural reforms■ Thorough rationalization■ Human resource development■ Nurture the “quality-first” mindset

Panasonic Electric Works Information Systems Co., Ltd.

Annual Report

Initiatives for theUpcoming Year

Market Environment (Forecast)
In the upcoming fiscal year, we anticipate new demand stemming from thegrowing prevalence of cloud computing and smartphones in Japan. However,affecting domestic IT investment, the Great East Japan Earthquake, which
struck on March 11, 2011, has caused business sentiment to worsen, and we
expect the trend of spending restraint to continue.

Our Initiatives and Strategies
The fiscal year ending March 31, 2012 marks the second year of the Group’s
medium-term management plan. We will forge ahead with initiatives designed tohelp us reach our objectives.
Specifically, we will progress in the five growth fields, as well as striving to create
new solutions that leverage Group strengths. We will also continue enhancing
the sales and development structures at our Tokyo office that will enable us
to respond more carefully and promptly to customers’ needs, reinforcing ouroperations in the Tokyo metropolitan area.
Net Sales by Customer Type■ Outside the Panasonic Electric Works Group(Billions of Yen)
■ Panasonic Electric Works Group (Billions of Yen)

Meanwhile, completing IT system development to support the businessrestructuring of the Panasonic Group is one of our top objectives for the fiscal
year ending March 31, 2012. We will put forth every effort on a companywide

40.0
36.6 34.2 37.5 14.0
12.1 35.0％
10.7
Outsidethe Panasonic
29.3％ 10.4 32.4％
Electric Works
30.4％
Group

basis to ensure the success of these activities.

25.9
25.3 26.0
70.7％ 23.8 67.6％ 65.0％
69.6％

will conduct server integration and introduce videoconferencing to reduce costs

In terms of bolstering our management constitution, we will boost the flexibilityof our structure, and continue to implement structural reforms. Furthermore, we
and move forward with rationalization. We also intend to make steady steps

Panasonic
Electric Works
Group

toward cultivating our human resources, emphasizing a quality focus, as we work
to go beyond merely satisfying our customers to delighting them.

2010 2011 2012 2013
(Plan)(Plan)

7

To Our Shareholders

Impact of Our Parent Company Becoming a Wholly Owned
Subsidiary of Panasonic
As discussed earlier, in April 2011 Panasonic converted Panasonic ElectricWorks Co., Ltd. and Sanyo Electric Co., Ltd. to wholly owned subsidiaries. The
Panasonic Group also plans to drastically restructure its operations in January
2012 into the three business categories: consumer, devices, and solutions.
We expected to take part wholeheartedly in the IT system development
accompanying this business restructuring. The impact of this participation has
been incorporated into our operating performance forecast.

Shareholder
Returns

Shareholder Return Policy and Dividends to Be Paid in This andthe Next Year
The Company considers the return of profits to shareholders a priority. While
keeping in mind the need to replenish internal reserves, reinforcing our managementfoundation for long-term growth, our aim is to ensure steady dividends, taking aproactive stance in linking dividends to financial performance.
The Articles of Incorporation provide that March 31, September 30, and otherCash Dividends/
Consolidated Payout Ratio■ Cash Dividends (Yen)■ Consolidated Payout Ratio（％）

55.0

we plan to pay stable annual dividends of ¥55 per share. While taking into overall
65.0

28.7
24.4

from surplus funds and that the Board of Directors shall be the decision-making
body concerning the dividends from surplus funds. For the foreseeable future

75.0
65.0

days specified by the Board of Directors shall be the record dates for the dividends

65.0

consideration the fund-raising environment, financial conditions and the payout
ratio, we aim to also reflect our consolidated operating performance in dividends.

27.0

26.8

19.5

In the fiscal year ended March 31, 2011, based on our policy of a stable dividendof ¥55 plus a performance-linked dividend, we set total dividends per share at¥65. Also for the year to March 31, 2012, we plan to pay interim and year-end
dividends of ¥27.5 per share, plus a performance-linked dividend of ¥5, bringing
total dividends to ¥65 per share. We ask for the ongoing guidance and support ofour investors as we face the challenges that lie ahead.

2007 2008 2009 2010 2011

Kazuhiro Maegawa
President

8Panasonic Electric Works Information Systems Co., Ltd.

Special Feature:

Toward the Next
IT Infrastructure“

Annual Report

With IT systems are Shifting in Focus from “Ownership” to “Usage.”
Issues to Consider as We Explore the Future of IT Systems.

”

Why optimize In today’s information society, we are able to acquire any information anytime,
infrastructure anyplace. Systems that manage information constantly surging like a flood are
indispensible to corporate management. However, the explosive growth in systems
now? resulting from advances in information technology has put the information system
departments of some corporations in a quandary over how to manage all thattechnology. They face serious problems involving management time, labor and power
consumption.
Furthermore, for the past several years, the IT industry has endured amid a severe
economic environment where not only has IT investment been largely curtailed, but
the way corporations think about IT in general has changed significantly. There has
been a shift toward “management without ownership,” in other words, from ownership
to usage of IT systems. Of these, the system currently attracting the most attention iscloud computing (hereinafter referred to as “cloud”).
In general, the cloud refers to public cloud where an unspecified number of users
are provided access to the cloud through the internet. For example, free web-based
email is one instance of public cloud. On the other hand, an increasing number ofcorporations have created a private cloud environment on their intranets accessible bya limited number of specified users.

Infrastructure
Optimization to
Take IT to the
Next Level

Processes backed up byhands-on experience

Cutting-edge technologies perfectedin the workplace

Solutions carefully selected fromthe user’s perspective

The “Nextructure” Concept

However, in both situations, the cloud is only being applied in a very limited sectionof the company. This is because there are still many obstacles to clear before thecloud can be implemented company-wide, including security, internal controls anddata protection. In pursuit of the easy and the popular over the short-term, we may, inthe process, be inadvertently creating irreversible problems for IT infrastructure.
What do we mean by “best” and “optimal”? If each corporation were to makeselections based solely on their own experience and predictions, they would ultimately
have to make tough decisions that they have never experienced.
Going forward, cloud compatibility will be an essential element of IT infrastructure
structural reforms. However, just as you can’t travel overseas from Japan on abus, we think it would be very difficult to realize IT infrastructure structural reforms
focused only on the cloud. Rather, to be successful, we believe several methods
should be used, just like airplanes, trains and buses are all used to move travelers toa single destination. Our next-generation information system infrastructure solution,“Nextructure,” was created to provide support for just such an endeavor.
One of Nextructure’s special features is that it provides solutions based on its own
real experiences. We are creating realistic processes in line with the various intentionsof our customers who wish to use the cloud, by fusing together processes backed
up by practical experiences, advanced technologies well-tempered through onsite
experiences and solutions carefully selected from the user perspective.
9

Special Feature:

Toward the Next IT Infrastructure

The Origin of “Nextructure”/
Three effects experienced by the Company that realized
infrastructure optimization with“integration by virtualization”
There was a period when we also worried about the speed at which information systems were growing. As open
systems spread, the number of servers required for operation shot up dramatically—before we knew it, we had over
1,000 servers ourselves.
In 2004, we began conducting server consolidation. Ultimately, these servers end up as virtualized “Egenera Blade
Frame®” blade servers, made by a U.S. firm, Egenera, Inc. Virtualized servers not only save space and energy, but theyalso dramatically reduce the number of unnecessary servers and operator-hours. At the same time, to ensure that we
do not lose the merits of the open system, and to clarify the roles of development and operations, we consolidated
operations across the entire company, launched initiatives to unify management in each system and were successful
at standardizing infrastructure revolving around Blade Frame®. Before the word “cloud” was even on anyone’s lips, we
had already successfully created private clouds for which we received high acclaim.

1.
2.
3.
3.

The management of 380 servers is handled by two internaland one external employees !

Racking, as done in the past

Saving ¥57million per year (Note 1)

Effect experienced
Management of a core system server responsible for mission criticalby the company
business affairs normally requires seven to eight specialized personnel.
After consolidation using the Blade Frame ® server, our 380 remaining
servers are operated by just three employees. A large portion of the laborcosts is incurred at data center operations, which is having a major positive
impact on cost.
Note 1: According to an estimation by the company

BladeFrame® racking

It only takes 30 minutes to get one server ready !
Urgent orders from our application department can be accommodated.
Server construction time reduced by 94% (Note 2)

Effect experienced Blade Frame® contains an image copy function that can copy the setup of an active server. Thisby the company
function lessens the burden of server setup when a new server is installed, because individual
manual installation from OS is not required, enabling the install and start-up process that usuallytakes an entire day to be shortened to about 30 minutes.
Also, the virtualization function allows flexible allocation of resources, so an urgent request fora production or test environment from onsite development can now be accommodated.
Note 2: According to an estimation by the company

Two and a half minutes to recovery (Note 3). Full-auto failover completed !
From broken machine to replacement machine in two and a half minutes

Effect experienced Blade Frame® excels at recovering from a fault. As soon as a fault occurs,by the company
the recovery process begins immediately and automatically as the machine
switches into a standby machine, and the whole process of switching andrestarting the blade will be completed in a several minutes. Moreover, even
if there have been changes to server settings (including applications) the
failover function will remain unaffected.
Note 3: Includes OS start up completion time (based on our estimates using Egenera Blade Frame ®)hardware check, memory check and BIOS start-up time, DBMS and file system recovery time.

10Panasonic Electric Works Information Systems Co., Ltd.

Annual Report

This Year’s Progress

Toward the provisionof the necessary
infrastructure forthe cloud era

Established a cloud technology
promotion groupwith the Daiwa Institute of
Research Groupand NS Solutions

On October 5, 2010, Panasonic Electric Works Information Systems announced
that it had reached an agreement with the Daiwa Institute of Research Groupand NS Solutions to establish a cloud technology promotion group with theobjective of applying cloud technology to core systems from the perspectiveof IT spin-off companies. The three companies will work together in an attempt
to improve quality and expand the areas of application for cloud infrastructure
through the technical validation of cloud devices and products.

Signed an exclusive agent agreement for
the Japanese market with Egenera, Inc.
for PAN Manager® Software for the
Fujitsu blade server PRIMERGY BX900

On December 2, 2010, we signed an exclusive agent agreement for theJapanese market with Egenera, Inc. for PAN Manager® Software for the Fujitsu
blade server, PRIMERGY BX900.
Going forward, we will make use of the wealth of experience gained
through using the PAN solutions over a long period of time, as a large user ofBladeFrame® and the first Asian user of the Dell PAN System, in providing total
services from providing a system to its maintenance support as the exclusive
agent of “PAN Manager® Software for Fujitsu”.

11Main Initiatives
during the Past Year2010
Topics

Apr.

May
Jun.

April 2010
• Kazuhiro Maegawa appointed President.
• Medium-term management plan launched.

May 2010
Consolidated subsidiary Panasonic Electric Works Net Solutions
Co., Ltd. launched sales of “Major Flow Time,” a web-based
attendance management system in response to revisions in the
Labor Standards Law.

June 2010

Our Tokyo facility moved (and expanded)from Chuo Ward to Minato Ward, where the
new Tokyo office was established.

Jul.
Aug.

July 2010
Announcement that Panasonic Corporation would make
Panasonic Electric Works Co., Ltd. and Sanyo Electric Co.,
Ltd. wholly-owned subsidiaries from April 2011.

August 2010

Participated in “Stock Navigation
Conference” held for individual
investors, with content streamed live
over the Internet.

Oct.
12

October 2010
Joined with the Daiwa Institute of Research Group and
NS Solutions to establish a cloud technology promotion group.
(

Please see p. 11 for details)

Panasonic Electric Works Information Systems Co., Ltd.

Annual Report

Nov.

November 2010

• Began provision of next-generation information system infrastructure
solution “Nextructure.” (Please see p. 9 for details)• Participated in Green Osaka, a citywide
Osaka cleanup program, as part of our social
responsibility activities.

Dec.

December 2010

Launched sales of “eneview” environmental monitoring software for monitoring energy
at data centers.

Signed an exclusive agent agreement for the Japanesemarket with Egenera, Inc. for PAN Manager® Software.
(

Please see p. 11 for details)

2011
TopicsFeb.

February 2011
The IT service management systems
in our data service centers received
ISO20000 certification.
13

Corporate GovernanceAchieving Swift and Appropriate Decision Making andSupervisory and Auditing Functions, as well as Business Controls
General Meeting of Shareholders
Appointment and Dismissal
Audit

Appointment and Dismissal

Board of Corporate Auditors
Auditors Room

Board of Directors

Accounting
unting Audit

AssistanceA

Cooperation

Appointment
and Dismissal

Cooperation

Accounting Auditors

A
Appointment
pp i tt and Dismissal

President

Instruction

Internal Audit Division (Auditing)

Supervision / Instruction

Executive Directors

Business Strategy Meeting

Executive Officers
Internal Audit
Control

Executive Division

Control

Business Review Meeting
Director in Charge of CSRM and Internal Control
Company-wide Committee

Corporate Ethics Committee,
Information Security Management Committee, Other Committee

Business Execution and Supervision
The Board of Directors meeting is held regularly
once a month and irregularly as required to report on
significant operating policies, decisions on substantive
matters, and the execution of business and duties, aswell as statutory matters. Also, to provide neutral andimpartial supervision, two of the seven directors areoutside directors.
Actual business is executed by executive directors
and executives under the leadership of the president
in accordance with policies that have been decided
by the Board of Directors to clarify the responsibility
and to sufficiently demonstrate supervisory functions.
Also, for the purpose of uniting the whole Company as
one through the discussion and sharing of informationnecessary for the smooth and rational execution ofbusiness, we have established business strategy
meetings and management study groups.
Auditing
The Company’s auditing system is made up ofauditors and the Board of Auditors, an internal
audit unit as well as an accounting auditor, and isconducted as follows: to implement a varied andeffective audit, each carries out the management audit
from a different point of view together with appropriate
coordination.
Board of Auditors and the Auditors’ Inspection
The Board of Auditors is comprised of auditors,
audit plans, methods and so forth, and reports on
the implementation status of the audit. The audit ismostly taken from the point of view of legality and isconducted on operations and the financial condition
by auditors based on plans determined by the Board
of Auditors. Auditors also attend important meetings

14

such as that of the Board of Directors and give
recommendations and advice from an independent
standpoint. To strengthen the functions of the auditors,
we also established an audit office to support theauditors’ professional duties, and we consult withauditors regarding the assessment of the office and its
personnel changes.
Internal Audit
The Company established the division with the aim to
execute fair and efficient business and maintenance ofan internal check system to preempt and prevent any
irregularities. The division conducts its audit in line withthe annual plan, and the results are reported to theBoard of Directors.
Accounting Auditor
Concerning the audit under the Companies Act and
Financial Instruments and Exchange Law, the Company
has entered into an audit contract with Deloitte Touche
Tohmatsu LLC.
Controls
We b e l i eve d e ve l o p i n g a s o u n d b u s i n e s s a n dmaintaining customers’ trust in our business areindispensible to the growth of the Company, so with thegoal of establishing a regulated business environment,
we have assigned a board member to take charge ofinternal controls (CSRM*). We have also establishedsuch groups as corporate ethics and information
security management committees that will deploy
concrete measures companywide based on the content
of discussions.
*CSRM: Combining CSR (Corporate Social Responsibility)
and Risk Management.

Panasonic Electric Works Information Systems Co., Ltd.

CSR

Annual Report

Seeking to Contribute to Global Culture by Using IT
Services to Enhance and Improve Societal Activities

As a Public Body
For approximately 50 years since the days of our predecessor, the information
systems division of Panasonic Electric Works, we have worked with the spiritof the words of the founder of the Panasonic Group, Konosuke Matsushita:“The company is a public body” and “All for the customer.”“A company’s mission is not just commercial pursuits. Aim to improve andWe take part in the cleanup activity that takes
place in Osaka City every year.

develop social life and contribute to the progress of global culture.” This is thebasis of our corporate social responsibility (CSR) activity.
Activities for Fairness
Based on the Panasonic Group management philosophy, we try to lookbeyond just complying with laws, ordinances and rules to conduct fair andhonest business activities according to conscience and good sense.
To thoroughly strengthen compliance, we introduced and are developing a
corporate ethics program.
All for the Customer
Contributing to our customers’ business leads to contributing to society.
“To be useful to the customer,” we always offer dedication in our workthrough IT.
Coexistence with the Global Environment
In parallel with the development of IT, power consumption is increasing, andthis is becoming a major problem for the whole of society.
We use data centers that can operate with lower power consumption than
before, and integrated servers that use virtualization technology; we arecarrying out business operations that consider the global environment at thesame time as utilizing our experience with the latest IT. In such ways, we aresupporting our customers’ environmental mitigation measures.
15

Financial Section

Financial Position

Management’s Discussion and Analysis

1.

Sales
During the fiscal year ended March 31, 2011 (April 1, 2010, to
March 31, 2011), the Japanese economy was in a phase of
gradual recovery. However, the outlook remained opaque, owing
to the impact of long-term yen appreciation, a slowdown in thegrowth of emerging market economies that had propped up therecovery, anxieties about the future business climate in the UnitedStates and China, and the discontinuation of economic stimulus
measures in Japan. In the IT service industry, conditions remained
difficult: although corporate capital investment appeared to
be ending its freefall, companies continued to hold back on
IT investment. Under these conditions, the Panasonic ElectricWorks Group faced a problematic operating environment withdeclining prices for its services. Nevertheless, we forged ahead
toward the objectives of our medium-term management plan,building infrastructure to reinforce
Net Sales/Operating Income/our sales capabilities and working Operating Income to Net Sales■ Net Sales (Millions of Yen)
to expand our development ■ Operating Income (Millions of Yen)
Operating Income to Net Sales (%)
structure. We ha ve begun
proposing products, services and 40,226 39,066 37,320
36,65034,221solutions to customers considering
the use of cloud computing, and 12.5 12.5 12.4 11.9 12.3
they consistently rate our offerings“best” or “optimal.” Nevertheless,
5,014 4,877 4,632 4,371 4,205
consolidated net sales fell 6.6%
from the preceding year, to2007 2008 2009 2010 2011¥34,221 million.

Gross Profit; Selling, General and Administrative
ExpensesDuring the year, we continued efforts to improve ourmanagement constitution through broad-based rationalization
efforts such as reducing outsourcing costs. Consequently, costof sales fell 7.6%, to ¥27,201 million. Gross profit fell ¥185 million,
or 2.6%, to ¥7,020 million, andCost to Sales Ratio
the cost of sales ratio improved
0.8 percentage point, from 80.3%（％）
to 79.5%. Selling, general andadministrative (SG&A) expenses
fell 0.7% from the preceding year,
81.2
80.7 80.6 80.3
to ¥2,815 million. The ratio of
79.5
SG&A expenses to net sales was
up 0.5 percentage point, from
7.7% to 8.2%. This rise reflected
our medium- to long-term stance2007 2008 2009 2010 2011
on investing in the development of
our human resources.

16

Operating Income, Non-Operating Income
Consolidated operating income fell 3.8%, to ¥4,205 million, while
the operating margin was up 0.4 percentage point, to 12.3%.
Other income increased ¥240 million, to ¥270 million. This waslargely due to extraordinary income on the sale of investment
securities, while an extraordinary loss was posted in line with therelocation of our Tokyo office. The interest coverage ratio fell
from the previous year’s 460.4 times to 269.5 times.
Net Income
Net income—income before income taxes and minority interests
less total income taxes—amounted to ¥2,581 million, up 0.7%
compared with the preceding fiscal year.

2.

Assets, Liabilities and Net Assets

Assets
As of March 31, 2011, total assets were ¥27,317 million.
Looking at major items within current assets, cash and deposits
were down ¥216 million, and accounts receivable–trade fell
¥246 million. Accounts receivable increased ¥231 million on
construction contracts, and deposits paid grew by ¥776 million.
Other prepaid expenses were up ¥258 million. In fixed assets,
equipment increased by ¥281 million and lease assets were up¥493 million. In investments and other assets, prepaid pension
costs rose ¥285 million, and long-term prepaid expenses
expanded ¥310 million.
Liabilities
Total liabilities as of March 31, 2011, came to ¥5,958 million.
Major factors among current liabilities included a ¥253 million
drop in accounts payable–trade, while income taxes payablerose ¥269 million. Accounts payable–other fell ¥218 million. Within
long-term liabilities, lease obligations expanded ¥394 million.
EquityAt the end of the fiscal year,
total equity was ¥21,359 million.
Principal changes in this category
included a ¥1,888 million increase
in r e ta ine d e a r nings. T he
unrealized gain on available-forsale securities, meanwhile, fell
¥187 million.

Equity Ratio

（％）

78.2
62.5

73.3

78.2

75.7

2007 2008 2009 2010 2011

Panasonic Electric Works Information Systems Co., Ltd.

Annual Report

3.

Cash Flows

Cash Flows from Operating Activities
Net cash provided by operating activities during the year cameto ¥3,154 million, ¥1,328 million less than in the preceding year.
Principal factors included income before income taxes andminority interests, which provided ¥4,475 million. Depreciation
and amortization also provided ¥1,495 million, an increase inother current assets provided ¥445 million, and an increase inprepaid pension cost provided ¥285 million. Major uses of cash
were a ¥254 million decrease in accounts payable and income
taxes paid of ¥1,435 million.
Cash Flows from Investing Activities
Net cash used in investing activities was ¥2,862 million, ¥33
million more than was used in these activities during thepreceding fiscal year. Purchases of property and equipment used
¥1,580 million and purchases of software ¥554 million, whereas
the sale of investment securities provided ¥417 million.
Cash Flows from Financing Activities
During the year, net cash used in
Free Cash Flowfinancing activities totaled ¥821
million, or ¥41 million less than in(Millions of Yen)
the preceding fiscal year. The mainuse of cash was for ¥693 million in
dividends paid.

Order Backlog

1,654

405

292

2007 2008 2009 2010 20114.

In the upcoming fiscal year, in Japan we anticipate new demand
stemming from the growing prevalence of cloud computing andsmart phones. Affecting domestic IT investment, the Great East
Japan Earthquake, which struck on March 11, 2011 caused
business sentiment to worsen, and we expect the trend toward
spending restraint to continue. As the upcoming fiscal year is thesecond of our medium-term management plan, we will step up
efforts to achieve the plan’s objectives. Furthermore, in April 2011
Panasonic Corporation converted Panasonic Electric Works Co.,
Ltd., and Sanyo Electric Co., Ltd., to wholly owned subsidiaries.
Accordingly, the Panasonic Electric Works Group will take partin IT system development initiatives as part of the Panasonic(Millions of Yen)

5,088
4,509
3,829
3,129
2,418

2007 2008 2009 2010 2011

5.
6.

The Group’s research and development activities are mainly
conducted at its R&D Center. During the fiscal year ended March
31, 2011, R&D expenditures amounted to ¥76 million, largely forverifying the functionality of new technologies and commercial
licenses. The new medium-term management plan regards R&D
activities for the creation of new businesses and technologies asimportant measures, and we plan to invest a total of ¥300 million
in these areas over a three-year period.

-2

Forecast for the Fiscal Year Ending March 31, 2012

Backlog Orders
at the End of the Period

As of March 31, 2011, our order backlog stood at ¥5,088 million,
up 110.3% from a year earlier. This extremely high level stems
from orders for IT system development related to the operational
restructuring of the Panasonic Group, forecast for January 2012.

Research and Development

927

Free Cash FlowsThe aforementioned operating
and investing activities resulted
in positive free cash flows of¥292 million.

Group’s operational restructuring.
Our consolidated results forecast
for the fiscal year ending March
31, 2012 (April 1, 2011 to March
31, 2012) calls for net sales of¥37,500 million, up 9.6% fromthe preceding fiscal year. We
also anticipate an 8.2% increasein operating income, to ¥4,550
million and net income of ¥2,730
million, up 5.8%.

Capital Investment

7.

Capital investment in the year to March 31, 2011, amounted
to ¥2,560 million. Investments were mainly made in additional
facilities related to the server integration environment, inaugmenting our Osaka Central Data Center and in thedevelopment of an integrated IT asset management system.

17

Financial Section

Risk Factors

Items in this annual report concerning business conditions andfinancial conditions that may strongly affect investor decisions
include the following risks. However, these do not cover all risks withrespect to the Group and there may be other hard-to-predict risks
not detailed in the material. The Group's business, performance andfinancial status may be adversely affected by various significant risk
factors. Items regarding the future were determined by the Group asof the financial statement filing date (June 16, 2011).

skilled employees in the technical and management fields. The
Group expects that it will be necessary to hire more personnel in theinformation services business field, but industry demand for skilledemployees exceeds the supply, making competition for attracting
and retaining these employees intense. Because of this severe
competition for skilled employees, the Group may be unable toretain existing personnel or attract new talent. If this should happen,
the Group’s business, performance and financial position could be
adversely affected.

Risks Related to Economic Conditions
Fluctuations in the Economic Environment

Business Alliances with Other Companies, etc.

Demand for the Group’s products and services may be affectedby general economic trends mainly in Japan. Economic downturns
and resulting declines in demand in the Japanese market may thus
adversely affect the Group’s financial condition, operating results andcash flows.

The Group develops its business by forming alliances with or
strategic investments in other companies, and the strategic
importance of partnering with third parties is increasing. In somecases, such partnerships are crucial to achieving the Group’s goal of
introducing new products and services, but the Group may not beable to successfully collaborate or achieve expected synergies with
its partners. In addition, these partners may change their businessstrategies and it may become difficult for the Group to maintainthese business partnerships. If any of the foregoing should happen,
the Group’s businesses, performance and financial status could be
adversely affected.

Interest Rate Fluctuations
Interest rate fluctuations may affect operating expense, interest
expense and interest income, as well as the value of financial assets
and liabilities, and may have an adverse impact on the Group’sbusiness, performance and financial position.

Stock Price Falls
The Group holds Japanese stocks as investment securities, anddecreases in their market value may necessitate the recognition ofvaluation losses. Furthermore, a decline in the valuation difference on
available-for-sale securities may reduce net assets.

Risks Related to the Group’s Business Activities
Competitive Environment
The Group faces different types of competitors in the information
services industry, ranging from large international companies torelatively small, rapidly growing companies. The Group actively
makes investments and takes initiatives in strategic products andservices. However, investments or sales initiatives for a particular
product or service may fail in comparison to competitors in termsof quantity, quality, and speed. Furthermore, competitors may havegreater financial, technological and marketing resources than theGroup.

Price Competition
The Group is subject to intense price competition in the information
services industry, and this may make it difficult for the Group to
determine prices for products and services to secure adequate
profits. This downward pressure on prices may have a serious effecton securing the Group’s profits, and becomes especially noticeable
when demand for products and services decreases. Prices of manyof the Group’s products and services are expected to continue
declining in the fiscal year ending March 31, 2012.

Competition in New Technologies
The Group may lose the ability to compete in new markets if it fails
to correctly predict and develop the new technologies, products andservices to meet future market needs.

18

Procurement of Raw Materials, etc., andPurchase Price Surges
The Group’s operations depend on obtaining high-quality products
and services in a timely manner and in the necessary quantities, andwe therefore select reliable suppliers. However, it may be difficult
to change or increase suppliers, or switch to other products andservices if the supply is interrupted or industry demand increases.
This may adversely affect the Group’s businesses. Moreover,although the Group and suppliers decide purchase prices bycontract, purchase prices may increase significantly due to changes
in demand or for other reasons. Furthermore, some products andservices are only available from a limited number of suppliers. If
the Group is unable to procure such products and services, its
businesses, performance and financial status may be adversely
affected.

Capital Status and Financial Conditions of Customers
Some of the Group’s customers purchase products and services
from the Group on payment terms that do not provide for immediatepayment. If customers for whom the Group has substantial
accounts receivable encounter financial difficulties and are unable to
make payments on time, the Group’s businesses, performance andfinancial status may be adversely affected.

Risks Related to Future Plans, etc.
The Group has announced its new medium-term management
plan, which covers the period from April 1, 2010, through March
31, 2013, and an earnings forecast for the fiscal year ending March
31, 2012. However, the Group may fail to achieve all of the goals
announced and/or the expected results.

Risks Related to Legal Restrictions and Litigation

Securing Capable Human Resources

Direct or Indirect Costs Related to Product Liability or
Warranty Claims Due to Defects in Products or Services

The Group’s future success depends largely on its ability to retain

The Group pays due attention to ensuring the quality of its products

Panasonic Electric Works Information Systems Co., Ltd.

Annual Reportand services. However, the occurrence of defects in products orservices could make the Group liable for damages, including indirect
damages, that are not completely covered by liability insurance and
the Group could incur significant expenses. Moreover, negative
publicity concerning these problems could impair the Group’s
corporate image, and the Group’s businesses, performance andfinancial status may be adversely affected.

Intellectual Property Right Protection
The Group works to secure a competitive edge for its businesses
by protecting intellectual property rights (IPRs) related to thetechnologies, products, and services it develops. However, rights
may not be granted to provide adequate protection based on IPRs.
Furthermore, the Group may be unable to use or be forced to use
on disadvantageous terms the technologies, products and servicesof third parties protected by IPRs when needed. As of March 31,
2011, the Group was using the IPRs of third parties under licensefrom third parties for some of its products and services. However,in the future the Group may not be able to obtain the necessary
licenses from third parties or may be able to obtain licenses only
under disadvantageous terms.
Litigation may also be necessary to defend the Group against
IPR infringement claims brought by third parties or to enforce theGroup’s IPRs. The Group may incur significant expenses and use
significant management resources for such lawsuits. Furthermore, if
third-party claims that the Group infringed on IPRs are upheld, theGroup may cease to be able to use specific technologies, products
and/or services, or be able to supply specific technologies, products
and/or services, and may be liable for significant damages.

commercial, antitrust, intellectual property, financial transactions,worker protection, subcontractor protection, and businesstaxation laws and regulations. Tighter laws and regulations or
stricter interpretations of them than in the past by authorities
could place restrictions on the Group’s businesses or result inincreased expenses for complying with them. The Group has taken
measures to ensure that it is prepared to handle a complianceviolation or other emergency through such efforts as establishing
networks of emergency contacts and organizational bodies
responsible for responses. However, the Group’s corporate image
could be impaired and the Group’s businesses, performanceand financial status could be adversely affected if its response
is inadequate.

Risks Related to Disasters or Unpredictable Events
Effects of Disasters or Unpredictable Events
The headquarters and major bases of the Group are located inJapan. The occurrence of a natural disaster such as an earthquake,flood or other unexpected event such as a fire, war or terrorist attack,infectious disease outbreak, industrial accident, malicious computervirus, breakdown or malfunction in the Group’s information systemor communications network as a result of such events may result inserious damage to Group facilities, and the Group may have to stop
operations at certain facilities and delay the provision of products
and services.
The Group may incur considerable expenses for restoringdamaged facilities, which could adversely affect the Group’sbusinesses, performance and financial position.

Other Risks
Changes in Account Standards and Tax Systems

Pension Liabilities

The Group’s business, performance and financial status may be
adversely affected by the unforeseen application of new accounting
standards and tax systems. Furthermore, differences in views with
tax authorities on the Group’s tax returns could result in the Group
being liable for more taxes than expected.

The Group has contributory, funded benefit pension plans covering
substantially all employees in Japan who meet eligibility requirements.
Revisions to experience assumptions and pension asset performance
could result in an increase in unrecognized actuarial losses, leading toan increase in future net periodic benefit costs of these pension plans.

Information Leaks

Fixed Asset Impairment

In the normal course of business, the Group obtains information(including personal information) about customers and the like relating
to privacy and creditworthiness. The Group pays due attention
to safeguarding the confidentiality of this information and has
implemented the greatest possible measures to prevent information
leaks. However, the Group cannot rule out the possibility that suchinformation may be leaked due to an accident or other inevitablecause. Such a leakage of information may result in the Group being
held liable for damages to affected parties and may impair theGroup’s corporate image. Moreover, there is a risk that the Group’s
trade secrets may be misused by external parties. In such a case,the Group’s businesses, performance and financial status may be
adversely affected.

The Group has many fixed assets, such as property and equipment.
All Group companies periodically review the recorded value of fixed
assets on the balance sheet to determine if future cash flows to be
derived from these assets will be sufficient to recover the residual
values in accordance with accounting standards governing theimpairment of fixed assets. If these assets cannot generate sufficient
cash flows, impairment losses may have to be recognized.

Losses Due to Other Legal Restrictions, etc
The Group is subject to governmental regulations in Japan andother countries and regions in which it conducts its business.
These include government approvals required for conducting
business and investments, laws and regulations governing national
security, and export/import laws and regulations, as well as

Recognizing Uncertainties in Deferred Tax Assets andIncome Taxes, Etc.
The Group evaluates the likelihood of recognizing the tax benefitsof deferred tax assets, based on taxable income forecasts and theevaluation of uncertainty, in considering the recoverability of deferred
tax assets and evaluation of income tax uncertainties. However,deteriorating economic conditions, tax audits and other factors may
result in temporary variances and net losses being carried forward
beyond the period during which tax benefits can be recognized.
In such a case, the Group would be required to recognize greatertaxable income than had been anticipated, resulting in the possibilityof higher corporate taxes.

19Consolidated Balance Sheets

Panasonic Electric Works Information Systems Co., Ltd. and Subsidiaries
March 31, 2011 and 2010

AssetsMillions of Yen

2011

2010

¥

¥

Thousands of U.S.
Dollars (Note 1)

2011

Current Assets:
Cash and deposits (Notes 4 and 14)

172

389

$

2,072

6,442

6,456

77,614

204

143

2,458

12,662

11,885

152,554

Deferred tax assets (Note 11)

322

265

3,879

Other current assets (Note 16)

730

287

8,796

—

(1)

—

20,532

19,424

247,373

907

885

10,928

5,142

3,934

61,952

Lease assets (Note 13)

835

237

10,060Construction in progress

531

565

6,398

Total

7,415

5,621

89,338

Accumulated depreciation(3,520)(2,444)(42,410)

Net property and equipment

3,895

3,177

46,928Investment securities (Notes 6 and 14)

341

791

4,108

Goodwill (Note 7)

45

61

542

Software

522

422

6,289

Development cost of software in progress

341

159

4,108

Long-term deposits paid

256

246

3,084

Long-term prepaid expenses

310

—

3,735

Prepaid pension cost (Note 9)

891

606

10,735

Deferred tax assets (Note 11)

33

44

398

Other assets (Note 13)

177

243

2,133

Allowance for doubtful receivables

(26)

(27)

(313)

2,890

2,545

34,819¥27,317¥25,146$329,120

Accounts receivable – Trade (Notes 14 and 16)
Inventories (Note 5)
Deposits paid (Notes 4, 14 and 16)

Allowance for doubtful receivables
Total current assets

Property and Equipment:
Buildings
Tools, furniture and fixtures

Investments and Other Assets:

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

20

Panasonic Electric Works Information Systems Co., Ltd.

Annual Report

Liabilities and Equity

Millions of Yen

Thousands of U.S.
Dollars (Note 1)

2011

2010

2011

Accounts payable – Trade (Notes 14 and 16)¥ 1,970¥ 2,224$ 23,735

Accounts payable – Other (Notes 14 and 16)

1,102

1,320

13,277

Income taxes payable (Note 14)

1,061

791

12,783

Consumption taxes payable

61

118

735

Deposits received (Note 8)

4

3

48

987

739

11,892

5,185

5,195

62,470Long-term deposits received (Note 8)

46

48

554

Deferred tax liabilities (Note 11)

166

67

2,000

Long-term lease obligations (Note 14)

561

166

6,759

—

11

—

773

292

9,313

1,040

1,040

12,530871

871

10,494

19,356

17,468233,205

(0)

(0)

(0)

92

280

1,108

Total equity

21,35919,659257,337

Total¥27,317¥25,146$329,120

Current Liabilities:

Other current liabilities
Total current liabilities

Long-Term Liabilities:

Other
Total long-term liabilities

Equity (Notes 10 and 17):
Common stock –authorized 40,000,000 shares; issued 10,656,000 shares
Capital surplus
Retained earnings
Treasury stock – at cost
195 shares in 2011 and 127 shares in 2010
Accumulated other comprehensive income –Unrealized gain on available-for-sale securities

21

Consolidated Statementsof Income andComprehensive Income

Panasonic Electric Works Information Systems Co., Ltd. and Subsidiaries
Years Ended March 31, 2011 and 2010

Millions of Yen

Thousands of U.S.
Dollars (Note 1)

2011

2010

2011

Net Sales (Note 16)¥34,221¥36,650$412,301

Cost of Sales (Notes 12 and 16)

27,201

29,445

327,723

Gross profit

7,020

7,205

84,578Selling, General and Administrative Expenses (Notes 12 and 16)

2,815

2,834

33,915

Operating income

4,205

4,371

50,663

Interest income

66

79

795

Interest expense

(12)

(10)

(145)

Gain on sales of investment securities (Note 6)

282

—

3,398

Other – net

(66)

(39)

(795)

270

30

3,253

4,475

4,401

53,916

Current

1,714

1,677

20,651

Deferred

180

158

2,169

1,894

1,835

22,820

2,581

2,566

31,096—

3—

Net Income

2,581

2,563

31,096Net Income before Minority Interests

2,581

—

31,096(188)—(2,265)¥ 2,393—$ 28,831

2,393—

28,831———Other Income (Expenses):

Other income (expense) – net
Income before income taxes and minority interests

Income Taxes (Note 11):

Total income taxes

Net Income before Minority Interests
Minority Interests in Net Income

Other Comprehensive Income (Note 15) –Unrealized gain on available-for-sale securities
Comprehensive Income (Note 15)
Total Comprehensive Income Attributable to (Note 15):
Owners of the parent
Minority interests

Yen

U.S. Dollars

Per Share of Common Stock (Notes 2.o and 17):
Basic net income
Cash dividends applicable to the year
See notes to consolidated financial statements.

22¥242.25¥240.51

$2.92

65.00

65.00

0.78

Panasonic Electric Works Information Systems Co., Ltd. and Subsidiaries Panasonic Electric Works Information Systems Co., Ltd.
Years Ended March 31, 2011 and 2010

Consolidated Statementsof Changes in Equity

Annual Report

Millions of Yen

Number of
Shares ofCommon Stock
IssuedAccumulated
Other Comprehensive Income
Unrealized Gain
Treasuryon Available-forStocksale Securities

CommonStockCapitalSurplusRetained
Earnings

10,656,000¥1,040¥871¥15,704¥(0)

Net income

—

—

—

2,563

Cash dividends, ¥75 per share

—

—

—

Purchase of treasury stock

—

—

—

Balance April 1, 2009

Total

Minority
Interests

Total
Equity¥ (42)¥17,573¥ 31¥17,604

—

—

2,563

—

2,563

(799)

—

—

(799)

—

(799)

—

(0)

—

(0)

—

(0)

—

—

—

—

—

322

322

(31)

291

10,656,000

1,040

871

17,468(0)280

19,659—19,659Net income

—

—

—

2,581

—

—

2,581

—

2,581

Cash dividends, ¥65 per share

—

—

—

(693)

—

—

(693)

—

(693)

Purchase of treasury stock

—

—

—

—

(0)

—

(0)

—

(0)

Net changes in the year

—

—

—

—

—

(188)

(188)

—

(188)

10,656,000¥1,040¥871¥19,356

¥(0)

¥ 92

¥21,359¥—¥21,359

Net changes in the year

Balance March 31, 2010

Balance March 31, 2011

Thousands of U.S. Dollars (Note 1)

Accumulated
Other Comprehensive Income
CommonStock

Balance March 31, 2010

CapitalSurplusRetained
Earnings$12,530 $10,494 $210,458

Unrealized Gain
Treasuryon Available-forStocksale Securities

Total

Minority
Interests

Total
Equity$(0)$ 3,373$236,855$—$236,855

Net income——

31,096——31,096—31,096

Cash dividends, $0.78 per share——(8,349)——(8,349)—(8,349)Purchase of treasury stock

—

—

—

(0)

—

(0)

—

(0)

Net changes in the year

—

—

—

—

(2,265)(2,265)—(2,265)$12,530 $10,494 $233,205$(0)$ 1,108$257,337$—$257,337

Balance March 31, 2011
See notes to consolidated financial statements.

23

Consolidated Statementsof Cash Flows

Panasonic Electric Works Information Systems Co., Ltd. and Subsidiaries
Years Ended March 31, 2011 and 2010

Millions of Yen

Thousands of U.S.
Dollars (Note 1)

2011

2010

2011

¥ 4,475¥ 4,401$ 53,916

1,495

1,247

18,012

Increase (decrease) in allowance for doubtful receivables

(3)

1

(36)

Interest and dividend income

(73)

(84)

(880)

Interest expense

12

10

145

(282)

—

(3,398)Decrease in accounts receivable

16

312

193

Decrease (increase) in inventories

(61)

472

(735)

Decrease (increase) in other current assets

(445)

2

(5,361)

Increase in prepaid pension cost

(285)

(247)

(3,434)

Increase (decrease) in accounts payable

(254)

133

(3,060)

Increase (decrease) in other current liabilities

62

(168)

747

Decrease in other long-term liabilities

(13)

(5)

(157)

Other – net

(120)

44

(1,446)

Subtotal

4,524

6,118

54,506

77

90

928

Operating Activities:
Income before income taxes and minority interests
Adjustments for:
Depreciation and amortization

Gain on sales of investment securities
Changes in assets and liabilities:

Interest and dividends received

(12)

(10)

(145)

Income taxes paid

(1,435)(1,715)(17,289)

Net cash provided by operating activities

3,154

4,483

38,000

Increase in deposits paid

(8,500)(7,500)(102,410)

Decrease in deposits paid

7,500

6,700

90,361

Purchases of property and equipment(1,580)(1,687)(19,036)

Purchases of software

(554)

(284)

(6,675)

Sales of investment securities

417

—

5,024

Interest paid

Investing Activities:

(145)

(58)

(1,746)(2,862)(2,829)(34,482)

Repayment of lease obligations

(128)

(64)

(1,542)

Dividends paid

(693)

(799)

(8,349)Net cash used in financing activities

(821)

(863)

(9,891)Net Increase (Decrease) in Cash and Cash Equivalents

(529)

791

(6,373)

Cash and Cash Equivalents, Beginning of Year

4,759

3,968

57,337

Cash and Cash Equivalents, End of Year (Note 4)¥ 4,230¥ 4,759$ 50,964

Other – net
Net cash used in investing activities
Financing Activities:

See notes to consolidated financial statements.

24Notes to Consolidated
Financial Statements

Panasonic Electric Works Information Systems Co., Ltd. and Subsidiaries Panasonic Electric Works Information Systems Co., Ltd.
Years Ended March 31, 2011 and 2010

Annual Report

1. Basis of Presenting Consolidated Financial Statements
Panasonic Electric Works Information Systems Co., Ltd. (the “Company”) was incorporated on February 22, 1999 as a subsidiary of PanasonicElectric Works Co., Ltd. (the “Parent”). The Company is 64% owned by the Parent at both March 31, 2011 and 2010. The principal business of
the Company is to provide integration service for information systems; maintenance of computer systems; design, development, sales, lease,rental of computer software; information network service and sales of related equipment.
The accompanying consolidated financial statements have been prepared in accordance with the provisions set forth in the Japanese
Financial Instruments and Exchange Act and its related accounting regulations, and in conformity with accounting principles generally acceptedin Japan (“Japanese GAAP”), which are different in certain respects as to the application and disclosure requirements of International Financial
Reporting Standards.
Under Japanese GAAP, a consolidated statement of income and comprehensive income is required from the fiscal year ended March 31,
2011 and has been presented herein. Accordingly, accumulated other comprehensive income is presented in the consolidated balance sheet
and the consolidated statement of changes in equity. Information with respect to other comprehensive income for the year ended March 31,
2010 is disclosed in Note 15. In addition, “net income before minority interests” is disclosed in the consolidated statements of income andcomprehensive income from the year ended March 31, 2011.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to the consolidated
financial statements issued domestically in order to present them in a form which is more familiar to readers outside Japan. In addition, certain
reclassifications have been made in the 2010 financial statements to conform to the classifications used in 2011.
The consolidated financial statements are stated in Japanese yen, the currency of the country in which the Company is incorporated andoperates. The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japanand have been made at the rate of ¥83 to $1, the approximate rate of exchange at March 31, 2011. Such translations should not be construed
as representations that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate.

2. Summary of Significant Accounting Policies
a. Consolidation
The consolidated financial statements as of March 31, 2011 include the accounts of the Company and its 2 subsidiaries (2 subsidiaries in 2010)(together, the “Group”).
Under the control or influence concept, the Company consolidates entities that it, directly or indirectly, is able to exercise control over operations.
Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets of the acquired subsidiary at the date ofacquisition and is amortized on a straight-line basis over five years.
All significant intercompany balances and transactions are eliminated in consolidation. All material unrealized profit included in assets resulting
from transactions within the Group is eliminated.
b. Cash Equivalents
Cash equivalents are short-term investments that are readily convertible into cash and that are exposed to insignificant risk of changes in value.
Cash equivalents include deposits paid, all of which mature or become due within three months of the date of acquisition.
c. Inventories
Merchandise and supplies are stated at the lower of cost, determined by the moving-average method, or net selling value. Work in process
inventories are stated at the lower of cost, determined by the specific identification method, or net selling value.
d. Investment Securities
Available-for-sale securities, which are not classified as either trading securities or held-to-maturity debt securities, are reported at fair value, withunrealized gains and losses, net of applicable taxes, reported in a separate component of equity.
e. Property and Equipment
Property and equipment are stated at cost. Depreciation of tools, furniture and fixtures of the Group is computed substantially by the decliningbalance method for the year ended March 31, 2010 and by the straight-line method for the year ended March 31, 2011 on the estimated useful
lives of the assets, while the straight-line method is applied to buildings and lease assets for 2010 and 2011. The range of useful lives is from 8
to 15 years for buildings and from 3 to 10 years for tools, furniture and fixtures.
f. Long-lived Assets
The Group reviews its long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset
or asset group may not be recoverable. An impairment loss would be recognized if the carrying amount of an asset or asset group exceeds thesum of the undiscounted future cash flows expected to result from the continued use and eventual disposition of the asset or asset group. The
impairment loss would be measured as the amount by which the carrying amount of the asset exceeds its recoverable amount, which is thehigher of the discounted cash flows from the continued use and eventual disposition of the asset or the net selling price at disposition.
g. Software
Software to be sold is amortized by the straight-line method over the estimated economic life of the software, 3 years. Software for internal use
is amortized by the straight-line method over its useful life, 5 years.

25

h. Retirement Benefits
The Company has a non-contributory, funded pension plan together with the Parent and certain other domestic consolidated subsidiaries of the
Parent covering substantially all of their employees. The liability for retirement benefits is accounted for based on projected benefit obligations
and plan assets at the balance sheet date.
i. Asset Retirement Obligations
In March 2008, the Accounting Standards Board of Japan (the “ASBJ”) published the accounting standard for asset retirement obligations, ASBJ
Statement No. 18 “Accounting Standard for Asset Retirement Obligations” and ASBJ Guidance No. 21 “Guidance on Accounting Standard for
Asset Retirement Obligations”. Under this accounting standard, an asset retirement obligation is defined as a legal obligation imposed either by
law or contract that results from the acquisition, construction, development and the normal operation of a tangible fixed asset and is associatedwith the retirement of such tangible fixed asset. The asset retirement obligation is recognized as the sum of the discounted cash flows required
for the future asset retirement and is recorded in the period in which the obligation is incurred if a reasonable estimate can be made. If areasonable estimate of the asset retirement obligation cannot be made in the period the asset retirement obligation is incurred, the liability should
be recognized when a reasonable estimate of asset retirement obligation can be made. Upon initial recognition of a liability for an asset retirement
obligation, an asset retirement cost is capitalized by increasing the carrying amount of the related fixed asset by the amount of the liability. The
asset retirement cost is subsequently allocated to expense through depreciation over the remaining useful life of the asset. Over time, the liability
is accreted to its present value each period. Any subsequent revisions to the timing or the amount of the original estimate of undiscounted cash
flows are reflected as an increase or a decrease in the carrying amount of the liability and the capitalized amount of the related asset retirementcost. This standard was effective for fiscal years beginning on or after April 1, 2010.
The Company applied this accounting standard effective April 1, 2010. There is no effect of applying this change.
j. Leases
In March 2007, the ASBJ issued ASBJ Statement No. 13, “Accounting Standard for Lease Transactions”, which revised the previous accounting
standard for lease transactions issued in June 1993. The revised accounting standard for lease transactions was effective for fiscal years
beginning on or after April 1, 2008.
Under the previous accounting standard, finance leases that deem to transfer ownership of the leased property to the lessee were to becapitalized. However, other finance leases were permitted to be accounted for as operating lease transactions if certain “as if capitalized”
information was disclosed in the notes to the lessee's financial statements. The revised accounting standard requires that all finance leasetransactions should be capitalized to recognize lease assets and lease obligations in the balance sheet. In addition, the revised accounting
standard permits leases which existed at the transition date and do not transfer ownership of the leased property to the lessee to continue to beaccounted for as operating lease transactions with certain “as if capitalized” information disclosed in the notes to the lessee's financial statements.
The Company applied the revised accounting standard effective April 1, 2008. In addition, the Company continues to account for leases which
existed at the transition date and do not transfer ownership of the leased property to the lessee as operating lease transactions.
All other leases are accounted for as operating leases.
k. Bonuses to Directors and Corporate Auditors
Bonuses to directors and corporate auditors are accrued at the year end to which such bonuses are attributable.
l. Software Revenue Recognition
On March 30, 2006, the ASBJ issued Practical Issues Task Force (“PITF”) No. 17, “Practical Solution on Revenue Recognition of Software”. The
Group adopted this task force in the year ended March 31, 2007.
m. Construction Contracts
In December 2007, the ASBJ issued ASBJ Statement No. 15 “Accounting Standard for Construction Contracts” and ASBJ Guidance No. 18“Guidance on Accounting Standard for Construction Contracts”. Under this accounting standard, the construction revenue and construction
costs should be recognized by the percentage-of-completion method, if the outcome of a construction contract can be estimated reliably.
When total construction revenue, total construction costs and the stage of completion of the contract at the balance sheet date can be reliably
measured, the outcome of a construction contract can be estimated reliably. If the outcome of a construction contract cannot be reliably
estimated, the completed-contract method should be applied. When it is probable that the total construction costs will exceed total construction
revenue, an estimated loss on the contract should be immediately recognized by providing for a loss on construction contracts. This standard isapplicable to construction contracts and software development contracts and was effective for fiscal years beginning on or after April 1, 2009.
The Company applied the accounting standard effective April 1, 2009.
n. Income Taxes
The provision for income taxes is computed based on the pretax income included in the consolidated statements of income and comprehensive
income. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of
temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred taxes are measured by applying
currently enacted tax laws to the temporary differences.
o. Per Share Information
Basic net income per share is computed by dividing net income available to common shareholders by the weighted-average number of commonshares outstanding for the year.
Diluted net income per share is not presented as no securities with a dilutive effect have been issued.
Cash dividends per share presented in the accompanying consolidated statements of income and comprehensive income are dividends
applicable to the respective years including dividends to be paid after the end of the year.

26Panasonic Electric Works Information Systems Co., Ltd.

Annual Report

The weighted-average number of common shares used in the basis net income per share computation was 10,656,828 shares and
10,655,909 shares for 2011 and 2010, respectively.
p. New Accounting Pronouncements
Accounting Changes and Error Corrections—In December 2009, ASBJ issued ASBJ Statement No. 24 “Accounting Standard for
Accounting Changes and Error Corrections” and ASBJ Guidance No. 24 “Guidance on Accounting Standard for Accounting Changes andError Corrections”. Accounting treatments under this standard and guidance are as follows: (1) Changes in Accounting Policies—Whena new accounting policy is applied with revision of accounting standards, the new policy is applied retrospectively unless the revised
accounting standards include specific transitional provisions. When the revised accounting standards include specific transitional provisions,an entity shall comply with the specific transitional provisions. (2) Changes in Presentations—When the presentation of financial statements
is changed, prior period financial statements are reclassified in accordance with the new presentation. (3) Changes in Accounting
Estimates—A change in an accounting estimate is accounted for in the period of the change if the change affects that period only, and isaccounted for prospectively if the change affects both the period of the change and future periods. (4) Corrections of Prior Period Errors—
When an error in prior period financial statements is discovered, those statements are restated.
This accounting standard and the guidance are applicable to accounting changes and corrections of prior period errors which are madefrom the beginning of the fiscal year that begins on or after April 1, 2011.

3. Accounting Change
Effective April 1, 2010, the Group changed their depreciation method for tools, furniture and fixtures from the declining-balance method to thestraight-line method. The Group believes the change is preferable as the straight-line method better provides uniformity across the Group’s
operations with respect to depreciation method, provides better matching of revenue and expense in the consolidated statements of income andcomprehensive income, and enhances comparability with peers. The effect of this change was to increase operating income and income before
income taxes and minority interests by ¥206 million ($2,482 thousand), respectively, for the year ended March 31, 2011.

4. 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, 2011 and 2010 were as follows:
Millions of Yen

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

2011
¥ 172
4,158
(100)
¥4,230

2010
¥ 389
4,380
(10)
¥4,759Thousands of
U.S. Dollars

2011$ 2,072
50,097(1,205)$50,964

5. Inventories
Inventories at March 31, 2011 and 2010 consisted of the following:

MerchandiseWork in process
Supplies
Total

2011
¥ 68
134
2
¥204

Millions of Yen

Thousands of
U.S. Dollars

2010
¥ 69
68
6
¥143

2011
$ 819
1,615
24
$2,458Millions of Yen

Thousands of
U.S. Dollars

2010

2011

6. Investment Securities
Investment securities as of March 31, 2011 and 2010 consisted of the following:
2011
Non-current:
Marketable equity securities

¥341

¥791

$4,10827

The costs and aggregate fair values of investment securities at March 31, 2011 and 2010 were as follows:
Millions of Yen

Unrealized
Gain

Unrealized
LossesFair Value

¥187

¥155

¥(1)

¥341

¥321

¥474

¥(4)

¥791

Cost

March 31, 2011
Securities classified as:
Available-for-sale:
Equity securities
March 31, 2010
Securities classified as:
Available-for-sale:
Equity securities

Thousands of U.S. Dollars

Cost

Unrealized
Gain

Unrealized
LossesFair Value$2,253$1,867$(12)$4,108The information of the available-for-sale securities which were sold during the year ended March 31, 2011 was as follows:
Millions of Yen

Proceeds

March 31, 2011
Available-for-sale:
Equity securities¥417

Realized
Gains

Realized
Loss

¥285

Thousands of U.S. Dollars

Proceeds¥3$5,024

Realized
Gains$3,434

Realized
Loss$36

7. Goodwill
Goodwill at March 31, 2011 and 2010 consisted of the following:

Goodwill on business acquisition
Consolidation goodwill
Total

2011
¥44
1
¥45

Millions of Yen

Thousands of
U.S. Dollars

2010
¥59
2
¥61

2011
$530
12
$542

Millions of Yen

Thousands of
U.S. Dollars

2010
¥48
3
51
(3)
¥48

2011
$554
48
602
(48)
$554

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

8. Deposits Received
Deposits received at March 31, 2011 and 2010 consisted of the following:

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

2011
¥46
4
50
(4)
¥46

Interest rates applicable to the welfare pension were 6.8% at March 31, 2011 and 2010.
Annual maturities of deposits received at March 31, 2011, were as follows:Year Ending March 31

2012
2013
2014
2015
2016
2017 and thereafter
Total

28

Millions of Yen

Thousands of
U.S. Dollars

¥ 4
2
2
3
3
36
¥50

$ 48
24
24
36
36
434
$602

Panasonic Electric Works Information Systems Co., Ltd.

Annual Report

9. Retirement Benefits
The Company has severance payment plans for employees. Under most circumstances, employees terminating their employment are entitled toretirement benefits determined based principally on accumulated points allocated to them each year according to their age and job evaluationand interest points over the accumulated points. 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
retirement age, by death, or by voluntary retirement at certain specific ages prior to the mandatory retirement age.
The asset for employees' retirement benefits at March 31, 2011 and 2010 consisted of the following:
Millions of Yen

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

2011¥ 3,840(3,110)730(1,635)14¥ (891)2010¥ 3,576(2,828)748(1,446)92¥ (606)

Thousands of
U.S. Dollars

2011$ 46,265(37,470)
8,795(19,699)
169$(10,735)

The components of net periodic benefit costs for the years ended March 31, 2011 and 2010 are as follows:
Millions of Yen

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

2011
¥216
89
(85)
(79)
127
¥268

2010
¥207
84
(70)
(74)
126
¥273

Thousands of
U.S. Dollars

2011$ 2,602
1,072(1,024)(952)
1,531$ 3,229

Assumptions used for the years ended March 31, 2011 and 2010 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

2011
2.5%
3.0%
7 years
15 years

2010
2.5%
3.0%
7 years
15 years

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

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

11. Income Taxes
The Company and subsidiaries are subject to Japanese national and local income taxes which, in the aggregate, resulted in normal effective
statutory tax rates of approximately 40.4% for the years ended March 31, 2011 and 2010.
The tax effects of significant temporary differences, which resulted in deferred tax assets and liabilities at March 31, 2011 and 2010, are as
follows:
2011
Deferred tax assets:
Accrued enterprise taxes
Depreciation
Accrued bonus to employees
Others
Total
Deferred tax liabilities:
Prepaid pension cost
Unrealized gains on available-for-sale securities
Total
Net deferred tax assets

Millions of Yen

Thousands of
U.S. Dollars

2010

2011

¥ 80
225
113
193
¥611

¥ 64
291
81
240
¥676

$ 964
2,711
1,361
2,325
$7,361

¥360
62
¥422
¥189

¥244
190
¥434
¥242

$4,337747$5,084$2,277

Because the differences between the normal effective statutory tax rates and the actual effective tax rates for the years ended March 31, 2011
and 2010 are not material, the tax reconciliations are not disclosed.

12. Research and Development Costs
Research and development costs included in cost of sales and selling, general and administrative expenses were ¥76 million ($916 thousand)and ¥1 million for the years ended March 31, 2011 and 2010, respectively.

13. Leases
The Group leases certain computer equipment, software and other assets.
Total lease payments under finance leases for the years ended March 31, 2011 and 2010 were ¥476 million ($5,735 thousand) and ¥734
million, respectively.
Obligations under finance leases and future minimum payments under noncancelable operating leases were as follows:
2011
Millions of Yen

Finance
LeasesDue within one year
Due after one year
Total

Operating
Leases

¥205
561
¥766

¥268
211
¥479

Thousands of U.S. Dollars

Finance
Leases$2,4706,759$9,229Operating
Leases$3,2292,542$5,771

Pro forma information of leased property whose lease inception was before March 31, 2008
Pro forma information of leased property whose lease inception was before March 31, 2008 was as follows:
Millions of Yen

2011
Tools, Furnitureand Fixtures

Acquisition cost
Accumulated depreciation
Net leased property

30

¥ 492
(435)
¥ 57

Software

¥2
(1)
¥1

2010
Total

¥ 494
(436)
¥ 58

Tools, Furnitureand Fixtures¥ 2,185(1,693)¥ 492

Software

¥ 17
(15)
¥ 2

Total

¥ 2,202(1,708)¥ 494

Panasonic Electric Works Information Systems Co., Ltd.

Annual ReportThousands of U.S. Dollars

2011
Tools, Furnitureand Fixtures

Acquisition cost
Accumulated depreciation
Net leased property

Software$ 5,928(5,241)
$ 687

$ 24
(12)
$ 12

Total

$ 5,952(5,253)$ 699

Obligations under finance leases:

Due within one year
Due after one year
Total

2011
¥62
8
¥70

Millions of Yen

Thousands of
U.S. Dollars

2010
¥461
77
¥538

2011
$747
96
$843

Millions of Yen

Thousands of
U.S. Dollars

2010
¥674
21
¥695
¥734

2011
$5,08596$5,181$5,735

Depreciation expense, interest expense and other information under finance leases:

Depreciation expense
Interest expense
Total
Lease payments

2011
¥422
8
¥430
¥476

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

14. Financial Instruments and Related Disclosures
In March 2008, the ASBJ revised ASBJ Statement No. 10, “Accounting Standard for Financial Instruments”, and issued ASBJ Guidance No.
19, “Guidance on Accounting Standard for Financial Instruments and Related Disclosures”. This accounting standard and the guidance wasapplicable to financial instruments and related disclosures at the end of the fiscal years ending on or after March 31, 2010. The Group applied
the revised accounting standard and the guidance effective March 31, 2010.
(1) Financial Instrument Policies
The Group raises necessary money from its own fund, in light of capital investment plans for development of software and acquisition of data
management facilities and hardware, etc. The Company places surplus funds only in short-term deposits.
(2) Financial Instruments and Risks
Accounts receivable - trade which are operating receivables are exposed to customer credit risks. Investment securities are shares in companies
with which the Company has business relationships or capital alliances, and are exposed to market fluctuation risks.
Settlements of most accounts payable - trade which are operating liabilities are within one year. Some of them are in foreign currency due
to exports of products and are subject to exchange-rate fluctuation risks. However, they have little impact because of their small amounts.
Lease obligations relating to finance leases are mainly for procuring the required capital investment. Maturities can be up to five years after
settlement dates.
(3) Financial Instrument Risk Management Structure
a. Credit Risk Management (including risks of customers breaching contracts)
In accordance with the receivables management rules, the Company regularly monitors the status of key customers' operating receivables
and oversee due dates and balances by customer in cooperation between the head office accounting department and each business division.
With this, the Company is endeavoring to swiftly identify and alleviate collection concerns that could stem from deteriorating financial positions
or other factors. Its subsidiaries have implemented the same management system in compliance with the Group's receivables management
policies.
The maximum amount of credit risk as of the end of the fiscal year under review is shown as a balance sheet value of financial assets
subject to credit risks.
b. Market Risk Management (foreign exchange and interest rate risks)
The Company's operating liabilities in foreign currency have little impact due to their small amounts. The Company checks out trends inexchange rates at each time transactions are made.
The Company regularly assesses the prices of marketable investment securities and financial positions of their issuers (business partners)
and constantly reviews the necessity of such holdings in consideration of the relationship with them.

31

c. Funding-Related Liquidity Risk Management (risk of inability to settle by payment dates)
The Company's accounting department formulates and renews funding plans based on reports from each department in a timely manner. The
Company also has made the agreement for use of the Cash Management System (CMS) with Panasonic Electric Works Finance Co., Ltd. so
as to control liquidity risks by managing surplus funds and balances constantly.
(4) Fair values of financial instruments
Fair values of financial instruments are based on a quoted price in active markets. If a quoted price is not available, other rational valuation
techniques are used instead.
Millions of Yen

March 31, 2011

Carrying Amount

Cash and deposits
Accounts receivable – Trade
Deposits paid
Investment securities
Total
Accounts payable – Trade
Accounts payable – Other
Income taxes payable
Long-term lease obligations
Total

¥

172
6,442
12,662341¥19,617¥ 1,970
1,102
1,061
561
¥ 4,694

Fair Value

Unrealized Gain/
Loss

¥

172
6,442
12,662341¥19,617¥ 1,970
1,102
1,061
552
¥ 4,685

¥–
–
–
–
¥–
¥–
–
(9)
¥(9)
Millions of Yen

March 31, 2010

Carrying Amount

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

¥

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

Fair Value

Unrealized Gain/
Loss

¥

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

¥–
–
–
–
¥–
¥–
–
–
¥–
Thousands of U.S. Dollars

March 31, 2011

Carrying Amount

Cash and deposits
Accounts receivable – Trade
Deposits paid
Investment securities
Total
Accounts payable – Trade
Accounts payable – Other
Income taxes payable
Long-term lease obligations
Total

$

2,072
77,614
152,5544,108$236,348$ 23,735
13,277
12,783
6,759$ 56,554

Fair Value

$

2,072
77,614
152,5544,108$236,348$ 23,735
13,277
12,783
6,651$56,446

Unrealized Gain/
Loss

$

$
$

–
–
–
–
–
–

–
(108)
$(108)Cash and deposits
The carrying values of cash and deposits approximate fair value because of their short maturities.
Investment securities
The fair values of investment securities are measured at the quoted market price of the stock exchange for the equity instruments. The
information of the fair value for the investment securities by classification is included in Note 6.
Accounts receivables and accounts payables
The carrying values of accounts receivables and accounts payables approximate fair value because of their short maturities.
Deposits paid
The carrying values of deposits paid approximate fair value because of their short maturities.
Income tax payable
The carrying values of income tax payable approximate fair value because of their short maturities.
Lease obligations
The fair values of lease obligations are determined by discounting the cash flows related to the debt at the Group's assumed lease interest rate.

32

Panasonic Electric Works Information Systems Co., Ltd.

Annual Report(5) Maturity analysis for financial assets and securities with contractual maturities
Millions of Yen

March 31, 2011

Due in One Year or
Less

Cash and deposits
Accounts receivable – Trade
Deposits paid
Total

¥

172
6,442
12,662¥19,276

Due after One Yearthrough Five Years

Due after Five Years
through Ten Years

Due after Ten Years

¥–
–
–
¥–

¥–
–
–
¥–

¥–
–
–
¥–

Due after One Yearthrough Five Years

Due after Five Years
through Ten Years

Due after Ten Years

$–
–
–
$–

$–
–
–
$–

$–
–
–
$–

Thousands of U.S. Dollars

March 31, 2011

Due in One Year or
Less

Cash and deposits
Accounts receivable – Trade
Deposits paid
Total

$

2,072
77,614
152,554$232,240

Please see Note 13 for obligations under finance lease.

15. Comprehensive Income
For the year ended March 31, 2010
Other comprehensive income for the year ended March 31, 2010 consisted of the following:
Millions of Yen

Other comprehensive income –Unrealized gain on available-for-sale securities¥321

Total comprehensive income for the year ended March 31, 2010 was the following:
Millions of Yen

Total comprehensive income attributable to:
Owners of the parent
Minority interests
Total comprehensive income¥2,884
3¥2,887

16. Related Party Transactions
Balances at March 31, 2011 and 2010 and transactions for the years ended March 31, 2011 and 2010 with the Parent, its consolidated
subsidiaries and its associated companies were as follows:
Millions of Yen

Sales
Purchases
Lease and rental expense
Accounts receivable – Trade
Deposits paid
Other current assets
Accounts payable:
Trade
Other

Thousands of
U.S. Dollars

2011¥21,223
120
545

2010
¥22,643
103
634

2011
$255,699
1,446
6,566

¥ 3,894
12,44424¥ 3,678
11,73628$ 46,916
149,928
289

8
138

17
238

96
1,663

17. Subsequent EventAppropriation of Retained Earnings
The following appropriation of retained earnings at March 31, 2011 was resolved at the Board of Directors meeting held on May 19, 2011:
Year-end cash dividends, ¥32.5 ($0.39) per share

Millions of Yen

Thousands of
U.S. Dollars¥346$4,16933

Independent Auditors’ Report

34Corporate Data
As of March 31, 2011

Board of Directors,Corporate Auditors
and Corporate Officers (As of June 15, 2011)

Headquarters

19-19, Chayamachi, Kita-ku, Osaka 530-0013, Japan
Established

President

February 22, 1999

Managing Directors

Paid-in Capital¥1,040 million

Directors

Fiscal Year-End

March 31Nature of BusinessInformation services
Auditors

Number of Employees

677 (consolidated)
Executive Officers

Consolidated Subsidiaries• Panasonic Electric Works Net Solutions Co., Ltd.
Paid-in capital: ¥70 million
Nature of business: Development of groupware• V-Internet Operations, Inc.
Paid-in capital: ¥60 million
Nature of business: Development of security systems

Kazuhiro Maegawa
Akira Hisano
Hisashi Kurono
Shuichi Takazaki
Tatsuo Yoshikawa
Shinichi Hasegawa *1
Takahiro Nakagawa *1
Takayuki Takeda *2
Tamaki Fujimoto
Makoto Iwahashi *2
Keisuke Tanaka
Hajime Onishi
Takashi Maeda
Mitsuru Maekawa
Hiroyoshi Maruyama*1: Outside Director*2: Outside Auditor

Stock Information
As of March 31, 2011

Total Shares Authorized

Securities Code40,000,000 shares

4283

Total Shares Issued

Stock Trading Unit

Breakdown of Shareholders
by Number of Shares Held(% / Number of shares held)

10,656,000 shares

100 shares

Number of Shareholders

Regular Shareholders’ Meeting

5,212

June of each year

Stock Exchange Listing

Transfer AgentTokyo Stock Exchange, First Section

Sumitomo Trust and Banking
Corporation

Panasonic Electric Works, Co., Ltd.
BBH FOR FIDELITY LOW-PRICED STOCK FUND
Employees Stock Ownership Association
Japan Trustee Services Bank, Ltd. (Trust Account)
The Master Trust Bank of Japan, Ltd. (Trust Account)
BNY GCM CLIENT ACCOUNT JPRD AC ISG (FE-AC)
FUJITSU LIMITEDIBM Japan, Ltd.
Oki Electric Industry Co., Ltd
Japan Trustee Services Bank, Ltd. (Trust Account 1)

1,045,955

1,000 ‒ 4,999
8.92% 950,645
5,000 ‒ 9,999
2.46% 261,800
10,000 ‒ 99,999
8.11% 863,600
More than 100,000
70.70% 7,534,000

Major Shareholders
Shareholder

1 ‒ 999
9.81%

Number of Shares Ownership Ratio(thousands)

(%)

6,787
400
243
101
58
57
36
36
36
33

63.69
3.76
2.28
0.94
0.55
0.54
0.33
0.33
0.33
0.31

Breakdown of Shareholders
by Investor Type(% / Number of shares held)

Financial Institutions

3.77% 401,600
Financial Instruments Firms

0.49% 52,714
Other Corporations

66.80% 7,118,300
Foreign Corporations, Other

6.08% 647,626
Individuals, Others

22.86% 2,435,760

35

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